We recently hosted a webinar on the “Pitfalls to Avoid When Launching and Scaling an International Channel”. Special guests Justine Cross, Managing Director, EMEA Channels and Nehul Goradia, Co-Founder, Enabler ONE joined Channel Mechanics VP Sales, John McArdle to discuss some of the mistakes they see vendors making. Along with some of the unrealistic expectations vendors have when launching an international channel.
Companies look to the channel as a route to market for a number of reasons. From his experience in the Middle East, Africa and Asia, Nehul Goradia believes one of the key rationales for why companies build a channel is to build a scalable, repeatable revenue model. But building your first channel can come with a number of pitfalls, for those not familiar with the channel ecosystem.
When it comes to start-ups or scale-up companies building their first channel, Justine Cross has seen lots of failures but also lots of good things. She believes it’s all about starting from the very beginning. From her experience working with many start-up companies, she believes that to succeed, you need to look at your product offerings and your technology and ask:
“First of all, you need to identify your market and then see if there is a big enough market to push this through the channel?” A lot of technology products that Justine sees are very vertical focused. That is, they are focused on a specific niche of the market. As such, there may not be a huge market for them. And that’s where the vendor says “Hey, let’s go and sign up one of the top four distributors“. But the reality is there isn’t enough revenue to be delivered through that model to make a channel successful. “So, understanding whether your product really suits a channel strategy is stage one.”
Justine’s focus is assisting vendors in EMEA. Here, she often sees companies from outside Europe, and even sometimes countries from within Europe, still class EMEA as a single territory. “When they start to analyze, they don’t really understand which markets to go for. So, they talk about the largest population, and the reality of that is that Nigeria has the largest population. Then they talk about the largest GDP. In EMEA, that’s Germany. But all of these different countries come with very complex, go-to-market knowledge that you need to have in order to be successful in them”.
As an example, Justine mentions Germany. By being based in Germany, Justine knows the German market is a really tough market for a vendor to break into. Germans respect languages so if you don’t have a product localized in German, or local language marketing material, it becomes very difficult. In addition to the language barrier, Germany has a strong culture for in-house/ in-country technology. Therefore, people coming in from the US, UK or Asia, may not recognize the strength of German market technology. So challenging them head on when you’re not ready, will cost you a lot of money. And you will make mistakes.
As such, to be successful, Justine believes “choosing the right market, the right country, and the right time is very, very important. And remember, big isn’t always beautiful!”
In addition, John sees respecting the culture of different countries, equally important. For Europe in particular and indeed in many regions around the world he believers “there is this perception that they are homogeneous. But they are very, very different in terms of business culture, relationships and how people do things.”
3. Key Relationships
From her vast experience, Justine sees a recurrence of this particular scenario. All too often, the importance of relationships are over looked. “I apologize for picking on the US here, but we see a lot of US companies saying, “Hey, we want to go into EMEA. We’re going to send over two or three of our really expensive guys, we’re going to fund an office in central London, in Paris, or, maybe Dubai. We’re going to send them over and they’re going to build everything really quickly for us. We are going to fund an office, fund them and fund their children with private school”.
The channel is not a one person job. Developing a channel strategy as a route to market requires buy-in from the top down. However, from his experience, Nehul sees most organizations when they’re looking to scale their channel internationally, will assign a channel manager, a channel sales manager or a regional manager. And that’s often it. The rest of the organization behind it is not yet ready to support that channel driven model. Therefore it’s bound to fail as it’s not a one-person job. To scale successfully, he believes “you need everybody within the organization driving towards the same objective.”
5. Unrealistic Expectations
The channel is not something that just happens overnight. It takes time and resources to build it up. Nehul sees this all the time whereby a vendor signs up 10 partners and immediately expects to see $10 million in revenue happening. “It’s never going to happen, it never does. Channel is a journey. You need to walk the path. There are no shortcuts.
For your channel strategy to be successful, Nehul’s advice is: “You will need to put in as much effort, if not more, as you would do for your direct revenue model.”