RTM: What made you start looking at partner business models?

BM: Well, a few years back, I was running HP’s consumables division and our resellers were constantly complaining that they weren’t getting enough margin from our products. They claimed that reselling them wasn’t even profitable. And they expressed real concern that, as their HP suppliers’ businesses grew, so their profits would start to dip.

RTM: So what did you do about it?

BM: Our first reaction was that this was plain ridiculous. We knew that sales were booming; we thought the margins were fair, and that there wasn’t a lot of price competition. So we got VIA International in to study the issue in more depth.

RTM: What did they find?

BM: They proved that HP supplies was a cash generator for them. Most channel players had their eyes only on the gross margin. They didn’t take inventory turn into account. And this meant that they didn’t appreciate the cash flow that HP supplies was generating.

We had a session in which Julian Dent from VIA presented his findings to our resellers and, about halfway through, you could sense everyone in the room giving a collective  ‘Aha’! It was a real turning point. They finally started seeing our products as a business opportunity rather than as a liability. It pretty much quelled the uprising.

RTM: Did it change anything else?

BM: It made us take a long, hard look at our incentives. Up until then we had been encouraging people to buy in big truckloads. And we realised that this policy damaged the profitability of our partners, because it inevitably left them overstocked and so lessened the number of inventory turns.

Instead we based incentives on their annual sales levels and we put in place some customer promotions and tightened the supply chain. We also realised that the key to selling to end-users was to have a very broad range of products in as many outlets as possible.

And we made sure that, when we signed new resellers, we took them through all these loops.

RTM: What effect did all this have?

BM: It changed our relationship with these guys. It became a consultative sell and people started turning to us for business advice.