Situation: A company wants to increase business by building a new channel. The new business is different from the company’s base business, but won’t change the company’s focus on its base business. What lessons have been learned by other CEOs who have accomplished this? How do you build a new channel?

Advice from the CEOs:

• One company created a new channel without changing the base business.
  • They responded slowly to the opportunity before deciding to change.
  • They needed to change infrastructure by adding more people.
  • They also needed to redefine the offering to meet the needs of new clients.
  • This involved adding additional data which had been accessible previously but hadn’t been presented.
  • At first the hand off wasn’t smooth. Hiccups that could have been foreseen with more planning were extra data fields and rough hand-offs. Future new releases will focus on improved process review and more challenging of assumptions, and more patience in the scoping stage.
• The second company created a new branch with different products and operations, but maintained one financial and inventory management system.
  • The initial produce was sold and installed, utilizing union labor. The new product is sold wholesale business to businesses and is non-union.
  • After struggling with attempts to house both operations under one roof the new operation was moved to a separate location.
  • This enabled company to set up separate operations and to fully understand the financials of both operations. It also makes it easier to assess the viability of each business and to implement changes in one without disrupting the other.
• The third company created a new offering to sell to the same customer base, with no change in the back-end systems.
  • The new business created an insurance model for the company’s services as an alternative to the original break-fix model.
  • The two systems use a common sales team, network engineers, and back-end system. Customers choose either insurance or break-fix.
  • The challenge was that the two models need completely different monitoring and incentive systems for the engineers. This took time for development and training.
• The fourth company created two production operations: turnkey and component.
  • This called for different sales and contracting processes and separate production areas on the plant floor, with clear delineation but using the same back end, financial, and engineering support systems.
  • The component process is short-run, high value, high margin; the turnkey is high volume runs, lower value, low margin.
  • The challenge has been in setting up a new set of contract agreements and monitoring systems to monitor the financial success of the turnkey operation.
• What is the common thread?
  • Put sufficient time into planning and evaluating options and challenges so that there is a solid understanding of the new channel before starting.

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