Otsikko

Otsikko

15 September 2014

Where to find assistance for Finnish SME internationalisation?

Many Finnish SMEs have a good market position in their existing markets and the customers appreciate their products, but these companies are still reluctant to go international. The reasons are many. It may be missing courage, not understanding the opportunities and requirements of new markets, not having the necessary expertise in-house or missing funding or resources. There are, however, means to overcome all these obstacles. A company is not alone, when figuring out the challenges of internationalisation - there are a number of sources available that can give advice and assistance.

Internationalisation assistance needed?


Systematic internationalisation can be divided into four phases, each of which requires different skill sets:
  • Strategy: Why and in what way internationalisation serves company growth and other objectives
  • Direction and capabilities: Requirements and prioritisation of target markets, as well as identification and development of required own competences
  • Research and plans: Deeper investigation of target markets, creation of market entry plans
  • Implementation of market entry: Starting and developing operations in selected new markets
In most cases, the steps are not taken in a serial manner, i.e. it is often necessary to return to the previous steps and iterate on the basis of the latest findings. It is therefore important that an internationally expanding company itself stays at the rider's bench whole time - enabled either through permanent staff or a temporary help closely integrated with the company's objectives.

Digitalisation has brought an enormous amount of different kinds of information within reach of a company going international, but here we focus on four sources that can provide advice and help for the Finnish SME:
  • Finnish public sector agencies
  • Internationalisation consultants
  • Target country public agencies
  • Target country local consultants
The role of the advisers at the various stages of the company internationalisation is assessed in the table below: the more pluses the cell house, the bigger the typical contribution in internationalisation activities. The estimate is based on the needs of the Finnish SME, but also startups and major companies can at least partially use this reasoning. This paper does not focus on the importance of external finance as an important potential enabler of internationalisation. Therefore, public sector financial aid for internationalisation is not reflected in the assessments of the table.




Finnish public sector internationalisation agencies


Internationalisation services of the Finnish public sector are centralised under Team Finland brand. A company can get help by contacting a regional contact person in Finland or a Team Finland coordinator in a target country. The network consists of 73 teams around the world and of 15 local teams in Finland. Individual services are produced by different units working for internationalisation, such as Finpro, Tekes, Finnvera, Finnfund, Finnpartnership, cultural and scientific institutes, MEK, ELY centres, the Finnish-Russian Chamber of Commerce and the Finnish-Swedish Chamber of Commerce. Services include, inter alia:
  • Business idea coaching: Finpro offers companies expertise in international business and its challenges. Service provides feedback on company's strengths, weaknesses, opportunities and threats, as well as support for internationalisation issues. Free Of Charge.
  • Internationalisation test: With Yritys-Suomi service of TEM, a company can assess and analyse its internationalisation capabilities. Free Of Charge.
  • Business opportunities:  Concrete business opportunities throughout the world identified by the experts of Finpro. Free Of Charge.
  • Team Finland Future Watch:  Reports on changes in the international markets, brought by Tekes. Free Of Charge.
  • Networking with business and public actors: Finpro will advise how to obtain information about target markets and helps to network with public target market actors and Finnish companies already present in these markets. Free Of Charge.
  • Export trade financing expertise: The objective of the Finnvera programme is to improve financing competences required by export activities. A basic programme is Free of Charge, Charges Are Applicable for extra sessions arranged by Finnvera training partners.
  • Shipping handbookFinPro's document, contains information from 190 countries on free trade agreements, import restrictions, required documentation and legalisation of documents, special certificates, product packaging and labelling, provisions laying down special conditions governing sending of samples as well as other goods. Charges Are Applicable.
  • Advice to enter Russian market: Finnish-Russian Chamber of Commerce provides useful advice and concrete assistance to Russian business operations, at all stages of the planning. Charges Are Applicable.
  • Advice to enter Swedish market: Finnish-Swedish Chamber of Commerce can advise on all matters relating operating in the Swedish markets, as well as consult companies to start exporting to Sweden. Advice is Free Of Charge, in consulting Charges Are Applicable.
  • Advice to enter developing countries for the purpose of projects: Finnpartnership advices on issues related to developing country business activities. Free Of Charge.
These services are able to provide the basic knowledge both for planning internationalisation strategy and for analysing own capabilities, as well as for acquiring basic information on potential new markets. And because the services are, as a rule, free, they should also be used. On the other hand, public sector services provide little help for deeper, company-specific internationalisation activities, such as building a detailed strategy, closing the competence gaps or getting a deep understanding of new market opportunities. This is, of course, caused by the fact that the services provided are largely productised and generic, thus leaving very little time and resources for extensive company-specific assistance.

In addition, the contributions provided by network experts vary in quality and quantity, depending on personal skills, experience and service attitude. For example, I have sometimes been able to make experts of the network as an integral and high value-adding part of the team, sometimes their help equalled results that half an hour of Internet browsing would have given.

Internationalisation consultants


In the name of internationalisation consulting, a variety of services are offered: training, compiling of reports for international organisations, research of new markets, starting operations in new market areas, opening up sales channels to certain customer segments, marketing communications, strategy work, etc. Both small and big domestic players as well as international companies with their Finnish offices are present.

According to my experience, the big threat for SME is that a consultant focuses the project on his own areas of strength, not on the ones that would be the most important and useful for the paying company right now. It is, for example, dangerous to let consultant´s considerable target market experience lead to deep market studies, when internationalisation strategy and sufficiency of own competences are still in the making.

Another important consideration is that many times an SME business needs only one versatile and seasoned professional, not a bunch of constantly-changing consultants with very narrow areas of expertise. This ensures that the consultant is a solid part of hiring company operations and the company can really lead the process of internationalisation. Certain nuances, related to the organisation of work, are then manageable: for example, whether it is about consultancy or interim management cooperation, or whether it is the consultant working hands-on in the project or primarily transferring his know how to company employees.

The role of consultants is the largest in the creation of internationalisation strategy, in setting direction and in defining required capabilities, see the table above. Depending on the consultant's background, he can be - in parallel with local contributors - also an important factor in the thorough target market investigation and actual market entry.

Target country public agencies


Almost all countries have the desire to attract foreign companies to invest in the country. To this end, public sector all over the world have been busily setting up specialised agencies for this. In Finland, Invest in Finland is the name of the active public player, and the world association of agencies, Waipa, has produced a good listing of its counterparts in other countries.

The agencies that are assisting market entering companies can usually provide useful information about the target country, its market and competitive situation, market entry alternatives and setting up operations in the country. For example, GTAI, German Trade and Invest, offers mainly free services in the following areas:
  • Information about Germany, its economy and business life
  • Industry information, including market situation and news about recent developments
  • Consulting services to create market entry strategies, to make evaluations in the country and to establish operations
  • Guidance on the different market entry questions
An internationalising company should definitely check out, how target country public actors are able to assist. For the assessment and prioritisation of target markets, it is possible to get - and in most cases free of charge - important building blocks. Also, good advice on setting up local offices can be obtained. Depending on the country, more customised free advisory services may be available, in which case tailored information, contacts and services can be acquired. It should be noted, however, that willingness of agencies to help depends besides the abilities of individual experts also on the objectives of the market entering company. A big business always gets more personalised service, and planned product development or manufacturing activities always get a warmer reception than mere sales office ones.

Target country local consultants


When it's time to explore your potential target markets in greater depth, to set up a business in a new market or to expand an existing one, local consultants are often utilised. Local specialists, however, are not enough to get the business up and flying; the hiring company must ensure that the basis of internationalisation, including the role of international operations in the company´s growth strategy, initial prioritisation of target countries and trimming of the company for internationalisation, is solidly in place.

The scope of consultants´ work can vary, some examples given below:
  • Market research and competitor analysis
  • Establishment of a local company
  • Identification of potential clients and creation of contacts with them
  • Search of distribution channels and partners
  • Financial, legal or environmental issues, marketing or HR 
In most countries, you will find plenty of willing local companies to assist in market entry, see, e.g. an extensive overview of various Market entry consultants in European countries, with detailed information about the contacts, served markets, services offered and industry focus. The Association of Finnish Entrepreneurs, Suomen Yrittäjät, has also an international network with Finnish-speaking contacts.

Probably the biggest pitfall for Finnish SMEs is the correct identification of local aid. For example, when I was once looking for a local consultant to tighten cooperation with potential customers, the selected person turned out to be the best in finding a suitable office space and in helping us to manoeuvre through local bureaucracies.

21 May 2014

Digital marketing maturity equals success - case Finnish B2B SMEs

Small and medium-sized enterprises (SMEs) are suggested to have a significant role in the revitalisation of the Finnish economy. Their current actual business performance is, however, not as good as expected. Therefore, it is necessary to look more closely at how companies´ own actions affect on their success. This post shows that based on a study, Finnish B2B SMEs do not effectively utilise digital methods and tools in their customer interface. It also finds that digital marketing maturity strongly correlates with success.

Changes in B2B business environment 


Competition in B2B markets is global, products and services are searched, compared and procured across the borders. Vendors have been forced to follow their customers, very few B2B companies can rely on domestic customers only. Local markets that used to be isolated with their own specific terms and conditions, are also changing: the same technologies, standards and processes are in place everywhere, making it easier to demonstrate and offer products by means of inside sales and marketing. Internationalisation also creates brutal cost pressure on all business operations.

Face-to-face meetings have traditionally played a central role in B2B sales. But today, customers are ready to meet sellers very late. According to a survey, on average, as much as 57% of customers´ purchase process is already over, before they are willing to meet with vendors. To win customer orders, vendor companies need thus to be able to present their offerings, references and other competitive advantages before the first sales appointment.

At the heart of the change is the Internet. It has become the first source of information for B2B buyers. And besides information search, the Internet significantly affects on all purchasing process stages. B2B company website and presence in social media are vital and indispensable anchors of Internet influence. The companies looking for information and solutions are then reached utilising inbound marketing techniques. Digital interaction with customers generates huge amount of data. Its utilisation will not only help to develop more competitive products, but also enables ever evolving customer operations. It is verified that B2B companies that effectively use digital methods and tools in their customer interface, are doing significantly better in acquiring customer leads, nurturing leads to paying customers and retaining their existing clients.

Besides evaluating overall digital marketing effectiveness, utilisation of real-time and predictive analytics as well as marketing automation are good yardsticks when estimating digital marketing maturity.

Real-time analytics (e.g. Google Analytics and Coremetrics) can be used, for instance, to follow how visitors will find company website and how they interact with it. This will improve, among other things, customer acquisition cost-effectiveness and understanding of clients' needs and priorities. In addition, it will sharpen marketing communications more relevant. Marketing Automation (for example Marketo and Pardot/Salesforce) automates communications and maintains customer interest in the marketer firm. It makes it possible to serve customers with higher quality and more cost-effectively – and thus get more sales. Studies show that B2B companies, utilising marketing automation, get more and higher-quality customer leads and grow faster than their competitors. Predictive analytics (e.g. Totango and Kissmetrics) with sensor-based customer listening capabilities can identify e.g. customers at risk of churn or intensify cross-selling and upselling.

Status of SMEs in Finland


Then, let us look at how digital tools and methods are used in Finland. A Finnish trade magazine, Kauppalehti,
database was used to pick randomly 108 B2B companies whose turnover is between 10 and 200 M€. Almost all the major industries were represented. Some, e.g. consulting, and construction were excluded, though the analysis is highly relevant to them, too. The selected companies are the best among their peers, so the general situation is hardly better.

To get an overview of digital marketing effectiveness, the companies were examined with algorithm based automatic tool, see also the box on the right. The results obtained can not in any way be regarded as an absolute truth, but anyway, the tool is accurate enough to analyse the situation.


We should be very concerned. The best Finnish B2B SMEs are below average in digital marketing, and almost every fifth of them are even rated bad, see the graph on the left. Only about 5% of the companies are good or excellent.

The situation by industry is uniformly poor, only software companies stand out better, see the graph below.

To get a domestic benchmark for the results, also the biggest B2B companies in Finland were examined (Finland top 20 in the graph). These enterprises are considerably


more advanced, even surpassing the software company results. Because there is a clear indication that the Finnish big ones are not at the utmost forefront of the global development, the SMEs sector is subject to a resounding wake-up call.

Next we examined the use of real-time analytics (by using an automated tool, see also the box above). More than one fifth of the surveyed SMEs do not take an advantage of it. It means that they in practise wander around in the dark, not understanding outcomes and shortcomings of their digital world activities. In the control group, on the other hand, all big companies in Finland are using the analytics. The most commonly used analytics solution, by the way, is Google Analytics that is free to use. US companies are a great international benchmark for the Finnish findings. There the big companies and also the SME sector seem to have faster adopted the use of analytics in their business operations than their Finnish counterparts.

Only 5.6 % of the selected Finnish small and medium-sized companies take advantage of marketing automation. There are no major differences across various industries, few pioneers are emerging in almost all sectors. Every fourth of the Finnish big corporation benchmarks are utilising automation. In the United States, it is estimated that 25 to 60 % of large B2B enterprises use marketing automation. Correspondingly, studies show that the penetration in US small and medium-sized enterprises is at least 10 to 25%. High-technology sectors, followed by consulting and manufacturing industries, are leading the pack in the United States.

None of the studied Finnish companies, neither large companies nor SMEs, used predictive analytics. Because of international examples, it is expected that those companies that have digital service elements in their offering will take the lead in adoption.

Lastly, we studied how digital awareness affects business performance. Business growth, profit, return on capital, as well as the size of international operations were picked up from the Kauppalehti database. The companies under investigation were divided into two categories, based on whether they are rated to be in the top half in digital marketing  (> 50) or in the bottom (< 50), see the graph below. The conclusions are very clear: on average the digitally-leading companies are growing faster and their profitability is better than those of their lagging counterparts. In addition, the international operations' share of net sales was clearly correlated to the digital marketing maturity.


Conclusions


On average, even the best Finnish SMEs are not taking care of their digital marketing very well or even satisfactorily. This is reflected in comparisons with large Finnish enterprises as well as relative to international benchmarks. And because utilisation of digital methods and tools is a key lever to achieve business success, we are facing a similar kind of problem as the whole Finnish economy: though business premises are good, the SMEs are capable of delivering significantly less than available potential. As an outcome, a company might face e.g.:
The situation, however, can be improved. Change is in the hands of small and medium-sized enterprises: they need to re-tool their strategies, processes and competencies to embrace new methods and tools in customer-facing operations - and then implement technologies that are supporting the new approach.

21 February 2014

Internationalisation - a solution to get your troubles far away?

Internationalisation is often seen as a trick that drives company's troubles away. This is not the case, however. For example, if the choice of the first target countries, finding channel partners or optimum location for your own sales office are initially the key issues, essential homework has not been done. Then you need a lucky breakAnd although you need luck in the business world, you must make every effort to try to improve your odds.

A structured approach to internationalisation is connected to the company's objectives, strategy, competences and resources. In this case, it is not a question of tricks, but of evaluation, if it makes sense – and in what way - to aim for international markets. This post tackles the following core questions of internationalisation:
  • Why to enter new international markets?
  • Which are the key issues when planning internationalisation?
  • How to build internationalisation in a systematic way?
These questions are relevant, regardless of whether a company is small or large, whether it is already making business in some foreign countries or is purely a domestic market or startup business. The post focuses on issues that are directly linked to revenue-generating market operations. Thus, for example, manufacturing or R&D resource driven foreign operations are not discussed here.

Why international markets


In most cases market expansion is driven by the reasons related to objectives or a business idea of a company, its products or customer relationships.

Probably the most common reason for internationalisation is the desire to grow. It might be too difficult to increase market share in the currently served markets, or extension of the product range is not considered lucrative enough. Operating across borders can also be a basic premise for the business; for example, many startups coming from smaller countries find their domestic markets far too small to support a profitable business.

Especially growth companies seek to aggressively increase the value of the company: e.g. to improve access to financing or to have better financing terms. Bigger potential markets and initial success in these markets will significantly raise the value of the company and its prestige among important stakeholders.

The most advanced and demanding customers greatly assist in creation of such product functionalities, which also a wider market and laggards will find useful later. So, for example, Swedish car manufacturers were for a long time deemed the pioneers in the area of security, so cooperating with them was good for success also elsewhere. Today, Germans are leaders in many vehicle technologies, so the market pulls keen supplier companies.

Many businesses have found that they cannot find customers for their products on the domestic market. The reason may be would-be customers´ lack of courage to adopt new solutions or business models enabled by them, or simply conservatism of an industry and its playersFor example, a Finnish machinery component supplier, Visedo, were forced to seek first clients in Germany, Austria and France, because domestic players were not forward-looking enough to take the new solution.

Key issues in internationalisation planning


By identifying the business drivers of internationalisation, we can also evaluate globalisation activities conducted so far. They may turn out to be either a great platform to scale the business considerably or it might be best to forget them, because their value is null and void, or they would put the company in the wrong direction.

After this, we will look at how company business idea and strategy affect on global expansion. In a similar manner, we will study in more detail company's products and total offering to customers, its differentiation strategies on the market as well as its customer-facing strategies. This will be used to create an overview of the capabilities and resource gaps that need to be overcome before one can expect success in the new markets. 

Business concept and strategy


A company's business idea defines the target customers, its offering and how the offerings are produced and made available for customers' use. If a company is customer-centric, its target segments and their needs also strongly influence offering properties. When globalising the key is to understand how well the new market customer segments and their needs correspond to the ones in the existing marketMany companies, however, have a technology or product based strategy. This emphasis the need to find in the new markets customer segments and customers that find company technology or product features compelling and value generating.

As a result, any plans to internationalise raise the following questions:
  • Is the business model in today's market well-tested and can it be replicated to new, international markets?
  • Is there willingness and ability to change the current model and how much?
Most of the incumbent companies will end up on the fact that the way of working of the home market cannot and should not be directly copied into new markets. On the other hand, if the business is created global from scratch, as in the case of, e.g. cloud service or application startups, the biggest challenges will again be product, differentiation and customer interface related ones.

Product


Absolute requirements of the market, customer preferences and total offering required by customers are the key product related dimensions. The Internet and social media tools have brought tremendous agility and cost efficiency to the understanding of these issues.

The absolute requirements are usually easy to understand and find out. They include local government approvals and other compulsory localisations. The latter include, inter alia, translations of marketing and user documentation and support of local standards or practises. For example accounting programs require support of local regulations.

More challenging is to evaluate new customer preferences in target countries and their influence on product properties. Of course, there are self-evident things, such as the need to adapt sizing of clothing company collections when moving from Northern Europe to Southern Europe or South East Asia. When we move from technical characteristics to emotional likes and dislikes, local preferences start to dominate. For example, a children's outdoor clothing manufacturer, Reima, has discovered that in Russia, consumers prefer different colours in children´s winter clothes compared to Finland. Increasing global uniformity of values, practises and consumption have created very homologous, international segments - in these cases the need for local preference modifications is small. E.g. many Internet consumer service companies take advantage of this.

Also in new markets, customers usually expect to have a total solution. In many cases, it may significantly differ from the one in established markets. When complementing products or services require external partners, availability and access to them in target markets should be separately assessed.

Differentiation


It is important to be different from competitors, because without it, a company needs to typically compete on price. And because most of the competitors have the same customer value-adding product features, differentiation based on artificially created new product features will succeed rarely. Unless there is something new in the product or business model that clients really appreciate, the solution is to look at a company and product image - which again puts emphasis on company's positioning and branding.

Differentiation formulae of the domestic market is not necessarily transferable to the new target countries. For example, a clothing and textile design house, Marimekko, have a strong brand in Finland supported by a long history, distinctive, locally-luminous leading figures and unique collections with locally well-known designers. When company activities have become more globalised, it has been noted that the domestic brand concept is not necessarily bringing success in other markets.

It is essential to understand that a company and its products do not have to be widely known in the new market, as long as it is well-known in the target customer groups. Who, for example, knows Wärtsilä and its ship engines, if one is not belonging to their target customer groups? In addition to being able to create awareness of the product, it is important that the company's products have a reasonably good reputation and that the target customers are hungry for these products. When we go into a new market, a company usually starts from scratch: it is not known and the clients do not have a special longing for its products - on the other hand, it still has a very neutral reputation. It is worth considering how much, for example, current market references, globalised sourcing decisions and consumption habits, as well as international operations of existing clients could help in the development of the brand. And it is always possible to re-position the company completely, at least in the international markets.

Customer acquisition and retention


Although business idea and strategy, products and total offering as well as differentiation in the new markets would be okay, no success will come without being able to acquire and retain customers. Looking this another way: even the best systems, people and partnerships for demand creation, deal closing and customer loyalty do not bring results, if the previously discussed basics are not in good shape.

The essential steps of the customer relationship cycle include creating awareness among potential customers, building interest and willingness to buy, deal closing and customer retention. If a company is capable of differentiating itself in the market, it is already a good start. A model that has been developed and tested in the domestic markets and that is capable of generating enough demand and revenues, is a good basis for developing activities in the new markets, too.

The key is to understand to what extent the established market practises are suitable for the new markets: which of them can be utilised and what kind of capabilities and resources the company has to change the existing way of working. For example, use of media advertising, solution sales process renewal or web enabled customer service could be considered as corrective tools.

Entering new markets will be most often done with thin investment and expense structureFortunately, different types of Internet and social media based marketing, sales and customer relationship management tools provide cost-effective ways to get ahead. A more traditional approach is to build partnerships based marketing and sales activities: the danger is loosing touch of customers and the market, which, at worst, will soon destroy company's competitiveness.

Systematic internationalisation


After own motives and capabilities in relation to the company´s business objectives have been studied, the decision can be either to go forward or to focus on other business initiatives that are more lucrative or urgent.

If it is decided to continue, a preliminary assessment of capability and resource gaps in the internationalisation should be made. It is also important to determine whether the gaps should be filled with building the capabilities and resources in-house or whether partnerships would be the solution. For example, a company may decide to build sales, marketing and customer service capabilities in the new target countries by itself or it can rely on channel partners.

When still known gaps in the market information have been filled in, a detailed plan for the internationalisation can be made with priorities, timings and budget. At this stage, the target market and channel partner selection issues are already relevant. 

6 February 2014

Go-To-Market: more customer-centric, hungrier and more agile

Turbulent market environment is constantly changing business and competitive conditions. New technologies blur industry boundaries, shorten product life cycles, change business models - and bring new competition through globalisation. In this environment, Go-To-Market (or GTM) success is becoming ever more important - competitive advantages are less and less sustainable; instead of technology and supply factors, demand and customer interface capabilities are becoming increasingly vital.

Today, most companies already have functioning GTM processes. They are useful in commercialising a new product or business model, opening up new markets or even when a new company has been acquired. 

This paper will first introduce GTM process and its benefits. After that some of the pain points will be discussed, and we shall show, how a more customer-centric, hungrier and more agile approach will boost results.

GTM process and its advantages


GTM activities make company's business strategy concrete by delivering its solutions and their value to target clients, see also a simplified picture below. In reality, however, GTM is a process, which covers activities from definition of a product to pricing, distribution, marketing, communications, sales and customer support.


Benefits of a well thought and implemented GTM process include:
  • allocation of resources to the most lucrative business opportunities
  • prevention of organisational silos
  • cooperation between centralised and decentralised activities
  • sharing best practises and learning
Metrics need to be created for GTM processes. The intent is to evaluate product and business profitability. Evaluation of project success already in product development and, respectively, GTM phases, ensures that resources are allocated only for the most lucrative opportunities. GTM thus acts as a tool to develop company's product portfolio.

Secondly, GTM process and project objectives bring together different functions of an organisation, thus inhibiting silos. This will also ensure that all the necessary skills and knowledge is just in time and adequately available. In addition, it is easier to create new practises in domains, which are new or require very different types of knowledge-based inputs. Smoother cooperation between marketing and sales activities is often highlighted as a great example of GTM process benefits.

When a company expands and becomes more globalised, it also needs to grow certain functions on a decentralised basis, in other words, close to customers locally. These include, for example, implementation of marketing and communications, sales and first level customer service. GTM process links centralised operations, such as specifying a product and planning of marketing and communications, seamlessly with distributed ones. Also GTM project objectives, strategies and other guidelines are centrally defined. In addition, prioritisation of regions and countries is usually centrally managed. By centralising selected GTM activities, duplicate work is avoided and local implementation gets adequate support.

GTM also allows for sharing of best practises within a project and between projects. Thus the most successful ways of working of the best individuals and teams become an integral part of the entire company's expertise, which is then available and repeatable from a project to another.

Improvement needs


As such an existing GTM process does not guarantee success. Among other things, drastically changing customer purchasing behaviour, multichannel marketing driven by digitalisation and new business models are forcing GTM models for continuous improvement.

More customer-centric GTM


Company products need to resonate well with customer needs and market demands. Thus increased influence of both consumer and corporate customers in the various stages of purchase process calls for rethinking and adjustments in a way a company approaches market. It is also important to find unique customer segments, whose needs can be met better. To tackle all this, GTM activities need to be built to meet customer relationship objectives and strategies, giving possible internal legacy requirements second priority.

Market studies conducted before product development start do not guarantee that products match with customer needs. Rapidly changing markets require that development activities are closer integrated with customers´ feedback on products. Customer development, which has its roots in the startup world, is playing a growing role to facilitate parallel product development and customer testing. Especially huge progress in the development of Internet and social media tools allows for market testing and possible corrective actions already in the early stages of product development. In a similar way it is possible to figure out target market prioritisation and GTM activities localisation needs.

Hungrier GTM


Overall effectiveness, quality and cycle time can be considered as baseline yardsticks of GTM process. However, this is not enough. Tougher business metrics should also be introduced: lead generation impact, sales increase and evaluation of GTM process on the basis of return on investment (ROI). By focusing on business outcomes, we can get rid of bureaucratic way of working, where checklists dominate over hunting for results.

Digital marketing and sales methods have been at the forefront of bringing measurability. But technologies are not to be seen here as masters but slaves - or enablers at most. The key is to create GTM strategies and processes that focus on right things. Furthermore, we should not forget people, who run the process and who truly need to understand and know how to operate the new fact-based model.

More agile GTM


Although a company would have created the world's best client-centred and business metrics-driven GTM process, it does not insulate the company from changes in the operating environment. These challenges require adaptability, responding by foresight or by further developing own activities. The keywords are continuous improvement and best practise sharing.

Activity and environmental data collection and analysis, as well as test and learn principle are the cornerstones of continuous improvement. Data insights lead us to the real issues and improvement options, which will be verified for operational scaling by testing. This makes it possible to avoid costly mistakes made with non-working or outdated GTM practises, and paves way for better results. 

19 December 2013

Ass laden with gold and other means to conquer new international markets

Philip, Alexander the Great 's father, is said to have remarked that with a gold laden ass one can conquer an invincible castle. Such tactics are not appropriate in today's market conquest, but instead, this post presents some ideas on how a company can make its path to international markets easier.

As a prelude an example of GSM system sales in Germany early 1990s. Initially, our main target was just licensed mobile operator, Mannesmann Mobilfunk or briefly D2 (now Vodafone Germany). Our starting point was not good. As a system supplier, we were very poorly known in Germany, and we did not have anybody in the country to promote our business.
But after all, we had something over there: TV product development, manufacturing and maintenance, PC maintenance, cable machine operations and much more. Some of our German operations were also global market leaders, e.g. in rubber mats for airport luggage carousels. We utilised these assets to build our marketing messages: our local presence, commitment and capabilities to support mobile operators. But we were beaten. That time we did not win the D2 deal. But we learned and gradually built a more solid foothold in Germany - and as a result won very significant deals with Telekom (D1), E-Plus - and also with D2.

In the following paragraphs we take a closer look at where companies can find building blocks to break into new markets.

Other businesses 


A company, which already has an existing business in a new country, should make use of it. Typically, a new business is not known, it lacks credibility, it is not seen trust-worthy and it is missing connections with potential customers and other business-critical players.

An existing country commitment sends a strong signal that also the plans related to the new products are serious and long-term. Secondly, local company infrastructure, such as offices and websites, can be used as stepping stones for building local presence. Thirdly, it is possible to use the relationships and contacts created by the already established businesses and their key personnel to lower the barriers to create new customer relationships and other partnerships. Although in the German example above, we were not immediately able to achieve positive results, credibility and support created by our other German businesses greatly reduced the time to close the first deals.

Local partners


If a company does not have prior operations in a target country, also partners can become helpful. Besides rapid establishment of activities, partners can provide, for example, complementary resources, required local flavour or existing relationships with target customers. For example, we managed to win a GSM system deal with Austrian Federal Telecommunications Authority (ÖPTV) through partnerships with local Kapsch, Schrack, Siemens and Alcatel. The biggest benefit was getting involved in local, slightly political decision mechanism, but the partners contributed some know-how assets and customer understanding, too.

The spectrum of potential partnerships is very broad, ranging from agents and representatives to manufacturing cooperation and mergers and acquisitions. Besides longer term goals, also risk and control are important factors to consider when selecting partnership models. For example, a local distributor or reseller responsible for customer sales minimises risk, because there is no need to invest in offices, distribution, sales force, marketing and customer support. On the other hand, control of the market is reduced: for example, what kind of market activities are conducted and how much customer and market understanding is accumulated. All this limits degrees of freedom in company's future market operations. Greater control generally requires greater own investments - this also makes it possible to better define company's  future aims.

Piggybacking


It is also possible to follow internationally domestic or other established market business partnerships. This is called piggybacking. Typically, customers and distributors are the players that you should look at.

When a principal company expands its operations internationally, its suppliers often have an opportunity - in practise often an obligation - to follow it. Especially in the B2B markets, this is a useful model of internationalisation. It is usually assumed that a supplier will invest enough in new markets. Besides sales and customer support, it may mean building of operations and R&D capabilities. But there is a risk that resources are too much focused on the original client company. This makes it difficult to acquire new customers in the territory and exposes the supplier too dependent on one principal's business fluctuations. Nokia mobile phone business and its subcontractors are an excellent example of this. Nokia pulled for example, Elcoteq, Perlos and Savcor to new markets, where these companies were not able to adequately expand their bridgehead positions.

If distributors, system integrators, retailers and other distribution chain players manage to create on one of the markets healthy and successful business with a company´s products, they have a strong incentive to try to repeat the same in other areas too. Distribution partners may be already present in these new countries or the countries may be for some reason easily accessible for them. If a company does not create own understanding of new market needs and potential, its long term operations and success may be at risk. As an example of distribution cooperation we look at the Spanish system integrator, Omnilogic. Over the years, we had successful cooperation in Spain, where Omnilogic took care of close to all customer contacts and deliveries. Later, the company expanded into Mexico and South American countries, thus opening the markets also for our products.

Other opportunities for international expansion may appear, for example, through technology vendors and financiers.

Digital tools


Digital marketing and sales, as well as compelling content, are a great way to pave the way for the creation of new markets. The key is to create in the target market company awareness among potential customers, their trusted thought leaders and other key stakeholders. Company website, localised for the new markets, is the centre of all action, providing target groups with important and interesting content. The target is to attract visitors to the website by participating in discussions both on traditional and social media.

In many cases, it is also possible to acquire customers through the web. A localised, or even an international online store, together with content marketing, can attract leading-edge customers. These are very important as the company penetrates more deeply into the new markets.

Modern inside selling tools can be used to sell also quite demanding products without a local presence. If, however, the complexity of the product, or other factors require local support, inside sales can assist to successfully pass the first customer decision criteria, thus creating better pre-conditions for the expansion to new countries.

Different business model


Business models that are different from the ones used in established markets are often a good way to penetrate challenging markets. There can be changes for example in monetisation logic, ways to approach customers and company's offering.

Licensing is natural for the companies that own a specific factor that is important for competitiveness. Such factors may be the brand of a product, its design, technology or manufacturing process. Licensing is also a risk-free way to get a new product on the market and customise it to local requirements. A locally established licensee partner gives an end product a local flavour, so licensing is particularly suitable for countries with high entry barriers. The challenge is the legacy that licensing creates, if a company later tries to build deeper market operations.

Franchising is a fast way to build a presence in new countries. Typically, it is used for providing consumer or business services.

Nokia's U.S. market entry utilising Tandy - Radio Shack brand and distribution chain is an example of complying to local requirements in customer interface. In a similar manner, Nokia cooperated with Alcatel and AEG in GSM base station development and marketing to create access to new, previously closed markets, such as France and Great Britain.



Spearheads


Spearhead tactics can build a beachhead in a new country. The goal is to use a selected product or service to create relationships with first customers and then deepen this relationship by selling more. Since the first deal is not yet meant to produce profits, pricing can be aggressive or the product or service can be even provided free of charge. Low-cost experiments, or pilots, are often used to reach the same target. The Internet makes it easy to create free service offerings, whose sole purpose is to market a company and make actual product sales possible.

The last example is from the same country as the first one, Greece. We sold the local Telecommunications Authority, OTE, a cellular network planning and measurement tool. The sale was not as such profitable, but it enabled us to create a client relationship and also awareness of our capabilities in the market. Later, we were rewarded handsomely.

12 December 2013

With a little help from my supplier friends

It is no use to develop only a little bit better product. Just adding new features is seldom the way to build company competitiveness and increase sales. Customer value is created by bringing additional benefits or pleasure. This often requires business model change.

Also Finnish companies have a lot of room for improvement. Too often business growth efforts are product-driven, with only marginal product improvements or changes.

When innovation is customer-centric, there are no more limitations to consider also skills outside the firm. Innovation can be based on building blocks originating from customers, suppliers or academia. This post focuses on the supply partners.

First we shall go through an example in which a company had a strong vision of disrupting an industry and bringing new value to customers. Because the company did not have in-house all the competences needed for the new products, it created various partnerships with technology suppliers. As a final ingredient for success, also a new, innovative business model was created.

Somewhere in California


In November 2000, I spent half a day at PortalPlayer, a company in Silicon Valley to meet their management and experts. The company was small, about 100 people; I came from a large, successful mobile communications company. The core know-how of PortalPlayer were solutions for portable music devices. The solution consisted of a dedicated music microchip, embedded software and a PC application. In addition, the company was able to provide a reference design for customers' own product concepts. In our company we were studying ways to expand our business and music-related products were also under consideration, thanks to the emergence of first MP3 players and Napster.  Although I was impressed by Portal Player´s capabilities, we did not start any cooperation with them nor were capable of developing music related businesses at that time.

Around the same time with my visit, another Silicon Valley company and their CEO envisioned creating and providing new, music-related experiences and solutions to consumers. The name of this company was Apple.

Apple had already made the decision to bring music management software for iMac computers. It was based on the SoundJamMP product, whose developer Apple acquired in July 2000. After some further development it was first launched under the name of iTunes in January 2001. But Apple wanted much more than that. The next step was supposed to be a portable MP3 player. Extremely high requirements were set for the player, with usability and value to the user raised to a whole new level compared to its competitors in the market. It was not important for Apple to design the electronics and the operating system by themselves, so they signed an agreement in early 2001 to use Portal Player reference design as the basis of the new device. iPod was launched in October 2001, and supporting iTunes music store in April 2003. The rest is indeed history.

Back in Finland: Too few ideas and too much risk avoidance


Also Finnish companies need to continuously improve their competiveness by bringing new products to market. Very different types of targets can be pursued. According to an often used breakdown, a company can expect benefits in one or more of the following areas:
  • Improved customer experience and customer engagement
  • More streamlined operations
  • New business or business model
Synergy recently published a research paper, in which it examined innovation capabilities of 50 Finnish companies. All the companies operate internationally and all have significant development activities in Finland. In addition, the results were benchmarked against corresponding international research, consisting of 200 companies. The conclusions were clear: Finnish companies' projects focus too much on marginal improvements and the companies also have a shortage of good ideas. The study has other good observations, but this post is not discussing them further.

Innovation in Finnish firms vs. global benchmarks
When the results are investigated in detail, it is found that Finnish companies avoid risk compared with international counterparts, see also the image on the left. This is reflected in the high proportion of product improvements and modifications as well as additions to existing product lines. Although a better customer experience would be a key objective, probably also lower material and personal costs are important drivers. This is not the way to build competitiveness.

Similarly, compared with the control group, the Finns invest lazily in projects that create new businesses or new, genuine innovations. And since the improvement of customer experience and retention are often outcomes of new business models, many of the companies are thus loosing the potential for higher margins.

Synergy's research also showed that many companies rely too heavily on in-house expertise and resources in generating new product ideas. There is not enough attention to understand customer needs, and the appeal of ideas is not tested with customers early enough. Similarly, if a company culture over-emphasizes technical or product-related know-how, suppliers and partners are easily left with a mere implementer role. As a consequence, new ideas and solutions, which would make it possible to take bolder development moves, are often effectively hidden.

Conclusions


Both the results of studies and the above example show that customer orientation and open-minded cooperation with other companies are the key to a successful business.

The great promise of seeking ideas and solutions from other companies is to have access to the best experts in each of the competence domains. The challenge is to find the right partners and to be able to create a close and trusting relationship with them. In order to partnering be truly useful, a company must be able to build through customer understanding a clear vision of the new brave world that will be available for their customers.

In addition, company processes need to support innovation with others: division of labor between own and other companies´ efforts as well as integration of the outputs. Also, there must be changes, how potential partners are discovered. The key is to keep eyes and ears open for companies that have an offering that could help to implement the targeted customer benefits. Thorough preparation of specifications for external purchasing and strict competitive tendering are well suited only for marginal product improvements and extensions. In some cases such advanced cooperation models as consortia and innovation communities might prove to be most successful.

And finally, in the development of new business models, supplier partners are - if possible - even more important. Besides ideas and solutions, these might have such kind of knowledge and insights that will help clearing up the previously insurmountable obstacles.