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.


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.


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.


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.

28 November 2013

Local mobile services - saviour for offline stores ?

Consumer buying behaviour change, driven by digitalisation, is inexorably advancing. This challenges consumer product companies to take advantage of new models to utilise the change. For traditional retailers, having physical stores, e-commerce growth means a serious threat. But after years of false promises, local mobile services based on wireless proximity technologies are wakening up. At best, they could get modern, digitally informed consumers to use their money in brick and mortar shops also in future.

Local services not-so-successful history

When computer-like features started to gradually appear in mobile phones in the 1990s, there was also a wave of interest in local services supporting retail merchants. In 1999, I was involved to establish a startup with a mission to use only recently published Bluetooth (BT) technology to send marketing messages to phones that were taken to shops. After that, I developed similar type of businesses at a large Finnish mobile phone company: in 2002, for example, we created patents for applications in local services context and for shopping experience improvement tools. Neither the startup nor the big company case turned out to be a success.

A number of other projects came up, both in local mobile marketing and in local payments. In addition to Bluetooth, for example Wi-Fi, RFID (or its offspring, NFC, widely used in mobile phones) and IrDA technologies were in use. For example, in the United States Wideray IrDA solution offered local data services for offline businesses. A little later, Wideray landed also in Finland, where Sonera's also Bluetooth-enabled iJack service was used, among other things, by individual stores, shopping malls and restaurants.

Wireless local marketing of brick and mortar stores has not really taken off in the last ten years. Today, it is easier, however, to analyse the reasons. The main obstacles were the factors related to retailers, ecosystem and mobile devices, for example:
  • E-commerce has only gradually disrupted retail business, its global value in 2005 was about $ 150 billion - the forecast for 2013 is already $ 1.2 trillion
  • Digital marketing has only recently established its position as a major tool for retailers and consumer product manufacturers
  • Mobile marketing formats and business models were underdeveloped for a long time; ten years ago, the global market size was only around 100 million dollars, the 2013 forecast is close to $ 15 billion
  • The number of mobile phones suitable for local marketing, i.e. smartphones, had a sharp increase only after 2007, after Apple launched iPhone; iPad tablets first came on the market only in 2010
  • Usability of smartphones has not been very good; easy to use applications enabled by app stores and other usability improvements have gradually changed the situation

The great promise

Next we shall discuss factors which, if successful, could make local mobile services a significant marketing channel - or, if this is not the case, delay realisation of the great promise till not foreseeable future.

Retailers and digital change

Consumers' growing willingness to use digital channels has resulted in a huge increase in e-commerce and fierce price competition, which affects both online and offline merchants. Price competition also lowers margins, which creates pressure on consumer product manufacturers, too. In addition, digital channels have become key information and communication tools between brands, retailers and consumers.

In this context, both traditional brick and mortar merchants and their vendors are looking for new success factors by creating new, digital in-store experiences. By approaching customers when they are presumably ready to buy, i.e. when they are already in-store or in the immediate vicinity, marketing messages can be targeted much more precisely than when using only standard user profile and behaviour based models. The potential value of these messages, both to consumers and marketers, is therefore very high.

Mobile payments, as well as access to product information through reading QR codes or barcodes have been the main drivers of mobile device utilisation in stores. In addition, also local digital in-store marketing will benefit from wider and wider use of mobile technology. Marketing tools provide consumers, among other things, with information about new products or promotions, coupons, store maps, shopping lists, recipes, and other additional services that support products or purchasing. Identification of consumer location is the prerequisite of the service provision, and there has been various technologies available for that for a quite a long time.

Although the benefits of local digital marketing for merchant business are very concrete, the ultimate question is, however, consumer willingness to receive marketing messages and use related services. On the basis of recent studies, consumers seem to increasingly want local digital marketing, but it is not yet clear whether this is enough for large-scale deployment. It is also fair to assume that consumers must be able to determine who and when can approach them.

Ecosystem and development of mobile devices

Perhaps the most important event in the development of the ecosystem was Apple's recent iBeacons concept release. iBeacons enables low-cost Bluetooth Low Energy (BLE, or BT Smart or BT 4.0) beacons. They emit signals that Apple smart phones or tablets automatically react to when they come within range of the beacon - maximum distance of up to a few tens of meters. Offline retailers can use the concept, for example, to allow payment anywhere in the store, for coupons and other local advertising.

A number of BLE beacon manufacturers have already entered the market. For example, Estimote offers three beacons for $ 99, Sonic Notify ten pieces for $ 300 and Roximity service costs $ 10 per month for one beacon. Adomaly is an advertising network to reach consumers in-store using beacons.

NFC technology use, again, is widely supported by mobile phone vendors, mobile operators and payment service providers, but it is already widely predicted that its growth will be stalled. The problem is that key stakeholders are often competing with each other, which has led that NFC software package is not widely enough available in phones. In addition, Apple has not been favourable to NFC, and it looks that BLE will be positioned as a direct competitor to NFC in local mobile payments.

Amount of smartphones and tablets, as well as their usability are already at good enough level to boost local services mass market. Although all the major software platforms have their own application stores, processes and models to bring also store related applications available for consumers are already sufficiently developed. Notably, Android platform is the most fragmented one, in Apple and Windows Phone environments there are less problems.

BLE is already supported by most iPhone models, 4S, 5 and the newer ones, as well as by Apple´s tablets. In many high-end Android devices manufacturers have already implemented BLE support, and the support on Android platform level is coming in the near future. By the end of this year all the Nokia Lumia WP models will also support BLE.

In summary, local mobile marketing is still a great promise for retailers and consumer brands - but realisation of the promise still faces significant stumbling blocks that need to be avoided:
  • There needs to be a common mode and format of communications between consumers, retailers and brands, and this needs to be supported by a sufficiently wide range of mobile device manufacturers and other ecosystem players 
  • Offline merchants need to be willing to build the necessary local infrastructure in their stores, and use it effectively for marketing and other customer relationship activities
  • Consumers need to be willing to adopt a new, mobile device based way to get information about products, access promotions, pay for purchases, etc.

20 November 2013

How to sell an innovative solution to conservative firms

I have many times come across a statement that company's customers are conservative and, therefore, selling them a new, innovative solution is difficult and slow. These customers include machinery industry, construction, services companies - and so on. This is partly true. But only partly - often company´s own legacy, ossified ideas and practises, is a major obstacle to commercialise new products and business models.

Industry after industry has seen its traditional business truths radically changing, driven and enabled by globalisation, digitalisation and other change forces. Also in disrupted industries, companies have complained about conservatism of practises and customers. And even though an industry sector would not be experiencing outright disruption, greater efficiency measures as well as marginal refinement of products and business models are not sufficient to ensure future success.

Current well-established way of working, with existing products, business models and customer approach need to be questioned when new solutions are brought onto the market. This post presents food for thought to consider ways, how to reduce obstacles to commercialise new, innovative solutions.

Sales process renewal

When a company develops a solution that will bring business benefits to customers in new ways or whose business model is different from usual, old recipes to conduct sales are no longer successful. A new solution can bring to customers a whole new range of benefits, which often in turn means that both buying process and its main influencers are changing. Thus it is up to the company, developing an innovative solution, to rethink its sales process.

Adoption of new solutions requires strategic considerations in client companies, which in turn takes decision-making higher than usual, often the senior management level. A vendor company must be able to influence these higher-level influencers much more deeply and using the language that they prefer. This calls for linking the benefits of a new solution to customers´ key business objectives. Supplier company´s top management commitment to and participation in sales work is also of utmost importance.

There are often parties in client companies that in the past have received less attention, but to whom the benefits of a new solution are important. For example, persons responsible for environmental affairs will surely appreciate solutions that help to reduce the environmental footprint of a client company or the one caused by its products. On the other hand, customers' financial officers may find business models that are based on costs proportional to income, instead of investments, very lucrative. In addition, e.g. business management and development, as well as sales and marketing management are more traditional, potential allies. It is essential to have at least one senior protagonist in a customer company, who can help to navigate client´s decision-making depths and shallows.

Just as important as finding allies, is to identify and neutralise potential opponents of a new solution. The key here is to understand the mechanisms how a solution changes a client company and thus identify the influencers, who may react negatively to change. Cooperation with protagonists makes this much easier.

Sales and marketing tools renewal

Finding right buyer contacts in customer companies is not enough. It is also worthy of developing suitable sales and marketing tools for innovative solutions. They are needed to handle reactions and emotions that relate to encountering new things, such as uncertainty, scepticism, ignorance, suspicion and fear. And because the issue is not simply communicating facts, it takes longer than usual to win customers. Here are some impetus to renew company toolbox.

Typically, more than half of the customers' buying process is over, before they are ready to meet with representatives of supplier candidates face to face. And in the case of new solutions, customer engagement needs to be started even before customers consciously initiate their buying process.

At the centre of this are digital sales and marketing tools, in particular inbound marketing. If at all possible, the target is to achieve thought leadership in areas that relate to a new solution and that are important to customers. This is done by presenting in-depth and well-justified information. The aim is not yet to sell a new solution, but to show company's in-depth understanding of the customers´ business environment challenges. Thus it will be possible for the customer base to adopt innovative features of the solution. Marketing and sales need to seamlessly and overlapping work together; when a customer demonstrates willingness to consider a new solution, it is time that inside sales and traditional field sales grab the baton.

Benefits justified by numbers are important to overcome customer doubts. Various modelling and simulation tools can be provided either free of charge or with a reasonable cost, acceptable to customers. Tools can be provided either via a web based service or as a standalone application. Web based tools are easier to link to other digital marketing activities. As with all aspects of digital content and tools, you should consider all of the key customer influential parties: for example, needs of financial officers and environmental people are very different.

A new, innovative solution is rarely accepted before experimental use, a pilot. Other clients´ pilots may of course be good reference cases, and in the best case they can also be utilised as part of content marketing activities.

Influencing through customers' customers

Customers' willingness to adopt a new, innovative solution can also be affected through their own clients. The basic idea then is that customers´ customers will appreciate and want the benefits that a new solution would make possible. In the best case, this may even mean that they specifically want a solution of the supplier company as a part of the overall solution they purchase. For example, a machine or device vendor may be able to convince its system supplier customer's customers that its new solution, utilising sensor and Big Data technologies, should be a part of the total supply. Consumer customers, on the other hand, appreciate for example Shimano bike parts, and Intel microprocessors, thus creating a strong pressure on bicycle and computer vendors to use these components.

Utilising customers´ customers requires two things:
  • A company is able to understand the business of its customers´ customers and to determine the benefits that the company solution provides them
  • A company must be able to communicate these benefits to customers´ customers
Digital tools, and in particular, inbound marketing, are an excellent and inexpensive way to reach end customers. The same type of tools can be utilised as in the case of actual customers; the content of course, needs to be adapted for a different target audience.

Partners in strengthening the messages

Partners typically complement a company 's offering and business model. In addition, they often have a significant role in overcoming customers' uncertainty and other obstacles to adopt a new solution. In order to successfully utilise partners, a business model must provide also them with enough stimuli to work actively together with the supplier company.

A good example of a complementary offering are services provided by partners: by agreeing on cooperation with an installation and commissioning company that is trusted by client companies, a machinery or equipment company can lower purchase threshold. Another option for this kind of company is to have a new solution as a part of a larger system offering, provided by a company well-known among customers. A third example, again, makes it easier for customers to accept a new solution by including elements of a component supplier, highly appreciated by customers.

Finally, a few words about second sources. Purchasing processes of many companies require second sources for key components or sub-assemblies. This is challenging for companies that use innovation as a means to differentiate themselves from other market solutions, aiming hereby to gain competitive advantage. However, customers need to be convinced that their business will not be greatly disturbed, even though a supplying company would face severe problems. Different types of contractual terms, such as escrow paragraphs, can give restricted security. Licensing a new product to other manufacturers or system suppliers is an example of other ways to solve the problem.

Utilising influencers

Especially in the early stages of the buying process, customer companies are looking for information from sources on which they rely. These sources are herein referred as influencers or advocates. The influencers may be individuals, consulting firms specialising in the industry, research firms, trade publications, etc. Their assessments, reports and opinions often have a major impact on which supplier companies and solutions customers are taking a closer scrutiny.

The most important thing when convincing advocates is to provide them with tools to increase their social capital: helping them to make their reputation better and increase their visibility. When information related to company's innovative solution is accompanied by new insights and views, it will have good chances to be accepted and further shared by influencers: resulting in increased customer awareness and appreciation.

Besides traditional mechanisms, such as face to face consultation, advocates can be efficiently and cost-effectively reached through the Internet and social media. In particular, inbound marketing tools make it possible to target right parties with right messages at the right time. Inbound marketing activities, as well as other activities to engage with influencers, must begin early enough. In practise, this means parallel execution with solution development.

If clients´ customers or partners are important for the commercialisation of a solution, similar type of measures as described above can be conducted to reach them.

Utilisation of pioneers and revolutionaries

Existing customers are known to be the most receptive ones for new solutions, due to close relationships between the two companies and their proven appreciation of the supplying company's solutions. But some customers are more innovative and faster than others. These customers should be identified, and sales and marketing efforts should be focused to them. Pioneer company references are then worth gold when tackling slower and more conservative customers.

If current customers do not find the courage to use a new solution, it is worth to look for industry customers, who are willing to rebel against prevailing ideas. These may have aggressive growth targets, desire to differentiate their offering and business model or they may strive to innovate using their broader ecosystem. As always, a company should not just wait to be contacted. It should identify interesting players and approach them with messages that fit with rebellions´ business objectives.

Revolutionaries that are industry outsiders are ultimately most open to new ideas. In the best case, a supplier company with an innovative solution is thus pulled to huge success - if things turn out to go badly, an outsider is excluded and forgotten.


This post is meant for companies that are developing - or planning to develop - new, innovative products and that are facing significant challenges to commercialise their solutions due to customer conservatism and inertia. The key conclusions are:
  • Potential customer and industry conservatism is just an excuse for innovation laziness and poor results; a company should also be able to renew itself; besides new solutions, this means new approaches, methodologies and tools for commercialisation.
  • To commercialise a new solution, a company needs to be active on the market early enough; the ultimate goal is to reach thought leadership in the discussions related to the new solution topic; digital media tools make this possible in a cost-effective manner.
  • Development of a new solution and its commercialisation should be overlapping activities; market and customer commitment to a new solution is best achieved by listening to customer needs, by giving them the building blocks to first understand the value of a solution and by supporting them when they use this value in their business development.

14 November 2013

Shotgun tactics when selecting international markets

A business acquaintance told me an interesting story about expansion into international markets. The starting point was four Finnish companies that wanted to start international sales. The companies wanted to cooperate as much as possible to minimise costs. Experts of internationalisation as well as public support organisations suggested that the companies should start by entering a very well-known neighbouring market, Sweden - and set that as a precondition for any funding support. The companies rejected the proposal. Instead, they hired a shared export manager and began an extensive round of testing the markets, the main instrument was trade fairs in over 20 countries. On the basis of this round, one of the companies launched successful international operations in a Western European country, one in East Asia, one in the United States, and one - in Sweden. If the companies had believed advisers, it is very likely that only one of the companies would have been able to successfully launch its export activities.

This post sheds light on why shotgun shooting tactics, as it is often called, is a feasible alternative when a company is planning to enter international markets or an established company launches a new product internationally.

International market selection

There seems to be a broad consensus on prioritisation and selection of international markets among internationalisation experts and researchers:
  • The first step is to select the markets for closer examination by looking at macro-economic variables
  • The second studies overall market potential of the industry in the selected countries, and
  • The third evaluates company´s sales potential in relation to required investments.
The most important factors affecting the selection are thus firm-specific ones and those related to target markets and their entry barriers.

The plans made according to above mentioned model are systematic but also mechanistic. They often lead to significant investments, not being able to change plans as needed, until available money has already been spent.

The main stumbling blocks of commercialisation, which can be identified only with considerable delay, include for example:
  • Do targeted consumer or business segments have adequate underlying needs that need to be satisfied?
  • Are company products acceptable for targeted consumer and enterprise segments?
  • Is there right type of channel partners available, such as distributors, retailers and system integrators?
  • Are there partners, events, communities and other necessary tools available that are needed to execute planned marketing strategy?
Of course, these things can be studied by means of desk studies, but a more in-depth view can only be found by having closer contacts with customers and markets. Traditionally, the tool has been own or outsourced market research, but its disadvantage is significant time, money and resources required. Globalisation of consumption and purchasing decisions, along with online methods, has created new, more cost-effective methods; international market selection can be made more iterative, avoiding too early choices that can easily lead to waste of resources. This means that before concentrating efforts too strictly on certain markets, it is better to shoot a little bit wider, so that really the best launch markets can be found.

Iterative development of international markets

This section primarily deals with digital marketing methods as part of an iterative process to select target markets. We shall focus on the four particular stumbling blocks of commercialisation, discussed above, which are also among the most important market criteria when selecting target markets.

Customer need - market fit

Social media is a huge data repository of consumer and business needs and preferences. Available data are also continuously updated, real-time, so decisions based on this data are likely to be more relevant than when conducting market research based on statistics or sampling methods. Also location information of potential customers is extremely important in country selections of a firm: Facebook, Twitter, Linkedin and other social networks provide information on needs at country level and, where appropriate, at regional or even city level.

Market information can also be obtained by using inbound marketing methods: compelling content that relates to customer jobs to be done, is created on company webpages and consumers or businesses are lured to visit the site. Potential clients are attracted by participating in discussions on key websites and digital communities important to them, by inviting visitors through traditional marketing messages and by optimising company website to get found by search engines. If a company needs to select, what customer jobs its products will be targeting, this can also be conveniently tested by means of inbound marketing.

A website available only in English, along with social media and market statistics, provide sufficient guidance to reduce the number of markets to be screened. The important thing, however, is that preconceptions and 'usual country priorities' should not limit choices too early. When both digital and traditional methods have been used to find a good subset of countries, it's time to go and study customer needs in these countries in more detail. If necessary, and if you have time, the content can be localised for target market languages ​​to go deeper into local websites and social communities. At this stage it is essential to find those potential markets, with customers most eagerly waiting for company products.

Product - customer need fit

In traditional commercialisation models, a product feature set is defined and almost built, before there is any wider feedback on how features fit with customer needs. Various types of limited customer testing are usually arranged, however. Although internationalisation has created customer segments with similar needs around the world, different markets often focus on different features. Iterative product development continuously tests product features and their fit with customer needs, and this testing is started as soon as possible in product development process - and at the same time it is tested, how various product characteristics resonate at different markets.

By discussing pain points that consumers or businesses are facing in their areas of interest, it is easier to understand the needs of potential customers, which in turn helps to prioritise planned features of the product. The audience can also be asked direct questions, queries that are fast and affordable to execute online. Needs for product related support and complementary services can also be evaluated using the same methods.

Seeking feedback from potential customers thus directs development and commercialisation of products to meet also changing circumstances. In addition, the feedback becomes an integral part of market attractiveness assessment and ensures that the selected target markets really appreciate the properties of the company´s product.

Channel strategy - market fit

A successful channel strategy identifies right channel partners as well as makes them strongly committed to sell company's products.

The Internet can be used to discover and explore in detail suitable partners to sell company products. Digital dialogue with potential customers and thus obtained feedback also help define the most popular purchasing channels. These methods are suitable for both online and brick & mortar stores. Similarly, also other important channel players can be found, such as distributors and system integrators. One can also study, for example, what factors are driving the business of potential channel partners or whether potential channel partners are already representing competing products.

Inbound marketing aims to get channel partners interested in a company and its products and tries to motivate partners to visit the company website. The aim is to create relationships, which can be further developed at face to face meetings and various events such as trade shows and conferences.

Understanding of customers and getting them excited to buy company products are precious tools, when trying to get channel partners committed to sell company's products. If this is combined with partner interest generated through inbound marketing, even a smaller firm is able to achieve reasonable cooperation terms and conditions.

Channel partner identification and building their willingness to cooperate should be started early enough on each of the markets relevant for commercialisation. If the process is able to identify channel partner relationships that would have a perfect fit with company business and product objectives, priority of this market should be considerably raised. If, however, a market offers only not so lucrative partner candidates, you should forget this market for the time being and seek the first references on other markets. Similarly, if the sales channel structure or its mode of operation in a market differ considerably from those of other target markets, it usually decreases the attractiveness of the market in question.

Planned marketing strategy - market fit

Here we focus on two things: availability of marketing partners and applicability of company´s marketing communications messages on studied markets.

In addition to channel partners, company marketing plans might reserve a major role for players that boost awareness and demand of company products. The most important ones are advocates, such as industry experts, Internet sites, magazines, etc., that are trusted and relied on by potential customers during various stages of their purchase process. The best and most profound way to affect advocates is by using inbound marketing activities; by offering them new information, views or other ideas related to company products, as well as by attracting them to visit company web pages for more information. Besides influencers, for example, complementary service providers, various communities and events can have a significant impact on demand increase; these can be found by using the same methods as presented earlier.

By testing marketing messages, the best arguments and ways to communicate benefits are found. Also such online content tools as pictures and videos can be tested, to find those that best resonate with potential customers.

To assess the attractiveness of an individual market, it is essential to understand how well partnering and communications, as defined in marketing strategy, can be applied to this market. If the match is great, local adaptation requires very few resources. Of course, if a market is a very interesting one, it is possible to tailor a specific approach applicable to the market by spending a lot of money. In this case, success is uncertain, as experiences from other markets cannot be directly utilised.

7 November 2013

Marimekko digitally x-rayed

Original collections, brand and marketing that is based on own and partners' shops are traditional strengths of Marimekko. At the same time, a number of consumer brands and retailers are increasingly building their competitive edge on digital tools, the Internet and social media. This post studies how Marimekko have managed to combine these new tools with their business activities. Although some of the analysis methods give only indicative results, the main conclusions are, however, built on a solid base.

Marimekko business 

Marimekko is a Finnish textile and clothing design house with net sales increasing again, after the bottom in 2009. This is caused by international growth, which in turn has eroded the profitability of the company. The numbers of 2013 are rough estimates based on realised results of the three first quarters.

Share of search engine visitors (%)

Digital Marimekko

Number of website visitors is a good yardstick for digital popularity. Most of the Marimekko website visitors are coming from search engines, see the figure on the right. More than half of the searches are Marimekko ones, written right or wrong. Thus, by studying the Marimekko keyword frequency, it is possible to make good enough conclusions about the company's popularity in the Internet world.

Global Google searches of Marimekko
If you look at the global number of Google searches made for Marimekko (see the picture on the left), we can see that the number was at its highest early 2008. After that the search numbers have fallen and the decline is projected (dashed line) to continue. The drop in 2008 is at least partially explained by the global economic crisis. It is to be noted, however, that the revenue growth seems to be driven by the visibility caused by retail expansion, not by Internet publicity (that is becoming more and more important).

The sentiment of Marimekko tweets
There is also room for improvement in how Marimekko use social media: the current effect is mediocre, and the company websites are not promoted enough. The sentiment of company's social network attention can be examined, for example, by means of tweets. There were not a lot of Tweets concerning Marimekko before April 2011. Since then the sentiment has been consistently positive, until since June this year apparently the copy scandal changed the tone much more critical. It seems reasonable to assume that the company, without further publicity problems, will soon be able to normalise the situation.

Engagement of Marimekko website vs. some benchmarks
When Marimekko get consumers to visit their website, they are out there reasonably well, see the picture on the right. Engagement of websites in Finland and in Japan is quite good, compared e.g. with fabrics and women's clothing benchmarks.  This is also confirmed by Hubspot evaluation of the Marimekko website, which gives 76 points out of one hundred possible. The main problems are the lack of regular blogging and partially website optimisation for search engines. Marimekko does not provide an application for smartphones and tablets to access the website conveniently.

In addition, the website has very little text (2.72 % ) relative to HTML code. This slows down page loading, which in turn affects e.g. result positions of Google searches. More broadly, Marimekko seem to have problems with content marketing, the low level of blogging is just a sign of it. Publishing compelling content for customers and thought leaders would help to get coverage on other websites and that would correspondingly feed visits to Marimekko's own website. The graph below highlights the number of inbound links to the company website. The number of links, both to the Finnish site and the international one, has since 2011 grown very slowly. It remains to be seen whether the good performance of 2013 is only the result of negative news.

Inbound links of Marimekko Finnish and Japanese websites

Business by market areas

Marimekko report their business by market areas, see the graph on the right. More detailed information is not available, but the analysis will attempt to go to the country level whenever possible. The numbers of 2013 are estimates.

Own stores

The table below shows the amount of Marimekko stores (own, retailer owned ones and shop-in-shops) by market areas. The revenue figures generally correlate well with the number of stores, especially in North America and Asia-Pacific. In Sweden, the option for online purchasing raised own sales; it remains to be seen, if possible online shop launches in other areas will affect in the same way. 

Marimekko webpages

Origin of Marimekko website visitors
Marimekko have their own websites in Finland, Sweden, the United States, Japan, China and South Korea. Swedish site is in English. In addition, there is an international site in English. The fact that there are no sites with local language available in some major market areas is a serious problem; France, Germany, Spain and Italy are good examples.

Global website ranking of Marimekko

There is no information available about the traffic volumes of the Far East websites. According to Sitetrail, Finland and the United States are leading the visit statistics of the rest of the world, see the picture above. The development of company´s global website ranking is shown in the figure on the left: despite of international expansion, the company ranking has not greatly changed. Finland is by far the most favourable country, Marimekko's rank is currently 615.

Marimekko searches

Google searches of Marimekko in Finland
Development of Google searches in Finland is shown in the adjacent graph. After 2011, there has been on a slight upward trend, surpassing even the sales and store number growth. Dashed line shows the forecast.

Marimekko searches, Sweden and Denmark

In Scandinavian countries, searches are, in turn, been on the decline, see the graph on the right. Interest to make Marimekko searches is thus not following the number of stores or even revenue growth.

The situation in biggest Central and Southern European countries is presented below. The trend is slightly positive in Germany and negative in Italy and Spain. United Kingdom has remained unchanged. In spite of the growing sales, the share of Marimekko´s store sales has been on the decline, which is also reflected in the search statistics. In all countries, the Google one day Marimekko promotion (Google Doodle) in 2012 has created a clear peak.

Google Marimekko searches in Central and Southern Europe
USA and Canada, Marimekko searches

Searches in the United States have roughly remained at the same level, only slight decline this year. In Canada, there is a slight increase. Although the number of stores and company own sales have grown up in a relatively fast pace, this does not appear to have an impact in the search statistics.

Japan and Australia, Marimekko searches
In the Asia-Pacific region, both in Japan and in Australia, business expansion, the opening of new stores and the popularity in the digital space have gone hand in hand. This has resulted in a brisk revenue growth. In Japan, the concern is that during the last couple of years, the trend is downward. There is no information available about China, due to the central role of the Baidu search engine in the market.

Inbound links to Marimekko webpages

Geographical origin of inbound links to Marimekko webpages is illustrated in the map below. At least China does not yet pop up with the weight corresponding to its value in Marimekko's strategy, and also in the United States the relative visibility is quite poor. In contrast, Finland and the rest of North and Central Europe are relatively well represented.

Inbound links to Marimekko webpages

Marimekko in social media

The origin of Marimekko tweets are shown in the map below. The United States and Japan are by far the biggest tweeting countries - the number of tweets in these countries is, however, always large compared to smaller countries. Other notable countries, as regards to Marimekko related tweets, include Finland, Australia, Canada, United Kingdom and Italy. There is a surprisingly weak popularity for example in Sweden, Denmark, Germany, and France.

Marimekko tweets by country

Business by product lines

The company business is divided into three product lines, Clothing, Interior decoration and Bags, see the picture on the right presenting their revenues. The numbers of 2013 are estimates.

Digital footprint and marketing of the product lines can be evaluated using Google search statistics. This is best done by comparing Marimekko related searches with suitable benchmarks.

Marimekko searches vs. women´s clothing ones
Women´s clothing is perhaps the most important segment of the Clothing product line. The trend of Marimekko searches has clearly fallen behind women's clothing category that serves as a benchmark. The thick horizontal line describes the zero-level development of searches  and Marimekko's line is a lighter blue, see the picture on the left. While Marimekko's Clothing sales has recovered slightly after the drop that started in 2008, this does not seem to appear in the digital popularity.

Marimekko searches vs. home-making & interior decor ones
Google searches of home-making and interior decor category are a good benchmark for Marimekko´s Interior decoration product line. Again, Marimekko has fared less well than the benchmark. Also the recent sales growth is not seen in Marimekko searches, compared with the benchmark.

Google Marimekko searches vs. clothing accessory benchmark
Clothing accessories category of Google searches are used to benchmark Marimekko´s Bags product line. The growth of the product line that started in 2010 was first visible also in search statistics, but after that Marimekko has fallen behind their benchmark.


It is clear that Marimekko are not effectively enough using available digital marketing tools alongside product portfolio renewal, expansion of retail and the brand. There is a risk that with changing consumer purchase behaviour, relying more and more on digital channels, Marimekko´s relative competitiveness will suffer.

Marimekko is not visible enough on the Internet. The websites are clearly not interesting enough, and the company messages do not reach other websites. In addition, in many major market areas, there are no company websites available in local languages. In social media, Marimekko is not sufficiently benefiting from word-of-mouth and the company websites are there not promoted enough.

The worrying thing is that Marimekko´s new stores and other major investments in new market areas do not seem to get enough support from digital activities. Although some promising examples can be found, this means inevitably only half-hearted success. All the three product lines seem to have a declining trend in the digital world compared with the benchmarks. 

Besides customer acquisition and retention, digital tools offer a great promise for in-depth identification of customer needs, rapid customer feedback of new products, as well as customer-oriented testing and improvement of marketing plans. Marimekko will face the threat of missing these potential benefits, unless they fully utilise opportunities of the Internet and social media.

31 October 2013

Internet industrially - doping for competitiveness

I got to know industrial automation in the late 1980s, when we developed software and interface modules based on Bitbus distributed control standard to connect sensors and actuators. In mid 1990s, I was leading another company, which created and sold one of the first machine-to-machine (M2M) solutions based on wireless communications. This fuelled the view that this area will generate great business - but, as is often the case, slower than we imagined at the time.

In retrospect, it can be understood why in the 1990s there was no premises for the emergence of major businesses:
  • Availability and use of sensors were limited and the prices were high: for example, our proprietary GPS tracking solution cost hundreds of dollars per unit
  • IP technologies and wireless communications were not yet sufficiently developed: for example, we had to use wireless SMS and a proprietary protocol built on top of it to communicate with smart devices 
  • Data storage and processing methods were immature: our solution was a typical client-server solution with proprietary applications
  • Ability and willingness of firms to use networked solutions for optimising operations was limited: in most cases, solutions were customised, and thus it was not possible to scale business
The situation is radically changing. The Internet and other new technologies open up a world of new business opportunities. This post outlines the opportunities from manufacturing industry point of view, focusing on companies´ product sales and customer relationships. Benefits, relating to e.g. company's own internal decision-making or improvement of internal efficiency, are not discussed here in detail.

Manufacturing industries meet the Internet

The physical world is becoming an information system. This change is referred to as the Internet of Things (IoT), sensor revolution or programmed world, among others. GE calls it the Industrial Internet. Regardless of the naming, sensors and actuators embedded in physical objects - from roadways to pacemakers - are linked through wired and wireless networks, which often (but not always) use the same Internet Protocol (IP) as the Internet. Vast amounts of data are sent through these networks to computers for analysis and the results are further submitted to users in an easily readable format.

There are number of factors driving the development, such as:
  • Availability of various types of sensors, growth of sensor use and sharply declining prices, caused by e.g. consumer product volumes and advances in material technologies
  • Development and standardisation of wireless communications technologies, such as 3G, WiFi, BT Smart and RFID
  • Development of Big Data storage and analysis technologies, especially driven by needs of consumer Internet services
  • Companies with strong interest in business model development and operations optimisation, based on realised benefits derived from the use of Internet tools
The core of the IoT is to use analytics for process automation, performance optimisation and downtime elimination, as well as to predict when a machine or component will fail. For industrial companies, this may indicate a threat or an opportunity. The threat is that the value of products will migrate to software, provided by other companies, thus endangering profitability of traditional product companies. A more sensible approach is to see the opportunities; in parallel with securing current product business, new value adding Industrial Internet offerings need to be developed.

The Industrial Internet is expected to see tremendous growth. Wikibon says that last year $ 20 billion were used in IoT technologies and the forecast for 2020 is $ 514 billion. Similarly, the Industrial Internet generated last year value of $ 23 billion, and in 2020 it is projected to reach $ 1279 billion. Looking this from another perspective, the Internet today is connected to a little more than 10 billion units. By 2020, the figure is 30 to 75 billion, depending on who is the predictor. The IoT is the biggest growth driver.

Regardless of whether above projections will be realised or not, huge business opportunities will be opening up. The key is to use existing and potential customer relationships and to create new solutions that are exploiting the Industrial Internet. This will also build competitive barriers against cheap equipment suppliers and create opportunities to maintain and further develop company's manufacturing competitiveness.

Business models for the Industrial Internet

To realise the potential of the IoT requires, besides new technology skills, also new business skills related to the Internet and its business models. This section first discusses various options for company business development and then presents four models of how the Industrial Internet can be used by a manufacturing company.

Development options

In principle, a company can develop both technical and business aspects of Industrial Internet solutions in-house, only recruiting necessary additional skills, if needed. Possible challenges here are the old models of thinking and the legacy in building new competences - the company makes too little and too late. Often used solution is to establish internal incubators, organised separate from day-to-day businesses. The incubators are able to develop and test new ideas before they are transferred to the responsibility of mainstream businesses. For example, Bosch has set up three innovation clusters: connected mobility, connected energy and connected building.

Capability building together with partners is a very viable option. Partners may be universities, research institutes and other companies. Especially with the latter, there are many models where traditional rivalry may in some areas be complemented with tight collaboration.

Mobile operators that are very active in the M2M space as solution providers, are natural partners among larger companies. Other prominent players include such companies as Cisco and Ericsson in communications, Intel in micro chips as well as IBM in software and services. Correspondingly, also the big Industrial Internet players are seeking cooperation. GE has made a substantial investment in EMC / VMware spin-off, Pivotal, a company that builds Big Data solutions. In the same area, GE has also announced collaboration with Amazon.

As in the development of the Internet in the past 20 years, startups are going to be a very important source of new ideas and innovation. Cooperation with startups can be anything from using their solutions to acquiring a startup. In this area too, GE has been very active by setting up a base in Silicon Valley and by kicking off a number of cooperation activities with startups.

There are plenty of startups working with sensors, Big Data and M2M, just to name a few. Besides sensor technologies and solutions, startups are also launching solutions to gather and aggregate sensor generated data. Storage, analysis and presentation of Big Data has spawned a number of new entrepreneurs. The traditional model of M2M startups has been seeking cooperation with mobile operators, but also other models are already being introduced in the market.

Improving product competitiveness

Improving competitiveness of a company´s products by increasing their life cycle revenues or by reducing their life cycle costs is probably the most common way to take advantage of the Industrial Internet. For customers this is realised through various value-adding services that are either a core part to utilise the product or supporting the product very strongly in some other way.

A good example is GE that embeds smart sensors in the jet engines and takes advantage of terabytes of data generated to optimise aircraft performance and the ways the engines are maintained. Konecranes TRUCONNECT services, on the other hand, contribute to crane safety, optimise maintenance costs and predict the needs of modernisation. An finally, Vesta support services assist customers to define optimal locations for windmills.

New business

It is also possible to build a completely new, independent business. Typical products are consisting of software that solve specific customer problems. Software may be able to control only the equipment provided by the firm, but it is often advantageous to create interfaces to other vendors´ products, too. In particular, for start-ups and businesses that account for only relatively small part of customer's installed base, this is often the only sensible strategy.

Bosch software products promise to integrate equipment with customers' business processes - equipment can be sourced from numerous manufacturers. The software can also be connected to various back-end systems from multiple vendors. GE has developed an application for power companies, which can be used to determine how to best build and operate turbines. Same kind of software are being developed for rail, mining, oil and gas companies.

New business model

Benefits of new business models - if successful - may be significant. The challenge of reaping the most dramatic benefits is that the development of new value chains requires key players´ support and it takes time to build these chains.

Real-time data generated by sensors, combined with historical data, makes it possible to analyse and predict with high precision use of equipment and machinery. This paves way for new business models, where manufacturers are charging for their products based on costs, revenues or time, whereas the conventional model relies on equipment or machinery purchase and maintenance.

Another example uses crowdsourcing to create added value for company's products. Ford is utilising open interfaces and allows in its OpenXC initiative to customise car features with add-on modules and applications. GE also relies on individual and startup innovation and value creation, and has launched measures to develop solutions for tackling air traffic delays and efficiency of hospital visits.

Marketing assistance

Although it would not be possible to create value-added products, totally new businesses or new business models, the Industrial Internet can significantly boost company's marketing and sales efforts. The main idea is to provide customers and other important stakeholders useful and interesting information, which will improve the competitive position of company's products. The key stakeholders are traditional and digital media, channel partners and influencers important to customers. In this context, the key source of information is the data generated by the products of the company or other data that the company can access at a reasonable cost.

Also the companies that sell to business customers cannot forget opinions of media and consumers: if corporate citizenship is not communicated properly, it will be quickly heard by customers´ decision-makers. If a company sells its products through channel partners, the partners will appreciate any information that helps them acquire new customers or any new opportunities to sell customers new services. Both for media and for customer advocates, it is important to get new information and insights that will enable them to further build their authority in the topic area. Well-thought, fact-based opinions based on available data are a great way to engage customers through media and advocates and thus support sales of company´s products.

For example, a car manufacturer could embed one more sensor to its cars: air pollution sensor would give a car user air quality information from those places that are important to him and give everyone an overview of air pollution situation. When used properly, this kind of activities can provide very interesting information for consumers and also for media, which creates good opportunities to highlight company's social responsibility. Cisco is strongly involved in even more ambitious project. Planetary Skin tends to use billions of sensors on land, water and in the air to detect and predict changes in the environment.