Saturday, April 18, 2015

Cross-Border Collaboration: Sell Successfully Overseas by Learning the Local Needs

By Steven M. Worth, President at Plexus Consulting Group, LLC

Too many US organizations see foreign markets as good “resell” markets—places where they can make an easy profit by reselling US products they’ve already developed. It is a mistake that even the most sophisticated organizations make.

See Neal Gabler’s article in The New York Times, “The World Still Watches America”) about overseas television stations that no longer carry American programs on prime time; even the most popular U.S. shows were being relegated to early morning time slots in Asian and European markets. Overseas television programmers, it seems, now prefer to show locally produced shows that they feel are more relevant to local audiences. U.S. association executives, meanwhile, have often seen their books and programs rejected by their sister organizations abroad.

All organizations—associations and others—are under great pressure to sell what is on the shelf. This is sometimes done for reasons that border on cultural chauvinism—the assumption that “We are the best, so why shouldn’t everyone buy what we have to offer?”

Americans are known for our marketing savvy; however, when it comes to selling internationally, they tend to ignore the primary marketing rule that they follow religiously at home: Know your customers, and give them what they want. The time when Americans could treat overseas markets as dumping grounds for excess or outdated products has reached a close. Americans do not want hand-me-downs, so why should they expect anyone else in the world to accept hand-me-downs? The curious thing about globalization is that rather than imposing uniformity on the world, it allows individual differences to assert themselves. More nations exist now than at any time since the 18th century, arguably because globalization has empowered people to assert their individuality.

In this climate, the challenge for international marketers is to identify this individuality in any given place. Because associations, more than any other type of organization, depend on consensus building and sensitivity to market trends, they are positioned to take a lead in this area. Global localization is more than a slogan; it is the key to success for international marketing. Identifying market needs is about working with people within the given market to discover those needs.

A failed approach
The unsuccessful international initiatives of one association illustrate the importance of customizing products and services for overseas markets. The association, a professional society in the field of healthcare, was under a great deal of pressure from its board of directors to find additional sources of revenue, and the overseas marketplace seemed ripe with possibilities. Having maintained distant contact with their sister organizations around the world, the association’s leaders were aware that their organization was larger, better financed, and more sophisticated than any of them. Surely, these overseas organizations would serve as ready markets for the association’s many publications, products, and services. The only questions were which ones to sell, in what quantities, and for how much? Or so the association’s management thought.

The association hired a market survey expert to poll these potential customers to find out the answers to its questions. After extensive surveying, the consultant reported discouraging results. A number of those surveyed were offended by what they saw as American effrontery—and they said so in no uncertain terms. In fact, conducting the survey fueled the perception that the Americans were seeking to sell their secondhand wares to societies that they thought did not have anything of value to offer of their own. Most politely said that they did not think these products and services developed in the United States were relevant in their market—even if they were to be translated into the local language.

Several years later, still in search of revenue, the association took another crack at the overseas market, but this time it used a different approach. Using the results of a domestic membership needs survey it had conducted, the association approached its sister organizations abroad to ask if any of these findings sounded similar to what they knew about the needs of their own members. For example, its US membership had listed professional standards development, education and training services, and professional networking at a national and international level as the membership benefits they valued and needed most. Indeed, the association learned that the priorities of the members of these overseas organizations were virtually identical to the US findings.

Armed with these similarities in member needs, the association then asked if these sister organizations would be interested in participating in a planning session that would seek to identify those areas in which it might be in everyone’s interest to collaborate in designing products and services that could be of benefit to all. Remarkably enough, the answer was unanimously positive. A meeting was set, and the planning session, which included the senior administrative and program staffs of each organization, took place in an atmosphere of great creativity and enthusiasm.

Participants identified areas of collaboration and international products and services to be developed—such as jointly hosted international conferences and the creation of international standards—most of which keyed off the products and services that already existed at the American association. The association had successfully identified appropriate products and services—not simply putting up open for business signs in overseas markets but by first engaging its international counterparts as partners to learn their needs.

A postscript: Unfortunately, in spite of these positive findings, the board of directors could see no value in investing any resources at all in tailor-making products and services for markets outside the United States. As a result, any international endeavors that might have been initiated have since been stalled.

Perhaps this case sounds familiar? Unfortunately any number of associations could tell similar stories.

The late Speaker of the House of Representatives Thomas “Tip” O’Neill was famously quoted as saying “all politics is local.” Association executives know that all association business is local as well. So how does a U.S. association made up essentially of U.S. members—all of whom have their own local concerns—arrive at the point where it can fashion products and services for the individual needs of overseas markets? Following are two approaches used by two very different organizations.

A regional development strategy
The Association of Career Management Consulting Firms International (AOCFI), Washington, D.D., started in the 1970s as a US-based trade association made up of domestic outplacement consulting firms that saw the need to develop and impose standards in a relatively new industry plagued by fly-by-night operations that employed questionable business and professional practices. After two decades of successful expansion in the US, the association saw the need to follow its members’ growth into Canada, Europe and Asia, which had similar needs for highly ethical business standards and practices.

But developing the trade association’s presence in these markets proved problematic. Apart from the usual linguistic and cultural differences, AOCFI quickly was forced to recognize that the employment markets its industry served were different from country to country. Labor laws and practices varied; what was accepted practice or legal in one country was not accepted or even illegal in another. And because the industry itself was so new, its relative levels of market penetration differed dramatically from one country to another. Moreover, the global regions that would need to be formed would have a combined annual budget of less than $400,000.

Nevertheless, industry leaders, including CEOs from the most developed markets (North America, Europe, and Asia) came together in a series of meetings to discuss the merits of forming a global organization. While recognizing that each market was distinct in its needs and practices, all saw an overriding need for a global organizational framework through which certain services could be provided. To begin with, participants determined that such services should include opportunities for cross-border professional networking among individuals and firms, recording and exchanging of best practices in ethics and government relations, and creation of a system whereby global standards could be incrementally put in place during the coming decades.

Because the industry was so dispersed and had such an uneven presence in markets around the globe, the leaders determined the best way to foster the global development they sought to create was to build a regional organizational structure, with the most developed national markets in each region assuming a leadership role. Canada and the United States constituted one region, Europe another, and Asia the third. Over time as the industry expanded and grew in Latin America and Africa, it was envisioned that those regions too would be represented.

Each region—which took the names AOCF-North America, AOCF-Europe, and AOCF-Asia—would be responsible for developing the services that it wanted for its respective national markets. Further, each region would select its own representative on AOCF-International’s board of directors—which would meet twice a year.

The international board, consisting of industry leaders, met to discuss what needs all regions held in common. Each brought to the table what his or her constituencies were asking for so that they could identify common needs—and decide whether the association could meet those needs. In doing so, it was able to determine the global services to be delivered and the avenues to deliver them: the Internet (all markets had 100 percent access to the Internet), an annual international conference (to meet the acknowledged common need of networking), and a quarterly global newsletter (to share ideas on effective government relations practices). The AOCFI Web site, membership records, and the quarterly newsletter were to be developed and administered by the largest U.S. office, which was largest of the offices and therefore had the infrastructure to do so. The content provision and costs for providing these services would be shared proportionately by each of the global regions. The annual conference would rotate among North America, Asia and Europe. The promotional costs and risks of each conference would be shared proportionately by the regions—according to their contribution—with conference revenues being used to offset these costs. Any profits derived from the conference would be split between the hosting region and AOCFI for use in future programs and activities.

In undertaking these steps, the AOCFI proved that an association did not have to be large and wealthy, nor does it have to represent a culturally, financially or legally homogenous industry to succeed in creating such an organization that has global ambitions but with a local focus. In fact, being locally focused, financed, and driven was the key aspect of AOCFI’s success.

Buy-in through collaboration
Another example of an organization tailoring its services to international markets can be found in the for-profit sector. In this case, however, it was a matter of bundling services from affiliates in various countries to create a unified global service. In essence, the need identified was to have various local services packaged in the form of a global service. By the end of the 1980s, the Berlin Wall had fallen and the Soviet Union was no more. With the creation of newly independent countries, new markets were opened up and the rush was on to see which western companies would be the first to establish a presence there.

For accounting firms, these global developments were a special challenge. Most of these organizations had no presence in these newly opened markets and most did not even have global service packages to offer their clients who were thinking increasingly in global terms. But globalization was seen as a key strategic advantage to any firm that could structure itself accordingly. The challenges were how best to create a global organization out of a highly fragmented structure and how to enter into new markets where they had no previous presence at all.

Deloitte Touche Tohmatsu, New York City, was one of the first accounting and management consulting partnerships to succeed in doing this. The partners of all the national practices, which were then only loosely affiliated, determined that building a global organization had to be a priority if they were each to realize the market opportunities that were being presented. The Deloitte example illustrates the importance of an organization getting buy-in from affiliates by treating them as equal partners in a global undertaking, as opposed to allowing a dominant member to impose its will on less influential affiliates.

To quantify these opportunities, the various national firms collaborated in assembling a list of all companies in each national market around the world that had an international presence. They then collected the figures of what each of these companies spent in fees for accounting and management consulting services. The sums amounted to billions of dollars—a huge potential market available to those firms that succeeded in developing the global service packages that their current and prospective clients were eventually going to require. Consequently, the national managing partners determined they wanted a global brand image for the firm, supported by global service packages that would be provided by international client service teams. International boundaries would be erased, meaning that one international service team would serve a particular client so that the client would not have to deal with different service teams in different countries. Moreover, the new strategy would standardize quality control across borders; a given company would receive the same level of service in, say, New York City as it would in Paris. Note that the elimination of business boundaries could possibly get sticky, with international teams potentially being viewed as encroaching on the territory of national practices—hence the need to ensure that all national practices would buy in to the global program.

With this end objective in mind, each national practice pledged to contribute a similar percentage of its gross revenue to pay for the effort that would be required in product development and marketing.

The partners assembled a core global practice team, of which I was a member, made up a permanent and seconded staff from the world’s major markets, with special concentration on the triad of Europe, North America, and Japan, which accounted for the vast majority of the world’s international trade flows. This staff was organized according to the types of global services the partners determined they needed to develop.

The challenge in creating the new global firm was to find those elements of accounting in the local practices that had global potential. In this, the strategy was to develop a client-focused and clientdriven firm that could provide global services locally throughout the world.

Committees, made up of senior partners from national practices around the world, met four times a year to make the strategic decisions that were needed to determine which aspects of the various national practices’ services would be incorporated into the firm’s global service. Significantly, each of the national practices approved final decisions.

Throughout the process, the organization took pains to ensure that sharing of expenses—potentially a sticky issue in collaborations—was equitable. The travel costs of the participating partners were covered by each national practice, but a formula was devised so that everyone paid an equal amount. The travel costs for a group were averaged so that a partner traveling to a meeting from, say, Australia incurred the same costs as a partner coming from somewhere in Europe.

Beyond this activity, the global coordinating team also sought out market opportunities that the firm as a global entity to try to win. Many of these were new service opportunities with companies requiring global services, but some were for government-financed projects through such organizations as the World Bank and the U.S. Agency for International Development. Each time the team won a project, new revenues would be generated for each participating element of the global firm—financial proof of the wisdom of this approach.

Today Deloitte stands as one of the world’s largest and most successful global service partnerships. It achieved this through effective use of local resources to create global service packages that were greater than the sum of the parts.

As a final note, in spite of the successful global practice that has been created, the national practices have remained strong—perhaps even stronger than the original architects had envisioned, with less business migrating to the global practice than was initially anticipated. One again, this is evidence that products and services must be created to fit the needs of the local market.

Equal participation
Neither AOCFI nor Deloitte would have been successful in its international undertakings if it had tried to impose the will of their largest member on the rest of the members. The key to both organizations’ success was in their shared global visions that included the recognition that the very differences so many organizations find difficult to accept or comprehend at the local level were in fact the source of their strength. This concept, which is central to American marketing practices, must be applied in overseas markets as well.

No comments: