You, Too, Can Take Your Small Business Global
WILLIAM H. FROST President of Strategy Analysis International
MILL CITY PRESS
Copyright Š 2013 by William H. Frost Mill City Press, Inc. 322 First Avenue N, 5th floor Minneapolis, MN 55401 612.455.2294 www.millcitypublishing.com All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the author. ISBN-13: 978-1-62652-377-7 LCCN: 2013915256 Cover illustration by Carl Wiens Š 2013 SAI. Book Design by Kristeen Ott Printed in the United States of America
The backbone of any country’s economy is the presence and vitality of its SMEs. This book is dedicated to the founders of SMEs everywhere whose energy and initiative have inspired it, and above all, to their long-suffering spouses whose patience and support count for much more than we will ever give them credit for.
TABLE OF CONTENTS
Preface ........................................................................................................................ ix Acknowledgments ................................................................................................... xi
PART ONE. WHY EXPORT? THE RULES OF THE GAME Chapter One. What’s In It For Me? ....................................................................... 1 Chapter Two. 4 Essential Ingredients .................................................................10 Chapter Three. Towards a Frame of Reference .................................................20 Chapter Four. Clients, Partners and Co-Production .......................................31 Chapter Five. Who Will Buy Your Stuff? ...........................................................37
PART TWO. KNOW WHERE YOU STAND Chapter Six. Border Out and Border In .............................................................45 Chapter Seven. USPs and All That ......................................................................55 Chapter Eight. Competitors and Confrères ......................................................72 Chapter Nine. KSFs and Foreign Purchasers ....................................................76 Chapter Ten. Learning by Doing & Don’t-ing ..................................................80 Chapter Eleven. It Never Stays the Same ...........................................................84 Chapter Twelve. Are You Ready?.........................................................................88 Chapter Thirteen. Now What Do You Want to Do? ........................................96 Chapter Fourteen. Now Stop Doing .................................................................101
PART THREE. GOING INTERNATIONAL: GOALS AND ACTION Chapter Fifteen. Get Organized ....................................................................... 127 Chapter Sixteen. Check Your Kit ..................................................................... 138 Chapter Seventeen. How to See a Stranger Across a Crowded Room.........151 Chapter Eighteen. Not Another Action Plan ................................................. 159 Epilogue: Of Cheaters and Checklists (or How To Use the Appendices) ..... 173
APPENDICES Appendix 1: The Task Checklist ...................................................................... 176 Appendix 2: The Border-In Forms .................................................................. 179 Appendix 3: The Border-Out Forms............................................................... 189 Appendix 4: The Final Word: Does Planning Help?.................................... 194
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PREFACE Some time ago, well before you were born, I signed on as a veterinarian on a cattle boat bound for Cape Town. Why did I do this? Not because I knew anything about vetting cattle (if that’s what veterinarians do). Not because of the money (but the berth was paid). Not because the feds were after me (the paternity suit came later). I did it because I was curious. South Africa under apartheid must be different. Certainly from Poughkeepsie. A few years later, I did the same thing (minus boat and cattle) and for the same reason—in Leningrad. The Soviet Union must be different, too. You read what people write about a place, and you believe them or you don’t. You can also choose to go there and see for yourself. It’s sort of the same thing with this book: You can believe what’s in it, or you can find out for yourself. The reason you’ve got it in your hands right now is because you’re at least slightly curious. But the real objective of the book is to get you beyond curiosity. I want you to board that cattle boat. In fact, the book is a simple accessory. You don’t really need it. To do what it asks of you will need about the same smarts as I possess about cattle. Reading the book is a lowrisk undertaking, but boarding isn’t. If you get on that cattle boat, you won’t be the same again. This book is dedicated to those SMEs who are curious about internationalizing their businesses. There are millions of you, especially in large countries like the USA, which are not international but can easily manage to be so. The book will tell you why being international is a good thing for your business. But this is not enough. Knowing is not boarding the cattle boat. There are oodles of research on internationalization. These oodles have been written and published by smart people in reputable graduate schools. The research is destined for other smart people, not for the likes of cattlemen like you and me. Precious little of this research has been carried out for, and by, practitioners. These people have other things to do. This book is for practitioners, people who actually do business. Part one lays out the rules of the game—how the international world of business works
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and, especially, how getting to know the customer’s customer is the only key to success. Part two helps you prepare for the grand entrance—everything you need to do and to have before you even want to venture beyond your borders. Part three is when you make your move. This is the action phase. Part three even offers in chapter eighteen an Export Action Plan. Hint: If you can only read one chapter in the book, chapter eighteen is it. Finally, you will find all the forms and worksheets you need in the Appendices. And yes, they are online as well. Sten Söderman (a smart professor who has published more of the practical stuff than most) said that I could have written this book ten years ago. And he is right. I had other things to do. In those ten years (and an additional twenty years before them), I’ve worked with close to 500 companies, export development agencies, international organizations, FDI (foreign direct investment) outfits, the defense offset crowd and more than a few assorted SMEs. In fact, most of these 500 companies have been SMEs. All the other organizations I have worked with don’t function like SMEs. Their people don’t talk the same language, nor do their owners worry about the same things at night. This book will not make you worry less; in fact, it should make you worry more. What if you don’t board the cattle boat? What if that dastard Throgmorgan, your worst competitor, has beaten you to it? What if he’s about to liven the cocktail chatter with international anecdotes about what should be your business? Yes, there are many worrying reasons for SMEs to avoid becoming international. These need not be yours. Read on, gentle reader, read on.
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ACKNOWLEDGMENTS There are lots of people to thank for contributing to this book. There are SAI’s (SAI is the company I work for) long-suffering customers who have unwittingly served as raw material for all of its contents. There are those who travelled with me before it was ever thought of and those that helped me in its making. There are people who opened my eyes to a world not at all of my making. These latter come from small countries that depend on internationalization for their survival. Of these, I am particularly indebted to Finland, one of whose exports I married at a time when she thought my career was still promising. Doug Monk, a fellow traveler, who has known me longer than anyone, deserves thanks not only for nit picking this tome, but also for his infective buoyancy that has kept me (and many others) afloat on more than one occasion. Brian Webber, of SAI Canada, has lived many of the cases contained herein and serves as my reality check in working life. Richard Normann, with whom I worked, on and off, for umpteen years, I still hold in awe for opening my eyes to a rigor and an ability to conceptualize in a messy business world that my technical training was abjectly inadequate to deal with. SIAR, a Scandinavian consultancy that, alas, no longer exists except in the minds of its alumni, both formed and deformed the author beyond recognition. France, where I am thankful to live and—mostly—work, is undeservedly maligned in the eyes of the liberal Anglo Saxon business community. Its SMEs labor under constraints theirs would not tolerate; the CEOs and founders of these I salute for their ability to survive the relentless pressure of their neighbors to the north. A few others need mentioning and praise: Chris Murray for his cheerful editing and deadlines, Brad Sullivan for showing up in strange places and for the book’s title, Klaus Arni, of SAI Finland, whose joviality left me and the world too quickly, Sten Söderman for constructively criticizing the manuscript and for not being a complete Swede. Not least, come Marianne, Tanya and Julia who now know in writing how much they mean to me.
PART ONE: WHY EXPORT? THE RULES OF THE GAME
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CHAPTER ONE: WHAT’S IN IT FOR ME?
When Tony “the Ink” Vitelli first started out, he owned a tiny hole-in-the-wall tattoo parlor in a run-down strip mall just off the Van Wyck Expressway in Queens, New York. But soon, the hip, young and tattooed “pretty people” of Manhattan heard about the Queens tattoo artist with designs that had never been attempted before (and in places that had rarely been attempted). Tony the Ink became the talk in all the trendy clubs and gyms of the island. Eventually, he received a loan from a banker (who was also a client) that allowed him to set up shop in mid-town Manhattan. But Tony had an even bigger dream: starting a franchise of tattoo parlors in the land of his grandparents: Italy. The Vitellis left the old country poor and desperate, searching for a better life. Tony wanted to see the Vitelli name return to Italy as a symbol of success. But it’s one thing to cross the East River; it’s another to cross the Atlantic. So that’s Tony. He needs this book because he’s got a dream. But what about you? You may be asking: What’s in it for me? What do I want to get out of this book? Should I grow my business abroad? Do I even want foreign clients come flocking to my door? Will it make me richer or happier? Will it make me a better person? Tighten my tummy and un-wrinkle my forehead? Stop me snoring and win me lasting companionship? Or perhaps get me a window table in afterlife’s best restaurant? Should I suffer by reading it now and reap the rewards in the hereafter?
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No, reading it will do none of these worthy things. Reading it, in fact, is probably a waste of time, if that is all you are going to do. Robert Browning said that “a man’s reach should exceed his grasp, or what’s a heaven for?” This book will extend your reach. It can also extend your grasp. But reading is not doing. Preaching is not reaching. And knowledge is not enough. So, if you’re thinking about the hereafter, well as Tony would say: Forgeddaboutit. You’ve got to a make a decision now: Is becoming international right for you? Is it the right thing for your company? This chapter is going to answer that question. Because you’re about to learn all the reasons that small companies like yours should look beyond your borders. And here’s the first reason to go abroad.
Reason #1: It’s Where The Growth Is We’ll start by boring you with the macro reasons for internationalization, give you some terminology to brighten your cocktail chatter, provide some ammunition for your spouse and bankers for what is an absolutely irrational idea, explain how Tony’s International Tattoo Salons started and prospered, and get back to what really counts: your contribution to my bottom line. No, no, I meant your material and spiritual happiness. Let’s take “globalization”: Which word could better explain what the world economy has been going through since the end of World War II? However, globalization is a polarizing word—you are either for it or against it, and it’s such a catch-all that it soon becomes non-productive. Like Alice said, a word like that can mean just what you choose it to mean. So let’s forget globalization. “Exports,” though, are “good”—the more you export, the better off you are. Perhaps this is why the world’s exports mysteriously far exceed its imports in any given year, and why corporate figures never list their imports. So let’s take exports; this is the good stuff. The other side of exports (no marks for being right) is imports. Added together, they make up foreign trade. Thanks to a fall in barriers to foreign trade with the creation of multinational organizations such as MERCOSUR, ASEAN, NAFTA, OECD, APEC, EU, WTO, ITC, IMF, ATT, CIA, FFA, IBAN, EdF, DDT, PCB, DNA, or any other
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supplied by the AAG (the Automatic Acronym Generator located in Macy’s basement), world trade has never been as dynamic as it is today. The fact is that the volume of merchandise trade is 20 times what it was in 1950. Today, world trade represents 60% of world GDP, Gross Domestic Product (i.e. your local market). The US figure is only half of this, and less than 1% of US companies export anything at all. World trade is growing fast while GDP is stuck. Even in lean times, trade growth has historically been at least twice that of world GDP. Only five times over the 60-year period from 1950 to 2010 has world GDP growth been higher than trade growth. The first four are given below…
… and the worst was during the crisis of 2009 :
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But the aggregate chart below shows how your company might have grown from before you were born in 1950 to 2011 if you had stayed at home or if you hadn’t. It also shows what staying home is likely to mean in the future.
There are thus clear macro-economic reasons to look outside your own borders: more sales, more growth, and the world’s increasing dependence on the AAG. That’s about all you need from macro-economics: all things being equal (which means nothing at all), if you stay home, you’ll grow as your home market grows; if you sniff out the opportunities abroad, you’ll grow at least twice as fast.
Reason #2: It’s where your future customers are Where does this leave Tony the Ink? Foreign trade doesn’t buy his tattooing services. A few macro graphs aren’t going to convince his backers (or his wife) to shell out for splurges abroad. Foreign trade is exactly that, foreign to
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most of us. Trade statistics are either post-facto data or something fed into predictive models. These data are perhaps interesting for civil servants and graduate theses. But they won’t sell two two-toned tattoos. Will they? If foreign trade isn’t the future of Tony Vitelli, what is? Who is growing twice as fast as Tony in mid-town Manhattan? The available market is not growing twice as fast: New Yorkers are not developing additional appendages, and skin surface growth is generally confined to receding hairlines. (And scalps are not Tony’s thing.) Let’s just say for now, in case you absolutely needed to know the whole truth right away, that the market doesn’t buy tattoos, people do. There are people hidden somewhere behind all those statistics and market figures. And we’re not just talking about people who want to show off the purple eagles on their backs at the beach. Behind these data are invisible people doing things that Tony never thought would have any influence on his business. And we can tell you another big secret here: These people may not buy his tattoos, but they will, sooner or later, actually define his business. Your domestic market may be saturated to you, but it isn’t to foreign suppliers who are not yet there. These suppliers are right now looking at your lunch. And for the same logical reason, you should be looking at theirs.
Reason #3: Why export? Because your government WANTS you to. You may not know it, but the AAG has defined you as an SME, SMB, MSE, SMME, MSME, PME, all of which mean the same thing. For simplicity, we shall use SME. You and exactly 99.7 percent of other businesses in both the developed and developing world are SMEs. What is an SME? S’me, as any third grader knows, is a text message for precisely identifying the sender. Let us start by defining equally precisely which companies fall into the category of SMEs. No let’s not. Look it up on the net. If you are reading this book, an SME (a small and medium-sized enterprise) is what you are. Although most of the news is dominated by major players who are used to outsourcing, subcontracting, bribing, and polluting in every country of the
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world, companies like yours account for the great majority of existing businesses and represent the basis of the world’s economy. Your government needs you. You are vital to its economy. You vote it in or out (at least in the developed world). It wants you to prosper so badly that it shells out an enormous amount of money to grow and create more SMEs. The government has a love-hate relationship with major corporations that grow by eating each other, shedding jobs, and contributing covertly to its coffers—but it really loves you. Why are SMEs so lovable? In general, SMEs account for close to 2/3 of total revenues in the west and employ 2/3 of the active population (excluding civil servants—who DO count as you will learn later). But less than 20 percent of them sell part or all of their products and services abroad. The amount of exports increases with the size of the company: The few large ones export three times more than all the SMEs combined. Either as sub-contractors to these large firms, or as exporters in their own right, SMEs are thus major employers but minor exporters. This fact has not been lost on your government. It believes exports create SMEs and growth. And it is probably right, if it’s not the other way around. We’ll give you the answer later. Unable to stem the rise of high-tech production and exports of the east, your government knows SMEs cannot avoid global interdependence. Hightech products and (medium-tech) services are being outsourced to Asia while western SMEs are being forced into ever higher-tech offerings that are “bundled” with high-tech services. How high-tech can Tony get? How can he resist the eastern offerings increasingly coming with their own bundles and add-on services? Well, he knows his government supports SMEs and so he tells them he has a dream to go beyond the East River… and they take it from there. Right? Well… almost. The next section will tell you what he did and what you can do, too, if Tony could. But let’s first finish with the rational reasons for exporting.
The Best Reason of All: Because YOU Want To The most compelling reason to become international is because you want to. You have some kind of a vision of what you want to be, and as with Tony’s dream, it never really leaves you. You can stay where you are, doing what
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you’re doing, but something is missing. You want this missing something. And do you know what? Wanting is close to 99 percent of what’s in it for you. If you have that international itch and you don’t have owners and a board breathing down your neck, then you don’t need much more. And this book will not give you much more. We have to nail this down: This is a how-to book, it’s not a motivational book. It is based on 127 real cases of companies like yours that we have worked with during the past 10 years. All have died and gone to heaven. No, no, I meant that all have been guinea pigs on the way to writing a how-to (and how-not-to) manual for your benefit. They really wrote this book, not me. So if it doesn’t work for you, don’t blame me. But, all seriousness aside, I know it works: We have made all the big mistakes already. Yours will be there as well, but they will be smaller and more manageable. So, if you have the desire, which represents 99 percent of what’s in it for you, we shall provide you with the missing 1 percent. We’ll give you the passage across the Atlantic, we’ll tell you what you’re to do when you get there (and before you get there!). If you’ve got this far, the rest is easy. Tony had that 99 percent; read on to discover how he managed the rest.
This Isn’t Just About Exports Various rational reasons have been put forward that could incite you as an SME to go international: r
r
r
Survival: The product/service area is a global niche, the domestic market is saturated and the leadership of larger players has shown the way. There is no room to grow at home. There is a surfeit of tattoo parlors in Manhattan. Opportunism: The product/service is in a mature phase domestically but can be exported to other countries where there is still potential. Let’s tattoo everyone in the Vatican. Business logic: The direct consequence of a company’s organic growth strategy, a “logical” strategic decision for business development. What’s this? Tony, the Ink, doesn’t grow organs—he just has
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a dream beyond the East River. He doesn’t even know what business development means. He makes money (sometimes) when someone (few of whom he has ever met) walks into his shop. This is his business logic. Whatever the reasons, rational or not (and “not” works best), internationalization, a fancy word that’s even better than exporting, is an increasingly common process for SMEs. Why? Because Tony’s INTERNATIONAL Tattoo Salon sounds a lot more chic. These up-market customers are the ones that pay. They’ll pay even more if they can tell their friends that Tony’s in Manhattan is OK, but if you really want tailored service, then you gotta try Tony’s in Rome. If you’re international, or even have a virtual presence abroad, then this can only reflect positively on your home business. Exports are good, but internationalization is better. Internationalization has all the favorable connotations of exporting with the added ingredient of some form of process and sustainability. SMEs going international are in search of a wider presence, access to complementary technology, and, most importantly, more orders. How does an SME internationalize? You know, this is just a near-unpronounceable word for doing business with foreigners. We will show you that these people are as accessible as the non-foreigners you are dealing with today. The same reasons that your customers buy your stuff today will be trotted out and applied to these exotic beasties. Once you have thought through the reasons, you apply it to them. The process is no more daunting than this. This process is simple (but not quick) business development. There are four essential ingredients for any successful business development. These we will tell you about in the next chapter. They can also be applied to internationalization. And this is what Tony the Ink did: He put it in writing (to bolster his courage and commitment); talked it through with his wife (his first client); got all the arguments why it wouldn’t work (and none that said it would); convinced himself that this was what he wanted— and then ACTED. This book will give you the knowledge, the how-to, the pitfalls, the processes, some tricks, a few ah-hahs, how others have tried and
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succeeded or tried and failed, a bunch of useful but forgettable charts, checklists that you probably won’t use, a few acronyms to bandy about at cocktail parties, and a few other things before it starts to gather dust on a back bookshelf. Tony did not read this book. But he did what this book is enjoining you to do. Act. Knowledge is not enough.
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CHAPTER TWO
4 ESSENTIAL INGREDIENTS
Let’s pretend for a while that you’re not Chief Bottle Washer of SME trying to meet the payroll for your six employees, deciding which supplier you have to pay now (and which can suffer), managing yourself the R&D, production, marketing, finance, admin, IT and human resources departments, vacuuming the dog hairs from the visitor’s sofa and un-jamming the printer for an overdue report. Let’s pretend you’re heading Major Company, and you can DELEGATE. You can actually come to an office where the printers work, the reports are someone else’s problem, the bills are paid, the heads of department are doing their thing, the factory is humming, no one is striking, the chauffeur is walking the dog… What does the new CEO of Major Company do first thing in the morning in his corner office? Yes, he (or she, but for the sake of simplicity I will use “he” in this book) sits down behind a big desk, turns on his computer and checks Major Company’s share price. THEN, what does he do? The crossword? Turn to the horoscope page? Make golf appointments? No, he does what you are supposed to be doing—he thinks about shopping for model train parts on eBay. No, no, I meant that he thinks about business development and what to DO about it. What is business development exactly? It’s not just taking care of business; your minions are doing this for you. It’s not just finding new clients and ensuring their loyalty. Your market-
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ing people are experts at this. It’s not about doing things right, and it’s more than doing the right things. It’s ensuring your future and making sure that your company is worth more than what is in the skull of CBW of SME. And, like buying model trains, it’s NOT something that you can delegate. So that’s what it’s not. Again, what is business development exactly? We sometimes forget that big companies started small with little more than the contents of the founder’s skull. Founder did not say, “Where do I find an expert to develop my business?” He, consciously or not, had a number of items in mind that he needed to externalize. He needed something more than an academic pursuit of an abstract idea. Belief in a business idea is good. In fact, belief is essential. But we have to get beyond belief. What was the reality behind the idea and how to translate it into practice? In short, founder DID something to develop his business idea. He took the first steps. He acted. This auto-action eventually led to tasks that he could delegate. But business development will not work without this action. Stop reading now if you don’t believe this. And I would not be writing this book without business development in mind. It is the fruit of 30 years of successes and failures in business development. We shall be taking you on a road that will examine and test what actions are best for your business development. (You can take the trip by yourself without us, but travelling alone is a bore.) Business Development. Exactly. Although this book is about international business development, one of its first messages is that if you follow our road, you will not be doing anything different from what you are doing now. We shall be giving processes, precedents, and pitfalls, but they are all applicable to your domestic business. This is why we dwell on business development as a process, not an end in itself. Getting there may be only half the fun, but it’s worth all the trouble. Knowing what you do right with your domestic business is the key to your business development abroad. Exporting is local business development with a foreign address on the invoice. There are four essential ingredients required for meaningful business development:
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Remember that this is a PROCESS. Business development is neither a beginning nor an end. You never get out of it alive. You are sometimes emphasizing one ingredient over another but mostly you are juggling with all of them at the same time. There is a kind of circular logic to the above diagram, but don’t let that fool you. It’s just easier to visualize in this form than a simple list: It helps describe the process and gives it an aura of rationality. We shall be returning to each of the above ingredients throughout this book. The “ACT” ingredient is written in capitals because it influences all the others. Without this ingredient, the rest is simply academic, perhaps useful to students and authors of how-to books like this one. BUT DON’T START HERE. We have to do some homework first.
Ingredient #1: Establish a frame of reference This ingredient is over and beyond us. It addresses the abstract and influences, whether we like it or not, our business vision. So it is useful stuff. We will develop a language to describe what we want to do and how we, and others, fit into the great international scheme of things. Everyone is doing his or her own thing, and we will do ours. We are interested here in conceptualizing how they do it, the tools they do it with, and how successful they have
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been. Mainly so we can copy what could be interesting for us. First of all, where do you start? There is no lack of choice: In 2012, there were 193 countries listed as full members of the UN, an additional 54 independent nation states, plus one continent (Antarctica) and a highly successful internationalized “country” (but don’t call it that) known to many as Taiwan. There were also a few areas in limbo such as Northern Cyprus and Palestine. After all these years, wouldn’t you think that someone must have developed a useful model to prioritize these markets for an SME? What is good business development? What works and what doesn’t? Is there a generic internationalization growth model—“one size fits all”? Is there anything like an international frame of reference for SMEs? The answer is a definite: sort of. In chapter three, I’ll give you a frame of reference that consists of two core ideas. First, this is the age of information overload. Everyone has been infected by it, including you. It’s not access to knowledge that you are lacking, but interpreting what you know and, above all, acting on it. Second core idea: It’s about the customer’s customer. Successful internationalization means knowing what the customers of your international customers want and need. Read chapter three to see what I mean.
Ingredient #2: Know where you stand This ingredient in the international business development process includes something we can call “border-in”—homework to be done before going abroad. This is dull work and often disheartening (why aren’t I richer?), but we shall try to liven it up. There’s also “Border” stuff, which is even more basic (such as obtaining a passport, something that more than 70 percent of US Senators have not yet figured out how to do). Even you can delegate this to someone else. Or read a checklist from the Dept. of Commerce. And “border-out” is the fun part. We’ll get to that later. At least half of your time will be spent on “border-in” tasks, so we’ll start with these. Knowing where you stand consists in carrying out an audit in order to understand why you are in business at all. The real purpose for this, you are
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beginning to suspect, is to find out a few pesky facts about you and your company, such as the reasons why people buy from you. You, of course, know all this already. (Your father-in-law accounts for 90 percent of your sales.) However, we are not so much interested in what YOU know; we are more interested in changing your perspective from inside-out to outside-in. So try to think like your clients because later you are going to try to think like foreign clients and why they should buy from you if you are not married to one of their favorite children. There are a few techniques we use here:
Historical development: At this point, we shall make a profound statement that you, too, can use to impress the cocktail crowd and to start the where-do-we-stand analysis. This statement is that structure precedes strategy. Eh? This means that we start with what we have, not with what we want. Both are important, but the process of business development begins with what you have built today, the organization you have now. What you have now has a history and provides great insights as to what you can do later. And what is likely to succeed. The best analogy is the family you were born into and your first marriage. Unless you are heir to a minor kingdom or concerned with the number of cattle your dowry will provide, neither of these structures started after a well-thought-out strategic plan. You use, for good or ill, the cards you were dealt with. We are interested in the good and ill of your present company and how it got that way. So we will need a few stories and milestones. When did the company start? When did you get your first order? When did you hire your first employee? What was happening in your industry or business sector at the time? When did you understand what business you were in? (Tony was not into tattooing; he was into embedded fashion accessories.) When did you lose your first order? Where are you today (warm bodies working for you, turnover, product/service offering, organization, production capacity, number of clients‌)? And we need a few success and failure stories.
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What we are after is trying to determine what you are good at doing, what your unique selling points (more on this later) are, what value do you add to your clients (get them to tell you), what problems you solve for them, and how closely you are integrated with them.
Product/service market analysis: This gets a bit trickier and you often need to do this with a friend and a good bottle. It will take several sessions. In the appendix, we give you some worksheets to struggle through. This is a necessary exercise to determine where you earn your money, where you are positioned on the market share/growth matrix, how you define your client segments, where you stand on SWOT, Eh? …Google it, if you don’t know… what people would buy if you didn’t exist, and a bunch of other data you would rather not know about yourself. Remember, it’s not the data that count, it’s not even how you interpret these data that is mission critical, it’s how you ACT on this interpretation (see essential ingredient #4) that is what we want to come to. Why is this necessary? I guess you can always act with your eyes closed. One reason is because your potential foreign clients will ask you about your business, and you will look pretty stupid if you don’t have some kind of response. More to the point, it is part of knowing where you stand and making sure you are looking in the right direction before taking the first step. This is a tedious exercise, a bit like relearning algebra (Madonna didn’t find it useful either). But, like algebra, once you’ve been through the process, you don’t have to go through the whole thing again. You can build on what you know, realize what you don’t know, and begin to understand how to fill the gaps in this knowledge.
Resource audit: This is the disheartening bit. What are our financial resources, what is our access to private and public funds? Then, what are our technology advantages, how is our intellectual property protected (most things can be copied more
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cheaply than you can make them, especially if you give your R&D away for free), and most importantly, whom can we count on? Who will man the fort when we are six time zones away? Who will pay the bills and take care of the day-to-day business? And, above all else, who will water the plants?
Ingredient #3: Develop a business vision The next ingredient in the business development process is this “vision thing.” It presents a problem for many people more intelligent than you or me. However, in spite of the evidence (below right), we believe that the condition is not genetic.
It really concerns ambition levels. The business vision is necessarily vague, instinctive, and quantifiable only in very uncertain terms. One, or at most two, key individuals in the company—the internationalization idea bearer (i.e. you)—must personalize the business vision. It is constantly modified by new learning impulses and can never be rigid nor based on quantifiable goals alone. Here are some examples of visions I have seen that have worked:
“Japan should realize half our US turnover in six years.” “If we can sell 100 to Germany, we can sell 50 to France.”
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“George should go there for two years and tell us what has to be done.” “Our next product generation must be developed in Japan” (or Germany or France) “We need a local partner to upgrade our technology” “I want to be the first in our industry to have a daughter company there.” “There’s no reason why we can’t underprice them in their own market.”
Try some out on yourself. Write them down no matter how corny they sound. This is important because, a year hence, you will forget what you wanted to do. This will be a milestone to refer to. Later on in our process, we will try to quantify the vision in operational terms and compare it to the option of doing nothing (staying at home).
Ingredient #4: ACT The fourth essential ingredient is action, taking the first steps, experimenting with our motivation to see if those foreign dogs will really eat our dog food. We are done with the analyzing. We know what we know. Let’s jump. But which way? Knowledge is good but action is better:
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Planning the Jump Before we jump, I will make an apology here for planning beforehand. So we will make a planned jump. That’s what ingredients numbers 1, 2 and 3 are about. Does planning help? (See the answer to this in appendix 4). What we can say is that everyone makes plans, and everyone gets them wrong. The process of planning is beneficial; the plan itself is a simple accessory. Belief in the business vision above is more important than the plan. We shall take you through this process and relegate the plan itself to a simple, but useful, record of what you believed then. This is absolutely true: Planning won’t make you rich. Or international. It’s not even a prerequisite. You’ve got to marry into it. (More on this later.) But it may help you to figure out why you are what you are and in what direction you want to go. Or not want to go. So which way do you jump? You have international ambitions, but how do you know they will work? One indicator is how you have acted in the past. Not how you have planned, nor what you knew, but how you acted. No one gets prizes for plans; everyone gets one for success. We looked at the correlation between success in internationalization of SMEs and personal experience of the founder or entrepreneur.
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The above figure presents findings by our company for entrepreneurs in high-tech SMEs. The combination of international experience (traveling in youth, studies abroad, etc), family background (parents working in international business, the role of the spouse, foreign or foreign-born) all appear to have a large influence on the international success of the company. It’s not what you know that counts; it’s what you do with what you know. Although this book is a call to action, before you jump, there’s a bit of preparation to go through first. We are going to take you through a planning process. The plan will be wrong and unfulfilled. But the process will be worth it. That’s what this book is for. Getting you to discern the patterns. Interpreting them together with you. Showing you that others have taken the export road before. Providing you with some of their kit. Delivering a planning process that is useful to SMEs. Here goes.
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OF CHEATERS AND CHECKLISTS (OR HOW TO USE THE APPENDICES) This chapter is for those of you who cheat and always start at the back of the book. If you are starting here, you will not know who Tony the Ink is. He’s the guy who ran the tattoo parlor just off the Van Wyck Expressway. He developed his business abroad without reading this book, not even this last chapter. So we can’t really say he cheated. He was, as a second-generation immigrant, born into it, sort-of. Diasporas everywhere have an international advantage. Tony had ocean-crossing and selling savvy in his Sicilian genes. Most of us SMEs are not so lucky. We need flow diagrams and checklists. So here they are. We are going to distill what we have been doing in the previous chapters in a snappy process diagram and checklist. You are free to use them as you please, but you will get more out of them if you understood why they work. This understanding you will get by referring to the previous chapters. First the checklist. Go to appendix 1. This is a checklist that summarizes parts two and three of this book—Know Where You Stand and Going International. It gives all the tasks in the process, the deliverables, the action required, what to focus on and things to remember. It gives it chronologically
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and by type of task. You can download this checklist for free at www.my-sme. biz, print it out and/or store it on your computer. You will not be able to remember these 27 tasks, so put them somewhere handy (I fold it into the back cover of my journalist’s notebook.) The cheat-charts for each task are found in Appendix 3. You will also find these downloadable on the same website. Then the snappy process diagram. You might think the diagram below looks like a lot of work, and you’d be right: it took me hours to make it look coherent. It has taken you much longer to do the exercises and work through the process. If you don’t know what USPs and KSFs are, then go back to chapters 6 and 9. They are the most important acronyms in the alphabet soup of business development. You may be able to sell to foreign customers without knowing what they stand for, but then you probably married into it and don’t need this book anyway.
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The final deliverable of all of tasks you have undertaken in the above process is the active contact matrix. This is what you will need to develop and secure foreign customers. It is the basis of your business development abroad. The process is forever iterative; the contact matrix is all but static; you and your export team will be constantly updating it; you will secure it and make in accessible instantly in your hotel room in Bamako; if someone steals your best salesperson, make sure you can turn off this access quick time; if some Chi-
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nese/Russian/Qatari moneybags buys your company, this is what they are really after, not you, your technology, your production process, your overdraft facilities, nor your framed first dollar. It may sound banal, but this is valuable stuff. It is, in fact, precious enough to kneecap a faux confrère for. This customer base is what we called in chapter four the basis of competitiveness in our service economy. If nurtured right, its value will outlive that of your present IP rights—indeed they nurture each other. Your next product or service innovation will come not from the pointy-headed people in white coats in your R&D department. It will come from this active contact matrix. The demands of your customers—and theirs on them—are the source of 99 percent of your inspiration for new offerings. If you restrict yourself to the demands of your domestic customers, you cut off the source of inspiration from the rest of humanity. Tony understood this intuitively. His future was not just off the Van Wyck Expressway. It was another country. If this is the only learning you get out of this book, don’t thank me. Thank the hundreds of SMEs that have made it happen.
Your business already has most of what is required to be global. All you need now is the courage to act. Small and Medium Enterprises—SMEs—account for over twothirds of economic activity in the western world. And yet only a tiny portion of these SMEs—much less than one percent in the United States—sells their products or services abroad. Imagine the gained revenue, the opportunity for growth, the millions of prospective customers lost because these SMEs don’t know how, or are afraid, to venture beyond their domestic borders. If you’re one of these SMEs, Small Company Big World will reveal how to take full advantage of becoming international. Written by a practitioner who has helped 500 small companies create a global presence, Small Company Big World lays out the practical steps to identify and approach new markets abroad that best fit the resources, capabilities and products of your company. With humor, checklists, charts, and scores of true stories of success and failure, Bill Frost shows you how to marshal your resources, uncover the opportunities (and traps) that await in foreign markets, make the right approach to the right people at the right time, and, finally, launch your global adventure successfully. With Small Company Big World lighting the way, you’ll discover what millions of SMEs discovered before you: That your company is not too small—and the world is not that big.
US $14.99 www.millcitypublishing.com
You, Too, Can Take Your Small Business Global
WILLIAM H. FROST President of Strategy Analysis International