Interviewed by Marylou Tyler: Breaking Into Foreign Markets
Some of the conclusions from the interview:
- The value of an information technology company that can prove global potential is dramatically higher than a company that only operates in one country. The return on investment from taking your company global is unbelievable.
- If you don’t take your company global then you will soon be facing tough competition from those of your colleagues that do, and these colleagues will be growing faster than you and become stronger every day making your life more and more miserable. Even in your domestic market.
- Even though the needs for information technology products and services are basically the same in all countries across the globe, there are always special circumstances in each country that require adjustments to our products and value propositions and adjustments to the way we facilitate the buying processes of our potential customers in each country.
Listen to the full interview.
Today I am interviewing Hans Peter Bech, author of the bestselling book ”Building Successful Partner Channels.”
Hans Peter is also the managing partner at TBK Consult, a consulting company specialized in helping information technology companies break into foreign markets.
Hans Peter is based in Copenhagen, Denmark.
Hans Peter, thank you for taking the time to do this interview. Can you start by telling us what does “helping information technology companies break into foreign markets” actually means?
[Hans Peter Bech]
Thank you Marylou for inviting me to your show.
I am really excited talking to you today and must start by complimenting you for your most recent book Predictable Prospecting. Earlier this year I read your first book Predictable Revenue that you wrote with Aaron Ross and I can tell you that we have included many of your recommendations in our work and that both your books are now on the reading list we provide our clients.
But getting back to your question let me give a little background.
Before I started TBK Consult 15 years ago I had spent more than two decades selling information technology all over the world.
From my base in Copenhagen I had started businesses in each and every country in Europe, in Japan, in Malaysia, in Thailand, in Singapore, in Australia and New Zealand, in South Africa and in North America. Several of the companies that I worked with were acquired by big global players along the road.
In the mid 1990’s I relocated to Stuttgart in Germany from where I built the business for a Danish software company in the three German speaking countries, that’s Germany, Austria and Switzerland. This company was acquired by Microsoft in 2002.
What I learned from these international activities was that the value of an information technology company that can prove global potential is dramatically higher than a company that only operates in one country. The return on investment from taking your company global is unbelievable.
I also learned that if you don’t take your company global then you will soon be facing tough competition from those of your colleagues that do, and these colleagues will be growing faster than you and become stronger every day making your life more and more miserable.
And finally I learned that even though the needs for information technology products and services are basically the same in all countries on the globe, there are always special circumstances in each country that requires adjustments to our products and value propositions and adjustments to the way we facilitate the buying processes of our potential customers in each country.
Sometimes these circumstances, that I now call the business model environment, can be so unfavorable in a specific country that we are better off leaving that country for later when we have more muscles.
So the three big questions that all our clients face are:
- Which country should you enter next?
- What are the adjustments that you must make to your business model to bootstrap this market?
- And how do you organize your marketing and sales activities establishing a beachhead from where you can grow?
As preparing a business plan is much faster and far less expensive that executing the plan we urge our potential clients to think before they jump. When they agree with this approach then we help them putting together the plan and test it before they commit serious resources to scaling the business.
How do these activities relate to your recent book “Building Successful Partner Channels“?
[Hans Peter Bech]
Way over 50% of all information technology products and services are brought to the market through a channel of independent business partners and when information technology companies decide to venture into new countries they predominantly choose the indirect channel route also when they entertain a direct approach in their domestic market.
There is therefore a massive need for understanding what it takes to find, engage, recruit, enable and grow business partners that then can find, nurture, mature, activate, develop, win, make, keep and grow happy customers on our behalf.
When you then combine Entering Foreign Markets with Building Successful Partner Channels then you have a business venture that can go awfully wrong and often does. This is where we can help navigating the complexity and help our clients land on both feet.
What are then the major challenges that your clients are facing?
[Hans Peter Bech]
Before I answer your question there are a few characteristics in the information technology industry that I would like to share.
People across the globe get the same ideas at the same time. As the barriers to market entry in the information technology are low and even steadily decreasing the windows of opportunity keeps getting smaller and smaller. Companies must move faster and faster expanding outside the comfort zone of their domestic market before the window closes.
Therefore, the information technology industry is an arms race for market leadership country by country.
Information technology product are basically invisible and that makes it very hard for customers to relate their needs and challenges to new vendors and new products. In addition, information technology products alone are seldom the whole solution that the customer needs. Implementation of the products requires consulting and changes to the customers’ business processes, which is always associated with some risk. Therefore, customers all over the world prefer to buy from the recognized market leaders.
And that leads me to the challenges that our customers are facing.
Most of our clients are younger companies that have brilliant products, that perform very well in their domestic market, but they have limited resources and time to take on new countries and making big and costly mistakes can be deadly. They need a lean way to find the best route to the international markets and a lean way to enter each country. We can teach them this lean approach and we can help them apply and refine the approach in the countries that they chose to enter.
You talked earlier about differences in the various countries around the world. Can you give us some examples of what these differences are?
[Hans Peter Bech]
As I mentioned earlier we call a new country for a new business model environment and we use a template to identify these differences that is based on Alexander Osterwalder’s book Business Model Generation that I believe is now becoming the world standard for business planning in the information technology industry.
The business model environment has four areas:
The first area includes infrastructure, demographics, language, legislation and culture and already here we find the first significant differences.
If you want to do serious business in Germany, France, Italy, Japan, China, Mexico, Brazil, Argentina etc. then you must run your business in the local language. You must verify that your products comply with local legislation and your local operation must also comply with local legislation. In the age of SaaS one of the big questions is where we store sensitive data. Many governments and companies are reluctant to accept sensitive data stored abroad.
And then we come to culture. Business is conducted in very different ways around the world. There are significant differences in how we build and maintain human relationships and how we address each other. The templates and processes that you suggest in your book will work well in North America and in Northern Europe, but in Southern Europe, Africa, The Middle East, Asia and South America social engagement and communication works differently and we will have to adjust the process and the wording.
Marketing and sales is all about communications and human relationships and therefore culture plays a very important role here. In our culture, what you know is much more important than who you know, but in other parts of the world it is exactly the opposite. In our culture you can be frank and speak your mind and customers even prefer that we challenge them and add new knowledge. That approach will be a complete showstopper in other cultures. Understanding local culture is fundamental for designing effective business processes.
The second area in the business model environment is the market and that includes everything associated with our customers, their specific needs and requirements, how they are organized, where they find their inspiration, who the listen to etc. We often find that even though our product complies with local legislation, there are market demands related to tradition and culture that makes our product unsellable. We may have strong USPs that the local competition cannot match, but there are a few basic functions that we miss and without those the product is useless. We need to have these in place before getting started.
The third area in the business model environment is the industry – our industry – and that includes everything associated with our competitors, the substitution alternatives, the supply chain partners that we have to work with or that we could sign up as resellers or implementation partners.
The obvious difference in this area is the competition. The competitive landscape is always different from country to country and there are often some strong local competitors that we have not even heard of. When we plan to enter big markets such as the USA, China, The UK, Germany, France and Italy these competitors are often much stronger than us and we need a very clever strategy to steal a share of the market under their noses.
The fourth area in the business model environment is macroeconomics and includes general market conditions, capital market conditions, resources and economic infrastructure. As most information technology companies do not need to set up local manufacturing, warehouses, distribution, spare parts and services locations this area is of lesser significance.
It sounds as a lot of planning is required before you can start selling into foreign markets?
[Hans Peter Bech]
If you have never done it before, then it may appear overwhelming. However, when you have done two or three times, then you know exactly what you need to look for and you know what is required to make the changes in your business model and your go-to-market plan.
I have to repeat that planning is fast and inexpensive – execution is slow and expensive. Jumping head first into the swimming pool before checking the depth and temperature of the water is not recommendable. You will eventually find out both ways but the trial and error approach may put you in a wheelchair for the rest of your life.
Either you commit the resources required to become competitive in the new country or you stay out.
What happens if you ignore the planning and jump head first into a new country?
[Hans Peter Bech]
The probability that you will fail is very high, meaning that you will spend more time and money than expected and generate less revenue than expected. But what may be even more critical is that you will not know what went wrong. Did you engage the wrong people, did you underestimate the competition, did you misinterpret the market needs, did you have poor project management, are there a few adjustments that could have made the difference? The people you have engaged to do the legwork will claim that it is the product, the price, the competition and all other factors than their own performance and you will not know if they are right or wrong. So you either pull out of the market or do the planning that you should have done in the first place.
There is a slight probability that you will be successful, but now you don’t know why. What did you learn from your apparent success and what does it take to now scale the business? Can you scale the business by doing more of what you did or was your break through just a lucky punch? I have seen many examples of companies getting some quick wins and then nothing happens for a long, long time.
So what are you top three recommendations to companies that consider moving into foreign countries?
[Hans Peter Bech]
My first recommendation is to change all marketing material and all formal internal communication to English. English speaking companies are fortunate because they already have that in place, but for the rest of the world that should be the first step. Doing so will enable potential customers in foreign countries to find you, and you can now get an early indication of the foreign demand for what you offer. People all over the world and especially early adopters use English keywords when searching for information and inspiration. If you do not get any inbound inquiries from abroad, then you have a problem that you need to fix first. Reading the first chapters in your most recent book Predictable Prospecting will be very helpful here. It is normally a problem with segmentation and focus.
My second recommendation is to carefully select the country you want to enter next and identify the changes required to your business model. Make a plan for doing these changes and start the execution. If these changes are minor, then you can move to recommendation three.
My third recommendation is to build the marketing platform in the foreign language and then start with foreign language speaking revenue generation staff located in your central office. You work closely with your new staff using Marylou’s book as the guideline for setting up the lead generation processes. If the entire process can be managed without physically meeting your customers, then you can scale this format for some time. However, differences in time-zones, lack of foreign speaking talent, the requirement for physically meeting your customers, and the need for major changes to your business model will require that you set up an operation in the country.
Where should people go if they would like to learn more about your recommendations and services?
[Hans Peter Bech]
Our web site is www.tbkconsult.com where all details about our services, workshops, keynotes, books, whitepapers and videos can be found.
I publish new material every Wednesday on our own blog and on Thursdays on LinkedIn and I also offer a bi-weekly e-journal that you can subscribe to. You can follow me on Twitter and I accept most LinkedIn connection requests from business development, marketing, sales and other revenue generation professionals in the information technology industry.
My contact details are available on my LinkedIn profile and I welcome any questions related to channel development and international business development in general.
Thank you Hans Peter for sharing your insight and experience. I am sure those watching this video have learned a great deal about how the world is different outside the borders of their own country and that we should always remember that if we want to be successful in other countries then we need to adapt to the business model environment in that country. As you said, the information technology is an arms race for market leadership country by country and starting late may well be too late.
I am Marylou Tyler. Thank you for taking the time to watch this video and stay on for a second if you want to write down our contact details and those of TBK Consult.
Thank you and have a great day.