This article answers the following questions:
- Why is this topic important now?
- What is the difference between an alliance sale and other forms of sales?
- What is a working definition of an alliance sale and why is it important to be clear on an organisational definition?
- What are some examples of successful alliance sales?
- How should one go about generating increased alliance sales?
- What are some further resources I can access on this topic?
Why is this topic important now?
A couple of years ago Accenture renamed its alliance managers overnight. They renamed them as ‘Alliance Sales Managers’. The change was small but significant. For the previous ten years the focus of Accenture and most other High Tech companies was on the relationship building aspects of alliances. There was extensive debate about the role of alliance managers and what they were there to achieve. These debates usually centred around the key question of: ‘Alliances: Are they all about the money?’.
Those days are now gone.
In the High Tech sector (Hardware, Software, Services and Telecoms) there is no doubt that the primary purpose of alliances is to generate increased (or incremental) levels of the sale of ones own products and services with partners. It was this change that Accenture was reflecting when it adjusted the business title from Alliance Manager to Alliance Sales Manager.
That sea change in the industry has brought the question of what represents an alliance sale into sharp focus over the last 18 months. For example if you are a software company and a global systems integrator (GSI) buys licences for your software to use in a large integration assignment, is this an alliance sale or ‘Business as Usual’?
Or what if the GSI buys your software and then adapts it to be more effective in a chosen sector? Are the resulting sales alliance sales or not?
The reason that this topic is important now is illustrated in a recent case study:
A large global software company that provided products to help organisations manage their IT departments had an active partner programme. But the CEO was concerned that the number of large alliance sales had dried up. There were increasingly few alliance sales logged on the system year by year. Hence the organisation reduced their investment in the alliance programme.
The CEO commissioned Alliance Best Practice Ltd (ABP) to find out what was going on. Here is what we found:
When a partner approached the company with a large potential joint sale to a customer the direct salesman involved received no commission for alliance sales, so he logged it as an ‘Enterprise Sale’ for which he did receive commission. But to do so he had to use the partner (in this case Accenture) as the customer, otherwise he didn’t get paid. Consequently the organisation adopted an aggressive ‘sell to’ policy with large partners that denigrated and damaged the alliance relationship.
The outcome was that although in reality there were tens of millions of dollars worth of alliance sales being brought to the company in practice all those sales were being logged as direct sales by the salesmen who wanted the commission the sale represented. Hence, the CEO saw no alliance sales so he didn’t invest in the alliance programme.
The problem was the lack of an adequate alliance sale definition and the mis logging of business as direct when in reality it was indirect.
What difference is there between an alliance sale and other forms of sales?
An alliance sale is not a direct sale and the differences can hurt you!
A sale is a sale is a sale right? .An alliance sales is just another variation. Wrong. An alliance sale is a joint sale and all the roles and responsibilities that you are used to, get thrown out of kilter with an alliance sale, which is why they need a different business model to be effective.
Lets consider the two scenarios of a direct sale and an alliance sale using the same two protagonists IBM and Cisco.
In a direct sale scenario the roles that each side plays are well understood, they are buyer and seller. IBM secures a sale of a new data centre for a large global retail banking organisation in Poland. It now has the job of deciding which network infrastructure company should it use for the project. It researches the market and determines that there are 3 or 4 credible suppliers it can use (including Cisco) so it sets about purchasing the necessary equipment from the chosen supplier. It makes a decision based on price and technical performance. Relatively simple right?
Now lets take exactly the same scenario but from the point of view of an alliance sale:
IBM and Cisco have a global strategic alliance, and as part of the alliance they determine a group of financial services companies that they will target for increased joint sales of their products and services. One of their targets is a large global retail bank in Poland. They approach the customer (the bank) with a joint proposition which they have crafted in advance (a joint business value proposition) which comprises networking infrastructure equipment from Cisco and integration services from IBM. The result is that both IBM and Cisco are sellers and the end customer is the buyer.
OK so if we accept that there is a difference, so what? What’s the big deal its just semantics right? Wrong!
In the first case when IBM was the buyer and Cisco was the seller IBM had alternative suppliers that it could use to drive down the price of the Cisco equipment, IBm had already secured the deal so every dollar that it spent with Cisco came off its own margin, which makes the relationship very adversarial. I win you lose.
In the second case the offering was joint and integrated. There was no sale if the customer rejected part of the solution this makes the relationship very collaborative. In the first case IBM will treat Cisco at arms length as a supplier in the latter they will encourage information sharing and joint winning with a valued partner. So the value of the sale to both is much higher in the latter case rather than the former.
What is a working definition of an alliance sale and why is it important to be clear on an organisational definition?
We have seen above that its very important to make a critical distinction between alliance sales and other forms of sales and it is equally important to log them into the organisation’s CRM systems accordingly. But how do you start? How can you make credible distinctions between the various forms of sales?
The answer lies in creating a robust and pragmatic definition of an alliance sale that the whole organisation can adopt. Without this initial definition everything else falls apart.
So what should this definition contain? How should it be expressed? Organisations vary in their definition of an alliance sale but ABP research suggests that there are common characteristics which consistently classify a sale as an alliance sale:
- The sale typically has been generated as a ‘sell with’ action rather than a sell to or a sell through
- The product or service being sold is a combination of BOTH partners offerings
- The sale provides good value to BOTH partners and consequently the sales team of both organisations are happy to sell the offering
- It is impossible for the customer to split the offering apart and combine it with another organisations offerings
- Fundamentally the sale would not have happened without the efforts of the other partner
- The offering to market (product or service) is something which BOTH partners have agreed is an alliance offering (sometimes called a joint service offering – JSO or a joint business value proposition – JBNP)
This leads us to the correct registration of the sale on the company’s CRM systems. Again there are certain characteristics or principles that should be followed in this process:
- The salesman or the key account manager should be the person to log the opportunity as an alliance sale not the alliance manager
- The partner identified should be able to demonstrate certain activities or actions that they undertook to secure the sale. These will have been agreed in advance (ie joint briefing with the customer, technical demos or proof of concept pilots, active involvement in the account concerned through providing account information or key introductions to senior executives)
- The role of the alliance manager is to communicate regularly with the field sales forces to identify prospective alliance opportunities and distinguish them from ‘business as usual’.
- The salesman or the account manager should receive adequate and remunerative compensation for the sale concerned as well as the alliance manager (eg 50% / 50% split)
- the alliance manager should be able to demonstrate a degree of effort in securing the sale for the salesman or the account manager
What are some examples of successful alliance sales?
Here are a number of examples of successful alliance sales:
- IBM and Cognos jointly developed a Crime Information Warehouse (CIW) for State and Federal Police Forces in the USA. The solution relied on an underlying DB2 database from IBM and the data analytics capability of a Cognos ‘front end’. The solution would not run without BOTH components.
- Capgemini and Oracle developed a public sector ERP solution which was sold to local council authorities in the UK. The solution relied on Oracle Fusion software and Capgemini system integration capability. Again the solution was redundant without either aspect.
- NetApp Cisco and Accenture developed a ready constructed IT stack called Flexpods that could be quickly deployed in data centres at a fraction of the cost of alternative offerings. The solution was dependant on: NetApp large data storage devices, Cisco networking equipment and Accenture integration capabilities.
- Samsung and IBM developed a mobile offering to take to market. The offering was dependant (in part) on Samsung mobile devices and IBM’s Knox security software which was preloaded on the devices.
- All of these examples (and many more) show the value of the whole being greater than the combination of the parts and each represents a valuable alliance sales product. In each case sales from the identified products created significant levels of additional revenue for both partners for many years.
How should one go about generating increased alliance sales?
Given our explanation of alliance sales above it follows that there is a logical sequence of events to set about increasing the amount and quality of alliance sales in organisations:
- Develop a robust and compelling definition of an alliance sale and integrate the definition into your overall partner segmentation model.
- Discuss / agree the definition with the field workforce to ensure full consensus throughout the organisation on such a definition.
- Decide which partners to develop alliance sales products and services with (alliance strategy).
- Run a joint business value proposition workshop with the chosen partners to develop the alliance sales products and services.
- Align the offerings in five critical dimensions (See Below)
- Finally forecast prospective alliance sales performance and track results on a quarterly basis running remedial actions as required.
5 – Aligning the Alliance Sales Offerings
- Commercial – ensure there is good commercial value in selling the chosen offerings for BOTH partners.
- Technical – Ensure that there is a ‘tight’ technical fit in the offerings to both a) prevent customers breaking the offerings apart into their constituent parts and buying only one aspect of the full solution and b) create a level of technical interoperability which delivers enhanced performance levels for the customer
- Strategic – Ensure that the joint offering is one which the market will see as strategically imperative and will thus insure: a) a head start ahead of the competition in the chosen offerings and b) sufficient demand in the market-place to generate ongoing demand for some time to come
- Cultural – Pay attention to the partner’s personal and organisational culture to ensure that they are easy to do business with. The last thing either side wants is to spend time energy and effort in a joint offering only to see it sit on the shelf because neither party could decide which one should take it to the customers first.
- Operational – Agree some operational protocols in advance to ensure that when sales start they are handled correctly and most importantly logged appropriately on the CRM sales systems of both organisations.
What are some further resources I can access on this topic?
There are multiple additional resources available from the Alliance Best Practice Ltd Database (www.alliancebestpractice.com) on this subject including:
- How to develop attractive joint business value propositions
- Developing an effective joint go to market (GTM) strategy
- Executing an alliance GTM plan effectively
- The seven critical success factors that impact alliance sales
- Alliance sales in action – a compilation of essential do’s and dont’s