WHAT SUCCSESSFUL EUROPEAN COMPANIES DO RIGHT
By: Philippe (Phil) Jafflin & JP Kalmeijer
Entering the U.S. market is a strategic business decision that requires preparation, planning and excellent execution to achieve the desired success. It is critical that all stakeholders in the business development venture are in-sync and 100% committed to its outcome. Having worked with a multitude of Small and Medium Enterprises (SMEs), over the years, it is clear that the 6 keys listed below are the same for all foreign direct investments into the US, particularly European-based companies who have a tendency to underestimate their importance. COGNEGY has seen the good, the bad and the ugly. Most importantly we have seen ventures succeed, mainly because they incorporated all of the following 6 key contributing factors:
- 1. Full awareness of the differences between Europe and the U.S.
- 2. Launch the project after meticulous preparation./li>
- 3. Create a business strategy for the project and provide executive backing.
- 4. Back the venture with sufficient funds for success.
- 5. Define a great value proposition for the market.
- 6. Bring the right partners on board early.
Let us look at the importance and impact of each of these 6 key factors for a business development venture trying to break into the U.S. market.
Awareness of the Differences
Although both the U.S. and Europe are considered western cultures, they operate on very different set of values and unwritten rules. Ignore one of them and you will keep wondering why things did not happen your way. For example, doing business in the Northeast will be very distinct from closing a deal in the South; California is definitely not Massachusetts or South Carolina.
Consider this, when savvy businessmen want to do business in China they will seek local advice, find translators and hire facilitators or culture coaches. Why would all this suddenly become redundant because one speaks English or knows about American culture?
We cannot emphasize enough the importance of continuously supporting the decision to open in the U.S. market at a business strategic level. Entering into such a demanding market will require the unequivocal support of the highest executives.
It is not a short-term ‘boost of revenue,’ it is an investment and it will take time to reap the fruits of your labor. Executive management needs to plan for a combination of lower margins and higher operating costs to get the business off the ground. Expectations of a quick return on investment will be met with disappointment.
Invest in building the right team, a strong combination of business development skills with mature market experience and strategic thinking that finds the right blend of the European company’s values with American requirements. Have a team that can quickly analyze and articulate the U.S. market needs back to ‘mother corporate’. Provide the team with easy access to the highest level executives that can quickly turn-on any vital company support, because it will not come easily. Unless the steps into the U.S. market are made strategically, success will remain optional.
Several European companies enter the U.S. market on a small budget, making them feeble and open to failure. This is the wrong time to skimp. Prospective clients in their decision-making process to replace established domestic competition, compare all your touch points to the reigning players in the market. Touch points can be products, prototypes, employees, proposed pricing, and marketing collateral (print, website, and brochures should be sending the same quality message.).
In most cases the ‘budgeteers’ (those who are there to ‘protect’ the company and have ‘zero’ responsibility over the business development effort) score easy points in two areas: marketing costs and people costs.
- Marketing & Sales Budget for a Continent.
- Very often, budgeters hold back on the marketing and sales budgets. They treat it as an expense/cost and not as an investment to open into new markets. To avoid the ‘inbound investment hangover,’ one should allocate enough budget to be able to run a smart strategy at your laser targeted (by the market entry strategy) market segments. You will be unable to outspend established competition, but there are no rules against outsmarting them!
- Funds to Hire the Right People.
- Some European companies can struggle with the compensation requirements of high quality domestic players. We have often heard the remark “I cannot hire someone who makes that much (more) money (than I do).” Most likely, this is an indicator that the U.S. project is not handled at the right executive level, and that it will require an operational effort causing the manager responsible to make the wrong hiring choices.
- Opening a new market, building new business and displacing entrenched competition is hard. It should only be entrusted to the best candidates available. Firstly, identify the right partners to help you budget realistically and spend specifically; secondly, budget to invest because it will take longer than you think/plan.
It can be an eye opening moment when an honest prospect tells you, “I do not care.” Consider yourself the lucky one. You now realize that nobody cares about your successes in England, your market share in Germany, your loyal client base in France or your achievements in Europe. No prospective client in the U.S. cares, unless you have a unique value proposition for them. If the ‘proposition’ is not available in the U.S. market it might indicate three things: the massive opportunity among the 312 million Americans is out there somewhere, but you have not detected it or it does not fit the market needs.
Forget about how you do things at home, ask yourself why you do it that way and what needs you fulfill for your customers. Then, think how to rearrange these unique attributes to one of the most competitive markets on the planet and provide a unique answer to the market needs. A thorough competitive market analysis will unearth what needs to be done to build a winning value proposition to beat the well-established local competition. Keep in mind that you will have to be better, equal won’t cut it.
The Right Partners.
Many European companies enter the U.S. market relying solely on their own in-house resources, with the idea to save money, do a high percentage of DIY. They forget that DIY is a hobby not a profession.
It is important to surround yourself with people with the expertise one does not possess; know what you do not know and do not remain blissfully ignorant. For immigration issues, use an immigration lawyer who can advise you on the right choices between E’s, L’s, P’s, R’s, H-1B’s, etc. For taxes, get a CPA on board who knows both the U.S. and European legislation, and can steer away from taxation errors. For recruitment, use a partner who understands the requirements of the European parent company and the needs of the American candidate. Outsource, whenever possible, it will accelerate growth. The same logic applies to the business development efforts; the concept of “I will learn as I go along” is flawed. You will learn alright, but your potential partner or client will have little or no patience for your learning at their expense. They will take their business somewhere else and will not come back. Although it might be commendable to want to try it on your own, (after all it is part of the entrepreneurial DNA) but it is a bad business practice. Focus on your strengths and complement your weaknesses.
In conclusion, businesses that are succeeding in the U.S. market have mixed these 6 keys into their own unique blend. The different elements make a better whole (but are still very distinct): awareness of American and European customs, the meticulous project preparation, executive backing for business strategic projects, sufficient funding, a great value proposition for the U.S. market, and a desire to find the right partners.