Growth Through Partners

The path to market dominance

through a channel of partners in
the software industry

Author
Hans Peter Bech

Whitepaper from TBK Consult

 Hans Peter Bech 2013

First edition
Unless otherwise indicated, all materials on these pages are copyrighted by Hans Peter Bech. All
rights reserved. No part of these pages, either text or image may be used for any purpose other than
personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission,
in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal
use, is strictly prohibited without prior written permission.
First published by TBK Consult in 2013 in electronic format only:
TBK Consult Holding ApS
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2930 Klampenborg
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CVR: DK31935741
ISBN 978-87-995228-4-2

Growth Through Partners

Table of contents:
Introduction

The channel is a necessary evil

For all the wrong reasons

1. The negative approach

2. The amateur approach

3. Searching for a business model

4. Lack of ambition and passion

To partner or not to partner

Proven Business Model

Designed for the channel

The Value Chain

Marketing and sales

Implementation and customer

management

Mass or niche market

10

Value Add and Deal Size

10

Competition

10

www.tbkconsult.com

The value chain and the three phases

of market penetration
12
The Value Chain approach

12

The three phases of market

penetration

13

The channel, the value chain and the

three phases

14

Bootstrapping
Customer Value Proposition
Ideal Customer Profile
Mitigating major risk in the
bootstrapping phase
Selling to existing customers

14
14
14
15
15

Conclusion
16
Establishing the Bridgehead
16
The role of the Bridgehead
17
Bridgehead format
17
Control
17
Drive
17
Exit
17
The joint venture/acquisition model 17
The fully owned subsidiary
17
The master franchise/distributor 18
Examples of Bridgehead formats
The Navision model
The Damgaard model

18
18
18

Bridgehead before bootstrapping

me too value proposition
You can afford it

19
19
19

Final remarks on the bridgehead

20

Scaling for Dominance

Vertical expansion
The skill set
Strategic Partner Development

20
20
20
20

The Partner Program

22

The Customer Value Proposition

and Ideal Customer Profile

22

The Value Chain and Delivery Model 22

Partner Value Proposition and Business
Support Program
23
Partnership Model Options

24

Bootstrapping Package

24

Ramp-up of new partners in the

bootstrapping phase

25

Establishing the Bridgehead

25

Customer and partner references

25

Scaling for Market Dominance

25

White Space Management Plan

25

Growth Through Partners

Targeted audience

The target audience for this whitepaper is the board of directors,

the CEO and the sales and marketing executives of software
driven companies with ambitions for achieving global market
dominance. The whitepaper is primarily addressing the
challenges of software companies with long value chains.

Abstract

The whitepaper discuss the role of the (partner) channel in the

three main phases of market growth in the software industry.
The whitepaper discusses the bootstrapping phase, the formats
for setting up local bridgeheads and briefly elaborates on issues
related to achieving market dominance.
The whitepaper argues that the approach for channel partner
recruitment and management changes drastically through the
three main phases of market growth. Recruitment strategy
and partner programs have to be changed as you progress and
increase your global market share.
Contradictory to common perception the whitepaper argues
that achieving market traction through a channel requires an
additional up-front effort and investment compared to the direct
approach.
The whitepaper then gives specific recommendations for how to
design and implement a channel program, which adapts to the
three phases of market penetration.

Acknowledgements

Thank you to Gianmaria Odello and Peter Ditlev for valuable

input and comments.
Design and lay-out: Flier Disainistuudio, Tallinn, Estonia,
www.flier.ee

www.tbkconsult.com

Proof reading: Emma Crabtree, TBK Consult

Growth Through Partners

Introduction

Using a channel of independent companies to resell, implement

and/or service customers has a long tradition in the history of
the software industry.
For some software companies the channel has
been a major contributor to global success, but
for most software companies making it work is
a depressing and constant struggle.
The word channel is used in the software industry to
describe independent companies that assume various roles and
obligations in bringing a software product to the customers. The
definition is rather broad, since the roles and obligations can
vary substantially from simple reselling to system integration,
solution development on top of the software, implementation in
terms of consulting, project management, customization, training
and support.

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The common denominator is the fundamental condition that

the individual channel Partner is an independent contractor
operating in his own name1, at his own expense and at his own
risk.

In channels designed as franchises however, this is not the case.

Growth Through Partners

The channel is a
necessary evil

Using a channel is never the dream scenario unless you are one
of the few eco-system owners. Thus if you embark on building
a channel it should be a part of your long term eco-system
strategy.
Eco-system owners attract partners by the thousands and
partners compete with each other. This is your dream scenario,
which is not without challenges, as we will explain later.
You need the channel to scale your business, but if you can do
the scaling yourself, you should. Here is the rule of thumb:
If you have enough money go direct.
If you have enough time build a channel.

For all the wrong

reasons

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1. The negative
approach

Why do so many software companies have difficulties in building

a partner channel and making it work?
From our experience with GTM2 projects in the software industry
all over the world there are four fundamental reasons why a
channel based GTM fails.

Software companies very often turn to a channel based GTM

approach to avoid the investment required for rapid growth
and the risk associated with the unpredictability of penetrating
unchartered territories.
Although this may appear as a solid business reason, the premise
is negative. You expect that someone who is not so familiar
with your product and your market should be prepared to make
investments and take risk, which you yourself are not prepared
to take? The premise is a negative approach and your behavior
will be colored by your risk aversion attitude. You perceive the
channel solution as the easy and cheap solution and try to shift
the investment and risk to the channel partner. This approach
conveys a fundamental anti-Partner attitude.
Long Term may not be so long anymore. Just dont rely on the
partner channel in your startup phase
2

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Growth Through Partners

2. The amateur
approach

When a software company with a direct GTM approach decides

to apply a channel based GTM they are starting from zero on
the learning curve. For some odd reason software companies
with a direct GTM approach tend to substantially underestimate
and misjudge what it takes to recruit, enable and grow a
channel. Continuing a direct approach in the domestic market
and operating an indirect approach internationally introduces
conflicts, which will absorb energy and resources.

3. Searching for a
business model

If you are still looking for a repeatable and scalable business

model, then trying to establish a partner channel may be
downright dangerous. The agility required when searching for
a repeatable and scalable business model can never be achieved
though a channel. You need direct contact with your customers
to figure out who they are, what they want from you, why they
want it, how much they are prepared to pay and the competitive
alternatives they have available. Introducing a channel into this
scenario will create a level of noise and disinformation, which
will jeopardize the survival of your business. Channels are
introduced to scale working business models, not to search, find,
test and select a new business model3.

4. Lack of ambition
and passion

Some software companies are simply not ambitious and

passionate about their business. They use a channel approach
as an easy and risk free approach to try and obtain some
additional short term business. They make no investment in a
channel enablement program and provide no support helping
new partners bootstrap the business. When the endeavor is
unsuccessful, they blame it on the partners and pull out.

Startups who consider a channel in their business model should read

Steve Blank: The Startup Owners Manual
3

Growth Through Partners

To partner or
not to partner

Proven
business model

When do we choose a partner channel based GTM approach and

when do we select a direct model?
The following issues have a substantial impact on the choice of a
GTM approach;
xx

Do you have a proven repeatable and scalable

business model?

xx

Is your product designed for the channel?

xx

Which parts of the value chain will you allocate

to your channel partner?

xx

How large is the market (in terms of business

opportunities)?

xx

What is the typical value add for the partner (in

pct. of total solution price and in money value)?

xx

What is the length of the sales cycle?

xx

What is the average deal size?

xx

How much is cost of sales in pct. of deal revenue?

xx

How long is the learning curve from kick off to

full qualification of the minimum partner team?

xx

How competitive is your market?

Companies looking for a business model (startups) should not

spend much time on the channel. Even if the channel is a an
integrated part of the business model idea, the focus should be
on finding the product/service, which customers are prepared
to queue up to buy. Until that business model has been found
and tested there is little you can achieve by spending time with
potential partners.
This whitepaper is not written with the startup in mind. The
whitepaper assumes that you have a verified business model and
that this business model is already scaling well at least in your
domestic market.

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Designed for the

channel

Most successful channel eco systems had the channel in mind

when designing the product and the business model. The channel
is not only selling the product/service. The channel is making
critical contributions such as:
xx

Vertical and horizontal product enhancements

xx

Customizations

Growth Through Partners

xx

Customer training

xx

Project management

xx

1st line support

xx

Lead generation

xx

Sales

These observations may seem contradictory to our statements

about the proven business model above, but they are not. The
channel may be an integrated part of your business model idea,
but you must first validate that there is sufficient customer
demand for your solution. Only customers can make that
validation; Channel Partners cannot.

The Value Chain

Marketing and sales

A software business value chain typically has two major parts:

1.

Marketing and sales

2.

Implementation and customer management

Most software companies are looking to the channel to also

assume responsibility for building awareness, generate leads
and close sales.
Most channel partners are looking for customers/projects where
they can sell more of the services they already have on the
shelves.
This dichotomy in the perception of roles often leads to massive
conflicts and frustration. The software company expects the
partners to generate business and the partners expect the
software vendor to build awareness and generate leads. Both
sides are waiting for the other part to move first.

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Implementation and
customer management

In many areas successful implementation and subsequent

customer management is just as important as closing sales. A
customer is not a reference until his is happy with the solution. If
you manage to sell, but fail to implement, then you have moved
two steps forward and three steps back. If you have implemented
poorly and dont get any add-on business, then you may never
achieve a positive gross margin on the deal.

Growth Through Partners

Mass or niche market

Your recruitment strategy and your business partner programs

must address each and every step in the total value chain for
which you expect your partner to assume responsibility.

A channel is most appropriate for very large markets. Small

niche markets are difficult to dominate through a partner
channel.

A channel is most appropriate for mid-sized deals.

Small deal sizes and short sales cycles are potential candidates
for a direct web based approach. Partners may come into the
picture later on, but typically on their own initiative.
Deal Size and complexity

Value Add
and Deal Size

Direct trough
your own sales force

Use a partner
channel

Direct trough the Web

length of sales cycle

Large deal sizes and long sales cycles are poison for the channel.
These types of deals require substantial domain and product
knowledge, which takes years to acquire. Partners may come into
the picture later on, but typically for selected implementation
tasks late in the value chain.
The mid portion of the curve with medium sized deals and
medium sized sales cycles can be suitable for a channel partner
approach.

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Competition

10

A market with no competition is not a market. Using a partner

channel is not a good option for building a market. Market
building is the job of the software vendor (brand owner).

Growth Through Partners

Breaking into a hyper-competitive market through a channel is

also very difficult. The channel partners already have competitive
solutions in their portfolio. Making them change requires dealing
with the cost of migration, which most often makes a shift too
risky for the partner.

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The best timing for using a channel is when a market is

established, but not yet hyper-competitive. Identifying this
timing is obviously not easy. There are no general guidelines
for assessing when the timing is right. We recommend testing
the waters and conducting experiments. Dont invest the whole
company in a single strategy, but test and adjust as you learn
what works and what does not.

11

Growth Through Partners

The value chain Building and operating a successful partner channel requires the
understanding of two fundamental concepts:
and the three
phases of market 1. The Value Chain
2. The three phases of market penetration
penetration
4

The Value Chain

approach

The objective of any software driven company is to get happy

customers and grow the installed base to a position where the
company is the market leader.

Figure 2. Sample Software Value Chain

The Value Chain5 remains the same through the entire journey.
However the effort associated with exercising the various parts of
the value chain changes dramatically through the three phases.
Lets take a look at a normal Value Chain in the software
industry as illustrated in fig. 2 on page 12:
1. Definition of the Customer Value Proposition
2. Segmentation and definition of the Ideal Customer
Profile (ICP)
3. Creation of customer testimonials (satisfied reference
customers)
4. Branding and awareness creation
The Value Chain concept is described in TBK-PFFS-005, which is
available on www.tbkconsult.com
5
The Value Chain is reflecting the customers purchase process and
your corresponding sales process.

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Growth Through Partners

5. Lead generation
6. Opportunity development
7. Pre-qualification & needs assessment
8. Lead activation
9. Presentation and value potential identification
10. Demo/Trial proof of value
11. Pilot verification of value
12. Proposal
13. Contract and delivery specifications
14. Full Scale implementation
14.1. Project Management
14.2. Development
14.3. Customization
14.4. Integration
14.5. Training
15. Support
16. Customer management (maintenance/up-sell/cross-sell)
The energy and insight required to perform each step of this
value chain varies substantially depending on whether you are
in the bootstrapping phase or in the path to market dominance.

The three phases of

market penetration

The path from local to global market dominance in the software

industry goes through three phases.

1. Bootstrapping
2. Bridgehead
3. Dominance
Bootstrapping is the process of getting the first minimum
critical number of customers in a new territory and growing the
revenue, which will allow you to establish your own presence in
that market.

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Bridgehead is the phase where you establish your own

presence in the market and grow your market penetration to full
geographic coverage
Dominance is the phase where you consolidate your position

13

Growth Through Partners

into your selected vertical industries. Dominance obviously

requires full geographic and vertical coverage. From a position of
dominance you can become the eco-system owner.

The channel, the value

chain and the three
phases

In this section of the whitepaper we will explore what to do in

each of the 3 phases to create your position and steadily grow to
the next phase, when a partner channel is a part of your GTM
strategy.
Lets make a blunt statement:
A partner will be reluctant to sell a new product to
his existing customers. A partner cannot sell a new
product to a new customer.

Bootstrapping

Bootstrapping into a new market through partners will seldom

work. Winning the first critical reference customers requires
that you be in front of your partners basically doing the job for
them.

Customer Value Proposition

You need to know your customer value proposition extremely well

and it must be thoroughly documented. We recommend using a
standard format for describing you customer value proposition
such as the NABC format 6.
Your value proposition must have a very clear competitive edge.
Selling something, which is already available in the market with
established references and local support is very, very difficult.
Thus your value proposition must explain why your proposal is
better than the already available alternatives.

Ideal Customer Profile

As described in the Value Chain Approach you must define an

ideal customer profile in order to identify which customers you
should approach first7. The challenges associated with breaking
into a new market also apply to the situation of breaking into a
new geography. We recommend studying Geoffrey Moore and his
renowned book Crossing the Chasm.

The NABC format is described in the document TBK-PFFS-002,

which is available on www.tbkconsult.com
7
The format for describing the Ideal Customer Profile is explained in
the document TBK-PFFS-003, which is available on www.tbkconsult.
com

www.tbkconsult.com

14

Growth Through Partners

Your challenge is that the main market is available to neither

you, nor your potential partners. Somehow you need to identify
and approach technology enthusiasts and visionaries first or at
least identify potential customers who will derive massive shortterm benefit from using your software.
Mitigating major risk in the
bootstrapping phase

The primary risk factors in the bootstrapping phase are time-torevenue and the learning curve.
It is hard to estimate how fast you can win the critical number
of reference accounts. If you assign all steps in the value chain
to partner(s) and provide him/them with some basic product
training only, then your chances of success are very slim.
Partners are extremely sensitive to time-to-revenue and tend
to reallocate resources if genuine sales opportunities do not
mature within a 3-month window. The value of the basic training
evaporates and you have to start all over again, if and when a
new sales opportunity appears.
Experience shows that it takes real life projects to effectively
travel the learning curve. Classroom seminars alone will not do
the job. You must drive the sales effort associated with winning
the first customer with the partner as a trainee. The second
customer can be a 49/51 effort and the partner can drive the
third customer project with you as the supervisor.

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Selling to existing customers

15

You MUST insist starting with the partners existing customers.

Selling a new product to an existing customer will cut at least
50% off the time-to-revenue.

Growth Through Partners

Partners are reluctant to sell new products to existing customers

because they are afraid it may jeopardize the customer
relationship. The partner may be really excited about your
product, but as he has no practical experience with the product
he will cool off when it comes to actually making the first moves
and introducing the product to his existing customers.
With a few exceptions partners are not professional sales and
marketing machines.
They are mostly technical oriented
feature creatures. Therefore they have a hard time getting new
customers. When they come across a new sexy product, they
believe the product can open the doors to new customers. After a
couple of attempts at getting the foot in door with new customers,
they will be disappointed and shift their focus elsewhere.
It is your job to insist on starting with the existing customers.
You must work with the partner identifying the buying centers
and work according to your Value Chain approach. You must
drive the sales effort and take an active role in the subsequent
implementation.

Conclusion

Bootstrapping cannot be left entirely to a partner. You have to

take him by the hand and walk him through the learning curve
until the first 3-5 customer projects have been completed and the
revenue flows.
Working through a channel essentially requires
additional investment as compared to the direct
approach.
Believing that bootstrapping through a channel of partners
is less expensive than the direct approach is based on false
assumptions. Developing a partner channel is an additional
investment. This investment will provide a return later on,
providing sales and implementation capacity in the market over
and above what you could have generated through your own
organic growth.

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Establishing
the Bridgehead

16

The Bridgehead is your representation in a local geography.

The first objective of the bridgehead is to secure full geographic
coverage in the territory. It is very unlikely that you can achieve

Growth Through Partners

full market coverage without a local representation8. Thus you

need a bridgehead.
As a rule of thumb you start building your bridgehead when you
have a revenue stream and pipeline, which can cover the cost
and secure breakeven within 18-24 months.
The role of the Bridgehead

The Bridgehead is responsible for growing the channel, supporting

the channel, local branding and local lead generation.

Bridgehead format

The main issues underlying the decision for the bridgehead

format are control, drive and exit option. Unfortunately they do
not correspond very well with each other.

Control

You do not want a bridgehead which you cannot control. You

want to have the power for hiring and firing the country manager.
You want to set and drive the direction of the business.

Drive

Your bridgehead is by definition remote. How do you motivate

the staff in the bridgehead to go out of their way to grow your
business? When people get on the pay roll with high fixed
salaries, they tend to be comfortable and relaxed. The list of well
paid country managers who failed to deliver the results, misused
the funds and left a mess behind is unfortunately very long.

Exit

If you do not own or have a pull option on your bridgehead,

what are you going to do in an IPO or industrial/financial exit
situation? The revenue recognition portion of a bridgehead you
do not own is small and limited to the margin you receive.

The joint venture/acquisition

model

Acquiring or doing a joint venture with a local player is a proven

way of making a bridgehead. You should insist on having full
control, but leaving enough equity to the joint venture partner
to motivate an extraordinary effort until critical mass has been
achieved.

The fully owned subsidiary

The fully owned subsidiary is the preferred way for most

software companies. Placing one of the companys headquarter
executives to run the bridgehead until critical mass has been
achieved is also a well-known approach. Your main challenge
For certain very niche oriented products a local bridgehead may be
required in markets of a certain size only. Example: Image a solution
for weather agencies. There may be only one or two weather agencies
in a small country and there is no basis for a local representation and
your customers will not expect this either.

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Growth Through Partners

is managing the subsidiary. Setting up a subsidiary requires

substantial investments. Running subsidiaries requires loyal and
capable local management but also corresponding headquarters
management and control functions.
The master franchise/distributor The master franchise/distributor model may be tempting and
may also work if you have a pull option. 100% dedication to the
business is crucial.

Examples of Bridgehead formats

The Navision model

Navision was a software company in the ERP market. Their

international go-to-market model was through a master
franchise type concept, where the local distributor operation was
owned and operated by independent parties. The distribution
agreement included a pull option for Navision. At any time
(after a grace period) Navision could exercise a partial or full
purchase of all shares in the distribution company. The pull
price was defined through an algorithm agreed by both parties
from the beginning. Before Navision did their IPO they rolled up
the entire network exercising their pull options. Navision later
merged with Damgaard and was acquired by Microsoft in 2002.
The owners of the local master franchises had the full P&L
responsibility. They knew that there was an exit strategy and
equity earn out opportunity.
The drive and commitment you get when people are responsible
for their own business operation and can read the equity value
in their dispositions, is hard to match with staff on a fixed salary
and a commission plan.
Exercising the pull option was a major investment for Navision.
However it was financed by the IPO and was a balance sheet
manoeuvre.
The Navision model still stands as one of the most successful
internationalization models in the software industry.

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The Damgaard model

18

Damgaard was also a software company in the ERP market.

Their international go-to-market model was a strategic alliance
with IBM. IBM was responsible for setting up and managing
the partner channel worldwide.

Growth Through Partners

While IBM certainly was an excellent brand name for attracting

local partners in the bootstrapping phase, it was not a good for
model for accelerating and maintaining growth. Damgaard
eventually bought back the distributions rights from IBM and
established their own subsidiaries to manage and grow the
channel internationally.
Setting up subsidiaries simultaneously in several countries is
a costly affair, which has a major impact on the P&L. On the
other hand it is highly controllable. Damgaard made a roll out of
Axapta (now Microsoft Dynamics AX) through its subsidiaries in
a highly uniform way over a very short time. To secure control
Damgaard stationed some of their senior executives9 in the
country management positions until critical mass was achieved.
The IBM agreement, which looked perfect on paper, probably
introduced a 5 year delay for Damgaard. Dealing with big IBM
was a drain on the resources for the relatively small Damgaard.
Damgaard made a successful IPO in 1999, merged with Navision
in 2000 and was acquired by Microsoft in 2002.

Bridgehead before
bootstrapping

There are situations where it makes sense or where a bridgehead

is even required before you can commence bootstrapping:
A. When your value proposition is me too

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B. When you can afford it

me too value proposition
(hyper competition)

When your value proposition and the way you position yourself
is very close to already established players in the market then
your only way to penetrate a new market is through brute force.
It is the application of the ancient military strategy the army
with the most soldiers will win the battle. You cannot execute
the brute force strategy from the outside; you must have a
bridgehead first.

You can afford it

It is not unusual to set up a bridgehead before bootstrapping.

If you can afford the investment and if you can accept the
unpredictability of time-to-revenue, then it is recommended to
start with a bridgehead.

The author of this white paper was stationed in Stuttgart, Germany

from 1998-2001 and was responsible for growing the business in DACH
(Germany Austria and Switzerland)
9

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Growth Through Partners

Final remarks on the

bridgehead

Establishing a Bridgehead may not be at the forefront of the mind

for the software company standing in front of the bootstrapping
phase. It should be. If you do not intend to get to the bridgehead,
then bootstrapping makes absolutely no sense. Why go through
all the hassle of bootstrapping and then leave it there? You may
have a slightly profitable business for a couple of years, but then
you will be outcompeted. No software companies we can think of
have survived without moving to the bridgehead.

Scaling for Dominance

The first objective to aim for after establishing the bridgehead

is geographical coverage. Channel Partners only have a certain
geographic reach. You must map and fill the white spots. This is
not rocket science it is diesel fueled cars and lots of miles.
As you build your brand the job of recruiting partners will
change. End user demand will increase and the pull effect will
make partners knock on your door. Focus on the geography and
recruit partners to achieve coverage. Your existing partners
will start complaining because they no longer have de facto
exclusivity. Dont listen to them let the best man win. The
partners will have to learn how to differentiate on their skills
and competencies and not on your product. You are heading for
market dominance and you will not get there unless you have
more people promoting your products that your competitors.

Vertical expansion

When you have achieved geographical saturation, your next

objective is to expand into other verticals. Step-by-step. There
is a learning curve associated with each new vertical. You need
partners who are already in those verticals. Domain knowledge
comes before product knowledge.

The skill set

The challenges associated with getting market dominance

from a position of strength requires a different skill set than
bootstrapping and building the bridgehead. You most likely
have to replace your channel account managers or move them
around.
You will separate channel management from channel
recruitment. Your main challenge shifts from market coverage to
the quality of partner skills and customer satisfaction. Upselling
and cross-selling opportunities gets on the agenda.

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Strategic Partner Development

20

Your growth potential in the market dominance phase is limited

to the growth potential of the individual partner. Getting
additional partners will become more and more difficult, thus

Growth Through Partners

you need to engage in strategic Partner development activities

with you most professional Partners.

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Facilitating such strategy development activities will require a

special brand of Partner Account Managers and a framework.
We recommend using the ValuePartner10 framework, which is
designed for exactly this endeavor.

21

See fact sheet TBL-VMFS-003, which is available at www.tbkconsult.

com

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Growth Through Partners

The Partner
Program

In this section of the whitepaper we provide a series of

recommendations for building the initial partner program taking
the previous mentioned challenges into consideration. The
Partner Program is the combination of the services and benefits,
which you offer the partner and the requirements you ask the
partner to fulfill.
The Partner Program is the container where all details of
partnering are documented. The Partner Program is often in
itself a key competitive differentiator for a software company.
Based on the Partner Program potential partners can assess the
cost/benefits of your offering and thus the value to his business.
Typical elements of the Partner Program are:

The Customer Value

Proposition and Ideal
Customer Profile

xx

Customer Value
Customer Profile

xx

Value Chain and Delivery Model

xx

Partner Value Proposition and Business

Support Program

xx

Partnership Model Options (with a Partner

Agreement)

xx

Bootstrapping Package

Proposition

and

Ideal

The Customer Value Proposition11 explains which compelling

customers needs the solution is addressing, the approach for
delivering the solution, the benefits provided for the cost of
migrating/implementing the solution and how the solution differs
from the competitive alternative available to the customers.
The Ideal Customer Profile describes the characteristics of the
customer deriving most benefits from the solution.

The Value Chain and

Delivery Model

The joint objective of the software company and the partner is to

find, win and maintain happy and profitable customers.

A more detailed explanation how to define and document competitive

Customer Value propositions is described in the FactSheet TBKPFFS-002. The FactSheet is available at the TBK web site.

www.tbkconsult.com

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Growth Through Partners

The Value Chain12 described in the beginning of this whitepaper

is the tool for defining the division of labor between the software
company and the partner. Who is responsible for what?
The Delivery Model describes how the software company enables
the partner to execute his portions of the Value Chain.

Partner Value
Proposition and
Business Support
Program

Many software companies mistake the partners for their

customers. If your ambition is to build a brand in the market,
then your partners are not your customers13. This may seem a
semantic and academic exercise, but it is fundamental to your
account management approach.
Recruiting, building and managing successful partners requires
a compelling and competitive Partner Value Proposition.
In the Bootstrapping phase the power balance is in your disfavor.
The partners have an operational business and can survive
without your solution.
You need the partners, but they dont need you.
In this phase the Partner Value Proposition must describe the
entire business opportunity. It must be very specific on how to
bootstrap, and it should clearly illustrate the substantial profit
opportunity achievable after getting started.
Partner Testimonials detailing how other partners became
successful with you and your solution should support the Partner
Value Proposition.
The Partner Value Proposition should include the following:

A more detailed explanation how to define and document the Value

Chain is described in the FactSheet TBK-PFFS-005. The FactSheet is
available at the TBK web site.
13
If you primarily engage in OEM type relationships with your
partners or if the partners consume your solution and there is little
value carrying your brand to the customers, then your partners are not
partners. Then they are customers.

www.tbkconsult.com

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Growth Through Partners

Needs
How does the combination of your product and
your Partner Program provide a compelling
business opportunity for the partner?

Approach
What is your approach to help the partner
getting started and how will you protect his
investment?

Benefits

Competition
What does the typical Partner P&L look like
in year 1, 2 and 3.

How is your business proposal superior to

any other alternatives the Partner may have?

The Partner Value Proposition must be 100% synchronized with

the Customer Value Proposition and the Value Chain. Describing
the full Value Chain and how partners add and profits from
adding value is essential for creating a solid business justification
and business case.
The Partner Value Proposition should be complemented by a
Partner P&L Model, which incorporates all the investments
required by the partner, your own support and contributions
including realistic sales cycles and average order values.

Partnership Model
Options

We recommend keeping it simple in the beginning. Stick to just

one partnership option and differentiate at the later stages.

www.tbkconsult.com

If you have various partnership options e.g. Platinum, Gold

and Standard, then you must have a complete description of
the requirements, associated benefits and the legal terms and
conditions. But again, keep it simple.

Bootstrapping
Package
24

Getting the first reference customers fast is crucial to the success

of the relationship. Thus training, planning and executing
market penetration must be parallel activities.

Growth Through Partners

We recommend not spending too much time writing elaborate

business plans. The Partner will have no experience with you
and your product thus the plan will contain too much guessing
on the Partners behalf.
Identify those of his existing customers who are candidates
for your product, get out of the building and meet with them.
Dont ask the customers for their opinion. Ask them to buy the
product and then listen to their feedback and the nature of their
objections. These meetings with real life customers will provide
you with a world of information on which you can move forward
step by step to more solid ground.

Ramp-up of new
partners in the
bootstrapping phase

The probability that a partner will become successful in the

Bootstrapping phase on his own cost and at his own initiative is
very slim.
All partners expect that the software vendor invests in building
the market, developing the first reference customers and prove
that the Partner Value Proposition actually provides a fast and
riskless path to success.
Time to revenue is the #1 priority in order to keep netinvestments as low as possible for the software company and
for the partner. The partner and vendor need to develop a Short
Term Ramp-Up plan with laser-sharp focus on closing the first
reference customers. Such a plan could look like this:
xx

Definition of success-criterias for the first

3-4 months

xx

List of most potential customers (ideally

from the Partners installed base)

xx

Sales Plan Who does what to generate

and support the sales cases, investments,
revenue sharing?

xx

Measure and follow-up

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Signing the Partner Agreement may be important to the software

vendor. However, to many partners the real commitment comes
with the business and not with the Agreement.

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Growth Through Partners

Establishing the Bridgehead

Customer and partner
references

After the Bootstrapping phase you have managed to build your

customer references with your partners. Ensure you have full
access to the customer references as your foundation and key
assets for setting up the Bridgehead.
While expanding your presence in the market, you will need
more partners to build coverage of the market. Build successstories based on the first partners in the market, and use them
as Proof of Concept that the partner model and value proposition
is trustworthy.

Scaling for Market Dominance

White Space Management
Plan

When Scaling for Market Dominance you need to cover every

customer in your target market. To do so, you need to build a
Partner Coverage Map that describes how your current partners
are covering the different customer segments, verticals and
geographies. This will show your coverage, and also where you
have market White Spaces; areas with no or low coverage.
Combine this Partner Coverage Map with local market analysis
to identify the potential of the White Space areas. You are now
ready to start recruiting partners into the attractive White Space
areas either by recruiting new partners and/or by supporting
current partners to expand their market coverage into the White
Space.

www.tbkconsult.com

Building such a plan requires lots of market data and in-depth

knowledge of your customer base as well as of your partners and
their competencies and focus areas. With the plan you will be
able to direct your investment into the most profitable areas and
reduce partners competing with each other.

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Growth Through Partners

Hans Peter Bech

Hans Peter Bech is a software industry growth consultant; he
has more than 30 years of operational experience with global
business development in the software industry.
His experience includes all types of software from high priced
enterprise management solutions to low price/high volume
software sold over the Internet and/or through telesales.
Hans Peter has been exercising all Goto-Market variations
such a direct enterprise sales into foreign markets, indirect
through resellers and distributors, through own subsidiaries,
through franchises and through acquisitions.
Hans Peter is the author of several whitepapers on software
business development and Business Model Management in the
software industry. He frequently writes articles on the subject.
He started his career as a management consultant in 2003
and founded TBK Consult in 2007. Since then he has built the
company to its present position with 24 senior consultants in 16
countries.
Hans Peter oversees the development of TBK Consult as well
as performing management consulting assignments for selected
clients.
Hans Peter holds an M.A. in macroeconomics and political science
from the University of Copenhagen. He speaks Danish, English
and German and is a certified ValuePerform, ValuePartner and
Business Model Generation consultant.

www.tbkconsult.com

More about Hans Peter Bech: http://dk.linkedin.com/in/hpbech

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