I've been involved with channels since my first job right after college. It was 1994, and I was 24 years old when I landed my first job as an electrical engineer doing installations and tech support of complex telecommunication equipment. This job was with the largest telecommunications channel in Colombia, ComWare, at that time. ComWare, a multinational reseller, at that time with presence in several countries in South America, represented the most important brands in telecommunications equipment in the world. ComWare pretty much owned the market in Colombia. The daily activities of my job involved interacting, at a technical level, with customers and vendors from the US and Europe. 

    After a year or so at ComWare, I moved to another channel, Microbit Communicaciones; a very innovative channel. ComWare was the IBM of Colombia: full of orthodox process-oriented professional business people; Microbit was the small kid on the block representing the most innovative telecommunications equipments in the industry and full of dynamic and energetic young engineers willing to do anything to make money selling telecommunications equipment. Microbit represented several US and European telecommunications companies, and had a small sales team where, after a few months, I became one of the star sales account managers. 

    After a year at Microbit, I decided to come to the US due to the worsening political and economic situation in Colombia. I came to the US and in 1997 started working for Nortel, where I started a tech support team to provide post-sales support to channels in Latin America. I worked with channels at Nortel for over 2 years. 

    In 1999, I started working for Lucent Technologies as a network systems engineer in the Complex Solutions Consulting department. It was a very exciting job since I was part of a team of consultants that helped large providers around the world optimize their telecommunications networks. I was sent to Europe for several months before I was semi-expatriated to Colombia for a while, where I led the deployment of Telefonica de Espana's nationwide network in Colombia. 

    In 2000, I transfered within Lucent to the CALA Business Partner (Channel) organization. I was a product/offer manager with several products under my responsibility. I was also responsible for the transformation of Lucent Technologies' channel program in Latin America from a 1-page contract and a handshake to a world-class channel program encompassing marketing, services, training, etc. I had to take the best practices from the best technology vendors in the world and apply those best practices to our channel program in CALA. I travelled extensively throughout the region meeting with channels, training channels, providing them with ideas on how to better position our products, and in general supporting channels in any way possible (with marketing events, trade shows, advertisement, special discounts, etc) to help them sell. I read books on channel programs, I was mentored by experienced channel managers/directors (with whom I still speak today), and I gained an extraordinary amount of knowledge by studying the best channel programs in the world from the best technology companies in the world. I was also in charge of strategic alliances in CALA. As part of a corporate initiative across the world, I was in charge of establishing alliances with Sun Microsystems and IBM in CALA so that Lucent could sell equipment and services through their channels. I used all the knowledge accumulated in my engineering school and later my MBA with all the experience and knowledge available at Lucent, a world-class company. 

    In 2003, I left Lucent, and I started my own investment company; I first started selling used telecom equipment through channels in CALA, and later took advantage of the housing boom and started my own real estate investment company. I bought my first property for around $60,000 and after 4 years, I bought, renovated, and sold about 50-60 properties and accumulated about $4M in real estate (rental properties). I liquidated all my assets in light of the crash of the real estate market around 2007. I took a sabbatical year off and wrote a book, La Cebolla de Pandora, about the evolution of human consciousness in light of the financial, social, and astronomical changes that as a specie, we're going through. 

    I've been part of SCORE (Service Corp. of Retired Executives), a non-profit nationwide organization in the US (sponsored by the U.S. government) dedicated to provide free consulting services to individuals looking to start or improve their own businesses. I joined SCORE, not because I was retired at thirty something years old, but because I love consulting individuals and love sharing my experiences and knowledge. I'm an avid reader of business literature, consciousness, and world affairs. SCORE felt that I had a lot to bring to the table on their efforts to help individuals succeed in business (...and I was the only Spanish speaker at the office were I served). I lost count of how many business plans and how many companies I've talked to at SCORE. 

    I may not have all the answers in business, but sure I've made almost all the mistakes, and I have a lot of the questions (which is better to have than some of the answers). I've done personality analysis in myself and the common outcome in all of them (and the feedback from people) is that I'm a natural teacher and a business oriented individual. I love studying, analyzing information, putting in an easier format, and sharing it. This is perhaps why I've always been inclined towards teaching/consulting/sales/marketing in one way or the other during my life. I even worked as a Spanish teacher in a high school in Minnesota, just for the fun of it. I also taught English to foreign senior citizens for a while; just for the fun of it. I used to hold weekly 1-hour Spanish classes at Nortel, just for the fun of it. I wrote a non-for-profit book about how homeowners can defend themselves in debt collection lawsuits, just for the fun of putting all my legal knowledge together so that others can use it to their advantage. Now, I have a free blog/newsletter with about a thousand subscribers that every month read my newsletter where I write about enlightening topics in life (health, finance, business, economics, politics, etc). As of the month of writing this article, March, 2009, I'm consulting the Cardiology Information Technology group of one of the largest and most important universities in the US, and perhaps in the world; this client needs help on how to analyze its current information technology business processes and optimize them based on professional world-class business practices on an IT department. I’m also helping a small company in Asia market a revolutionary product, EFI-X™, in the Americas (www.efixna.com and www.efixlatam.com).

    I'm telling all this just to make a point: I've made so many mistakes in my business life that I could write 20 books on how not to do things. Another point I am making with all this: I love helping companies succeed. It's very sexy to see a group of individuals create something that spreads around the world. I see human creativity at its peak when a company comes up with a concept and makes it a reality and sells it across the globe. Another point I'm making with this: I can confidently say that I know a lot about the channel business; I've been a channel myself, and I've been a vendor to a channel myself.  

  Companies evolve and grow in two main fashions: 1) they grow by luck, opportunistically, or 2) they grow by strategic planning. As somebody one said, ...”If you don’t plan, you plan to fail.” The first companies are very rare. Some make it, the great majority fail. They rely on handshakes, on unprofessional habits, on informalities, on rules that change everyday (if they even have rules), their business plan is what they "feel" they should be doing, etc. A few of these companies are at the right time, and at the right place, and with the right product and they succeed and make millions, but how many more millions could have they made had them done things more strategically? The second group of companies are professionally managed and use well defined business practices, strategies, commonly accepted business formalities, have a well defined budget for marketing, have a marketing plan, a business plan, a well defined go-to-market strategy, and they understand that before they run, first they have to walk, and before they walk, they have to crawl and understand the steps involved in bringing a new product to market. Even on the second group of companies, the failure rate is high, but much lower than the first. It's like in our personal health. Some people eat what they "feel" and just hope for the best outcome on their health. Others take a more strategic approach and carefully think and select what they eat, they exercise, and their longevity and health generally increases. My grandfather ate anything, never exercised, drank, danced, and had all the women that he wanted and lived a long and healthy life; but he's part of the minority that follow this path and succeed. 

    Successfully selling a product (regardless of how good it is) through a channel partner is not about having them sign an Non-Disclosure Agreement, sending them a price list, and hoping that they have "cojones" and sell a lot. A channel is an extension of one's company on a territory where one doesn't have resources. A channel is not a customer that places an order and pays for it. A channel is like an adopted child: It's not part of you biologically, but depends on you, and you love him as if it were naturally part of you. Sending a channel a price list and later complaining that a channel hasn't sold anything is like sending your child to school with books, and later reprimand him for not performing in school. Channels need to be supported with a great product (at a price where the channel can make very good money), a well structured channel program with clear set of rules (a distribution agreement), with training, with excellent tech support, with funding for joint marketing activities, with a professional image on the vendor's part that instills authority and respect on the channel, etc. This is "channel management 101" in any text book or any channel oriented organization. The name of the game in managing a channel is "mind share". The channel must love you! The channel must only think about you. You cannot allow your channel to deviate its attention from your product or from your company. 

    There is a fundamental difference between a distributor and a resale channel. Generally speaking, a distributor is a logistics "box mover" with large inventory to supply the demand for a specific product through a resale channel. The great majority of resale channels buy their products through distributors for simplicity of not dealing with complex importation laws, for availability of credit (thus improving their cash flow), to simplify their operations (instead of dealing with hundreds of international vendors, they only deal with one local one), etc. Typical distributors do not create demand for a product; a typical mayor distributor is not an "intelligent" entity; it's rather a simple logistics "box mover" that solely consolidates products and supply a demand. The great majority of channels are usually small companies that see a niche market and try to sell to it. Distributors depend on their channels for feedback on the products to carry on their inventory that can supply a local demand.

    On the other hand, there basically two types of channels in my view. There are what I call opportunistic channels and "go-to-market channels". Opportunistic channels are channels that have a line of products or two that they constantly sell in a niche and that generates most of their cash flow. Opportunistic channels see a new product as a tool to increase sales only when the opportunity arises (e.g. If a customer asks me for a device to make bubbles, I know the vendor where I can get the bubble device from). These channels are preferred by established vendors whose products have a known demand in a market. "Go-to-market" channels actively create demand in a market. These are usually aggressive channels that are constant innovators in their market; usually full of young and innovative people. These channels sit down with the vendor that's looking to introduce a new product, and together define a sales and marketing plan where either the vendor contributes the funds or the channel and the vendor jointly contribute funds, or the channel along (rare cases) do the necessary homework to introduce a product (e.g. local trade shows, local advertisement, local product launch events, etc). These channels are preferred by vendors when introducing a brand new product into a market. In general, channels do not introduce new products by themselves; specially when the product is unknown and tries to change a technological paradigm (which makes the introduction even more time, resource, and monetary intensive). So, in summary: vendors play a very active role in generating demand on a market. The vendor guides the channel, the channel executes locally, and the distributor supplies the product that's needed to satisfy the demand created. The vendor is instrumental in generating demand; way beyond supplying review units for magazines to publish reviews. 

    Products are like pretty and sexy girls. You see them at the mall walking around; you engage them into a conversation, that leads to some drinks a few days later, and that perhaps will lead to an intimate moment in bed. The guy (the channel), at the beginning is infatuated with the girl (the product), but in the course of the courtship, he realizes that the girl is not that pretty without make up, she doesn't really have financial stability (and could become a burden for him), she doesn't really know how to speak property (embarrassing the guy in front of his friends), that she is rather frigid in bed, and that she is not that sexy after all. So many channels embrace a new and revolutionary product with great enthusiasm and make grandiose plans for the product (same way the guy makes grandiose plans with the girl), and after a few days, weeks, or months, realizes that they are alone in the jungle with some new product and that they have to invest a considerable amount of money to introduce the product and to break a technological paradigm. According to Gartner and Dataquest, leaders in IT research, as customers look for improved results from their technology investments and technology vendors rely more heavily on their channel partners as the preferred route to market, channel programs must evolve to deliver a greater return on partnering, greater profitability and competitive differentiation (see Dataquest/Gartner report ID# G00151108 titled Channel Programs Evolve to Improve Partner Performance, Profitability and Customer Satisfaction)

    So, if you have sent your price list to some channels in a region, and sales are still down, what’s could be the reason for that? I don't pretend to have all the answers, but I can give you some of the questions that you can start asking yourself. Have you carefully identified the profile of the channel that you need to partner with? Are you choosing your channels carefully after establishing a satisfactory business and marketing plan with them? Are you giving your channels the opportunity to make a good profit? Are you giving your channel superb technical support? Are you giving your channels a set of rules, terms and conditions that they can refer to for RMAs, technical support, training, etc, etc.? Are your giving your channels training on your product? Are you developing joint marketing programs with your channels? Do you have dedicated funding for demand generation end-user marketing that your channel can benefit from? Are you giving your channel the legal and commercial guarantees needed so that they feel comfortable investing money in marketing your product? Are you providing your channels a written and fair Distribution Agreement that spells out all duties, responsibilities and rights of the parties (and remedies for default)? Are you portraying yourself (and your company) professionally so that you instill confidence in your channels so that they feel comfortable doing business with you?

    The ones above are just some of the questions that you need to ask yourself. These questions become even more relevant when we're dealing with a unique product that attempts to change a technological paradigm. As Bertrand Russell said, "The resistance to any new idea is proportional to it's importance." I'd also add, that the resistance to any idea is also proportional to the monetary investment needed to make it popular. Do you see now why very, very, very few channels or individuals are willing to invest money in a venture where they see more uncertainties than rewards and where they feel that they are left along in the jungle? Try telling your small child that you will leave him along in a room with his favorite food or TV show....he very likely will run after you for company and comfort rather than being left along in a room full of uncertainty. 

    Yes, the economy in the US is really bad, in Latin America is no better; the signs are evident: Argentina is at the verge of another economic collapse; Chile, the star of the region, is going through a recession; Colombia depends 100% of the US and has entered an unofficial recession with all the economic indicators in decline; Brazil is a going through its worse economic times in many years and the government is pumping money like crazy into the system to keep it afloat; Venezuela, besides its high unemployment and high inflation, is really feeling the pinch due to the low oil prices and PDVSA, the state oil company, has defaulted on its financial obligations with its vendors, and the government is running out of reserves to make up for the lost oil revenue (look at what happened to Dubai); Mexico is at the verge of financial and social collapse for its dependency on the US, and for its drug violence that is turning into a civil war, etc, etc (the US military has issued an statement that it's preparing for Mexico's "sudden collapse." Peru is the only country that still has some good indicator in the region (due to high commodity prices that are their main export product), but for how long?). Add this sad economic news to the fact that a few days ago, Gartner, the authority in IT related market research, has said that the global PC industry will suffer its 'sharpest decline in history' in 2009, as overall demand for PCs falls by 11.9 percent compared with 2008.

    In this challenging economic times, is when a company needs to get even closer to its channels and invest on them, so that together can come up with creative strategies for success. Wouldn’t you hire a tutor when your child is not performing at school?

To your success,

Julio Martinez-Clark

March 6th, 2009