Using a direct go-to-market approach means that we are employing and paying all the resources required for finding, winning, making, keeping and growing happy customers. The benefit of the direct approach is the full control we enjoy and our ability to make fast changes to the way we interact with the market. The drawback is the massive investment this approach requires and the steadily growing organization we need to manage on our path to global market leadership.

Using an indirect go-to-market approach means finding, recruiting and managing independent companies that find, win, make, keep and grow happy customers and who provide solutions with our product as a core component. Such independent companies operate in their own name, at their own expense and at their own risk. The benefit of the indirect approach is the enormous potential available for scale. The drawback is the added complexity of managing independent companies between us and our customers and the additional time it takes to recruit and enable the partners before we can book any significant revenue.

Understanding that we introduce a third party business model into our own business model is probably the most important observation that will help us become successful with an indirect channel.

Using the business model framework introduced by Alexander Osterwalder in his seminal book Business Model Generation, a business model with an indirect channel is illustrated in this figure:

1. The first observation this framework provides is the realization that our partners are not our customers. They are our channel to our customers.
2. The second observation is that the customers of our channel partners are still our customers even when the invoicing relationship is through our partners. We want to build and create brand awareness with the customers and ensure that they see value in the fact that the channel partners’ solutions are built with our core technology.
3. The third observation is that recruiting and managing channel partners becomes a key activity and that it is a core competence we must have.
4. The fourth observation is that we now need a value proposition for our partners as well as value proposition for our customers. Our partner value proposition is based on our understanding of the business model opportunity we provide them.

Thus, it is not only about our product, but about enabling our channel partners to build and scale a successful business model with our product as a key component of their customer value proposition.

Choosing the indirect go-to-market approach generally requires more time and additional investments up front, but pays off as our channel partners gain momentum and grow their business with our product.

This video provides a short introduction to the Alexander Osterwalder business model framework: https://youtu.be/QoAOzMTLP5s

I write about issues related to revenue growth and globalization in the software industry.

You can follow me on Twitter: @hpbech

Author:

Hans Peter Bech is an author, economist and consultant. He is a frequent blogger on issues related to growing software driven companies to global market leadership and is the author of several books and whitepapers on business development in the software industry.  Hans Peter also facilitates workshops for software executives in the TBK Academy¨. 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.

http://www.linkedin.com/in/hanspeterbech

hpb@tbkconsult.com