Question, why does it seem that so many non-US firms fail (at least initially) in their forays into the US market? Are there specific attributes of the US economy or culture that are at work, or is it a failure of execution? One of the most difficult challenges a non-US tech company can face is entering the US market. While many seem to have broken through - SAP, Nokia, and Sony come quickly to mind - many would-be entrants fail in their efforts to crack the world's single largest market for high tech goods and services.
The US is very open to non-US companies, having one of the least restrictive regulatory and customs system in the world; however, the majority of high tech companies working to gain market share in the US struggle for years – or quit in frustration - in their search for New World success. The fact that some companies seem to "get it" and rapidly expand market share while most don't only underscores the difficulties in putting together a successful US market entry.
When entering the US market, we can break issues of market entry into four groups: pitfalls, pratfalls, shortfalls, and windfalls:
Pitfalls
One of the most obvious pitfalls for those coming to the US is the market size. The very thing that makes it attractive can be a primary source of difficulty. A small European software firm may decide to open a US office, and to initiate a marketing campaign. However, the company's experience in a single European market -- or even a unified European market -- may translate into a marketing budget too small to have any real impact.
Geography can become a pitfall, as well. For example, a European firm may decide to open its initial (and only) US operation in Boston, because it is closer to European headquarters. But this location may be all wrong based on the geography of its clients. Note that this example may reveal another, more profound, and self-imposed barrier to market success - insufficient autonomy in US operations can be a powerful problem. Consider that until quite recently, European and Asian companies would impose their domestic approaches to hiring and compensation on US employees, and this often meant little or no stock options, but perhaps slightly better vacation and salary. The result was often a revolving door for employees who accepted the jobs for the short-term benefits while continuing the search for other positions offering a better upside.
Pratfalls
The business practices of other countries don't always translate well in the US. While networking is a key element of US business development, it takes different forms than elsewhere. Several firms we have worked with floundered in their business development activities in the US by importing a Ph.D. in Computer Science as head of Sales or of the US operation. These folks tend to look for someone like themselves inside the prospective client companies, and - alas - there just weren't very many folks there like him. Instead of learning about the ways and wherefores of the client's operations, these imports seem lost, hoping that everything will snap into a familiar form.
Shortfalls
The US market moves faster than other markets, and the speed differential can be astonishing. Many Europeans and Asians take a few months before they 'click' on the time dimension. One US/European strategic partnership that I was involved in as an advisor for the European team fell apart because of the inability to come together on the sense of immediacy. The US group wanted to move quickly - to come to terms and launch a joint initiative within a few weeks. The European group, involving company members from three European countries, was not confident of their ability to operate at that pace, and the deal fell apart because of the two group's discordance about time and its place.
Perhaps the single most common shortfall arises from inadequate influencer intelligence: not digging deeply into the community of thought leaders, press, and analysts that surround a marketplace and provide the market with the community of thought leaders, press, and analysts that surround a marketplace and provide the market with product and market analysis. Advertising and networking can only go so far, and without effective integration into the influencer community, it can be impossible to gain mindshare.
Another major shortfall area many technology companies run into are gaffes that arise from language difficulties - badly translated manuals and white papers, help files with French names, menu options in German, and 'zee' versus 'zed' - but these are generally remedied by using US nationals in marketing communications.
Windfalls
Most - if not all - successful US-market entrants base their initial market push on strong alliances with established US firms. Even with a plan to build on well-entrenched US partners, the greatest single windfall can be getting the right head of US operations. The unusual combination of sales, marketing, and international business skills make this role very difficult to fill, indeed, perhaps second only to the challenge of hiring the actual CEO of the company.
Getting the right person for this job can make or break a market entry.
Press and analyst relations are critical for any software firm, but the value of doing these tasks well is exponentially increased given a new market entry. Getting the right PR firm, for example - one that not only pushed your stories but works to develop your press relationships - is enormously important.
A venture partner or investment group who are experienced and knowledgeable about the costs and risks of a US market push can be a great windfall - not just in terms of the direct investment they are committed to make, but just as importantly in the partnership opportunities they may be able to broker.
Best Practices
There is no activity more likely to cause a firm to stumble than to move from its own domestic market and to try to break into another, larger, international marketplace. Below are just a few of the many best practices as touchstones for anyone contemplating such an initiative for entry in the US market:
1. Build partnerships, and build on the partnerships
Partnerships at many levels - investment, technology, marketing, sales, consulting, and customer management - will prove the most critical factors in market success. Build the relationships with partners before launching, and bring in your partners on the particulars of the launch - make it their launch, too.
2. When in Rome...
Hiring policies, compensation packages, titles and perks, sense of time and immediacy, sales models, and most all the operational framework for any US operation should accord with US norms. If this requires the formation of a US subsidiary, form one. Even when you think the German (or Japanese, or English, or whatever) policies are better for the employee, you will be introducing a problem that is likely to lead to staff turnover.
Likewise, the style and model of marketing and sales in the US is unique - not necessarily better in any objective fashion, but unique - and the easiest path to success is to learn US ways of doing business as fast as possible.
3. Hire a great head of US operations, and give him control
Bring aboard the very best to fill the role of US head of operations, and give him a great deal of autonomy in all decision making. Do not structure things so that he is forced to fly "back" to headquarters to gain approval for strategic actions, let along tactical ones. The best will not long tolerate such a set up, and it will unnaturally slow down reaction to opportunities and challenges in what is the world's fastest moving market.
With the US economy softening and the dollar having its challenges the US market can be a good opportunity for companies wishing to enter it now. Many business people, especially Europeans, tend to look at the US with contempt and arrogance. Looking past that, if done correctly, can make the US market a substantial opportunity to grow your business.
