Entering the US Market - Pitfalls, Pratfalls, Shortfalls, and Windfalls

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.

The Practical Reality of How Buy-Side Analysts Work

There is no school where you can learn to become a buy-side technology analyst. Most buy-side analysts, in fact, end up surprised that they have this job in the first place. How, then, does a person end up creating and tracking IT markets, influencing decisions on the buyer side, and wielding such substantial power over vendors?

Since the job involves tasks that normally professors perform-research, teaching/speaking, and writing new ideas-the field often attracts pedagogical types who perhaps were not thrilled by the dismal money paid to teachers and opted for an analyst job. In addition, our research shows that many have been analysts from the start with no vendor side experience at all. Even fewer are from the ranks of technology buyers and many are young - just out of college in fact. Then, there are IT analysts who might have fancied themselves financial analysts, but who were afraid to join that cutthroat industry. Instead, they decided to be a pundit in the more flexible, rules-free technology sector.

In any case, no analyst will ever know more about the products you are selling than you do. What an analyst can give you is perspective on your company, relative to other companies in your market. How?

These analysts act as the gatekeeper to their firm's client base, one that is likely to contain your prospects and clients as well. Often, the analyst will hide this information from you, usually for one or more of four reasons:

• The prospect or client has requested anonymity.
• The analyst is lying about the extent of the relationship.
• The analyst wants to maintain power over you so that you will continue to purchase his or her research.
• The analyst hopes to hide his or her lack of knowledge by using the client base as a smokescreen
• An analyst also receives information from all vendors, including your competitors, and frames them in radar, much like an air traffic controller. Each of these vendors offers information about itself in order to achieve favor with the analysts.

Therefore, the analyst, who has no formal training outside their particular firm's research methodology, sits in the middle of a needy client base and eager vendors. But how can someone who has never used your product and only talked to three of your clients for perhaps thirty minutes each (if that) suddenly influence the decision of the next buyer?

The most accurate analysis comes from examining the link between the client base and vendors, and the best analysts serve as interlocutors between the two groups (the lesser analysts simply pretend that they

do). How do you deal with an analyst whose knowledge and client bases are suspect? Here are some practical realities and best practices for dealing with this:

Analysts know less than you do-Do not assume that analysts know more about your company than you do. They may have information on your competition or clients, and this access gives them some authenticity, but client access and subjective references alone are not a sufficient research sources from which to make recommendations.

Analysts use most meetings as intelligence gathering- You expect cogent recommendations from a briefing or inquiry. However, the analyst uses these very meetings to do his or her primary research, while later complaining that the interactions are "vendor-centric," and, hence, non-objective.

Analysts will lie to you-Stay in touch with your client base so that you can call an analyst on a suspicious recommendation or assessment.

Best Practices

Manage and know your references-If an analyst calls you for five references, you need to ask how they will be used and when they will be called. Stress the processes and policies you have in place for handling references and ask that the analyst respect them. Analysts use client access as a main research resource. Neglect of these relationships with customers will hurt you in the end.

Do not let the analyst contact the references directly- Although they will object, ask the analyst for a standard list of five to ten questions he wants your clients to answer, send them to the clients and then mediate the relationship between the two factions very closely.

Follow up with both analysts and clients-For the client: Did the analyst call? What can you share from the meeting? For the analyst: were all of your written questions answered? Can we help you get any more information?

Question analyst research methodologies-Just because the analyst firm is respected does not mean the analyst knows how to evaluate you effectively. How long has the analyst been there? Is he or she prepared to offer relevant, well-researched suggestions? Has the company had an exodus of senior analysts recently and given you a young analyst who has just begun to research his or her particular market?

Understand the intangible aspects of technology research- As a vendor you drive the creation of markets and analysts follow you. Often, your meetings with analysts become future research. In the past vendors sometimes wrote reports for certain analyst firms and the firms simply put their names on them. While this practice is rare, immoral and illegal, it still effectively occurs in verbal exchanges of information. Know that you have influence because you are a creator and not evaluator of software.

Publish white papers and case studies-Analysts can utilize this collateral to see you as a thought leader in your market.

Tie these to your reference base. Bottom-line, understanding the inner workings of analyst firms and how the analysts approach their work is a key ingredient in gaining positive rapport with the analysts, and leveraging their impact on your company's success. Know what to expect when going into an analyst meeting or briefing. Understand the analyst expectations prior to making your pitch or presentation. And do your homework when researching the relationship between your current and prospective clients and the analysts. These initiatives are imperative if you are to optimize your investment in analyst relations and your relationship with the analysts. Stay well informed and you will be well armed when engaging the analysts who shape and influence the perception that your customers have of your company and its offerings.

Dodging the Hype & Customer Success Stories

In an increasingly competitive and skeptical marketplace, most vendors vie for differentiation and positioning through buzzwords and hype. But how much is real? In a down market, ETBs (End Users/Technology Buyers) are more cynical and skeptical about the products in the marketplace hyperbole becomes the first casualty. In addition, as today's ETBs increasingly turn to the analysts for decision making insurance, vendors should expect more challenges from the analysts about their claims of product superiority, business benefits and economic feasibility.

What's real? Counters for the dog and pony show, the tap dance and the magic act lie not in more "smoke and mirrors," but in econometrics - the use of statistical methods in the study of economic data and problems. It is literally a mixture of economics and metrics, a new kind of economic measurement.

So, as marketers, if we say our products are bigger, better, faster or cheaper, we also need to be able to prove what we say in economic terms, using standards of measurement that are valid for our industry. When it comes to putting this in front of the analysts, we must back-up our claims and have proof to show when the rubber meets the road.

In today's world, the analysts expect that any time your company makes a claim that points to economic gains or savings, you need to prove it. Examples of these metrics are claims that your product or service:

• Increases revenue
• Speeds time-to-market (saves money by saving time) 
• Decreases costs of implementation and maintenance
• Improves security (cost avoidance related to security breaches) 
• Reduces turnover (return on investment in employees) 
• Increases productivity (increases revenue per employee) 
• Contributes to raising shareholders' value.

Most vendors turn to customer case studies to provide the proof of these claims, but in many examples these do not do the trick - because in most cases customer success stories fail to convince the prospect that any measurable results occurred. Did you really cut costs in half?

Did you really double revenue? The only inherent proof in a typical case study is evidence of one good - contextually relevant - customer reference. To quantify the economic value of your products, companies must show how implementation of your product, service or solution translates into measurable cost savings, revenue or other benefits. There also needs to be a time element, a beginning point and an end point against which to measure the change or improvement.

What most case studies lack is the baseline against which measurement is made. More times than not, by the time a case study is written, no one can remember why the customer bought the product in the first place, and what happened when they rolled-out the solution and which relative measurements contrasting the new situation with the former one.

It is important to incorporate a method of capturing specific quantitative information about your customer's business problems, and what they did before you came into the picture. This should be part of the sales cycle. While that may be easier said than done, there are many organizations that can help to incorporate econometric processes into the sales cycle such as management consultants or large partner organizations such as IBM, Microsoft or HP, or even some specialized firms like Mercer Consulting. Additionally, you can turn to the analysts themselves - several firms have econometric practices like Gartner, Nucleus Research, and Forrester.

It is important to remember that the facts in your customer successes need to be real, observable, measurable and substantiated in economic terms, as black and white as the bottom line of a financial report. Some key things to keep in mind are: Develop proof points to substantiate product, service and company claims. A helpful mantra is "If you say it, prove it."

• Use economic metrics to measure financial claims, such as revenue growth or cost savings.
• Get a baseline against which to measure improvements.
• If you don't have the time, resources and expertise in-house, look to consulting firms or the consulting services of industry analysis firms.
• Be on the lookout for IT buyers who look beyond cost factors, and use value- based methods with them.
• Use case studies that are real, measurable studies and not just "customer stories".
• Use substantiated metrics with all your audiences, including customers, analysts, journalists, thought leaders and board members.
• Above all, do not use the same references over and over again. Develop a practice to continue to evolve and create new customer case studies.

Once again, and most importantly, if you say your products are bigger, better, faster or cheaper, make sure you can prove it in economic and realistic terms. Doing so will save you a lot of skepticism from the analysts, save your marketing and sales teams from a huge headache, and most importantly, save your prospects and customers from the hassle of trying to figure it out for themselves.