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The Joint Value Proposition as a Differentiator

–Cannot make it alone? The most successful businesses rely on each other!

In my daily work, I speak with, and write for an audience that is very familiar, and -I hope- convinced of the value that partnerships bring to the table. However, in the larger context, it is very common to see references to getting rid of “the middleman” and “going directly to the manufacturer”. These messages predicate price savings that rarely materialize, on the basis that the layers in a value chain between the manufacturer and the consumer add no value whatsoever, and all they do is add up to the cost, collecting some type of an underserved fee. This article is from the point of view of someone who has worked for years for companies that have leveraged external partners to make it possible for their businesses to reach new heights, and offer a better experience for their customers.

WHEN THINGS WORK, COMPLEXITIES ARE IGNORED

This indicates that about 70% of the global economy flows indirectly, and for good reason. Each one of the participants adds value. But how is value added? Why do we need these intermediaries?

In today’s complex business environment, there is almost no product or service that is made or delivered end-to-end, by one single company. There is always an intricate network of supply-chain elements and partnerships of sometimes completely independent companies involved. With the exception of the few of us who are deeply wading in the waters of partner ecosystems, these complexities tend to be ignored.

To make things worse, not even in some partner-friendly companies is everyone adequately acquainted with their own delivery models. More than a few times, I have found myself briefing an executive about the differences between their own Value Added Resellers and Agents.

Very often, these relationships are also, more than simplified, dumbed down. They are sometimes wrongly classified like a “supplier” or even worse, called “the middle man”, as if for some inherited privilege they have earned the right to collect some type of tax that they don’t really deserve.

THE MIDDLEMAN IS THERE FOR A REASON

In reality, many companies rely on partnerships to deliver their products to the market, and their partners are an integral part of their Go-To-Market strategy. In today’s world, it is a rare find a company that is capable to deliver its product or services all the way from the source, to the hands of the customer. Along this journey, several companies -or “partners”- may perform services, attach other products, etc. adding value to the final product that lands at the customer.  It is from this journey and the several steps of value-add that the concept of the value chain stems from, and the product or service that is delivered to the customer is experienced through its Joint Value Proposition.

While these concepts are omnipresent in the tech industry, they are all over our economy as well. Two of the most noticeable ones are the Distribution Channel and the Service Delivery Partners. As for the first one, we see it everywhere, from the grocery store, the car dealership, or our trusted IT gal. For example, it is impossible -or not cost-effective- for car manufacturers to set up showrooms in every town, so they rely on entrepreneurs who are willing to enter in this business. In a similar way, growers and other foodstuff producers cannot afford to go to every town to sell their goods, so they engage in the distribution network that brings those goods to your local grocery store.

We must recognize the value that each of these partners offers for the consumer. Yes, they take a portion of the profits as compensation for their services, but they also add value to the product or service. For example, the local dealership makes it easy to get there, they offer financing (they bring together the automobile, and a financial product, the loan), and they can also service your car. In the case of the grocery store, besides making it really convenient to buy, with extended business hours, refrigeration, and now even home delivery, they are also an “aggregator”, allowing us to buy apples, milk, and honey, without having to visit the orchard, the dairy farmer, and the beekeeper.

A Service Delivery Partner can be a key player in the value chain, especially if the product or service requires installation, servicing, or any form of customization. They can be as simple as the independent contractor that may install the carpets that you bought at the big home-improvement store, or as complex as Microsoft’s partner network, where partners specialize in specific technologies. There is a huge difference in value between the carpet just delivered to your house in a roll, vs. actually being able to step on it. How much more value does that have in terms of your ability to enjoy the product?

IS A PARTNER RELATIONSHIP RIGHT FOR YOU?

The way we experience a product or service is the result of all the value transactions that occur throughout the value chain, before they reach us. Some of these value transactions and the players involved, have evolved over time, filling a need. Others have been created intentionally, by design. This is where some companies have the opportunity to differentiate themselves from others by designing value chains that complement each other, delivering value to their customers. Across the board, some of the benefits of working with partners, instead of building every single aspect of the business, are:

Let a specialist deal with getting your product to the customer, the way the customer wants it. Partners have been doing what they do, for years. This makes them experts at it, and they can guarantee quality in a consistent manner.

Reduce the overall cost for the customer. Because of the specialization that partners may have developed, they are also in the position to perform the services required at a fraction of the cost that you would be able to do them in-house. (Yes! Partners can actually make things cheaper!).

Limit your exposure, adjust to sales volumes. Partnerships generally operate on a variable cost basis. This means that during times when business is slow, you will not have to pay them that much.

Be agile to scale. In the opposite scenario to the above and in the same way that a partner can scale down when business is slow, they can also quickly ramp up their services when business is booming.

CHOOSE PARTNERS WITH THE RIGHT CAPABILITIES

When considering the way your product or service should be experienced, your differentiated value proposition. What does it look like? Can you make it happen? From the source to the end? What are you missing?

Instead of creating all the necessary parts to build your ideal differentiated value proposition, one option may be to partner with the right company, to complete your vision, and in this case, create a Joint Value Proposition. What kind of partner would you need to complement the value that you create?

Conversely, Is your business in the channel? Are you a reseller? An affiliates seller? A retailer? It is just as important in this scenario to do the exercise and be able to articulate what value you add. Do you make the customer experience better? Do you provide delivery? Help with selection? Install? Do you provide some kind of support afterwards?

PARTNERSHIPS ARE FOR THE LONG RUN, MAKE THE RIGHT PROMISES

Partnership relationships can be complex though, and they require a lot of forethought. Companies partnering remain independent and is important to align incentives in order to make the partnership sail smoother and put in place a contractual framework that supports the partnership. Talking to a specialist in this area can pay off many times over the years.

As someone in business, instead of “cutting the middleman”, it may be wiser to seek it out and have someone to lean on.

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Huba Rostonics
Huba Rostonicshttps://channelmeister.com/
Huba Rostonics is a go to market and business strategist, helping companies navigate change. With a unique sales & marketing, services and support, and program design background; and a demonstrated track in the cloud & virtualization, networking & telecom, and IT security verticals; he has successfully started, managed, and grown partner go to market and marketing programs, crafting strategies to attain ambitious sales objectives, building strong and resilient partner ecosystems. A relentless optimist and an EMMY-nominated communicator, he helps executives and organizations to define their unique value, align their strategy, and overcome their challenges with innovation.

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