Chapter 16
The West: Place => Partnerships
We cannot enter into alliances until we are acquainted with the designs of our neighbors.
—Sun Tzu, The Art of War
Selling Direct versus through Partners—Know Your Customer's Preference
You should know how your customers want to be approached and what kind of relationship or engagement clicks with them. How do they learn about your product and gain confidence in it and in you? Do they prefer to be engaged directly or through a local distribution channel? Know their preference.
Customers in emerging markets are not the same as those in developed markets, and they have different expectations. As mentioned before, personal communications and getting to know customers is key in these markets. Trust is gained through high levels of relationship building and face time. To engage more deeply, stop talking at your customer and listen more. The Chinese and other emerging entrants understand all this, which is why they sometimes can be more successful than Western companies—they have the strong mind-set and attitude that a customer is always right and always comes first.
During your market-segmentation exercise you should prioritize your target segments and key customers. Based on your selected target segments, decide which customer base you will sell to directly versus through distribution channels. This decision might be based on the size of the deal, the long-term potential of a particular customer relationship versus one that is a short-term one-off, or the complexity of the solution required and whether this varies among customer types.
Sometimes you may not have the luxury of choosing whether to go direct or through channel partners due to the location of the customer. In emerging markets in particular, Western companies most often go through partners. There are certain business practices that are sometimes best implemented through local experts.
However, going direct allows you to provide a high-touch model, which is highly beneficial, and perhaps expected by a first-tier customer, as trust is gained through greater relationship building and face time. Alternatively, you can still use a partner as the primary interface and show up at more meetings in the role of a complementary resource (more on this later). For smaller revenue customers, it is likely more profitable to outsource this customer segment to a channel partner.
Partners Are Key and So Is Your Involvement
There are many different partnering options to explore for your market access strategy. While partnering most often results in greater reach for a company, there is additional effort that a company should be prepared to invest in order to reap the rewards. Further, one must be prepared for ongoing involvement with this customer throughout the relationship. It is not like the typical distribution channel arrangement of simply signing the agreement and expecting the other party to execute thereafter.
Engage with Channel Partners
Sometimes you do not have a choice and need to go through a channel partner to sell to a particular customer. However, high-end or priority customers may expect to hear directly from the supplier they are purchasing from. It is one thing to educate your channel partner, but the level of detail and knowledge intimacy associated with complex products and technical solutions cannot be entirely transferred to a partner. And some customers just want to know that they are getting the same level of special attention that they are getting from a competitor, especially when the purchase is a significant size and/or involves a considerable investment that will have long-run implications. Customers feel better about making a supplier decision when the supplier is present in the deal discussions along with the partner.
We recommend taking on a more hands-on, supportive role with your channel partners or distributors. While your local partner will front the execution of the business agreement, it is good for customer relations for you to be sitting at the table during discussions, to show that you care and that you feel that the customer is important. In addition, it is important for customers to know that your distribution partner has back-end support from the quality/branded company they are purchasing from. This is particularly helpful in emerging markets, where channel partners may be less experienced.
Be more involved and strive for more face time with the end customer, if that is what is warranted and especially if that is what your competitors are doing.
Educate Your Channel Partner
Supporting your channel partners also includes regularly educating them on your solution, including how it compares to your competitors' solutions. This knowledge transfer requires delicate balancing, however, because many partners sell other competitors' solutions and you don't want to be giving away confidential information that could get into the hands of your competitors. Yet you also want to have your partners trained well so that they will choose to sell your product as opposed to your competitors' products. Gaining preferred supplier status is paramount.
This kind of education is particularly appreciated in emerging markets, where training is often less available and less accessible than in the West. Making the knowledge transfer straightforward and easy to absorb and learn is essential. And positioning the training as a career enhancer is an added plus and makes for a stronger commitment from the channel partner.
Partner with Your Customer
With strategic customers or must-win accounts you may choose to partner with your customer as opposed to a supplier, particularly when your product or solution entails a revenue-generating opportunity. This demonstrates that you are willing to share in the risk of your customer selecting your solution, and that you believe in the strength of your offer because you are betting on its success. It also shows your customers that you are supportive of their future growth and are in it with them for the long haul as they build and grow. As mentioned in Section II, the Chinese and other emerging entrants are good at employing this strategy.
Services and subscription types of revenue streams are two profit-sharing mechanisms that you can use in partnering with your customers. Customers can use your product to start their revenue-generating services, and once they start making money you can take a percentage of their revenues and/or begin to collect payment for your product or solution.
Form Public-Private Partnerships
Public-private partnerships are particularly important and effective for emerging-market governments, who appreciate involvement at the socioeconomic level (i.e., assisting with the country's development goals). This also demonstrates a longer-term view and commitment from the Western supplier. If you can look at not just your customer's need but the bigger picture of the country's needs, this makes for a stronger, longer-lasting relationship, ultimately increasing the chances of your becoming the supplier of choice.
An example of a public-private partnership in the high-technology networking industry might be to help an emerging-market country with the build-out of its national telecommunications and Internet infrastructure. By collaborating with a government in meeting their socioeconomic development goals, a win-win situation ensues. This may also include subsidization by international development banks or investment groups.
Partner with the Competition: Coopetition
Sometimes you need to take an “if you can't beat 'em, join 'em” approach and cooperatively bid for a deal with another supplier. Each company may have its strengths and its core contribution to the bid. Partnering with other suppliers with complementary products and/or market credibility is particularly beneficial when neither one of you has all the desired pieces requested by the prospective customer in an RFP.
Playing in Each Other's Sandboxes—Making It a Win-Win
Whether to sell in your emerging competitor's market or country is an important consideration and it can become challenging to do. For a truly successful global expansion, both you and your competitor(s) must learn how to play in each other's sandboxes—and to play nicely and fairly. However, this coopetition dynamic is a tricky dance that requires constant attention and evaluation. More often than not, equal access is not easily achieved.
Partnering with the Chinese: A Caution for Western Companies
Ken Wilcox is chairman of Silicon Valley Bank and had been in China for over four years, leading the creation of a joint banking venture between Shanghai Pudong Development Bank and Silicon Valley Bank. Based on his extensive experience and career as a corporate leader on both sides of the ocean, Mr. Wilcox compares the U.S. and China approaches:
The U.S. is often less assertive than China, yet when Americans are assertive, they are assertive in the wrong way. They should speak softly and carry a big stick, and instead they speak loudly and carry a small stick. Or, to put it differently, the U.S. appeals to fairness when they should be applying leverage, as the Chinese do not understand fairness, they understand only leverage.1
Mr. Wilcox offers the following cautionary insight to U.S. and Western companies who are approached by Chinese counterparts seeking to create joint ventures. The following summarizes what he considers to be the sanctioned model for Chinese success with the United States and says that sadly, Americans repeatedly fall for this approach:
- The Chinese figure out what technology/knowledge they are missing.
- They determine which U.S. or Western company has in its possession the desired technology or knowledge.
- They encourage that U.S. or Western company to come to China.
- The U.S. or Western company is lured into a joint venture (JV) with the prospective Chinese company.
- The Chinese government ties up the JV with regulation that prevents it from doing business for a few years.
- During those few years the Chinese encourage/incentivize the U.S. or Western partner to teach its JV partner all it knows, under the pretense that doing so will enable the JV to get out from underneath whatever regulation is holding it back.
- Once the JV partner has learned all that it needs to, China eliminates most of the regulatory restrictions so that the JV can start to make progress, however…
- The Chinese still maintain enough regulatory restrictions to prevent the JV from really blossoming in China.
Place and Presence
Ensure that you show up where you know your competitors (as well as customers) will be—places such as trade shows, specific regions, and so on. If this is not part of your immediate-term plan, realize that your absence will often be noticed more than your presence. For example, not having a booth at a conference that you know is going to have a lower customer-lead return than desired might be a mistake if your top two competitors in a new market are going to be there in full force. You would be sending a strong message to your prospective customers that you don't think that they, or the marketplace, are significant enough to expend time and resources. When you show up to a bid, your customer may remember your absence from the conference and this may influence his choice of supplier—after all, if you weren't at a trade show, are you going to be available to him for servicing or questions after the purchase?