How Can Your Company Enable a Resilient Channel Strategy During a Severe Disruption?

By: Jim Fogarty, Principal

We hope you and your family are safe and well during this unprecedented time. The Covid-19 pandemic is a humanitarian tragedy affecting millions of people in our global community, and it is causing an extraordinary social and financial disruption. The intent of this brief is to share perspectives regarding the implications of the disruption for a company’s channel strategy, the method it uses to cover and serve its target markets and deliver exceptional customer experiences.

We initiated conversations with clients and colleagues across the globe to capture insights and perspectives, and we will periodically share them with you as the situation evolves. Our hope is that, together, we navigate the situation in an intentional, empathetic and successful way.

We invite you to contribute your voice as well. You are welcome to contact a member of our team to share your perspectives; we provide contact information at the end of this brief.

Planning Context and Horizon

Prior disruptions sensitized management teams to the importance of contingency and resiliency plans. The varying and dynamically changing shapes of the Covid-19 pandemic transmission curves and governmental and health policy responses across the globe reinforce the need to continuously and dynamically adjust them.

As health experts calibrate the transmission curves, management teams can begin to assign time frames to three important stages of their plans: Triage, Transition, and Innovate and Transform (see Figure One).

Figure One—Economic Phases and Planning Stages

Economic Phase:Severe Social and Economic DisruptionRecoveryNext Normal
Time Period:Immediate, Short-
to Mid-term
Mid-Term to Long-TermLong-term
Planning Phase/Perspective:TriageTransitionInnovate and Transform

Most of the global community is in the throes of the severe social and economic disruption. As it continues and amplifies and the social and fiscal responses emerge and evolve, management teams are quickly responding to the fluid situation… empathetically leading their teams, guiding and enabling transitions to home-based work and virtual interactions with key stakeholders, identifying and adapting to disruptions in supply and demand, assessing fiscal stimulus packages, calibrating cash flow and analyzing financial scenarios, etc.

As social and economic activity in select geographic regions begins to re-start, ramp-up and accelerate, the initial recoveries will likely be fitful and require continuous, nimble responses and adaptations as the initial experiences in China and Hong Kong suggest. A company’s successful evolution to the “next normal” is likely to depend on the actions and posture it takes as it triages and transitions. Research reveals that management teams that balance strategic cost-cutting and investment during disruptions are best positioned to outperform competitors as the economy transitions to the next normal.[1]

Critical Actions at this Moment…

Our hope is that this and subsequent briefs help your team successfully navigate the disruption and identify market and operational opportunities that enable it to adapt and enhance its channel strategy as it races to triage the many immediate human resource, supply chain, operations, and financial challenges associated with the Covid-19 shock.  In the near-term, we suggest the team consider four key issues:

  • Actively Engage Direct Sales Teams and Channel Partners— like the company itself, its direct and indirect sales teams are navigating uncharted waters. Direct and indirect sales, customer service, technical support and service teams are transitioning to virtual roles (the first “Zoomer” sales team cohort) as they also deal with the personal and emotional issues related to this human tragedy. Therefore, clear, coordinated, empathetic and continuous communication is required to provide the leadership and support they need to remain focused and engaged so they can productively contribute to the enterprise’s survival and innovation. If the existing compensation plans encumber the teams’ focus and performance, then the management team should adjust them to accommodate the radically changing circumstances and provide ongoing support as their roles change.
  • Continuously (Re)Calibrate Supply and Demand and Align Sales Efforts— companies are dynamically adjusting to the shifting sands of supply and demand. Clients have shared examples of demand surges in specific sectors like healthcare equipment (ventilators), pulp and paper and food. They have also described demand collapses in other sectors like hospitality, entertainment and oil and gas. Sales teams are scouring sales funnels to verify and close near-term opportunities and properly nurture the remaining, qualified ones to safeguard sales and cash flow. A partial list of the supply and demand patterns in a mix of industries demonstrates the fluctuating patterns these teams are dynamically navigating:

INDUSTRY SECTORS
Travel (e.g., aerospace and rail): ↓Construction: ─ (short-term); ↓ (mid-term)
Hospitality (e.g., hotels, restaurants and bars): ↓Medical Equipment: ↑critical modalities; ─ / ↓ other modalities
Entertainment: ↓Pulp and Paper: ↑
Retail: ↑ (on-line); (brick and mortar)Agriculture: ↑
Automotive: ↓Technology: ↑
Oil and Gas: ↓Government: ↑

The direct and indirect sales teams are positioned to spot changes in demand and customer behaviors. With the proper guidance, support and feedback mechanisms from sales leadership, they can provide the insights to keep direct sales teams and channel partners focused on viable, near-term opportunities. Since the demand patterns during this shock will likely fluctuate more rapidly and unpredictably than they do during a financial disruption, this market insight is critical.

As the disruption continues, management teams should also provide the team with guidance and feedback mechanisms so it can provide insights that spark innovations in value propositions, customer engagement models, sales processes, sales tools, etc. that provide competitive advantage during and after it.

  • Monitor and Dynamically Adjust to Changes in Purchasing Patterns and Behaviors— business and consumer purchasing patterns will change. As companies come under increasing financial stress, many (depending on the sector) will likely delay or cancel capital purchases and focus on maintenance (emergency, preventive and predictive) and repairs to reduce their cash outflows. These patterns emerged during the last recession and persisted after the recovery.

    Companies that serve industries that normally have significant new project activity should calibrate and closely manage investments in specification and quoting activities since the mix of short- and long-term opportunities may materially shift. Within this context, leadership teams, with input from market participants, can also proactively define solutions their sales teams can use to intercept customers and prospects in target markets that are searching for creative ways to reduce their operating costs.

    Since these evolving purchasing patterns will likely endure through the recovery and shape the next normal, management teams should dynamically tune product mix forecasts and align sales resources, activities, processes and tools to align with them.

  • Enable the Resiliency of Channel Partners— channel partners are grappling with the same business continuity issues as the companies they represent, so their businesses are under stress as well. Given the nature of the channel management function, companies will benefit from a proactive and coordinated approach. Senior sales or channel management leaders should organize a team to structure and coordinate its response and actively monitor the performance of its portfolio of channel partners. In the immediate time frame, this team should:
    • Communicate— structure, facilitate, coordinate and enable clear, empathetic and continuous two-way communication with internal stakeholders across all functions and channel partners. The team should brief channel partners on the company’s situation, plans and expectations. It should also proactively and continuously solicit insight and guidance in a structured way from channel partners so it understands the issues affecting their businesses and informs its plans and actions
    • Arm Channel Managers— savvy channel managers can help channel partners navigate this shock; therefore, the team should position them to do so. In the immediate time period, the team should guide and enable channel managers to:
      • Proactively communicate with channel partners and solicit their insights, feedback and guidance in a structured way
      • Proactively collaborate with channel partners to recalibrate sales forecasts and re-assess opportunities in the partners’ sales funnels
      • Facilitate channel partner’s transition to virtual selling and support by sharing and training them on new software applications and changes related to evolving sales and service skills, practices, processes, and tools
      • Provide guidance regarding how channel partners can adjust their sales incentive plans to retain personnel and keep them engaged and focused on critical activities, if it has the resources to do so
      • Brief channel partners on the company’s supply patterns and allocation approach
      • Share insights on demand patterns and brainstorm ways to continuously tap into qualified pockets of demand so channel partners can dynamically align their sales efforts with viable targets such as geographies, industries, applications, and accounts
      • Fine-tune short-term, tactical marketing plans and activities so they align with the demand patterns
      • Proactively provide guidance so channel partners manage stocking plans and purchases to optimize their working capital investments
      • Spot and bridge liquidity issues if the manufacturer has the financial wherewithal to do so (e.g., modify terms and conditions) or provide insight to help channel partners tap into the emerging government-provided financial assistance programs if it is able to do so
      • Ideate new value propositions to spark demand as customers’ requirements and purchasing patterns change
    • Increase Rigor of Channel Management Process— more frequent and structured interactions with channel partners will inform and help the company refine its activities, respond to dynamic changes, and execute its actions. The team should also help channel managers define, track and monitor a mix of leading indicators to help spot impending distress that may compromise the company’s market coverage (e.g., weak sales funnels, significant lay-offs, late payments, etc.). Channel management teams should proactively develop contingency plans to maintain coverage in areas at risk.

Summary

Collectively, these four actions are designed to help manufacturers focus immediate- and short-term sales efforts on qualified targets, spot and navigate shifts in demand patterns, mitigate risks that compromise market coverage, and innovate and transform offerings and channel strategies.

We will periodically share ongoing perspectives as the Covid-19 disruption evolves, and we invite you to contribute your voice to this conversation.

You are welcome to contact us at the following addresses:

John Henderson: hendy@franklynn.comCarl Cullotta: cpc@franklynn.com
Jim Fogarty: jfogarty@franklynn.comBob Segal: bobsegal@franklynn.com
Stephen Martin: smartin@franklynn.comTracy Moag: tmoag@franklynn.com

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[1] Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen, “Roaring out of Recession,” Harvard Business Review, March 2010.

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