The Endeavour US Market Entry Blog
Crossing the Chasm with focus
by Philip Rogers on 01/17/12
One of the most common problems for international companies entering the US market is focus. Most companies come from small markets where they achieved success through a niche offer to a range of different segments. A similar approach in the US often leads to them achieving early success but results in them getting stuck of the wrong side of Geoffrey Moore's chasm. Companies proudly point to their clients in 10 or 15 industries and across three or four countries. This is enough to attract the innovators and early adopters but not enough to allow them to move into the mainstream market where the real revenues are. International market entrants are not alone. Many US start ups fall into the same trap. A common outcome is that real revenue growth never comes. Investors get fatigued by demands for additional capital or lose belief in the exit opportunity. The end result is a "zombie" company that has enough cash flow to survive. The failure to achieve the required dominance in any one segment to trigger substantial revenues and profit means that true success is never achieved. The lesson - identify the customer segment that most values your solution and own it - then move to adjacent markets.
Why 2011 could be a great year for US market entry
by Philip Rogers on 12/22/10
Historically, the US tends to set up for a long period of growth after a major down turn. The rebound from the great recession has been slow but there are indicators suggesting that the US economy could be setting a multi-year bull run.
1. Economic conditions
Improved relative economic performance and movement on deficit reduction efforts are likely to mean a stronger US dollar over the next few years. US companies are sitting on over $2 trillion in liquid assets. As a percentage of assets, this is more than any time since 1959. The corporate sector will need to put these assets to work. Real estate, unemployment and increased consumer saving rates will continue to be a drag on economic growth making 2011 a relatively slow growth year. However, the deflating of the real estate bubble is probably over done at this stage and unemployment is trending down. The US consumer is already showing signs of starting to spend again. 2011 is likely to be the ideal time to get positioned for a multi-year growth cycle.
2. Major disruptive changes
Some of the big disruptive changes that kicked off during over the last decade or so are now maturing. In 2010, more will be spent on web advertising than print. Salesforce.com is on track to exceed $1.3B in revenues this year. Online sales are forecasted to reach $250 billion. Many of these changes have created opportunity for international firms.
In technology, cloud computing, mobile, consumer internet and digital media continue to build momentum. Big companies continue to struggle to adjust so there are land grab opportunities in many areas. There is talk of a bubble particularly in consumer internet and digital media but adoption of these technologies is rapid and reaching critical mass.
Web retailing continues to take market share with Amazon leading the way. Web retailers are typically easier to get listed and work with compared with traditional retailers. Being a featured product by brand name web retailer gives international companies immediate credibility with US consumers. Setting up your own US ecommerce site is a low cost and easy creating a high margin channel over the longer term.
Global brand building is now inexpensive. Social media means that many firms are building global brands by default. Marketing efforts in the US can be supported using the existing marketing team. The opportunity to engage with your ideal US consumer before you even set foot in the US market is invaluable.
3. The positive innovation loop
The US market in 2011 is in the midst of a major innovation cycle as the recession forced businesses to change. Being part of this cycle can drive innovation in the home market business operations. Competing in the US will give you an edge in other markets.
The usual caveats do apply. The US market is competitive and will probably cost twice as much and take twice as long as the business plan says. Economic conditions change and there are no guarantees. However, the current environment looks very positive for companies with great products /services and a story that the consumers or businesses can connect with.
Top 10 considerations for US market entry
by Philip Rogers on 12/21/10
1. Think big
Companies from smaller markets need to readjust their goals. Do some analysis on market potential and plan to take a good percentage of market share over a five year period. Think about what you want your business to look like three years or five years out, write it down and then build a plan to get there.
2. A sales plan is not a plan
Many companies see the US market as simply a new market and therefore operate based on a sales plan rather than a full analysis of their business model. Look at your US operation as a start up. Critically analyze everything from your target segment, value proposition to your revenues streams and cost drivers.
3. Segmentation / Value proposition / Brand
Focus is the key to success. Identify the segments with the highest potential then develop ideal customer profiles and related personas to help with this focus. The generalist capabilities that are valuable in smaller markets are not valued or understood in the US. Buyers are looking for experts in their field. You have to be in the content business to build this expert reputation. A mix of blogs, white papers, speaking events need to be part of your strategy to build a market presence. Branding is important whatever your business. Rethink your business and make a decision on the one value or brand essence that you want to stand for. Build everything around that. Be different. Look at comparable industries and see how the most successful firms are going to market.
4. Channels
Most companies either work with a channel partner or hire a sales person in market as an initial step. You need to remember that winning the first US customers is not easy. If you are going to hire someone, you need someone who has the entrepreneurial drive and motivation to make this happen. A sales person used to working in established businesses will struggle with the transition to what is a start up environment. A channel partner’s sales force is unlikely to take a risk on a new product and put their current business at risk by doing so. Creative compensation and training strategies for channel partners and prioritizing start up experience when recruiting early employees can help to manage these issues. Create a budget for demand generation and other support costs whether you choose a channel or direct strategy. Also, think about the long term impact of these decisions. A channel partner might look like a low cost strategy initially but might not look so attractive in the medium term when revenue shares start to kick in. Founders and the management team need to commit to spending time in market to gain initial traction and support employees and / or partners.
5. Operations
Winning the sale is only one step. It is possible that you could end up with a customer in Boston and another in San Diego - a 3,000 mile drive. How are you going to support these customers cost effectively? Do your operational constraints impact the segments that you can target? Outsourcing of functions from marketing to human resources can make sense. Outsourcing makes fixed costs variable, allows you to access local expertise and networks as well as provides flexibility. The skills and processes involved with managing outsourced providers need to be thought through.
6. Financing
The evolving business plan may uncover new revenue streams and different approaches to managing costs. Achieving your businesses true potential may require outside financing. US private equity and venture markets are highly developed. The thinking big approach means that financial partners are probably a necessity.
7. Accountants and lawyers
Accountants and lawyers in the United States are plentiful and the standard of their work is generally high. The tort claims make big news but the reality is that most business-to-business relationships are no more likely to end in court than in other countries. Litigation is generally not a good business strategy unless you are protecting intellectual property rights. Consumer markets are riskier. The real value that professionals bring is their network and experience. Consider the case of an international technology company seeking financing in the US. VC firms work through introductions. The selection of a law firm, accounting firm and bank that previously worked with the target VC firms would be a key part of the financing strategy.
8. Staffing
When considering staff requirements, think about all the options including consulting and outsourced providers. Contractors from CFOs through to sales are available allowing you to keep costs low and maximize flexibility. Prioritize start up experience. A new entrant requires people who can make the impossible possible. Be skeptical when reviewing resumes. How much of the performance claimed was the person actually responsible for? Hitting sales goals with IBM is a lot different from hitting goals in a start-up with few resources. Also, remember the investment line - past performance is not indicative of future performance.
9. Location, networks and support
Major entrepreneurial hubs like Boston, Austin and San Francisco have a range of groups and institutions available. Consider secondary cities located near the big hubs to keep costs down. It is easier to be a big fish in a place like Providence Rhode Island compared with Boston. All states have economic development agencies that can be helpful. Get creative in areas like workspace, communications and transport. There are a slew of business services targeting the one to ten person companies. Co-working providers allow you to rent office space part-time. Car sharing gives you access to vehicles when you need it. Web conferencing is the norm.
10. Business culture and learning
The entrepreneurial culture in the United States is very impressive. Children are doing marketing projects at age 10 in the schools. New business ideas and marketing strategies are being trialed and refined all the time. Social media has made all these ideas very accessible. The learning opportunity is enormous. Take advantage of this opportunity.
