Milestone Group Quarterly: October 2007
Articles
Milestone POV:
Why Nine Men Can’t Make a Baby in a Month by Bill Burk, Milestone Group Principal
In the all of the years that I've been consulting there is a consistent scenario among the companies and clients with whom I work. It may manifest itself as an early stage company (with an interesting product) that is not gaining traction within the marketplace. Obviously, the board and/or CEO are unhappy with the results. Or it may take shape as a company just coming out with product and needing to jump start their business development efforts.
Almost all of the companies I've worked with had potential for great success; but surprisingly, too many of them simply didn't have the infrastructure, thought process, tools, or ability (desire) to execute on what are often ambitious goals.
It always surprises me when this happens, because up until the point they've engaged me a significant amount of time and capital have been dedicated to making the product or service "market ready." But during this gestation period no one's given much thought to nurturing the most critical period in a product's life - it's infancy.
Not to extend the metaphor too far, but the question at the point of product introduction is this: who's going to help us raise this baby? Most technology products need a partner channel for success and there are four key focus areas that I have found that significantly increase the chance for healthy growth.
The four steps to maximizing a product's performance in the partner channel are: understanding the OEM value proposition, identifying and understanding target opportunities, creating well defined and easily understood pricing models, and defining the steps to close.
When entering the OEM space, it is important to define and understand what the value proposition will be to prospective targets. It has been my experience that the OEM value proposition will be significantly different than the value proposition found within existing non-OEM channels. The underlying thought process needs to transition from: "How do I sell my product to someone who will use it?" to one that asks: "How do I sell my product to someone who will use it as a part of their offering."
The value proposition needs to be crisp, clear, and quickly differentiated from the twenty other companies going after the same target. A good value proposition will succinctly define the importance of the product, the value it will bring not only to the OEM customer, but to their customers as well.
Possibly the most important factor to a successful campaign comes from a thorough understanding of target opportunities. Correctly identifying target verticals and companies at the outset of the endeavor will ultimately save time, energy and money while accelerating positive results.
Too many times I've had executives at companies suggest that we should target a certain company simply because they are a big name; and to hear them tell it: "A big name like theirs must need something like what we're offering." Of course, a company wants (and should want) to do deals with big companies, the key to success here is understanding where the product potentially fits in by demonstrating ease of integration, and establishing that an investment in the technology will have a better overall return than any other partner channel possibly could.
Often, I have worked with companies that struggle to determine how a product should be priced, and then look to a potential customer to help them make that decision. As well, I have also worked with many companies who tend to make price the biggest selling factor. Neither strategy is useful.
It is my experience that companies are actually willing to pay more to OEM a product if they perceive that there is well defined and visible value, and a higher price can actually create a perception of value. (Here's an interesting analogy - a retail luxury brand is often concerned that their price is too low for a market, thereby diminishing their brand value. We should all have such problems.)
Bear in mind that terms and pricing are always negotiated. It's much easier to change a term or lower a price than it is negotiating terms and pricing dictated by the customer (and potentially creating a deal that you are unhappy with over the long term). With that said, it is always a good idea to keep the pricing model as simple as possible. More complex pricing means a more complex agreement, which then, potentially, creates a barrier to completing a deal.
As with any sales situation, setting expectations - both internally and externally - on what needs to happen to close the deal is critical. Except in rare occasions, deals are not executed overnight. OEM deals are very much like marriages inasmuch that compatibility needs to be established before making the commitment to a deal. Not all potential deals are good deals, and better to terminate a relationship prior to agreement.
I have found it useful to create a "close checklist" to share both internally and externally so that there is complete synchronization and expectation for all involved parties. This checklist will identify the necessary steps to close and targeted dates for each of the steps, and provide a good tool to keep all involved on task.
OEM deals are often an intricate part of a company's sales strategy. Properly identified and executed, the deal should provide a great source of revenue, and as importantly, provide credibility for an early stage company within the marketplace. A well defined OEM strategy will accelerate the sales process, focus the resources necessary for success, and clearly define the steps and processes necessary to getting a deal done - both internally and externally.
It takes time to put an OEM strategy in place. And it should begin early on in a product's and/or service's development phase. Healthy growth is growth at the right rate of speed and trying to push a nine-month process into a one month window will only show the market that this one wasn't really planned.
Bill Burk has more than 20 years of direct and channel sales experience in the security and networking space. He has worked both at Fortune 500 and startup companies, creating new markets, building teams and driving exponential revenue growth.
Burk has served as VP of Sales, Americas at SSH Communications Security, where he designed and implemented a sales strategy that increased enterprise revenues from less than $500 thousand to over $8 million in less than 18 months. Customers included US Treasury, Caterpillar, GE, Disney, Best Buy and Fidelity.
As VP of Data Products and Data Services Sales at Avaya, Bill was responsible for a world wide sales team that produced over $550M in revenue of Avaya's Security and Networking Products.
As VP of Sales at VPNet Technologies, Bill drove revenue to $18M before selling VPNet Technologies to Avaya in 2001. Customers and partners included SBC (now AT&T), Wal-Mart, Department of Defense, NTT Docomo and NEC.
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