Throughout the years, I have consulted to a
number of start-up companies and over time, I have noticed that most start-up
companies experience the same types of challenges in international markets, and
usually they are very different from those of established companies.
First, many start-ups operate in narrow
niche markets that often don’t exist in their home countries, so that going
international is not an option, but a built-in necessity. As early
internationalizers, however, they often are still in the process of developing
their technologies, products, or services. As we have learned from Igor Ansoff
more than 50 years ago, it’s probably not the best thing to be in a place where
new product meets new markets. Start-ups therefore must make sure that they are
ready before they approach markets, especially international markets where
enough will go wrong even without failing value propositions.
Second, much of the start-ups’ resources go
into research and development. This doesn’t only divert resources away from
much needed business development activities, but it also breeds a certain
mindset that values scientists and engineers more than marketers and business
developers. This often creates market myopia.
Third, when selecting international
markets, start-ups with potential in multiple industries or distribution
channels are often faced with the difficult decision between industry-focus (or
channel-focus) and country focus. It’s hard to give good advice on this, but
it’s probably the question if you’d rather know everything about one thing or a
little bit about everything. While the industry focus will help start-ups to
build valuable industry-specific knowledge, to establish network relationships,
and to get word of mouth going, it will also mean that a lot of business
development time will be spent on planes, traveling between countries. And each
time, new country-specific environments will have to be dealt with. Under the
country-focus, on the other hand, they only need to learn about a new, strange
land with strange people once, and they’ll probably penetrate the market deep
into the last, dark corners. But then again, boundaries between industries may
often be more difficult to bridge than the borders between countries, and
resources may be wasted learning about new industries and squeezing the last
bit out of those industries that are only a distraction.
Fourth, different countries react
differently to technological innovations. Some embrace them, others fear them,
so why don’t start-ups avoid the latter and enter the former? Well, the
innovation-ready countries are often already crowded with competitors and if
they’re not, they will be. Too bad that the ones that your competition shies
away, too, are exactly the ones that are skeptical of everything new. Foreign
start-ups are of course hit by the double whammy – they are strangers offering
strange new things. Fifth and finally, the types of innovations that start-ups
create often require significant education of customers. Business developers,
sales reps, or distributors (particularly when they are paid commissions and
when they are thousands of miles away) are not really interested in spending
years educating the market, especially not for free. They want to close that
sale today so that the commission shows up in their accounts tomorrow. So,
start-ups, don’t leave the creation of the pull to sales, have a good strategy
around this.
I’m sure that there are things to be added
to this list, so this is to be continued…
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