In my last entry, we talked about a series of investments SolidWorks made in expanding and developing our Value Added Reseller (VAR) channel between 2002 and 2008. Now, let’s talk about how we actually pulled this off.
Where to start?
We knew from experience that we had to improve and expand our partners’ business skills, but at the time, it was hard to decide exactly what to do. Some VARs were growing and thriving without our help. Others were struggling to stay in business. On the surface, we couldn’t see any obvious patterns. We decided to uncover best practices among our VARs, understand their capabilities, and determine what they needed most from us. So we put on our social scientist hats, went into the field, and set out to observe, measure, and understand.
Our VARs are concerned with sales, support and marketing. Things like product management, product positioning and R&D are not relevant–they are a pure sales channel. The good news: most VARs knew their value, and followed this model. The bad news: we had over 300 VARs to assess.
Asking the right questions
Before we could start measuring the VARs capabilities, we needed to figure out what to measure. If you don’t know what to ask, any answer will do. So we developed a 65-question survey, with six categories:
- Business Planning,
- and Technical Support.
We trained two-person teams to conduct face-to-face interviews with each reseller in the most significant regions. Each session took a day. The survey scored each VAR on two dimensions: Vision and Execution. Said another way, we measured VARs on being “Willing and Able.”
The scoring system helped enormously. Given the volume of information coming in, we had to have some way of cutting through the noise and getting to areas for improvement that would yield the greatest returns in the least amount of time. Clustering the VARs by rank and quadrant guided us in understanding the type and extent of training and development needed. Additionally, it helped with VAR buy-in; each understood his needs and why his particular “get-well plan” differed from another VAR’s plan.
Some of you will recognize this; it is a variation on the GE Market Management model that they have been using to run their many businesses for the last three decades. We just “tuned” it to fit the unique needs of our business.
Scoring drives achievement
We wanted to find out how well the leadership at each VAR understood and executed against each of the six business objectives mentioned above. We also wanted to discover what level of importance they gave to each function, and assess what processes and procedural capabilities they had in place to execute on them. For each question, we scored on the physical evidence to support their response. Put another way, actions, not words. Having a business plan didn’t matter if it wasn’t shared with the VAR employees. We assigned a numeric score from 1 to 5 on a worst-to-best scale. Here’s an example of the kinds of questions we asked.
|Do you have a dedicated sales manager?|
|What percent of your sales representatives has attended formal sales training?|
|Do your sales reps have specific goals for sales activities such as number of calls, demos, meetings, etc.? How are they tracked and measured?|
|How do you manage the pipeline reviews? How often?|
|Do your sales reps follow a consistent, structured sales process?|
|How is sales performance measured?|
|Do all your sales reps have a quota which is aligned with your business objectives?|
|What is your subscription renewal rate?|
|Do you have an inside sales process and team? What are their areas of responsibility?|
|What is the process to identify and manage underperforming sales reps?|
Can you put that in writing?
During the interview process, we looked for written evidence of processes. While most VAR owners had an excellent understanding of their business, a majority of them had no written documents capturing their plans or tracking their performance.
The willingness to document plans and publish results is essential to scaling a business. If all critical knowledge remains in the head of the owner and nothing is written down, measured, or communicated, business decisions get made in a vacuum, based on instinct. Employees aren’t involved and accountable.
All the news that’s fit to print
With the survey results in hand, we built a simple performance database for each category and region. We assessed the relative strength of each VAR, compared the scores to the overall benchmarks, and delivered a customized report to each of them in person. In these reports, we presented absolute and relative scores, indicating which areas were at, above or below the norm. One important note–we did not disclose VAR scores to one another. This information was (and is) treated as Company Confidential and Restricted.
Some of the key findings, consistent across many VARs, included:
· a need to solidify and standardize a sales pipeline management process, and to introduce a formal Sales Manager position,
· a need for annual financial planning and review processes,
· a need for market planning and better-structured marketing programs,
· a need for new employee training and mentorship programs,
· and a need for defined personnel policies and performance review practices.
The proof of the pudding is in the eating
For each developmental area, we created seminars, training programs, materials, and Web resources that kept the VARs in ongoing communication with SolidWorks. Not unlike a golf or tennis academy, instruction ranged from one-on-one consultations to group lessons.
Was there uniform VAR buy-in on the program or on every recommendation? Was every VAR able to execute on every idea? The answer, as you would expect, is no. This is the real world and not every VAR “got it,” and not everyone “could.” That said, most of our VARs improved in most areas, some more than others. In aggregate, we have a more knowledgeable, capable and developed channel that has grown and profited from our collective investments.
Clearly, we wanted every VAR to be both willing to participate and able to execute. And after five years, most VARs are well ahead of where they were when we started. We’ve enjoyed organic growth of 18% – 20% in a market that grows in the single-digit percentage. There is a very real gear effect in this strategy; our profits and productivity are almost double the industry average.
One final, really important note: this program fails if you use the scoring to “punish” VARs. You’ll lose the chance for buy-in, and won’t be considered a member of the VAR’s “Board of Directors”. Again, the purpose here is to have programs attuned to the needs of each VAR, with an obsession on moving all “up and to the right.”
In the third and final part of this series, we’ll talk about the structure we’ve put in place to help ensure that our channel partners continue to grow. We’ll conclude with recommendations for things any company can do, regardless of size and maturity, to effect real change in the channel.