Innovation in Channel Partner Ecosystems can be elusive. However, it offers channel players an enormous opportunity, when successful. Anyone who has worked in the channel knows that the day-to-day reality of margin pressure has a tendency to limit available funds. This is turn limits the ability of some vendors to work with and leverage the expertise of their channel partners in this very resource-intensive way. Experience has proven that, without targeted funding AND dedicated resources on both sides, innovation in the channel partner ecosystem constantly takes a back seat.
Predictably, limited time and resources produce limited results…and bring Innovation in your Channel Partner Ecosystem to a halt.
An emerging trend to jump-start innovation in your channel partner ecosystem is for vendors to create a formal program component targeted specifically at seeding and supporting joint innovation with key partners. The program itself can go by many names. Usually, it’s a carve-out from an existing Market Development Fund (MDF) budget that shifts funds from pure marketing activities (ex. events, campaigns, etc.) to higher value innovation activities.
This important planning step identifies relevant vendor capabilities along with existing partner capabilities. It’s importance cannot be over stated. It also specifies new capabilities that will be “seeded” by the funding. It uses activities-based costing methodology to identify the resources, budget and timing required and sets the measurable goals that will be tracked throughout the initiative.
Essentially, this phase involves working with a key customer who joins with the vendor and channel partner, to develop the specific business case. This critical step should do two things: (1) it establishes a solid economic rationale for the solution (vs. purely a technical value) and (2) it helps the customer understand and communicate the value both internally and externally.
Once the business value is confirmed, the team focus now moves to developing a technical prototype for the solution. The aim being to prove feasibility.
It is important to emphasize that these funds are not meant to replace MDF. They are purely reserved for key channel partners with proven expertise and an ability to develop innovative solutions. In addition, they may need to meet other criteria the vendor may want to establish. These could include revenue attainment in a key business area or leadership in a practice area that aligns particularly well to the vendor’s business strategy. Critically important is the demonstrated commitment of the channel partner’s executive leadership. This could involve the signing of a Memorandum of Understanding that documents what the partner will give in return for the investment.
Because these funds – and their associated resources – can be substantial, it’s important to consider the following design principles:
In the past, the mere idea of carving out investment funds from MDF would have caused channel managers to rise up in a single cry:
“Great idea….BUT we have enough trouble just managing MDF!!”
And they would have been right. Everyone has experienced runaway MDF!! But today, with the automation of channel programs, management of these essential funds has been tamed, allowing channel managers to generate solid returns from all qualifying partners. While at the same time, freeing their time to plan strategically with the critical few who are willing and able to help lead the way with innovation in channel partner ecosystems and new market solutions.
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