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? As I look at today’s office technology landscape, a lot has changed in terms of the balance of power between manufacturers and their channel partners. First and foremost, the market has reached maturity and has largely commoditized. This alone has made it more challenging for any one manufacturer to maintain power given that product portfolios don’t generally provide enhanced value vs. others. Second, the channels have consolidated dramatically. What once was a channel made up of over 7,000 outlets has now dwindled to below 2,000 with that number shrinking on almost a daily basis. And although OEMs have generally built their own direct operations as a hedge against their dealer businesses, the fact of the matter is that most OEMs are still highly reliant on revenue from an ever-shrinking base of dealers. With the continued expansion of megadealers, the days of OEM power domination are likely drawing to a close. Third, the involvement of private equity in many of the megadealers is a likely signal that the power meter will begin its migration back toward the center. And finally, let’s not forget about business diversification. As dealers begin to derive greater percentages of their business from non-traditional sources, they will become less reliant on traditional print manufacturers and more likely to desire better terms.

The signs of this balance of power shift were already beginning to show themselves five years ago as dealers demanded tiered incentives in pricing and marketing programs, greater legal protection in relation to customer information, and improved terms and conditions in dealer agreements as compared to the past.

One might question whether this is good for the industry. Considering that OEMs and dealers have enjoyed considerable growth over the last 25+ years, one might wonder if a change in power dynamics will be of benefit. I say it will. Given today’s market and its trajectory, although dealers are well positioned to continue to grow, OEMs are not. Eventually, growth for dealers will become challenging as well. For all parties to effectively navigate through steady industry decline, a cooperative spirit will be essential to extracting a diminishing level of industry value. A balance of power is a sure means of promoting such a spirit.

Canon’s relationship with HP can provide us with a great example. Through market ups and downs, the balance of power in this relationship has remained relatively stable. While both companies compete with each other, they have also recognized the greater value available by working together. A one-sided power relationship may have never allowed such cooperation to materialize.

Whether evaluating the relationship between alliance partners or OEMs and their channels, all business relationships thrive on the creation of mutual value. Without it there is no partnership. The key to long-term relationships is to constantly assess this value and make adjustments when such value swings too far in one direction.

By doing so partners can be assured that their best interests and objectives are being met and both can feel the power!

Dennis Amorosano is the president and founder of Dendog Strategy Insights LLC, a management consulting firm focused on strategic planning, new business development and go to market execution. Providing services in the areas of strategic business planning/execution, new business development, content creation/marketing automation and technology sourcing support, Dendog Strategy Insights brings 30 years of technology marketing, sales, product planning, software engineering, and professional service experience to help clients implement strategies that yield success.