ChannelCorp undertook the research presented in the following articles for our clients — the Presidents, CEOs and Board Members of technology resellers. In completing the research, we sought to create new insights about growing resellers (and reseller transformation) in order to assist the Presidents,

CEOs and Board Members in becoming more effective at their jobs.

There were two situations in which we wanted the work to be useful. Specifically, we wanted ChannelCorp’s clients to be able to answer two critical questions a little easier:

Question 1 — What decisions do I have to make in order to grow and transform my company?

Question 2 — If I work with another company or companies in a partnership or alliance, or if I merge with them or acquire them, do they have what it takes to meet the growth or transformation program requirements?

The research was a combination of what we have learned providing management consulting services to some of the world’s best-run high technology companies, secondary research of a variety of studies/articles, and personal interviews with a number of Presidents/CEOs and senior managers of small, medium and large resellers of high technology products and services.

The initial focus of the work was to examine how various functions in reselling organizations transform as the organization progressed through a variety of stages.

The assignment of companies to various stages of growth was “neat and clean”; however it was not very useful in meeting our research objectives. It became clear to us that the change we wished to examine was primarily growth-induced.

Furthermore, growth was not a constant or linear process but rather more like a squirting, surging or hopping process. Growth companies seemed to move from bottleneck to bottleneck, opening space for themselves as they went. During the course of the research it became clear that in order to sustain growth, top performing resellers required a solid set of foundations. The foundations required a solid set of functional underpinnings to support them. The functional underpinnings and foundations, our research indicated, were in some cases late, in some cases early, and in some cases not even in existence.

The results of our research were very clear — growth and transformation drives reseller success. Those resellers that we reviewed and those individuals whom we interviewed clearly told us that without growth, there was no success. Research indicated that high growth resellers generated five to ten times the returns for their investors and owners that slow resellers did. High growth resellers also developed new services and introduced new products 1.5 to 2.0 times faster than slow growth resellers. High growth resellers innovated more frequently than slow growth resellers. High growth resellers clearly had a set of attributes that set them apart from moderate or low growth resellers:

Internal focus on improvement, updating and modifying business systems and processes, and client retention benchmarks

Focus on client retention — formal quality control processes, ongoing customer satisfaction research

Focus on client acquisition — new / improved products sold to new/ existing clients

Focus on business/financial planning to ensure adequate capital to grow

Focus on employee training to ensure adequate talent to grow

Focus on creating financial flexibility — more sources of capital/more permanent capital resulting in lower debt/equity rations and breakeven levels

Growth companies were different

In a comprehensive study of the 200 fastest growing companies in the world (Deloitte Touche Tohmatsu International), it was found that “the winners have created integrated business systems to drive sustained growth and have planted them deeply in their organizations.” The study also found that regardless of industry or country of origin, there were five foundations that allowed a company to sustain growth (Figure 1). Not only had growth companies invested in these foundations, sustained investment in these foundations had resulted in sustained growth over the longer term.

Our research and experience was consistent with the findings of the aforementioned research. However we were compelled to push deeper. We discovered that down below the five foundations there were a set of Functional Underpinnings that needed to be in place for a reseller to achieve sustained growth. If these functional underpinnings were not in place, or were added to the reseller too early, or were added to the reseller too late in development, the continued growth of the reseller was put in jeopardy. The functional underpinnings were in turn supported by a Transformation Plan which needed to be clearly communicated to the organization. The key architect and driver of the Growth Plan was the reseller CEO.

The process of reseller growth and transformation

We are extremely grateful to our interviewees. The candid discussions that they had with us regarding growth helped us better understand its true nature. It became clear to us during the research that growth was not a linear, unbroken function (Figure 3). Resellers actually surged forward like an animal running, or leapt forward like a person crossing a stream by stepping on one flat stone at a time. Some resellers, most often due to a failure in the development of one or more of the Functional Underpinnings, seemed to stall at certain levels of revenue or numbers of employees. Some resellers would even slide backwards if the strength of the Functional Underpinnings was eroded.

Our research revealed many resellers that had performance consistent with the pattern of Arrested growth or Backsliding growth. More often than not, these companies were without enough of the Functional Underpinnings in place to move the company forward, or poor client experience reduced their ability to reinvest or rebuild eroded Functional Underpinnings.

The driver of growth and positive transformation

It became clear early on in our research that the key driver of growth, and therefore the key driver of positive transformation, was the Chief Executive Officer (CEO) of the reseller. The high growth resellers had at their helm CEOs who were constantly asking the question of what the business needed at the particular stage of development that it was in. The constant transformation and development of appropriate Foundations and the correct Functional Underpinnings were crucial to growth. The high growth resellers had CEOs who would create and articulate a Transformation Plan, put the required Foundations and Functional Underpinnings in place at the right time, and ensure that the Company was complete.

Founder to CEO — critical transition

The critical nature of the role of the CEO in the growth of resellers of IT products and services was the most fundamental of our key findings. The resellers that were achieving high growth had coherent, comprehensive and consistent Transformation

Plans put in place by the CEO. The “winning” CEOs invested time and money to put the correct Functional Underpinnings in place on which they built appropriate

Foundations to grow their companies.

Unfortunately, the “CEO issue” was the source of great concern to us as we completed our interviews. We estimate that only five to ten percent of resellers under ten million dollars in revenue have a functioning CEO in place. As a result, a relatively small number of resellers have a realistic Transformation Plan in place that provides the required focus on establishing the Functional Underpinnings and Foundations required to achieve high growth.

The following is a list of the concerns that emerged from our work.

Few CEOs — founders or outsiders — had a realistic Growth or Transformation Plan for their companies that included explicit attention and plans to strengthen Foundations and Functional Underpinnings

Few CEOs knew the depth to which transformation had to take place in their organizations in order to continue to grow

Few founders of resellers had made the transition to become a “real CEO” and few qualified outsiders had been asked to execute the role completely

Many resellers exhibited all the signs of Arrested or Backsliding growth as a direct result of decisions not being made (or even considered) regarding Foundations and Functional

Underpinnings

Many Presidents/CEOs wanted to transform their organization but they did not have a clear enough understanding of the process of growth to actively make it happen — many resellers appear to be “always hungry, never starving”.

Bruce R. Stuart is the President of ChannelCorp. He is the author of the recently released books Reseller Management Handbook — 7th edition and Channels Handbook — 2nd edition. Both books can be perused at http:// www.channelcorp.com/products.htm.

Bruce Stuart is one of the world’s foremost experts on solution provider profitability, business model transformation and vendor channel strategy improvement. He has educated and consulted with channel and channel partner executives from more than 40 countries over the last 15 years. He is a frequent speaker at vendor events worldwide. Mr. Stuart can be reached at info@channelcorp.com. The corporate Web site is www.channelcorp.com.

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