Building Sustainable Partner Value Propositions, Part 2
Posted: 6/29/2010 by Norma Watenpaugh
In my last post, I talked about the "value triangle," and how it creates win-win-win value propositions for you, your partners, and customers. Today, I'll flesh out what I mean by solution, financial, and sales and marketing value, as well as present a case example of how a global systems integrator applied the principles of this "value triangle."
Solution value most directly addresses the customer needs. This is where partners blend their core competencies to create a value proposition that is greater than the sum of the parts. Developing the solution value begins with a thorough understanding of the customer’s pain points, how they make purchase decisions, who the key decision makers are, and what they care about. In effect, creating a joint offer is not dissimilar to process of used by many companies to create a market requirements document that guides product development. A well crafted joint solution can create competitive advantage in the market place, create differentiation, and reduce deployment risk in a multi-vendor environment. It can even shorten time to market by combining the proven abilities of two organizations rather than opting to build from scratch.
Financial value comes in many different forms and may in fact be different for each partner. Financial value is ultimately how the alliance is measured by executive management and translates into corporate performance. It is how we judge if an alliance is working. Key financial metrics include incremental revenue realized from sales of the joint offer, cost savings from shared marketing or development costs, and resulting increased profitability.
If a joint offer enables a company to address a new customer community that was previously unreachable, financial performance is reflected in incremental sales in a new addressable market.
Cost sharing can be an important aspect of financial value, especially in go-to-market alliances where the costs of building customer awareness of a new offer can be substantial. Cost sharing in other operational aspects of the business such as R&D, services, or manufacturing can increase profitability and conserve capital.
Other financial metrics relate to an improved sales model that accelerates the sales cycle or increases deal size. These are addressed in more detail under sales and marketing value since these value propositions create motivations for your sales organization to engage.
Sales and marketing value is often overlooked. But it is critical in go-to-market alliances where joint selling to expected. Why should the sales forces of two organizations cooperate and collaborate? There is much that can be done to facilitate the process of collaborative selling but ultimately there needs to be a compelling incentive for each sales representative to place a focus on selling a joint offer with his partner counterpart. Introducing another player to a sales campaign adds complexity and might even mean loss of control in the account. Sales organizations need to see a clear advantage in collaborating to offset increased complexity. Combining selling efforts can result in the following advantages:
- Access to key executives when on sales teams has a better customer relationship.
- Share information about the account by combining what each team knows or discovers on their customer calls.
- Accelerate the sales cycle through better account coverage and greater solution value presented by coordinated team.
- Increase deal size by introducing greater value to the customer.
- Build Customer credibility by creating confidence in the partnership.
- Build the pipeline and revenue opportunity for both sales organizations via lead sharing.
Understanding the alliance value proposition yields not only the foundation for a sustainable alliance but gives the alliance manager a valuable tool to enhance collaboration and joint business planning. Alliances that succeed use value propositions to drive plans for value delivery and to set metrics to measure the value of the alliance for the company, partners, and customers.
A global systems integrator teamed with a large service provider carrier to provide end-to-end application hosting services. The service provider was losing business and customer confidence due to poor performance and execution. There was a shortage of skilled expertise in delivery of hosting services and deploying business applications. There was also a lack of formalized processes and procedures for implementation.
In joining forces with a systems integrator, the service provider’s organization was augmented with an influx of additional skilled resources and best practices in client services management, governance, business process management, and transformation management. The carrier provided the network and computing infrastructure, system monitoring and maintenance. Both took joint responsibility for change management and end to end service management. The value proposition for this alliance was clearly defined for all stakeholders and in all three value dimensions:
- Solution value to the customer was recognized in increase of services delivery quality. Problems were solved before deployment through assessment services, resulting in increased customer satisfaction and increased customer retention.
- Financial value was recognized in more services delivered to the customer and greater profitability through less problematic service delivery that ate up resources to correct.
- Sales value was demonstrated in an improved win-rate through increased customer confidence by the combined resources of both companies. This of course added to the financial value in terms of incremental new business.