To put it bluntly, early-stage exporters start with hypotheses about copying the sale of the product in a new market. They then skip the critical steps of defining an export (business) model and rush to market, only to find that their hopes and dreams are unlikely to be realised. The risks of entering a new market are considerable – which is why only 1 in 4 companies succeed in their first year of exporting.
Start all over with understanding the customer
“It is the customer who determines what a business is. What the business thinks it produces is not of first importance. What the customer considers value is decisive, and it is never a product. It is always utility, that is what the product does for them.” Peter Drucker
So it makes perfect sense to optimise the product / market fit before you start. When targeting new customers, you need to repeat the customer validation process by asking customers in the new market what value they derive from your product. Only then can you start repeating that value to the next customers, because it will resonate with them.
Forget about the product
But just as product/market fit is rarely the result of a single defining event, it is definitely not an operational theory or model. Unfortunately, the majority of scaleup CEOs make the mistake of staying glued to the product and its evolution – and thus fall into all the risks of exporting – even those exporters with incredible revenues under their belt.
Now is the time to cross the chasm into the evolution of the export model. A deep understanding of customer value will lead you to adapt your export model – as long as you understand that the export model is dynamic – “when it rains, it pours”…
Remember, sustainable scale – I assume this is why you are exporting in the first place – is not necessarily millions of users, a great product or the best user recommendations. Sustainable scale is the act of translating this new insight into customer value into a revenue model and a repeatable process that delivers that customer value over and over again in your export market.
Design your go to market strategy
So how do you introduce a business model that is completely alien to potential channels? It’s not easy – and any comprehensive answer would be complicated to summarise in two sentences. But you cannot ignore go-to-market strategy as a key export challenge. Do you know a successful company that doesn’t dominate a channel? Exactly.
So target your channels: Do you want to be ‘hands on’ and control your relationship with your end customers/buyers, or do you want to take a ‘hands off’ approach and let an intermediary manage the transaction? Would you prefer a mix of the two? What does that look like? Define your prospects (e.g. OEM manufacturers, distributors, importers, sales reps, etc.) accordingly.
Consider LinkedIn as a primary source – the tools for narrowing your search are quite extensive. And of course, trade shows and related directories can also be helpful.
If you are targeting new distribution channels, why should they take on your unfamiliar product with no market traction?
Often the answer is to provide a reference point that makes the new product easy to understand. You may need to make the first sales yourself to illustrate the business opportunity for future channels and to educate potential distributors about the new offering.
But that is rarely enough. Your value proposition needs to appeal not only to the end user, but also to the channels that bring your product to the end user. So how do you make it easy for the distributor? How do you add value to their business? Your export model needs to address this in a compelling way.
Make it stick
To make it work – not just in the model, but in real life – you need to consider your management and organisational capacity. You have finally reached a stage where the business model design has been tested and seems to make sense. But some of your people will be barriers to change for many (good) reasons, and others will prove to be effective change enablers. How do you sell the idea of change internally, how do you recruit the experience and know-how needed to make a successful transition to export business, how do you get early results to build further motivation?
How do you get early results to motivate people to keep going, how do you make the processes an integral part of everyday life?
With the right human capital in place, your company will know that the go-to-market process is iterative. You will need to constantly challenge your key assumptions – or hypotheses – to fine-tune the model and constantly adapt to market dynamics. The greater the mental distance between your export market and your company’s DNA, the more important it is to work with hypotheses.
These are all important parts of making it happen. It is hard. And rewarding. Perhaps. There are ways to reduce the significant risks and free yourself and your resources to start perfecting your export model. Let me know if you want to know how to increase your chances of success from 1 in 4 – to 2 in 4.