Lenovo Channel Chief Cato On Increasing Rebates, MDF And Sales Alignment To Get Back Into 'Growth Mode'

'Channel Transformation' At Lenovo

Following an overhaul to Lenovo's channel compensation program last fall that hurt profitability for many partners, company executives pledged at the Accelerate 2018 conference in May to make partner-friendly changes as a way to spark growth in the Lenovo PC business.

Now, CRN has learned more details on the changes from Rob Cato, Lenovo's channel chief for its North American PC and smart devices business. "Last year, growth and acquiring new customers were not at the forefront of what we were doing," Cato said in an interview with CRN. "We're now in a position where we want to reward growth and reward our partners for going out and acquiring new customers."

What follows is an edited portion of the conversation.

What is changing about Lenovo's channel approach right now?

This stems from the last few months, having spent a lot of time with partners at Accelerate, and at roundtables and in one-on-ones. It's really related to the overall transformation that Lenovo is going through. Lenovo is transforming from a very product-centric company to one that is very focused on customers. The channel transformation is about optimizing everything that we're doing.

One [focus] is optimizing our investments -- everything from our financial investments, our marketing investments, our people investments -- to drive growth and market share across three segments. Those are SMB -- which is still very relevant for us -- as well as the large enterprise space, and also the K-12 customer segment. Those are the three segments that we're going to focus and hone in on with our partners. We're increasing the level of engagement -- engaging our partners with the coverage model that we have, allowing us to be deeper and more strategic with them, and aligning with them across North America.

What's your strategy for targeting these segments with partners?

Feedback that we heard first-hand at Accelerate and in roundtables with partners was that we needed to align around our mutual goals and objectives. Partners were very clear that, 'Hey, you guys have a world-class portfolio. But in some cases we don't feel like you're aligned with our objectives. And maybe you're not quite as relevant as you should be with our business.' We took that to heart. So we're trying to drive new levels of engagement to become more relevant to them.

Another thing that's part of this transformation is that Lenovo is now in a position to get back to growth and [customer] acquisition. Last year, growth and acquiring new customers were not at the forefront of what we were doing. We're now in a position where we want to reward growth and reward our partners for going out and acquiring new customers, at very high levels. And so we're going to reward them and incentivize them to go out and grow their business across the SMB, large enterprise and K-12 space, and also acquire new customers with us.

How are you going to be increasing engagement with channel partners?

Around SMB, we don't have an end-user salesforce, so the channel is really our engine around that. What we're doing is building an SMB community of resellers. So our Gold, Platinum and NSP partners will all be a part of that SMB community, and our field resources will be aligned with them to go capture market share in that SMB space. So we're making new investments, we're having tighter sales coverage, and our support organization will all be aligned to help drive that SMB growth with those partners.

We're also creating other communities around the large enterprise and K-12 space. In those spaces, because of the way that we incentivize them around products, we heard that it wasn't necessarily incentivizing them for growing their business with us. We want to build a community of resellers that will be focused on those two segments, and reward and incentivize them. For example, in the K-12 space, that community will have new incentives to help drive new form factors. And then some of the new solutions, such as AR/VR [augmented reality/virtual reality], which are now starting to take shape in the classroom -- we want to make sure that partners who are selling those solutions are [incentivized properly].

Then, we're going to leverage our distributors to help us grow and build our Authorized and our Silver base of partners.

What specifically are you changing in terms of incentives?

The community of resellers will have specific targets for their growth and will have opportunities to be rewarded for growing their business more aggressively than in the past. For that group of partners in the SMB community, or in the large enterprise or K-12 community, we're going to have specific incentives for them to help grow their business and grab market share. Lenovo is back into growth mode -- we want to acquire customers at a great pace.

We're building these communities of partners -- we haven't had that before, and we'll be supporting them in a new and different way. There'll be different incentives, higher sales coverage and a better, more robust support organization to help them grow their business.

We're going to put growth incentives in place so partners will have incentives for growing their business. Most of these will be in the form of back-end rebates. And we'll have MDF accruals that they will receive to drive additional opportunities in the marketplace.

You've also been working toward delivering pricing information more quickly to partners?

Many of our partners were telling us that we were slow to respond, whether it was speed to price or on requests from partners on certain things. We needed to improve the speed at which we delivered information, and specifically pricing, to our partners. Especially around the SMB space. So one of the things that we've invested in is a new SMB bid desk. And we're going to add other SMB tools that partners can take advantage of. So that SMB bid desk will now speed up the turnaround time for pricing for SMB opportunities, from what used to be days now down to less than 24 hours. That launched July 1, so it's out in the market now.

The other tools that we're investing in will come over the next several months, and some into next year. Some of these are digitalization tools that allow our partners more access to information -- everything from product information to pricing information to rebates. We've got to get into the next era of where this business is going, and digitalization has got to be a part of that.

We're still leaving in place some of our most popular programs, such as the customer bonus program which is designed for SMB partners and SMB customers. And we're also leaving in place the deal registration program, but we're going to continue to enhance that.

Overall you believe this will increase partner profitability?

I do believe it will increase profitability -- in fact, I've had some conversations with partners over the last several weeks, and we got their feedback about what we're doing with building these communities. We've done some work [on incentives] and I do believe it will enhance their profitability. I also believe it will give them the excitement back into the Lenovo business that, frankly, we needed to have.

Are you looking to recruit partners?

Yes. If you look at the base of partners that we have today -- we have about 26,000 partners in our network, and anywhere from 10,000 to 12,000 are active on a monthly basis -- obviously we want to continue to do as much as we can with the ones we have. But I think there's an opportunity to bring in new partners. And that's one of the areas we will be asking distributors to help drive for us. We're going to work very closely with them and with our team to recruit new partners, bring them on board, and give them a very clear path as they come on board. I think we've designed a very clear path as they grow from Authorized to Silver to Gold to Platinum.

What is the significance of organizing partners into different communities?

It's around the customer segmentation -- SMB, large enterprise and K-12. There are partners out there that spend the majority of their time going after [one of these areas]. The feedback we got from them is that some of our incentives, some of our focus, some of our investments weren't targeted toward them. So we want to make sure we have the right investments targeted toward all of those communities. As part of the community, they get deeper relationships with our channel sales teams -- and not only with our channel sales teams but also with our end-user sales teams. We're going to provide improved enablement through training, partner playbooks. And then better business planning. One of the things they asked us to do was to sit down and start planning with them, and understand how they're investing, so that we can turn that around into new opportunities to go grow together. So we're going to have better alignment with them around that.

Are you increasing MDF?

We are increasing MDF. We think it's something we need to do to continue to help invest in their business, and give them marketing opportunities to grow with us -- again in the SMB, large enterprise and K-12 space. Partners will be pleased with what they're going to see from us [on MDF].

How far are these measures going in terms of rebuilding trust with partners?

I think this is the first step in rebuilding that trust. Obviously, that is earned over time. I feel very confident, after talking to a number of our partners, that we are on the right path. I'm confident that once we start getting back into a repeatable growth mode, and we show that we're reinvesting back into the channel, I really believe that we're going to rebuild that trust over the coming quarters.