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The Balance of Power

Power. It’s a reality that anyone in business will encounter at some point in their career. Whether in the relationship between a boss and their subordinate, a vendor and their customer, or alliance partners or a manufacturer and their channels of distribution, power and who holds it is something that must be assessed and navigated.

The power balance between alliance partners, as well as manufacturers and their channels, can often fluctuate, making them an interesting study. Take alliance partners for example. Many alliances, particularly those littering the office technology industry, have been built around office technology OEMs sourcing product from small to mid-sized companies to either fill portfolio holes or approach new markets. The power dynamics in these relationships have tended to favor the OEMs given their vast infrastructure and market reach; two assets most small companies cannot approximate without significant capital investment. But what happens to the power dynamics in cases where such relationships are successful? Although not true in all cases, the greater the success, the more balance we typically see in terms of power. Initial alliance agreement terms and conditions that heavily favor the OEM tend to erode with greater levels of alliance success. This erosion can often lead to a loss of some of the intrinsic value OEMs anticipated in connection with the alliance. In the worst of cases, it can lead to significant challenges in maintaining healthy relationships, diminishing value for all parties involved. This continual shift in power dynamics is one reason building truly successful alliances is so challenging and that the examples of such success are fleeting.

What about the relationship between OEMs and their channel partners? Of the power dynamics we have seen in the industry, this is the relationship and power struggle of greatest interest to me. When I joined the industry in the mid-1990s, the market was just beginning its transition from analog to digital technology. In many respects, OEMs were at the height of their analog prowess and despite the fact that OEMs were largely dependent upon channels as a means of capturing business, the power largely rested with manufacturers. And their dealer contracts bore this out, generally providing manufacturers with significant terms and major leverage. Even with the growth of mega-dealers like IKON and Danka the power remained squarely on the side of OEMs, and while we did begin to see some concessions from OEMs to dealers, these were minimal at best. During this time, the market made its ultimate digital transition, and the growth provided to all players made it possible for OEMs to maintain their historical leverage.

But what about today?

Check out the rest of my blog by heading to The Imaging Channel.

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