Entering a Foreign Market - Syllabus

Entering a Foreign Market Syllabus v. 1.0 for a 2-‐day workshop Copyright © TBK Consult Holding ApS 2013. All rights reserved. Any distribution or copying is subject to prior written approval by TBK Consult Holding ApS, CVR: DK31935741. © TBK Consult Holding ApS June 2013

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Hans Peter Bech has written this syllabus for TBK Consult Holding ApS. This document is provided for educational purposes. TBK Consult Holding ApS does not warrant that it is suitable for any other purpose and makes no expressed or implied warranty of any kind and assumes no responsibility for errors and omissions. No liability is assumed for incidental or consequential damages in connection with or arising out of the use of the information contained herein. Terms of use: 1. Individuals and training providers may only use this syllabus as the basis for training and education, provided they have written agreements with TBK Consult Holding ApS. 2. Any individual or group of individuals may use this syllabus as the basis for articles, books or other derived publications, provided that the copyright of the authors and TBK Consult Holding ApS as the source and owners of this document is acknowledged in such publications. Any inquiries regarding this publication, request for usage rights for the material included herein, or corrections should be sent by email to Emma Crabtree: ecr@tbkconsult.com.

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Preface

The objective of TBK Consult is to assist software companies with local and global growth. The objectives of the TBK Academy® are to share approaches and experiences with various go-‐to-‐market strategies and frameworks and to give software executives an opportunity to build an international network of peers. The objective of the workshop “Entering a Foreign Market” is to give software executives an opportunity to review and discuss the issues related to growing global market share. The workshop will provide frameworks and tools, which the executive can implement immediately after the workshop.

The purpose and structure of the syllabus

The syllabus is the basis for the workshop and explains the learning objectives, the structure and the content. A summary of the “Entering a Foreign Market” workshop can be found in the fact sheet TBK-‐AKA-‐015.

Software market segment The workshop primarily addresses issues related to B2B software with “medium and long value chains”, complex sales situations and the requirement for some customer specific services in sales as well as in implementation (value-‐add). Value chains The length of the value chain refers to the number of steps and activities involved in finding, winning and keeping happy customers. The more steps the longer the value chain and the average sales cycle. Complex sales situation A complex sales situation is defined as a situation with more than one decision maker. Value-‐add When software requires complementary services to be sold and implemented we define this as value-‐add or situations where a product serves as the door opener allowing up and cross selling other products and services.

Course participant prerequisites The workshop and learning of the syllabus assumes general knowledge of and some experience with sales and marketing of software. The workshop also assumes experience with general business financial concepts such as revenue, Cost of Goods Sold, Operational Expenses and return on investment considerations. Knowledge about the Alexander Osterwalder Business Model Generation and Value Proposition principles will be an advantage.

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“Entering a Foreign Market” -‐ Agenda

Day 1 Time 08:00 08:30 09:00 10:30 11:00

12:15 13:30 15:00 15:30 17:00

Agenda item Arrival, coffee and registration Welcome, objectives, agenda and presentation of participants What is different when Entering a Foreign Market and what remains unchanged? Break Frameworks for unambiguous communication and business development: § The Business Model Framework § Customer Value Proposition § Ideal Customer Profile Lunch The Value Chain and the AIDA process. Defining what it takes to find, win, make and keep happy customers. Break Choosing Foreign Markets. How do we choose the markets yielding the best profit/investment ratio? End of day

Day 2 Time 08:30 09:00 10:30 11:00 12:30 13:30 15:00 15:30 16:30

Agenda item Arrival, coffee Market Intelligence (assessment) How do we get market insight helping us to shorten the time to revenue and profit? Break Bootstrapping How do we get the first light house customers? Lunch Organization & Funding How do we organize for effectively Entering a Foreign Market? What are the capital/cash requirements? Break Wrapping it all up. How do we prepare and execute “Entering a Foreign Market” minimizing risk and improving predictability? End of day

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What changes with “Entering a Foreign Market?” In this module we will review which parameters change, which may change and which should remain unchanged when “Entering a Foreign Market”. Our insight and knowledge about a foreign market is obviously very different from the markets where we already operate. What must we know before we take any initiatives in a new market and what can we learn as we go? What are we willing to change (as we learn), and what are we not prepared to change? Learning objectives After completing this module the attendees will understand how to define which business parameters they must change and which they should not change when “Entering a Foreign Market.”

Frameworks for unambiguous communication and business development

A number of business development frameworks will help us describe our business in terms that are easy to understand for the people (customers, staff and partners), with whom we will have to engage when “Entering a Foreign Market.” These frameworks will also help us understand what we must and are prepared to change and what must remain unchanged.

Customer Value Proposition A customer value proposition is the most fundamental element in any software business. The customer value proposition explains how customers get value from the product/service offered. The customer value proposition is justifying the investment required to acquire and implement the solution and justifying why this product/service is better than the alternatives available. Customer value propositions typically include a market segmentation element1. Most product/service combinations will have a much higher value for certain type of customers than for others. A software company must always target those segments where the perceived value is the highest. TBK Consult uses the Value Proposition canvass developed by Alexander Osterwalder to facilitate the development of customer value propositions for our clients. Based on this framework software companies can continue the refinement on their own and validate the value 1 Only very few products can serve all markets and only very few companies can afford to address all © TBK Consult Holding ApS June 2013

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proposition with customers in the field. A customer value proposition also includes considerations on segmentation, packaging and pricing. The customer value proposition typically includes a generic part, which is used for market positioning and segmentation purposes and a customer specific part, which is determined in the individual sales project. For highly customizable capital-‐intensive solutions the individual portion of the value proposition is crucial for winning deals.

The Business Model Framework

Today’s markets are not conquered with excellent products, but with excellent business models. Any company has a business model. The ability to explain this business model to potential customers and potential partners is critical in the first phases of engagement in any new market where you have neither brand awareness nor reference customers. When a software company enters a new market, potential customers as well as potential partners will need to understand how the business model works and be convinced that it is a viable, solid and scalable model. Potential business customers and partners do not just look at the product. They look at the business model to make sure that they are engaging with a winning player. TBK Consult is using the Business Model framework developed by Alexander Osterwalder2 to help software companies “compose the story” of their business model. For potential customers the most critical parts of the business model are the “value propositions” and the “customer relationships.” These are the elements that will deliver and maintain compelling value to customers against the price asked for the products and services. These two elements will make potential customers understand the full process offered/required to acquire and implement the product/service package and harvest the business value that the package promises. However, potential customers will also make sure that the remaining parts of the business model 2 Alexander Osterwalder & Yves Pigneur: Business Model Generation, Wiley & Sons, 2010 © TBK Consult Holding ApS June 2013

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work, enabling the software company to support and improve the value proposition over the lifetime of the product and the relationship. For potential partners, who are to resell and/or provide other “value chain” services for the software vendor the “channel model”, the “customer relationships” and the “business P&L” are critical. However, business partners will need to understand and appreciate the full business model to ensure that they are engaging with a professional supplier and not just a product company. The business model elements are generic and should remain the same for all markets. Only through solid business models can software companies create scalable and repeatable penetration approaches and achieve economy of scale in their international operations.

Ideal Customer Profile The Ideal Customer Profile is a definition of the main characteristics of the customers, who will derive most value from our value proposition. For software companies in operation the ideal customer profiles are typically based on the characteristics of their current installed base. New and potential customers will ask for and look for references, with whom they share as many of the characteristics and challenges as possible. Addressing similar type of customers will minimize the perceived risk for the individual customer and well as strengthen the domain experience and insight which is crucial for winning additional business in new market. Learning objectives After completing this module the attendees will understand the importance of the basic business development frameworks and can apply them on his/her own business.

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The Value Chain and the AIDA process The module introduces the value chain and the AIDA3 process. The Value Chain explains what it takes to find, win, make and keep happy customers. The AIDA process is the operational marketing and sales process reflecting how customers find our products and how they make the decision to purchase.

Learning objectives This module will enable the attendees to design and document their own Value Chains and AIDA processes.

Choosing Foreign Markets Companies with growth ambitions all share the challenge of deciding which market(s) to approach next. As penetrating any additional market is associated with investments and uncertainty, using a fact-‐based process for the selection can help accelerate the return on investment and mitigate the risk. A market is in this context defined as a geographic market. A geographic market is not necessarily equal to a country. While small countries may be considered as one geographic market, larger countries are divided into several geographic sub-‐ markets. Germany, Italy, Spain, France, China, UK, Australia, Russia, USA and many others are made up of several substantial and independent sub-‐markets. The Ideal Market Profile is a description of those characteristics, which are considered important demand indicators for the product4 in question. The Ideal Market is per definition a market with a high density of Ideal Customers. The Ideal Market Profile is based on three basic concepts: 3 AIDA: Awareness -‐> Interest -‐> Desire -‐> Action. 4 The term ”product” is used for any type of product, service or solution. The term “product” is synonymous with the term “the whole product” as defined by Geoffrey Moore in his book ”Crossing the chasm.”

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§ § §

The Customer Value Proposition5 The Ideal Customer Profile6 The Value Chain7

The definition of the Customer Value Proposition is required for evaluating the importance of the competitive situation in a new market. The definition of the Ideal Customer Profile is require for selecting those characteristics which indicate a high density of Ideal Customers in a new market. The Value Chain definition is required to estimate how fast and smooth an established value chain framework can be established in a new market. Based on these definitions the Ideal Market Profile will normally include the 10-‐ 20 most important characteristics, which will indicate a high density of Ideal Customers, an acceptable level of competitive pressure and an infrastructure available to operate the value chain.

Learning objectives After completing this module the attendees will understand how to prepare the choice of foreign markets.

5 See TBK-‐PFFS-‐002: Customer Value Proposition 6 See TBK-‐PFFS-‐003: Ideal Customer Profile 7 See TBK-‐PFFS-‐005: The Value Chain © TBK Consult Holding ApS June 2013

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Market Intelligence & Assessment The objective of the Market Intelligence & Assessment phase is to map the competitive environment and the demand pattern for your solution. The mapping is typically performed based on a series of interviews with your potential clients meeting the Ideal Client Profile8 criteria. The Market Assessment will provide the basis for designing the most productive qualification, contact, sales and closing processes. The Market Assessment will answer the following questions: Are there competitive solutions serving the same needs as yours? Which Value Added Resellers and Systems integrators are active in your solution environment (for indirect Go-‐to-‐Market approaches)? What are the value propositions of the competitive solutions? How satisfied are the customers with their current suppliers and their solutions? Do the clients plan to replace or complement their current solutions? Are there pain areas, which are unresolved by the existing solutions? If no competitive solution exists, then how latent is the pain scenario, which is required to generate enough interest for your solution? How easy/difficult is it to get access the highest possible decision making level with your current value proposition?

The outcome of the Market Assessment will enable you to manoeuvre more effectively when you start qualifying and setting up meetings with prospective clients. Meetings and appointments may already be scheduled during the market assessment phase as an outcome of on-‐going discussions; however, this is not the primary objective.

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Learning objectives After completing this module the attendees will understand how to prepare the choice of foreign markets.

Bootstrapping

Entering a Foreign Market always starts with bootstrapping. Bootstrapping is the process of getting the first lighthouse customer. Lighthouse customers serve as references and provide revenue to fund further market penetration. Entering a Foreign Market has many of the same characteristics as starting the business from scratch. Most potential customers in the new market will be sceptical and will refrain from doing business with you simply because you are new on the market and have no or only few references. In this module we will review ways to perform bootstrapping, reduce the time it takes and mitigate the investment risk. Learning objectives After completing this module the attendees will be familiar with ways to perform bootstrapping in a new market.

Organization and Funding Entering a Foreign Market requires organizational resources and capital. In this module we will discuss which competencies are required, how the capital expenditure planning can be organized and how the risk can be mitigated. A tool to align strategy and organizational resources will be introduced. Learning objectives After completing this module the attendees will be familiar with the organizational and the capital expenditure issues related to Entering a Foreign Market.

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Bringing It All Together In the last module of the Entering a Foreign Market workshop we will apply all the concepts learned on a real life case story.

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