Channels Service Sales Performance Management

Contributors: Mark Micheletti and Sanjay Shitole.

Organizations looking for a competitive advantage and financial gains extensively utilize Partner networks to increase their selling reach of products and services. Why Partners? Partners can provide immediate access to new markets – geographical, vertical or additional reseller networks who sell to end-customers. In addition, these partner arrangements can have lower cost per dollar of revenue generated versus selling through the Organizations direct sales force.

Partners have various roles in reaching the end customers. This combination or network of partners make up the channel network. For the purpose of simplicity the following picture depicts a commonly found channel structure:

Routes to Market (Products and Services) – Direct and Indirect Channels

Direct – Sales to end customers is achieved by the organization’s sales force
1-Tier partners procure products and services directly from organization and sell them to end customers
2-Tier partners or resellers source products and services from distributors and sells to end customers.

This blog focuses on measuring the performance of partners in selling services to end customers within high tech organizations.

Before going into the measurement aspects of this blog I want to highlight that the amount of sales delivered through the channel network needs to be determined as part of a thorough analysis of the business objectives, financial capabilities/performance, market pressures, product complexities, and more. In some cases a low utilization of a partner network is optimal, however the trend is moving to utilizing partners more and more. As the outsourcing of the sales activities increase the more an organization needs to build robust performance management systems. Measuring channels services sales performance is a two way street – it is important to both the organization and  partners: Organizations want to make sure the maximum amount of revenue is captured/delivered by the channels and the channels want to make sure there is clarity and accuracy on the measurements that determine their compensation and selling effectiveness.

Channel Service Sales performance metrics:

Organizations need to measure what matters to assure partners perform well in selling services. There are two metrics that are most commonly utilized in high tech industries: The first measures the ability of the partner to attach services to the products being sold, i.e. Attach Rate. The second one measures the ability of the partner to renew expiring service contracts, i.e. Renewal Rate.

The following section discusses the metric calculation details:

1. 1. Attach Rate metric: Measures the partner’s ability to attach service on the products sold in a measurement period. The measurement period depends on the organizations need to look back into past for measuring performance, typically 12 months.
   
   

Example, If Partner sells $1,000,000 worth of products in a measurement period and Partner has attached services on products worth of $900,000 value then the partner’s Attach Rate is 90%.

Another related metric to maximize revenue is the Install Base Coverage Rate.  This metric provides visibility into how much of the install base is covered with a service contract.  This enables an organization to tap previously “invisible” revenue opportunities and thus place goals and rewards on partners to capture this incremental revenue in their forecast.

Note: The number of units included in the install base should be adjusted for products that have reached their End of Service Life – i.e. not eligible for coverage under a service contract.

1. 2. Renewal Rate metric: Measures partner’s ability to renew service contracts which are about to expire in a defined measurement period. The measurement period is typically a quarter.

Example, if the partner has $500,000 normalized dollar value worth of services expiring in the measurement period and partner has renewed services worth of $450,000 normalized dollar value then the partner’s Renewal Rate is 90%.

There are a few additional renewal rate related metrics which measure partner’s effectiveness in renewing service contacts:
On-time Renewal Rate: measures the partner’s ability to renew service contracts prior to actual expiration of the contract. Renewal Rate metrics will only include the contracts which are renewed on or before the expiration date of old contract.
Renewal Rate with Gap: measures the partner’s ability to renew service contracts after it has expired. Renewal Rate metric will only include the contracts which are renewed after the expiration date of old contract
90 Days Report: measures the timeliness of the partner in sending out the first service renewal quote (and/or first contact with the customer) 90 days prior to the earliest expiration. This metric is a ratio of the ‘Total dollar value of all quotes that included the first contact with the customer at least 90 days prior to the  contract expiration during the measurement period’ to that of ‘Total dollar value of all contracts expiring within 90 days during the measurement period’

The above are a few of the key metrics utilized by organizations to monitor the effectiveness of their partners in optimizing service revenue. Now let’s look at the criticality of “accuracy”.

Organizations establish performance goals and compensate partners with discounts, rebates, or sales commissions based on performance. Accuracy of performance metrics depend on the ability to design metrics that take into account the complexities of a service business. It is important to identify the viable business scenarios and exception rules and include them in the metrics design. Here are some of the guidelines for designing accurate metrics based on industry practices:

Identify the products or services which should be excluded for metrics calculation

Variations around length of the service contracts and overlapping contracts should be handled as per organizations business policies.
End customers receive services from various partners, any services business takeover from one partner to another needs to be identified and the right partner should be compensated as per the rules established by the organization

After determining the suite of metrics to manage and measure the performance of the channel partners, an organization needs to focus on building an efficient reporting tool on metrics data for managing the partner’s performance, driving compensations, and forecasting of services sale opportunities. As the trend is moving to utilize the channels network, it is important for organizations to manage channels service sales performance and drive partner’s to achieve their performance goals for receiving maximum incentives. Measure what matters!

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Visualization Modeling for Enabling Operational Excellence

Contributors: Abhijeet Khadilkar, Keshav Gupta, Will Andrews, Halim Habiby, Sanjay Shitole & Sherri Hendrickson.

Over the last few decades, High Tech companies have experienced rapid growth. Given the pace of year- over-year double-digit growth, these same high-tech companies have not given equal priority to scale and drive operations to be closely aligned to the growing size of the business.  Instead, operations become a patchwork of processes, organizations, engagement models and technology implementations to point needs.  Most of the management attention and resources are focused on customer acquisition and retention, revenue generating activities, product portfolio expansion, and increasing production capacity.  What can develop is an “institutional sprawl,” where the number of people, processes, and systems continues to multiply unchecked and reaches a breaking-point, especially when markets make significant shifts. As an example, fast growing high-tech companies with a market domination focus and an operations backbone built for selling products may find themselves at odds with how to deal with the shift to cloud services and solutions. This is compounded by the operational complexity built over the years to support the immediate growth at hand.

Create a Common Operations Reference Model That Can Be Leveraged Across the Organization

Ask the question, “Have you ever seen an entire business operation through a single lens?” and most people will respond they have seen product definitions, architecture diagrams and process flows, but not “Business Operations.”  An innovative visualization model approach solves the challenge of having an end-to-end view of business operations for critical decision making, business prioritization and executive briefing sessions without getting lost in the myriad of details, in essence providing an ability to “see the forest from the trees.”  At the same time, this model also allows for drill-down capabilities that can prove to be of interest to architects and business process experts. The model becomes a tool that can assist cross functional teams in formulating and reaching decisions, while creating an environment for effective collaboration and reaching consensus.

Known Methods for Modeling are Generally Inadequate

Capturing and effectively visualizing an organization’s business processes, is an important step in any Operational Excellence initiative, yet one that is often underestimated. Process maps, Information Flow diagrams, Swim-lane charts, and PowerPoint documents turn out to limit the speed to improve and innovate for several reasons:

Virtual tool and the media of visualization became the limitation – Almost always, the size of the computer screen is the limit to the amount of information we can display and use to exhibit complexity. The information might be there, but cannot be easily consumed by the decision makers. As an example: one single slide can provide an end-to-end view of process.  However, in order to zoom-in to a specific area, there is a need to change slides and in the process, lose that context level view of the end-to-end process.

Absence of common language across the organization – Different groups in the organization repeatedly create several PowerPoint or process documents to describe the same issue while using different vocabularies and views. It then becomes very challenging to distill the essence of the problem into a form that Business and IT can share. There is a constant need for translation where the details might get lost, the objectives could be misunderstood and the decision-making is delayed. Siloed knowledge leads to local optimum – In a multibillion dollar company, there may be very few business leaders that have a clear vision of the end-to-end process. Most of them have a local view of the process while, when we evaluate a decision, there is the need to look at the system holistically and globally. As a consequence, the decision making is based on partial views that do not take into account possible interdependencies across the organization. The risk is to get stuck on a local optimum that could even worsen the existing efficiency of the organization.

We explored a host of virtual 3D visualization modeling and simulation tools (e.g. from Google SketchUp to Second Life) to create a representation that would adequately capture the essence of business operations for a large global organization. However, after spending considerable time and effort, we realized that a Physical 3D Model would best allow us the sandbox we wanted to use to manipulate and experiment with this concept.

The Physical 3D Visualization Model

The Physical 3D Visualization Model represents a robust framework to address complex organizational environments and can become a powerful instrument for cross-functional teams in sharing, organizing, and visualizing the information that might influence their decisions.

It also provides a common ground for decision making across multiple organizations, groups and functions. People gather around it, quickly relate to the scenario and do not get lost in detail while focusing their energy on decision-making.

The 3D visualization model provides a series of benefits that make it superior to the traditional visualization techniques, not because of technology, but because of effectiveness:

Physical model to facilitate understanding: It is a known fact that business leaders have enough PowerPoint or Visio documents to review as a means for information dissemination and use. We do not need to abuse the technology and become constrained by it.  A certain lead time is required to get acquainted first with the media and then with issues content captured in the tool.  We found that the physical model is incredibly powerful in quickly conveying the message and engaging stakeholders in the discussion. The ability of interacting live with the model in a simplified fashion shortens the understanding phase and accelerates toward the problem solving and the decision making stages. It is a collaborative environment where people actively interact while leveraging the model as a single source of truth.

De-layering complexity: A global organization is typically characterized by a fairly complex operations environment. The 3D visualization model enables comprehending complexity through simple means by way of the “de-layering” technique.  De-layering progressively exposes the audience to increasing amounts of information in the areas of interest while always maintaining the connection and clear view of interdependencies with other components of the organization. Audiences do not get overwhelmed with information, and can move faster towards the decision phase.

Universal reference and baseline across the organization: The physical 3D visualization model becomes a common reference model which is institutionalized across the entire organization. This technique minimizes churn and the lead time needed to align people to the topic of discussion. The unstructured information and knowledge that was residing in the head of an expert, is now crystallized in a final form that is available to be consumed by everyone.

Multiple views:  The physical 3D model presents the possibility of adapting the same model to create multiple views of the  end-to-end process for different stakeholders (e.g. partner focus, internal operations focus, IT focus) providing an extremely versatile and effective communication tool while providing targeted process views:

-  Executive “30,000 foot” view
-  Operations “Process flow” view
-  IT “System” view
-  “Partner Ecosystem” View
-  “Ease of doing business” View
-  Product / Solutions View
-  Life cycle of an Order View

Multi-dimensional: Most of today’s problems are multidimensional in nature.  However, traditional techniques (e.g. PowerPoint, Visio) do not allow for visualization of all the available data. The 3D visualization model is able to embed in one single instance several dimensions:

-  Geographies and channels for sales
-  Type of products and solutions
-  Level of automation versus manual processing
-  Capability size in terms of volume of transactions
-  Capability ownership by organization
-  Cross reference with other prevalent operations reference models
-  Systems supporting each capability and offering

Dynamic model that explains the time dimension: When representing a transactional process, most people visualize a linear flow that starts from New Product Introduction all the way up to Revenue Recognition. The 3D model is able to show how this process is anything but linear, with several iterations that could take place between configuration and pricing. In the physical model there are means to incorporate the time dimension in the dynamic analysis. Through this technique we highlight the process bottlenecks that control the ultimate throughput.

The Bottom Line

The 3D visualization model has the objective of transforming the existing business process knowledge from implicit to explicit while providing clear boundaries and enabling organizations to achieve Operational Excellence. We expect it to mature over the next quarters as we gain market and client feedback through facilitated sessions. The model can be constructed for a host of scenarios and use cases in order to:

-    Align multiple organizations to the same view so benefits can be realized quickly
-    Accelerate complex decision making that usually involves many stakeholders
-    Facilitate portfolio management decisions
-    Support co-development of a solution between multiple business groups and geographies involved
-    Map operations of an acquired company to assist integration efforts

Physical 3D visualization can give users the power to get going on the path for Operational Excellence through an ability to deconstruct business operations for improvement and better decision making.

If you are interested in learning more about the visualization model please email sales@trianz.com

Piero Marcolongo, Abhijeet Khadilkar, Keshav Gupta, Will Andrews, Halim Habiby & Sanjay Shitole

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Why GE’s Six Sigma Success Story Is Still Relevant

The Six Sigma business management strategy developed by Motorola in 1986 has come to be synonymous with quality and success. After over 20 years, why do companies continue to seek out Six Sigma help? What does it take to have a successful Six Sigma rollout? In order to answer these questions, this article will explore GE’s experience launching Six Sigma in the mid-1990s.  Though more than 10 years have passed, the GE story remains relevant – their results have been duplicated over and over again by other companies. GE is one of the greatest success stories in business and is still considered to be one of the best companies in the world for innovation and financial success.

The purpose of this article is not to give all the details on how to use the tools and methodology of the Six Sigma discipline. The focus is on sharing how powerful Six Sigma can be in driving tangible business results and how to create a culture in which this methodology can flourish.

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Operationalizing XaaS

Have you noticed the increasing usage of acronyms that end in “aaS” in the high tech industry? “aaS” stands for “as a Service” and is being used in a host of different ways. Here are a few examples – Software aaS (SaaS), Platform aaS (PaaS), Information Technology aaS (ITaaS), Database aaS( DbaaS). For simplicity’s sake let’s refer to all the various flavors of “aaS” as XaaS.

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Program Communications In the World of Global, Virtual Teams

The challenging economic climate has forced corporations serving the global marketplace to be more frugal. Advances in technology, such as the connected network and readily available web meetings, have increased the popularity of cutting costs by staffing programs with global, virtual project teams. However, as the distance between program team members and their stakeholders increases, communications can easily break down and put the ability of the program to deliver at risk.

This article looks as common virtual team challenges and provides program communications guidelines and best practices.

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Data Integration: ETL vs. ELT

In the last few years, the rapid increase in data volume has forced companies to have a robust and scalable data integration strategy. There are many data integration tools available that support various techniques for integrating data. Before choosing the right tool, the key question that needs to be addressed is “Where will the data integration work be done, inside or outside the data warehouse?”

The choices above are better known as Extract Transform Load (ETL) and Extract Load Transform (ELT) in data warehousing parlance. In this article, we will explore these two approaches and discuss the pros and cons to consider in order to choose the right strategy and tool for your needs.

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Achieve Global Operational Excellence with B2B

Before we start to delve into the core discussion topic, I thought we should take a couple of minutes to consider a few thoughts. If these ring a bell, read on:

• Globalization has expanded beyond the initial phase of simply focusing on global customers and now encompasses the whole gamut of manufacturing and distribution processes. Organizations are realizing the value of outsourcing processes in the supply chain lifecycle.
• There has been a fundamental shift of power to the customer as a result of the commoditization of many markets. Consequently, it has become critical to emphasize real-time collaboration with end customers.
• The Top 500 companies in the world continue to get bigger through mergers, acquisitions and international expansion. As their revenues grow larger, their quest for efficiency grows stronger.

The few points highlighted above call out two major trends – globalization and operational excellence. Traditionally, information technology was implemented to automate processes within an organization and make it efficient in its operations.

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Managing Service Renewals

During the last boom cycle, some high tech companies focused almost exclusively on moving product out the door to support their record sales. These companies gauged their product supply chain effectiveness on how well they performed against certain measures, such as forecast accuracy, order fill rates, and on-time deliveries. The operational back-end practices which are so important to post-sales service were largely an afterthought. Gaps in communication between service, field service, maintenance, and repair departments caused high-tech companies to aggravate and even lose customers.

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Challenges of Managing Business Operations within Innovative High-Tech Organizations

Most leading high-tech organizations are known in the marketplace as the pioneers who bring new ideas and innovations to both corporate customers and main-street consumers. In spite of the global recession and slowdowns in venture capital funding, there have been a fair number of new innovations brought to customers’ doorsteps in the last 18-24 months, including social-network gaming, small but powerful devices for music, video and entertainment, and “cloud” based services for the corporate world.

However, as these smaller innovative companies grow and scale, they are unable to keep up with the needs of their operations and IT infrastructure. A similar reality holds true behind the firewalls of the more established leading organizations – a continued lag of operations and IT infrastructure to support faster time-to-market and lower cost of operations limits how many innovative ideas can be funded and brought to the market. Conventional wisdom suggests that customers see less than 10 to 20 percent of the ideas that could have been brought forward had these organizations solved their internal operations challenges.

This article analyzes the underlying realities that force high-tech organizations to operate in such sub-optimal fashion, including the dichotomy of innovation, external versus internal perspectives, simplicity of use, operations transformation, and finding a proper balance between operational excellence and employee morale.

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Distribution Channels

In order to begin the discussion of direct and indirect distribution, let’s review the business definition of distribution channels. Distribution channels are defined as the:

“Path or ‘pipeline’ through which goods and services flow in one direction (from vendor to the consumer), and the payments generated by them which flow in the opposite direction (from consumer to the vendor). A distribution channel can be as short as being direct from the vendor to the consumer or may include several inter-connected (usually independent but mutually dependent) intermediaries such as wholesalers, distributors, agents, resellers, retailers. Each intermediary receives the item at one pricing point and moves it to the next higher pricing point until it reaches the final buyer. Also called channel of distribution or marketing channel.” 1

To summarize, distribution channels are the process by which products and services are transferred or sold by a producer to an end customer.

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