Hans Peter Bech, 2015

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ISBN: 978-87-93116-17-7
TBK-WIPA-022

Building Successful Partner Channels: The Business Model in the Business Model

Table of contents:
Target audience

Abstract

Author

Acknowledgements

The Business Model Framework

The Channel Element of the Business Model

The Business Model in the Business Model

The Direct Channel Approach

The Indirect Channel Approach

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8

Building Successful Partner Channels

www.tbkconsult.com

About the author

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Building Successful Partner Channels: The Business Model in the Business Model

Targeted audience

The target audience for this whitepaper is the board of directors,

the CEO and the sales and marketing executives and their staff
in software driven companies1 who have ambitions for achieving
global market leadership through a channel of independent
business partners.

Abstract

This whitepaper explains that the challenges of working with

channel partners are caused by the need to understand, operate
and optimize at least two completely different business models and
corresponding environments.
Using an indirect channel to perform some or all of the activities
required to find, win, make, keep and grow happy customers
introduces third party business models into our own business
model, reducing the control we can exercise.
The white paper recommends a structured and methodical
approach to manage this lack of control and explains how to
motivate and align the independent channel partners to work
towards our objectives.

Author

Hans Peter Bech

Acknowledgements

Design and lay-out: Sordako O, Tallinn, Estonia

Proof reading: Emma Crabtree, ecr@tbkconsult.com

www.tbkconsult.com

Independent Software Vendors (ISVs)

Building Successful Partner Channels: The Business Model in the Business Model

The Business
Model
Framework

We all know the term business model, but do we have the same
definition of what a business model actually is?

This whitepaper uses the business model definition provided by

Alexander Osterwalder and Yves Pigneur in their bestselling book
Business Model Generation2 first published in 2010.

Figure 1 Framework: The Osterwalder/Pigneur Business Model Framework

The Osterwalder/Pigneur business model framework, which is

illustrated in fig.1, is comprehensive and easy to understand and in
my opinion there is currently no better framework for understanding,
describing and optimizing businesses.
While the Osterwalder/Pigneur business model framework includes all
the variables that we control ourselves, the so-called business model
environment covers those variables that are outside our control.
The Business Model Environment presents opportunities that we can
take advantage of as well as threats that we need to predict and deal
with.

www.tbkconsult.com

Business Model Generation: A Handbook for Visionaries, Game

Changers, and Challengers, by Alexander Osterwalder & Yves Pigneur,
July 2010

Building Successful Partner Channels: The Business Model in the Business Model

All companies have a business model and are operating in an

environment, but very few have mapped out the elements in a structured
and transparent way allowing the discussions with internal and
external stakeholders to be correspondingly transparent, structured
and methodical.

Figure 2 : Business Model with the Business Model Environment

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The Channel
Element of the
Business Model

One of the nine elements of the business model framework is called

channels.
Our channels take our value proposition to our chosen customer
segments. In the Osterwalder/Pigneur business model framework the
channel building block defines how we find, win, make, keep and grow
happy customers.
For the business model to be profitable the revenue we generate in the
business model must exceed the cost of operating our business model.
For most software companies the channel is the most difficult element
of the business model to organize and scale.

Building Successful Partner Channels: The Business Model in the Business Model

Many software companies choose to leave the challenges associated

with finding, winning, making, keeping and growing happy customers
to independent channel partners.
For some software companies using independent channel partners
works really well and releases eco-system forces propelling market
coverage and growth forward. However, for most software companies,
leaving the channel obligations to independent channel partners doesnt
work so well and seldom scales at all.

The Business
Model in the
Business Model

The reason that so many software companies fail in making the

independent channel partner approach work can be explained using the
business model framework.

The Direct Channel

Approach

Lets imagine that we operate the channel ourselves. We engage the

marketing, sales and pre-sales people required to find, win, make, keep
and grow happy customers.

Figure 3: The Software Business Value Chain

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The activities that we are undertaking and optimizing are illustrated

in fig. 3.
Operating the activities and resources ourselves gives us overall
control. We can manage all processes and resources in the constant
effort of optimizing the performance of the channel (how we find, win,
make, keep and grow happy customers). It is entirely within our control
to start new initiatives, monitoring progress, taking corrective actions
and engaging and dismissing resources.

Building Successful Partner Channels: The Business Model in the Business Model

The Indirect Channel

Approach

When we decide to leave the responsibility for some or all of the activities
concerned with finding, winning, making, keeping and growing happy
customers to independent channel partners, we introduce a layer of
substantial complexity.
We are introducing an independent 3rd party business model into our
own business model as illustrated in fig. 4. below.
Independent channel partners are operating their own business models
and have their own perceptions of their business model environment.
Building successful channel partners requires that we understand their
business models and manage to align them with our business model.
We cannot expect that all our independent channel partners will
have exactly the same business model, thus we need to understand
each individual model or at least group them according to their
characteristics.

www.tbkconsult.com

Figure 4: The Business Model in the Business Model

Our independent channel partners operate their own businesses

according to their own objectives, skills and resources. We can introduce
incentives and offer support programs, but we cannot control how they
should run their businesses.

Building Successful Partner Channels: The Business Model in the Business Model

This profoundly highlights the difference between our customer value

proposition and the value proposition of our independent channel
partners3.
Our independent channel partners will typically have a value
proposition that is dominated by the customer intimacy value.
The focus of our channel partners is to satisfy the needs of their (our)
individual customers. They do so by sourcing products from vendors
and adding services that match the needs of the customers in their
target market segments.

CGI is committed to helping our clients achieve their business goals4

Figure 5: Partner Value Proposition

As a software vendor our customer value proposition is dominated by

the product leadership value. We have left the jobs associated with
finding, winning, making, keeping and growing individual customers
to our independent channel partners. Our value proposition is market
driven as opposed to our
partners value propositions,
which are customer driven.
In the business models of
our independent channel
partners we are (hopefully)
a Key Partner (the element
to the far left in the business
model). As opposed to the
direct channel approach, in
this scenario we have very,
very little if any direct control
over their operations.

Figure 6: Software vendor value proposition

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Please see our white paper: The Software Partner Channel and the
Customer Value Proposition

Example of a typical mission statement from a channel partner/

systems integrator

Building Successful Partner Channels: The Business Model in the Business Model

Building
Successful
Partner
Channels

The key to building successful partner channels is in accepting that our

business model is completely different than the business models of our
independent channel partners. We need to understand the business
model of our independent channel partners and the environment in
which they operate. Then can we design and implement programs
supporting our channel partners business models, helping them
become successful.
Introducing the Alexander Osterwalder business model framework
into our business will enable us to work in a transparent, structured
and methodical way when designing and managing our independent
channel partner approach. We will need to apply the framework on our
own business first and make all our staff members familiar with the
terminology and structure.

Then we can apply the framework on our work with the independent
channel partners and use this framework for building a common
understanding of the joint business we are running and how we can
help each other achieve our individual objectives.
The business model framework is very well documented throughout the
two books from Alexander Osterwalder and Yves Pigneur5.
There are training courses, as well as numerous management
consultants, all over the world available to help teach and implement
the methodology.
Understanding the business model framework and how to use it
in working with independent channel partners will improve your
productivity considerably.

www.tbkconsult.com

Business Model Generation: A Handbook for Visionaries, Game Changers,

and Challengers, by Alexander Osterwalder & Yves Pigneur, July 2010

Value Proposition Design: How to Create Products and Services Customers
Want (Strategyzer), by Alexander Osterwalder et al, October 2014.

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Building Successful Partner Channels: The Business Model in the Business Model

About the author

Hans Peter Bech has been developing and managing global
partner channels in the software industry for almost 30 years.
He is an advisor to IMMIB (The Turkish ICT Exporters Council)
and lectures in Channel Development and Internationalization
at the Sabanci University in Istanbul, Turkey.
Hans Peter holds a M.Sc. in macroeconomics and political
science from the University of Copenhagen. He speaks
Danish, English and German and is a certified ValuePerform,
ValuePartner and Business Model Generation consultant.
Hans Peter Bech

More about Hans Peter Bech

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Other publications by the author

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