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Learning to Love Your Channel

Executives at {complink 3297|Maxim Integrated Products Inc.} will be the first to tell you that three years ago, they were tough to do business with if you were a distributor. “I'd say we were probably one of their least favorite companies,” says Jason Green, Maxim's managing director for sales and applications, Americas, and corporate distribution. “Maxim did not have operational or sales programs focused on the channel, and we looked to distribution largely as a fulfillment mechanism.”

It's not unusual for a chipmaker like Maxim, with complex, highly proprietary products, to have a limited distribution channel. FPGA makers such as {complink 6248|Xilinx Inc.} and {complink 265|Altera Corp.} each carry one global distributor, a catalogue house, and maybe a few specialized regionals. But these companies also reward their distributors with programs that compensate them for sales and design support. “We had great technology that provided growth through the channel despite the lack of focus,” says Green. “We focused all our Maxim resources on our top 200 OEM customers.”

But as both the market and Maxim grew, the company wanted to reach small and midsized OEMs and develop a more balanced customer base. A small team of Maxim executives knew this would involve distribution and a massive shift in culture. One of the first things the team did was securing a top-down commitment from its CEO, Tunc Doluca. It pulled former {complink 577|Avnet Inc.} executive Don Sweet out of retirement. And it went to work.

In order to get the full attention of its channel, Maxim signed its first and only global distributor — Avnet — and disengaged with the rest of its channel. It also maintained its relationship with catalogue distributor Digi-Key. The distribution team then had to put programs and systems in place to support its new channel strategy.

“Operationally, we didn't have a lot of policies and procedures that would be deemed 'distribution friendly,' ” says Sweet, now Maxim's executive director of global distribution and business development. Maxim implemented a design registration program; aligned its materials management systems with distribution; and made sure its factories and fab partners were prepared for the new model.

This was crucial, says Sweet. “We started the design registration program, but we also had to focus on inventory management.” Although inventory seems to be a no-brainer, design registration programs — and customer relationships — fail when a distributor wins a design but doesn't have product on the shelf to support it.

Among the biggest challenges, says Green, was skepticism within the channel that Maxim's commitment was real. “We had a negative perception that we had to overcome.”

“We had to make sure our distribution sales people had [Maxim] people in front of them,” says Sweet. “So we put our sales people face-to-face with their distributor counterparts at the branch level. We spent a lot of time with distribution management. And we knew we had to do it quickly because the more time we let lapse, the more time it would take [distributors] to believe we were really committed to this program.”

For the kind of ramp-up Maxim was targeting, three years is not a long time. The majority of chip suppliers that sell through distribution have been doing so for decades. “I was surprised at how quickly [distribution] accepted us,” says Green.

Maxim succeeded because it emphasized partnership with its channel. Broadline distributors such as {complink 453|Arrow Electronics Inc.} and Avnet have limited time and resources to devote to the 50 or more semiconductor companies vying for attention. By limiting its channel, Maxim made sure its partners shared in its success. Although Maxim executives aren't comfortable sharing specifics about its growth through distribution, the company reported record revenues of $566 million for the most recent quarter.

Executives will point to NEDA's recognition, though. When presenting the award, NEDA President Brian McNally said Maxim's achievement was “no less than remarkable.”

Do you have a channel success story to share?

2 comments on “Learning to Love Your Channel

  1. Hardcore
    November 3, 2010

    I would have to say that  when a IC manufactures stops supporting the engineers/ prototypers, that is when it has problems that no amount of 'tweaking of the supply chain can fix.

    IC suppliers supply chain has always been the difficulty, and as an engineer i say that is what they get paid for…plus it keeps them out of the engineers way. 😉

    I cannot remember a single instance of anyone in my supply chain trying to get me to use parts (other than semi-sales staff. but they don't count).

    Maxim is one of the few suppliers that has :

    1. remained consistent on engineer samples/ free samples.

    2. Has great data sheets.

    3. Has had some really innovative products. (RS232 range/ Buck/boost power systems etc) their products really reduce down PCB real-estate requirements, and they are hardy little beasts, taking significant abuse during prototyping.

    It seems like a no brainer, but for some reason in semiconductor companies the corporate suits and sales people do not seem to realize, if an engineer cannot get parts for the 1 or 2 off prototypes then they are not going to see any orders.

    That said, it is interesting to see how various semiconductor companies respond to the internet, some have embraced it (maxim's site is actually nice), Cypress was dire until they copied maxim's

    Some are just downright reckless:

    1.demanding registration before they will release data-sheets for product that have been on the market for 10 years

    2. continually cancel your login if they don't think you have ordered recently

    3. daft enough to think that 'individuals' cannot register their own domain (many companies now disable 'login' if you use gmail, or any other public email system… hay!! perhaps i do not like the continual spam you flood me with)

    4. Continually spam the email address with worthless information on hard to use parts, because the data-sheets need 'special' login to access

    5. don't realize hobby sites can be significant sources of income.

     

    Companies need to spend more time looking at their competitors:

    take a look at places such as:

    http://www.ftdichip.com/

    They provide software, drivers, data sheets ,samples and have an online store, yes they are smaller not in the same league as maxim but they do have some good products.

     

    Then couple it with:

    http://dangerousprototypes.com/

    http://hardcoreforensics.com/

    how many  ic suppliers have thought about dropping such sites a 'package' of their parts once a year?  

    Such actions get the manufacturers parts out there to a massive internet 'hobby/hacker' market, which in turn translates into orders via distributors channels and all for the cost of a business lunch once a year!! (i suspect that because  it is not Quantitative, cannot be 'graphed' or go down on the 'key accomplishments' chart in the sales meetings, there is no interest)

    The other interesting fact, is the number of 'Chinese' OEM designs that 'contain' material found on the internet, again a marketing vector that may not have been explored

    Device exposure in hobby market = mass produced cheap rip-offs from China.

    Seriously Maxim is not that bad, they have always supported the engineers/prototypers, yes they had a few bumps along the way with the distributors but that  is nothing unusual.

    If there is a demand for the parts, sales channels will sort them selves out, business always finds a way to make money if there is demand for a service, we can see that from both  'google' and 'twitter'

  2. Barbara Jorgensen
    November 4, 2010

    Thanks Hardcore–a good point that you bring up: How much “attention” does an engineer want or need?

     I know catalog distributors have varying approaches to this. One catalog does not participate in design registration programs because of the process you describe–getting two or three parts requires so much time and effort it's easier to go somewhere else. This company believes there should be no barriers between customers and what they are buying.

     Another catalog is very selective about following up qualified leads–they do want to sell products and support their suppliers–but do not want to alienate engineers. 

    It's always a balancing act, and one of the things that impressed me about Maxim. They were doing fine without the channel, but also weighed the importance of global distribution and reaching a wider audience. They do have to give distributors some incentive, though, so design registration came into the mix. Most of all, they had to change their culture, and so far it sounds like they've succeeded.

    It looks like they still offer plenty of direct support–I checked out their website in researching the article–a lot of in-depth data there–and their distribution channel is very limited. I know this model has been successful for Xilinx and Altera.

    I'm going to check out the sites you included in your feedback–I'm not familiar with them. I'm like you in that regard–if you make me register for information or ask too many questions–or wose, give me 20 different choices–I'm outta there!

    Again, thanks for your feedback!

     

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