Keith Lubner, Co-Founder and Managing Partner of Channel EQ, joins me, Jen Spencer, on The Allbound Podcast to discuss determining company readiness for building a channel, and common pitfalls to avoid once your channel exists.
Thank you, Jen. I’m really, really glad to be here today.
Well I’m excited to have you here because Keith you’ve been in the channel world essentially your entire professional career, over 25 years. And you’ve worked with some of the most well-known channel organizations like Oracle, IBM, Microsoft, some pretty heavy hitters in the channel space. I’m really curious to understand from your perspective what are some of the most significant changes that you’ve seen in channel organizations over this time period?
Interesting question, Jen. Yeah, I sort of date myself sometimes when I say that I’ve been in the industry for over 27 years. I’ve had our company for over 10 years now and there are a lot of really significant changes especially within the last 3-4 years in particular. The rate of change is absolutely increasing and it’s really the channels ability to keep up with the change which is one of the most significant things that we need to keep an eye on. Let me outline really two particular areas that we’ve seen a lot of change; one is internal and one is more external. When we look at channel organizations and I worked with a lot of the big ones as you indicated, but also a lot of startups, and I’ve seen a trend over the years in that internally years and years ago I call a static or reactive mentality is what most channel organizations had, simply because of the function of how the marketplace was working. People within the vendor and people within the partner, they managed themselves, they managed partners and deals in a very reactive way. Pipeline management, recording, those were sort of the tasks that they were trying to accomplish, their roles, the functions that they were undertaking. Now there’s a dramatic shift into these organizations need to be more what I call “adaptable”. They need to adapt to their surroundings, they need to adapt to the customers, because the customers quite frankly are a lot smarter and they move a lot quicker.
So is it the customers that are driving this change and causing these organization to look ahead as opposed to always looking behind?
That’s a great question. Customers are a part of it, but really the root cause of it is technology itself. Technology itself is allowing a couple of things to occur. Number one, especially in the SaaS space environment you’re looking at a complete seismic shift in the way customers are buying now, and you’re looking at what we call the customer journey to be a lot different than it was years and years ago. And what that is causing a lot of channel organizations to have to do is they have to change themselves and be more adaptable to the customer and their journey, and the journey is different than it was before. Customers are going into more pilots now and they're going into more smaller projects and they are able to execute a lot faster. Customers are also able to get to a lot of information around a vendor and the offerings a lot easier than it was before. Now that vendors lost a lot of control they need to - especially from a sales perspective - adapt to the environment of that customer. Where there is the problem is that there’s a huge gap in skills. There’s a gap in skills from what they were years and years ago from being static or being reactive, to what they have to be now and being adaptive.
So, Keith when you say “they” need these skills, let's clarify who are you speaking about?
I’m talking about the vendors themselves, the vendors themselves and their partners. So, you’ve mentioned the big ones I’ve worked with; Oracle and Microsoft, Cisco, etc., any sort of vendor around that stream there, big or small, they need to adapt their internal people. Okay? The partners themselves they have to adapt as well because their interacting a lot of times with the customer as well. So, they need to be adaptive and not reactive in nature, sometimes it’s a really difficult shift for them to make.
Oh, I can imagine, absolutely. You mentioned an internal and external force or changes; did we cover those?
No, we didn’t haha.
I want to make sure we get to that goodness.
Yeah no we didn’t. The external force is actually the type of partner that is now needed. So, let’s look at the classic definition of a VAR. Twentysomething years ago a VAR - a value-added reseller - the business model was pretty cut and dry. Resell a vendor's’ product, make money on that margin, maybe on a little bit of services, and have maintenance on top of it. NOW the definition of a VAR is very different. That value add component has to take on a number of different variations, from services all the way through, and the revenue model for that type of partner is a lot different now as well. When you look at selling subscription based offerings they’re not really focused so much, nor should they be, on selling the subscription base, they need to rely on the vendor to do a lot of that, because in the end that partner is not going to make a lot of money, they’re not going to survive if they rely their entire business on that. So what they have to do is they have to look at the combinations even more so now. They have to look at how they can influence the subscription based sale with the vendor, so they need to partner a lot better on that front, but they really need to look at everything else around it that they really quite frankly can add value to. Externally the change has been in how they have to go to market and the type of partner that they are.
It was interesting talking about this value-added reseller and the change of this partner. You recently wrote this blog “The Value of a Third Party” and what I love about what you wrote is that too often executives see partners merely as just another source of leads, which we know they can be of course. Here at Allbound we generate leads from partners, but what additional value can partners bring particularly to these rapidly growing subscription based types of companies?
Great question, so really three areas. Services as in implementation services is obviously one component, and a partner to really make significant and a really nice margin if they take on that mentality, that’s one. But there are two other factors that sometimes partners don’t really look at where they can add a lot of value. One is brand awareness for the vendor, because they are essentially an extension of the vendor and the vendor's’ sale force in the entire marketplace. So the vendor needs to view them from a couple different perspectives, not just a selling organization but one that can extend the brand accordingly into the marketplace. And then the third thing is, and this is very important, in fact we did a project years ago when Cloud was just starting to come to the forefront around what do partners really need to do in the Cloud and how to transform. One of the findings of the study we did was that partners truly need to focus on domain expertise and become an expert in a certain area, whether that area is industry specific or geographically specific. What I’m getting at is the more the partner can be an expert in a certain area it’s better for the vendor, because that vendor can then rely on specialists that can impact a business a lot better because of that expertise in that particular area that that business may be in, so think financial services or manufacturing or health care. If the vendor is looking to implement a solution into one of those areas it's best to have somebody who is an absolute recognized expert in those areas that they can rely on, because the value they’ll bring to the customer is around the configuration and around how to best utilize the technology etc., and no vendor can be all things to all people and all customers, so they need to rely on the partners to be able to do that more so.
You know before I was here at Allbound I had worked at a software company where we had about 90% of our revenue actually coming through our channel. We had this pretty robust partner program but what I always found interesting was that we spent a lot of time and energy trying to ensure that our partners didn’t run into each other and that our partners had these sort of unique experiences and we didn’t have these exclusive types of partnerships. We didn’t openly talk about partners to each other, we didn’t bring them all in the same room together, we kind of didn’t want everyone to know we were dating someone else. And then a few weeks ago on this podcast I had Jared Weise from Cisco, and he was talking about the way that Cisco’s partner ecosystem really has evolved and how today in order for them to truly be successful in serving their customers they need to be actively creating opportunities for those partners to engage with each other to ultimately serve that customer. It was awesome hearing that from him, I’m curious in your interactions with the companies that you’re working with today, that Channel EQ is working with, are you seeing that more of an ecosystem type of approach to partner programs or do we have partner programs still operating in individual silos?
It’s interesting, and he’s absolutely right. We’ve done work with Cisco and its entirely critical for an ecosystem like Cisco to be able to have their partner community collaborate with one another. The answer to your question is yes, we’re seeing this and it’s a really important component. Three years ago when we were doing this study around Cloud and everything one of the key factors was to teach partners how to partner with other partners, so helping them build their ecosystem out, and that’s exactly what I think Jarrod is referring to. If they can create that then they can come to market with best of breed partners that don’t compete with one another per say, but just focus on one particular area and are just rock solid good at it, and that ultimately is what’s best for the customer. So yeah, we see that partnering mentality starting to rise up if you will.
A lot of the people that listen to the podcast don’t have partner programs yet. We talk to people all the time who and they’re thinking about it or considering it as a next step, maybe they’re a software company and they’re doing about 10 million in ARR and they’re ready to for that 100-million-dollar mark, and they think building a partner channel might be a way to do that. How do you determine if and when a company is ready to build a channel partner program?
That’s a really interesting question. What we talk a lot about is triangulating the truth, it’s a mouthful, triangulating the truth around three primary areas. Number one the technology has got to be rock solid. Technology has to be rock solid because people can bring technology to market a lot sooner than ever, ever before, so you need to compete. And if you need to compete for the mindshare of a partner it's really critical that this technology is just so good and better than anybody ever can have, that’s number one. Number two is commitment, you need to have an absolute commitment from the executives in order to make all of this happen. If you have that commitment then the executives are going to make the strategy and bring the strategy through a lot easier than you ever could. And then the third area is primarily around investment. This is one of the most critical ones, so if you have the first one checked off, great, if you have the second one checked off that’s very important because commitment from executives to make anything happen is important, but the third area, investment, is really where the rubber meets the road. Is the company willing to invest in the systems, the processes, and most importantly - from our viewpoint is - in the skillsets to make the channel happen. You can have the best product in the world and we’ve seen it time and time again, and you can have executives saying “yeah we are committed to doing this” but when it really comes to putting up for all this to happen it’s the investment they’re not willing to make. If they’re not willing to make the investment what will happen is the channel will just go very, very slowly and just won’t happen. So, those three things are really what we see as critical, like I said we call it triangulating the truth, if you check off those three points of the triangle then your chance of success goes up tremendously.
I think those are really great point and I can underscore that last piece. When I’m talking with individuals and they tend to be individuals, I mean I’m not talking about the Cisco’s of the world, I’m talking more about the 10-20-million-dollar software companies, people I might meet at a conference or people I might engage with on social media and you build that rapport and there trends to be this one man or one woman show that is supporting the channel and is responsible for recruitment, enablement, for onboarding. What always baffles me is the amount of revenue, the sheer quantity that these individuals are able to drive for their organization and yet they can’t get approval to have a piece of training content created, to add additional personal resources, to really grow and really enhance their channel program and it leaves me scratching my head, I mean what is going on? Can you shed any light on this, working with executives and working with channel professionals, why does there seem to be this massive gap in resources for the channel?
You know it’s interesting and I’ve seen it from every different angle over the course of my career, and you are absolutely right it’s head scratching, its mind boggling. And it’s really a lack of knowing and sometimes it’s just really needing to educate them more on here’s exactly what it takes. Even then after that education, I mean that’s why people hire us, because we’ve been doing this for so long, and even then, they're still not commitment and their still not willing to invest. So right away I think you know, you guys do this as well, you set that expectation right up front “here’s what it’s going to take”. We use the phrase “it’s a journey, it’s not an event”. A lot of times what happens is executives come from a sales driven environment, which is okay but its direct sales driven environment, so they’re used to owning the entire process. They’re used to owning each customer, they’re used to owning all of that and when they get into the dynamic of a partner channel they don’t understand the concept of leverage and letting go and understanding building around somebody else to get to the end customers, and they still think in the direct mentality and they think it’s more of an event. So, what happens a lot of times is that they find a customer, sometimes you know with a partner offhand, they get the customer, they sign the deal, they get it all done and they think “wow, this is easy” and they think it should happen like an event. And it never happens that way, they may get lucky in the first partner, but it never happens in the end, they don’t understand that it’s a journey to get to that point and the journey has to entail investment, has to entail skill development, has to entail processes, has to entail systems, has to entail all these different things in order for it to truly, truly work. So, this is the age-old problem in the channel and the people who want to build channel programs, and some people get it and some people want to invest and some people understand that mentality and others don’t, and the others that don’t never will. It’s where you and I will scratch our heads until the end of time because we know what it takes, and in the end the fruits of the labor are so much better than anything else but it’s hard to get that through to somebody and get them to understand that.
Besides this concept of just under resourced, what are some of the other mistakes you see executives make in the channel, maybe they’ve established a program and things are working okay, they’re chugging along, but what are some of the pitfalls the things our listeners can try to avoid?
Focus on systems, the processes and the people. The lessons are always keep an eye on those three particular things. Make sure you have systems, make sure you put the processes around the systems, make sure you have people aligned with the processes and the systems. If you keep an eye on those three things you’re fine. What happens and there’s a lot of mistakes that can be made, but what happens is the eye is taken off of one of those three things. So for instance we see it a lot, we see people go into implement systems and they put processes around that and then they just expect their people to operate efficiently and it never happens that way, they don’t train their people, they don’t get it up and running, they don’t enable them effectively. And then you can say the same thing around other areas, they get some people that are just rock stars when it comes to the channel and they understand it, but they don’t put the process and the systems in place to help support them, they just expect them to go out there and just magically build the whole thing. So the mistakes are they take their eye off of those three components, one or the other or a combination of two.
You don’t need to say what the name of your organization by any means, but I think it’d be great to hear a success story, it would be great to hear about an entity that you or your team have worked with that have just an awesome happy ending channel story? Do you have something like that you can share with us?
Oh, I have a ton of them actually. We need to make this podcast last for a long time, haha. Let me give you some real recent ones, I’ll give you two examples. So, the last couple years the transition of the Cloud has been a real difficult transition for partners in general. Right? So what we focused on from a channel perspective was not just building out the channel, we do that all the time with people, but this was a younger channel they had some components to it and what they wanted to do was enable their partners - they had a Cloud based offering – enable their partners to better understand how to sell in the Cloud basically, and how to sell subscription based offerings. The key to all of that was we had to understand basically where are they at now, their current state, and where are they going, their ideal state. Once we understood that we understood the gaps that were associated with getting them there and then what we did is we turned around and established a set of 30 tools basically, sounds like a lot but you’ll understand where I’m going. Once we had these tools assembled that focus on these different areas, then what we were able to do was take each partner that this vendor had and were able to run them through what we call “the maturity model”, help them understand where they stood as it relates to effectively selling Cloud solutions. What was their maturity in sales for instance, what was their maturity in marketing, what was their maturity in operations? And it was a scale and once we understood where they stood on the scale then we had the tools that we developed aligned to that. So therefore they were able to take a journey and very systematically start to do one thing after another. What I mean by one thing after another for instance is how do they ask better discovery questions as it relates to a subscription based software or a Cloud based software, what are the questions they need to ask and how can their salespeople ask those questions better? Very elementary tactical three things that they could do, and what happened was that they were able to close deals faster, they were able to find more customers because they started to go through the marketing part of it and understand how to market better, and their overall business became a lot more effective and efficient. Alright, so that’s one scenario with a vendor doing this. Now another one is around the concept of what we call “adaptive partnering”. So with adaptive partnering, that was one of the first things I mentioned in this podcast today is that it’s a problem, organizations are having a problem adapting. So we developed this workshop for somebody and we put it into the Channel EQ methodology in the platform if you will. We went in and we taught the vendor organizations, the vendor organization in this case was actually sponsored by two, a distributor and a top, top, top, very top big vendor that I can’t mention, but it was sponsored by them. And we taught these principles to all of their partner managers and we got partner managers to shift their old way of thinking into a new way of thinking with using this methodology of adaptive partnering. The result was absolutely mind boggling. What happened was one of the partner managers, and there’s a lot of them, one of them came back to us within a week and said that by using the techniques they were able to get from the workshop and reinforcement mechanisms that we put in place that they were able to find another partner. So they were able to recruit another partner, particularly value proposition better, ask the right questions of that partner, cement the relationship with that partner and in a weeks’ period of time they were able to get $250,000 worth of business from this partner by doing this.
In a weeks’ time?!
In a weeks’ time. Now do we get those results from everybody? No, I use that as an outlier. Right? Because I’m stunned and I have the quotes and I was stunned as well, I was like “you’ve got to be kidding me”. Now when you peel the onion back it was a new partner forum, they had them on the radar screen, but what happened was they used our techniques, they used the adaptive partnering and they hit them at the right moment with the right information and the right techniques and the right tactics and all this fell into place. I’m not saying everybody that comes to us is going to find that result or else I think I’d be retiring soon. What I’m saying is an outlier that’s pretty substantial as far as changing from the old ways to the new ways and what they have to do. Even if it’s not $250,000 in one week but if its incremental over time that’s what we all want in the end.
Well that’s such a great story of really aligning the people, those skills, the processes, all together, everything that you’ve been sharing and talking about, that all kind of coming together with one objective and then being able to success so it’s beautiful, that’s a great story.
Thanks, I like sharing it.
So Keith, before I let you go, you’ve been answering some pretty serious channel questions but I don’t like to let anybody leave the podcast without going through my speed round of personal questions so that we can learn a little bit more about you. So are you ready to answer some quick questions about yourself?
Absolutely! Let’s do it.
Okay. My first question is what is your favorite city?
Favorite city, Philadelphia.
Oh, that’s a good one, I haven’t heard that one yet.
Let me back that up. Favorite city that I lived in is Philadelphia. Favorite city number two is Charleston, South Carolina.
Alright, awesome. Question number two, are you an animal lover? Yes or no?
Yes.
Do you have any pets?
We have multiple pets. We have 18 horses, we have 6 cats, but we don’t have any chickens or goats.
Do you live on a farm?
Yes, I have a farm.
Question number three, Mac or PC?
Both.
Question four, Uber or Lyft?
Uber.
And question five, let’s say I was able to offer you an all-expenses paid trip, where would it be?
All expenses…wow this is a really great question that I don’t often think about. All expenses paid trip Kiawah Island, South Carolina.
Have you been there before?
I have.
Oh, okay so somewhere you’d like to go back.
I’m a golfer so it has the best of both worlds, it has the beach and it has the golf.
Got it. Well Keith it’s been so great getting to chat with you and listening to you, getting your insights and hearing some of these amazing stories that you’ve experienced at Channel EQ. If listeners would like to reach out to you, what’s the best way for them to do so?
Sure, I’ll give you two, keith@channeleq.co or go to our website there’s a form there just fill the form out it will send it right off, I get copied on them as one of the founders we always make sure we’re in touch so I get copied on something like that. So, either send me an email directly or go there.
Alright! Well thank you so much and thank you all for listening. I hope you’ll join us next week for another episode of The Allbound Podcast.