The secret to profitable growth for todays’ channel business

Up until now, technology providers, no matter where they sit within the channel, have been blessed with decades of prosperity.

Fast forward to 2020 and things are not so rosy. There’s no doubt that there will always be demand for technology. However, a number of factors have come into play in recent years, such as the shift to consumption/as-a-service, commoditization of technology as well as over-competition, resulting in tighter margins. Which is why, channel businesses must now re-evaluate their sales strategies to ensure long term, profitable growth.

Recently, I had the pleasure of interviewing two industry greats – Remi Gicquel, Head of Sales and Strategy for HPE and co-author of the book “Installed Base Selling to Maximize Revenue”, as well as my old business partner, Scott Frew - CEO of iasset.com. And with so much useful advice shared within that vlog, I thought it would be beneficial to expand on what was discussed, in this blog.

Balancing the new and the old

Up until now, majority of the focus and resources within the channel has been aimed at hunting new customers. Scott believes that, “By nature, Wall Street only cares about net new sales and companies are geared to report on that. It’s not really until the introduction of cloud and consumption, that some of these companies have started to drift towards that recurring revenue, whether it’s an annual renewal, or cloud - which is monthly. As this happens, the recurring revenue number will be bigger and the lifecycle will become more important. I’m not saying net new sales are not critical for companies, but they’ll realize that there is a lot more opportunity sitting within their customer base.”

According to Remi, channel businesses can no longer survive chasing the ‘big whales’, because it does not ensure profitability in the long term. It’s clear that finding the right balance between net new and existing is key.

“With the money in current consumption economies, how do you keep grabbing the ‘minnows’ in the net rather than chasing the whales. That’s where automation and making sure those data flows are correct inside the system will take a load off the low-end part of your system, so you can focus the sweet spot which is typically somewhere in between the whales and the minnows”, Scott pointed out.

The importance of your installed base

Having read Remi’s book on installed based selling, I was amazed at the similarities and common themes throughout the book and the LIPS strategy I have been working on with Scott. In his book, Remi outlines three core sales motions:

1. Protect your installed base (renew, refresh)
2. Expand your installed base (sell across your portfolio)
3. Hunt net new customers
   
   

So why is the above sales methodology so important?

In Remi’s words: “Installed base is a journey – not a single destination. By focusing on installed base selling, you protect and develop your existing customers and by doing so, you generate more profitable revenue. And that leads to an acceleration of profits and what we call the ‘installed base profit wedge’. Unlike traditional profit wedges you achieve by cutting costs and resources, this installed base profit wedge is something that you can repeat again and again and develop long term profitable growth for your business. You then free up capacity to hunt for net new logos, because we know that we still have to acquire net new logos. But you can do that once you’ve done a good job of protecting and expanding your installed base.”

We all agreed that proactive sales engagement is key. Because only then can you position yourself as a trusted advisor and deliver value over and above your competitors. “If you’re not proactive and you wait to be called by the customer, you are in competition with the rest of the group and you have already lost,” says Remi.

Why the resistance?

According to Remi, only the most successful companies that he surveyed are taking advantage of their installed base and really driving their customer success journey. And according to Scott, many of the prospects he speaks to at iasset.com are still in the very early stages of implementing the mechanisms needed to make it work. He sees a lack of investment to enable automation to handle this kind of cadence of renewals, expansion, extension across the board.

But, having personally experienced the benefits of installed base selling in my previous distribution roles, I’m still baffled as to why there are so many laggards amongst today’s vendors/distributors/resellers.

Scott believes that change is coming, it’s just not at a pace we’d expect. There were some common roadblocks observed by everyone on the call, such as:

1. Data: A key issue raised by nearly everyone wanting to get into installed base selling is the state of their data. Sitting within multiple, disparate systems, all collected or used for different purposes/departments, collating/cleansing and turning it into useful, meaningful installed base data is seen as a mammoth job. What they don’t realize is that it doesn’t need to be that complicated. Scott says that the iasset.com platform can collate and cleanse as you go, so it doesn’t need to all be done manually upfront.
   
   
2. Execution: Remi says that irrelevant of the complexity of your business and the many product lines you could be driving, you need to assemble a puzzle that’s customer specific. Providing the sales team with the right information on who to engage, when to engage and what to propose is key. And in the context of the IT channel, you need to equip all the key players in this transformation. That’s why a platform like iasset.com is so critical to make it all work in an automated, operationally efficient manner. Yet, Scott still comes across vendors, distributors and resellers who are relying on Excel or building their own platform to try and manage their installed base. “A lot of the distributors and manufacturers have massive IT teams that think they can build something in-house to handle their installed base. Yet they never try to build an ERP or CRM themselves, so why they choose to try and build that doesn’t make sense. And, Excel is never going to work, because it’s a financial application, not an installed base management tool.”
   
   

In summary

It is clear that installed base selling requires a fundamental shift in company culture toward customer retention and success. As Remi says, it is a journey and by no means will you achieve the end state overnight. But you have to start somewhere with what you have, and you need to invest in your business to ensure your installed base management is operationally efficient.

The good news is that the return will be immediate and considerable, if executed correctly. With shorter sales cycles, lower operational costs and greater margins, you will soon experience long-term, profitable growth.

Click here to view the full video.