Value is intangible and revenue is king, but for the value-added distributors and their partners, the future is always a blank page to be written on. Thus spoke the ARN Round Table participants when asked to define the notion of value and its delivery in an environment where adversity of change and its psychological impact are rapidly rewriting the definitions of key supply chain concepts and relationships.
And as Baker, Mitchell, McKenna, Rust, Jeffries and Meier were trying to answer the question of how does a value-added distributor (VAD) differentiate and compete in the current market, Lan Systems and Express Data showed the market they could squeeze the ‘v’ out of the value that Tech Pacific was providing to their common partner, Cisco Systems.
By its own admission, Tech Pacific has never been incredibly skilled in selling complex technologies, traditionally the strength of Lan and ED. The efforts of John Walters in revamping TP’s networking division, and the expertise he brought to the distributor having learnt his Cisco trade at Lan, could have possibly paid off had the tender come out six to 12 months later. But it was the combination of Lan’s Cisco focus and its widely-reported ability to provide reseller partners not only with key support in solutions sales, but also with some badly wanted TLC, and ED’s combination of broad-based logistical strength (enforced by the launch of Expresso) and long-term Cisco investment, that won the day.
The answers may seem obvious now but weeks of speculation and uncertainty were an unmistakeable sign that the market itself was not sure how the new value paradigm was to be delivered to the network pioneer.
Clearly, what Cisco is looking for is to lower the cost of distribution by reducing the number of distributors and rigorously controlling the inventory in the channel. More than that, the global giant claimed the need for the right balance of volume and value distribution, and for the partners capable of taking it into new markets.
Kip Cole repeatedly stated that, in making the choice of partners, he was driven by market measurements of their performance, rather than by relative volume of product they were moving. And the market obviously voted value.
Which brings me back to the round table discussion, the coverage of which you can find on page 4 of this week’s issue. Over and over again, the participants in the discussion offered theoretical insights into what Cisco’s choice proved in practice last week. Value may be intangible except for the perception that a distributor’s customers have on both sides of the market. And if Cisco was making up its mind based on the feedback from Lan, ED, and TP reseller customers, then perhaps it was the market — and not the vendor — that made the decision on what that value is after all.
It follows from the above that defining value in distribution is not as elusive as it sounds. For a vendor, at least, it revolves around a skilled partner willing to focus on common objectives and (surprise, surprise) the willingness to put in a hard yard or two to help the relationship grow. Revenue and market share are expected to follow naturally. Well, that’s probably a slightly naive exaggeration, but the formula goes along those lines nevertheless. Now, if only romantic relationships were as easy as that!