Managing Relationships Across the Distribution Channel: What's Next

Fastwater Rapids v. 1.6, 5Oct98

In a recent Network Economy Practice, we reported on Bay Networks' use of its website to improve the performance of the company's distribution channel, to use the channel as a competitive advantage, and to improve its customer service. The Bay Networks case study provides a useful jumping off place for a broader look at what it takes to make effective use of the web in support of third party channel sales. Getting a broader perspective on these issues is particularly critical for companies today, as the established sales force automation vendors begin making claims that the client/server systems they have developed to support internal operations are now "web ready." What does this mean? Will it meet your needs?

Let's begin by reviewing what Bay Networks built to support their channel. Key components of Bay's web communications include:

customized publishing, based on BroadVision technology, that captures data about the specific interests of customers and partners.
an online product support system directly available to customers. This gives the customers the latest, most accurate information, and gives Bay Networks first-hand insight into where customers are having difficulty.
extranet systems for partners that provide personalized product news, access to presentations and collateral materials, access to training, and detailed technical and support information.
a “Product Configurator,” based on technology from IBM/Trilogy, that a customer can use to build a list of all the components required for a specific installation. When configuration is complete, Bay Networks puts the customer in touch with a distributor or reseller -- the customer walks in with a pre-configured system; the distributor gets highly qualified leads; Bay Networks gets information about what customers are interested in
custom-built tools, such as an “ROI calculator” to help partners do a better job of focusing on winning the sale.
and, most recently, on-line ordering for channel partners via PC Order.

Using the website, Bay Networks is capturing more information about their customer's needs, interests, and service history. Ultimately, Bay would like to use this profile and service data as one more part of their program to pass qualified leads to channel partners. But they are not doing that yet. Today, Bay can support its channel with documents and ordering and with leads for prospects who have already configured a product -- but cannot yet give partners effective ways to use of the broader range of customer data.

The reason that this is interesting is that it reflects an industry wide problem with moving customer data outside a company, to partners.

Customer Data Management

Naturally, the place for companies like Bay to look for assistance would be the technology that is used today to manage customer interaction data elsewhere in the company. Companies including Siebel, Vantive, and Aurum at the high end, and Pivotal and Onyx in the mid-market, are the masters of unified databases that hold records of customer interactions with salespeople, customer service representatives, and, (starting recently), marketing campaigns as well.

Today, these "front office" systems are used to generate leads for internal salespeople and customer service staff. Recently, front office vendors have been adding thin-client capability to these systems, allowing companies to hand off leads to external channel partners. This is a logical progression for these vendors. The web is the fastest growing channel for sales and customer service. Moreover, the technical requirements for "web customer data management" are similar, at the most basic level, to the requirements for "internal customer data management."

However, the first generation web capabilities from the front office vendors fall short of what is needed for businesses to manage relationships with channel partners over the web. Though the core technology requirement is the same - a relational database of customer interaction data - the orientation required to succeed on the web is very different. Some of these differences in focus include:

External vs. Internal Processes: Front office software has focused primarily on automating and streamlining the processes of internal sales and service employees. These systems make sure that a salesperson or customer service person walks through a similar set of steps to qualify a lead or solve a technical support problem. This internal process automation automation saves companies money, and on the sales side, drives revenue through more effective sales processes. Web solutions, however, are of primary benefit to partners and customers who are outside the direct control of the company. Web solutions, therefore, need to be attractive to partners and customers. Otherwise they won’t get used.

Enabling vs. Controlling: The most common first step that front office software vendors take to the web is to expose their standardized data-entry and customer interaction tracking processes through a browser interface. The intent is to get channel partners - or customers themselves - to use the system to log their own support requests or to data-enter leads. This type of control is difficult or impossible outside the company walls. Building an application that is usable by an outsider, with no training, in an undetermined sequence - is very different from building a structured client-server application that the users will trained for and commanded to use.

Integrating Data with Publishing: Vendors selling front office customer data management solutions often speak as if the data and process management component that they provide is the main piece needed in order to manage relationships with partners and customers on the web. The result is a "customer service" application consisting of a screen in which the customer enters her name, address, and requirement, and waits for a sales or service person to call her back. This model does not work on the web, for customers or for channel partners. Before giving their name and number, customers want to browse company and product information; customers expect to receive some value before they give up information on the web. For channel partners to use a web system to contribute data, they need to get value back - qualified leads, information about customer's purchase and service history, up-to-date product and service information, news about customers and competitors. The implication is that a complete internet customer or partner interaction system needs both documents and data.

Interoperability: Since they reach outside the walls of the company, relationship management systems for Internet and extranet use have to be able to work in a more heterogeneous environment than one encounters in internal systems. This need is particularly pressing in applications that support a distribution channel, since resellers typically sell a range of complementary and competitive products - it is not realistic for them to use a different web-based application for each one of their suppliers.

Focus on Networks, Not Chains: Vendors selling front office customer data management solutions often speak of the “value chain” as if it were linear and one-directional. Once you move outside of the controlled environment of “re-engineered” internal processes, the relationships between the different parties in an engagement are more likely to take the form of a network than a chain. The relationships are complex, there is give and take, and success depends more on interactions between parts, rather than on execution of a system.

Customer Data vs. Customer Interaction: Building a web-based system for partners and customers is more complex than it first appears. It requires incorporating customer data, publishing, useful applications (such as Bay's ROI calculator), and collaborative features into integrated interaction systems, that can be used without training, and provide value to the people who use them. This is much more than putting "a pretty face" on the same old customer service data entry screen.

Over time, front office software vendors will need to adapt to the requirements of doing business over the web. In the short term, users should carefully evaluate front office vendors' claims about their web solutions, and realistically determine the amount of effort it would take to integrate these features into supportive system for channel partners and customers.

Focus on the Relationship Network

When we advise companies on how to think through the business problems that they will address with their website, we have them begin with a careful analysis of the network of relationships extending beyond the bounds of their company -- just as Bay Networks did. The first, most productive opportunities are usually associated with parts of that economic network that are broken or “noisy,” in the information sense. As in the Bay Networks case, these are places where one finds “institutionalized inefficiency” -- systems of “patches” built up to compensate for faulty or slow communications. Complex systems create such patches without anyone’s deciding to make it happen.

Given a map of the network of business relations and a list of the points in the network that are slow or noisy, the company can begin evaluating these nodes in terms of criticality and opportunity. The greatest opportunities are at the places where you can not only improve efficiency, but where doing so enhances your position as a central node in the network. Today, Bay Networks is “fixing” poor communication in the “chain” from them through distributors to customers by rewiring the network. This puts Bay Networks in a more central role. Value increases as you increase control over “nexus” points where communication paths join.

The next step is to more tightly incorporate customer data into the application. The web is about to have a profound impact on the interface between manufacturers and channel partners. Using the internet, companies will be able to turn the trickle of data that passes along the distribution channel into a torrent. Over time it will become increasingly important for companies using indirect distribution to support the distribution channel with leads and other data about customer requirements - and in return, channel partners will contribute more information than ever before about what end users are doing with the products they buy.

The increased data flow will create new success factors - establishing and managing the data flow, and managing the changes in the relationship that result from this increased level of communication. The transition must be managed carefully, to support the channel, rather than alienate important partners.

We counsel clients to focus on one problem at a time -- this is a network -- making too many changes at once produces effects that are hard to predict. And we help them think through all the implications of these changes, just as Bay Networks recognized that making product and support information more efficient could put the distribution network at risk, and so also designed the website so that it would help distributors succeed in new ways.