On Monday, September 15th, 2008, Lehman Brother’s surprised the market with the largest bankruptcy filing in US history. Everyone was caught off guard and the vast majority of financial firms didn’t understand their full exposure. If you were fortunate enough to be a client of BlackRock and utilizing their risk management services, you had a report on your desk that morning with a complete summary of your entire exposure with suggestions on how to mitigate the risk. If you got news on Monday that your top competitor had acquired your best channel partner, would you be equally prepared?
One key lesson I learned years ago is the notion that channel partnerships follow a defined lifecycle. How you engage with partners and what activities you undertake should align to their position in this lifecycle. Some partners may very well be at the end and it is time to take steps to retire the relationship. In other cases, your hand may be forced by external events
The Partner Lifecycle Diagram below is an adaptation of Steve Steinhilber’s Alliance Management Framework. It illustrates the steps a relationship naturally goes through. Best in class companies have distinct strategies and tactics for each stage to maximize performance over the lifecycle.
When we share this lifecycle concept with people, two things jump out at them:
- The concept of incubating a partnership
- The concept of an orderly, planned process for retiring a partnership
I know its Saturday and you need to hit Home Depot so let’s focus on only one of these today. It might prompt some thinking while you are outside planting and clearing later today
Every business relationship is fluid. Changes in markets, acquisitions or strategic focus can cause a partnership to outlive its usefulness. At this point, the best channel management organizations have a clear process for dealing with it to minimize disruption
Key elements include:
- A de-selection criteria to add clarity to whether a partnership should be retired
- A prepared plan for exit alternatives
- Reduced Scope
- Phased Exit
- Scheduled termination with replacement
- Schedule termination without replacement
- A defined time line with activities
- A defined set of internal and external messaging
I have personally witnessed partnerships worth millions of dollars come to a complete stop via an acquisition announcement. Hundreds of transactions were up in the air as people scurried around trying to determine if the deals could still be processed and customers grew more annoyed by the day. This company saw an increase in customer churn within 6 months of these events. It sounds like a lot of work to pre-plan the exit of a partnership but think about the credibility you gain by having a clear message for your customers the same day that outlines how you have spared them disruption.
Take the time this week to review your de-selection criteria and exit strategies for your existing partners. Happy Spring Cleaning!