Welcome! In this blog post we discuss:
When I see a foreign B2B technology company entering the United States, a Tolstoy quote comes to mind: "Happy families are all alike; every unhappy family is unhappy in its own way." This could be turned into an observation about the US Market entry: “Successful companies look all alike; every unsuccessful company has failed in its own way.”
It is true that many companies fail in attempting to enter the hyper-competitive US market. The positive view, however, is this: U.S. market entry is actually not a very complex process, and when it’s done right, it opens the #1 largest market opportunity without costing an arm and leg. And while those companies’ failure may have been caused by a whole variety of problems, the list of fundamental “market entry errors” is relatively short.
Based on our team’s 20+ year experience in U.S. market-entry execution, I hope this blog will provide some helpful observations and lessons learned on today’s topic: how to become a happy(ier) business by entering the USA?
Although the United States contains only 4% of the world’s population, it accounts for nearly 25 % of global economic output. For most B2B technology firms, USA represents more than 50% of the business potential. As discussed in this European Commission 2016 research study, access to a large market, AND access to growth capital, clearly have emerged as the main drivers for most of European high-tech companies relocating to the US.
Can you build a $100 million B2B technology company without entering the USA? Of course, you can. It is simply that the probability of success for a maximum scale in the USA is higher than anywhere else. For a competitive B2B technology solution, USA presents a homogeneous market where any new industry best-practice is adopted rapidly nationwide. A successful U.S. business owner, as your prospective customer for a B2B technology, is hyper competitive by nature. If there is a new, better way to run the business, he will adopt it immediately (assuming the benefits outweigh the cost) because if he doesn’t, he knows that tomorrow his company will have lost its competitiveness.
According to EC Joint Research Centre’s (JRC’s) latest 2017 report, the US is the leader in Information and Communication (ICT) investments and business expenditure on research and development, spending €64 billion in 2014, followed by China (€33 billion) and the EU (€29 billion). The new technology adoption and investment in technology by US business buyers is clearly exceeding their counterparts.
Another factor making US market entry an attractive option is that U.S. business culture and language is often already familiar to the average European business professional. Management’s learning curve in building successful strategy is therefore relatively short compared to many European or Asian countries, where the cultural and language barriers (20+ languages in Europe, 50+ in Asia) may introduce friction to the market entry, making it slower and far more expensive than in the USA.
An ideal profile for a fast scale-up in the USA
Can any successful European B2B technology business enter the USA? In theory, yes. But if the question is “what is the optimal profile of a B2B company for the fastest scale in the USA,” then we have to offer an additional criterion.
In short, for those readers familiar with the Lean Startup methodology, here is nothing so much new to you. What makes the company scale fast in general, holds very much true also in the US market entry. This is : B2B business models built around well-productized solutions, with modular components, and the least amount of coding or configuration required at the customer installation, become more repeatable (cookie-cutter at best) in the market adoption process, and are therefore the obvious winners in fast scaling.
At the other extreme, business models that are delivering generic engineering services and project work, where every sales transaction is different, struggle to gain adoption at the market entry. To enter USA with these business models will require “boots on the ground” from day one. It is not easy to build a large-scale engineering project business in the USA over Skype. And those engineering and development services that CAN be scaled remotely, such as Software Development, have already become extremely competitive global markets, where the low cost & high-skilled engineering labor from India and China is often difficult to beat.
Takehill guidance - the fastest-to-scale company profile when entering USA: a company with a repeatable product or solution, that has a clearly defined differentiation, quantifiable customer value (ROI), and has demonstrated past performance beyond $1 million in annual sales.
There, hope you find this all helpful. Your comments will be very much appreciated.
Until the next time!
Antti Korhonen is the Founder of Takehill Partners LLC, a Boston based consulting firm. He has helped several European companies entering the US market, and as CEO has built two successful B2B Technology companies with global operations between Silicon Valley, Washington DC, Boston and Helsinki. He lives in Concord, MA, and after spending 12 years in USA he is a dual citizen of USA and Finland.