This is part 2 of a blog series on channel transition management. You can read part 1 here.
In our last blog post, we discussed why proactive evaluation of channel transitions is important, and how to build a strategic process to effectively assess channel channel Transition options. After companies have determined one or a combination of transition options to implement, it is also critical to build a change management plan to execute the changes and avoid potential disruption.
As companies face markets that are slowing or experiencing disruptions such as trade issues, spending cuts, or currency volatility, their existing channel strategies may become suboptimal. MNCs’ distributor performance can also deteriorate as less competitive ones become exposed. While changing channel structures or partnerships become inevitable, handling these changes at such a volatile time can be extra sensitive due to weak demand and price sensitivity.
According to FSG’s Channel Benchmarking Survey, multinational companies across geographies and industries have experienced channel transitions in the past five years, but many of the transitions are painful. Many companies tend to make mistakes during execution, which often result in brand damage, distributor retaliation, loss of key customers, loss of sales, and even legal troubles. Without setting proper execution timelines, communication cadence, and a back-up plan, MNCs are at risk of abrupt, badly timed, and dysfunctional transitions that can hurt market performance significantly.
Companies must develop an effective change management plan to ensure smooth channel transitions
While switching partners or models can be risky and disruptive, planning for changes proactively can help avoid having to make shifts when the situation is critical and the business is already suffering. Once MNC executives have identified channel capability gaps and confirmed a need for change, they must design an implementation process that aligns all stakeholders and takes into consideration possible push-backs.
To successfully implement a channel transition and avoid disruptions to their businesses, companies should develop an effective process to ensure smooth transition, e.g., effectively prioritizing which customers or geographies for transitions, anticipating distributor reactions to avoid brand damage and retaliation, communicating with corporate to align on short-term and long-term impact of transitions, preparing for potential risks and building a plan B.
Companies that can manage the implementation of a channel transition successfully often excel in three critical steps/aspects:
- Develop a clear execution plan: Prioritize channel transitions and carefully evaluate timing and potential resistance to create a clearly defined roadmap and workflow
- Ensure smooth communication: Ensure alignment among affected partners, customers and internal stakeholders
- Build a back-up plan: Prevent risks by including key contract details and preparing for contingency actions in advance
To learn more about how to effectively execute a channel transition, please fill out the form below.
Clients can access the second report in FSG’s two-part series on channel transitions management, Executing Channel Transitions, complementing the first report on Evaluating Channel Transitions. It offers a strategic framework and 13 case studies to highlight the best practices and common pitfalls during the implementation of a channel transition, which will help companies strategically plan for executing change in their distribution channels.
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