Technology Assessment International

Your company manufactures and/or sells products in market A. Why could you not sell them in market B? It seems simple enough. You could use the same manufacturing facilities and work force, the same product designs, share the overhead and give your sales force some new “territory” to farm. How hard could it be?

The answer might surprise you: entering a new market successfully is almost as hard as starting a new business. Only the use of the existing business infrastructure (building, utilities, accounting system…) makes it easier than a business start up.

Hard, however, does not mean impossible. Entering new markets is a cornerstone of business growth and healthy companies do it all the time. The biggest impediments in getting revenue from new markets are:

• Not enough information on hand which leads to…
• Internal debate over the wisdom of entering this new market
• No one on staff capable of getting new information on the market
• Not sure what to do
• No one has clear responsibility for making this a success
• Not making the necessary adjustments to the organization 
• No plan! 

Insufficient information describes the situation and accounts for half of the similarities between entering new markets and starting a new business. Consider the differences between your core and intended markets.

Your Current Market: The World You Know

1. Market: You understand your current market: its size and structure, its players, its trends.
2 Customers: You know and understand your customers: who they are, how they do business, how they use your products and services andtheir decision making process. Your employees have earned the trust of their employees.
3. Products: This knowledge allows you to offer products tailored to your customers’ needs through appropriate Sales Channels.
4. Competition: Finally, you know your competitors: their strengths and weaknesses, their offerings, their reputation, which customers they target, how they compete and how they price.

Your New Market: The Hidden Face of the Moon

What do you know about your new market? Perhaps you already have a few customers in this market. Perhaps you think your products will work “as is” in this new market. Perhaps some of your competitors are already in this new market. All this amounts to having a handful of pieces in a thousand-piece puzzle, while your competition has all the information you enjoy in your core market. Does this sound like a recipe for success?

An Effective Methodology

TAI has developed a standard methodology for entering new markets, based on many years of hands-on experience and similar to the process used for New Product Development. This methodology has 6 steps: 

1. Get an Initial Market Assessment and Validation

A Market Assessment will provide basic information about the structure of the market, its trends, needs and potential attractiveness. Is the industry growing or shrinking? Why? Are there a few big players or many small ones? How big is the potential market? Will you need to capture 50% of it to make it worth your while or will 2% make you ecstatic? What are their decision patterns when purchasing your kind of products? What will be your competition? Will your products and ways of doing business need accommodation?

This kind of Market Research is best left to experienced professionals. Few insiders have this experience as it rarely comes up in the course of running an existing business. At TAI, not only are we proficient in locating the needed information, but having used it to enter new markets, we understand what is of practical use and what is window dressing.

A core benefit of hiring us is objectivity in answering the key question: how competitive are the company’s offerings compared to the products already serving that new market?

2. Articulate Your Value Proposition

The value proposition is the sum total of benefits provided to the customer, including what differentiates you from your competitors. It could be the best price, turnkey installation, superb technical service, best product features, simplicity…The value proposition needed for the new market is not necessarily the same as in your core market. The value proposition should derive from the expectations of your new target market and drive the changes you make to product features, business model and your organization.

For example, a manufacturer sold electrical equipment central to their customers’ activity in its core market. Its value proposition was high reliability, sophisticated features and skilled technical support. When it entered another market where its products took a supporting role for the customers’ activities, the company had to extend its value proposition to include more hand-holding and installation services.

3. Select a Leader

Could your favorite football team win without a quarterback calling the plays? Of course not! Yet, many companies simply expect all their employees to add the new market to their daily responsibilities and to coordinate among themselves. Without leadership, a push into a new market stops and starts like an engine not firing on all cylinders until it is abandoned for lack of results.

Waiting until after Market Research and the development of a value proposition allows the selection of a leader with the right skills. For example, in a market with few large customers who are used to buying direct, hiring an account manager who is already selling in this market might make sense. But in a fragmented market accustomed to buying from distributors, the new market leader needs to bring skills in developing a distributor network. You could not have known this before conducting Market Research.

A common approach is to make your own current rising star the Market Manager. Since opening up a market is so similar to starting a business, this is a good stepping stone to P&L responsibility. It is a great challenge, but the new Market Manager will benefit from coaching by someone who has done it before. Perceived or real failure as a Market Manager for lack of qualified mentorship could destroy a future leader unnecessarily.

4. Develop a Plan

Entering a new market is much like starting a new business: you need a business plan. Now, look around your staff (and your considered hires): which have ever started a business? Opened up a new market? If your company is typical, the answer is “no one”. Your chosen leader is likely to be:

    • One of your rising stars
    • A newly hired insider from the target market

You could have hired an entrepreneur and expected him to learn both your products and the new market, but frankly, there is a short supply of entrepreneurial minds willing to join an established business. Either of the above is a better choice because the skills they bring to their job will remain valuable past the start up stage.

Consider how you could supplement the durable skills of your leader with the temporary contribution of someone who has experience entering new markets. Now, you have the best of both worlds. The two can jointly develop a business plan based on your market research and customized for your organization according to a battle tested methodology. 

5. Structure Your Organization

It may be that your current organization will work just fine for the new market as long as you appoint a new market champion. But you should not assume this to be the case. If you were building the company from scratch to serve just the new market, how would it look? Compare to what it is now, and make the necessary adjustments.

Last, examine the incentives employees will have to work in the new market. In a world of limited time, the familiar usually pushes aside the unfamiliar. If too many key individuals have dual responsibility for both markets with no incentive to work in the new one, the old one will triumph. In general, we recommend that you align your sales channel with your company’s business plan. To read more on the topic, download our white paper at www.technologyassessment.com/increasing-sales

6. Go!

Time Line: What Should Be Your Expectations?

In general, the answer depends on the resources you assign to the project, how active you already are in this market and the type of products or services you sell.

If you already have customers in this market, focusing on understanding their needs can yield the earliest extra sales. If you have no existing Sales in this market, there could be an incubation period of 2 to 3 years before a significant market share is achieved.

The less differentiated and expensive your products are, the shorter the incubation period will be. For expensive and critical products and services, expect the incubation period to be longer.

In all cases, not having a “New Market Champion” and a coordinated plan of entry will add years more likely than months to the gestation of new revenue.

Conclusion

Serial entries into new markets can be the backbone of your business growth. But entering a first new market can be almost as challenging as starting a new business. Technology Assessment partners have entered dozens of new markets as practitioners and can save you months if not years, by guiding your company from beginning to end. We can also provide specialized services such as Market Research, Sales Alignment Assessment and Business Plan Development. By working with us, your organization will be internalizing this very important discipline of business growth.