Advisory Case Study: A successful U.S. expansion.

by Kris Tuttle on March 5, 2009

One of our first major advisory assignments was to help a small European enterprise software company figure out what to do about the U.S. market.  They had a great deal of success in their home country and were ready to expand.  By way of example we list out some of the steps along with the overall case study.  (This work was conducted over the course of 2006.)

Step one: Is there a meeting of the minds? For an advisory assignment to be meaningful and a good value (no matter how much or how little it costs) there has to be a good relationship in place.  This generally means that leads come by way of referrals.  Trust and integrity are the foundation of any relationship and may take too long to build from scratch.  The first discussion or two can happen via the phone or online but subsequent to that a physical meeting is required.

Step two: Did both sides meet expectations? For the advisor the company and the CEO have to be something they can be enthusiastic about helping.   In this case the company has a very powerful and unique enterprise software solution and a CEO who is brilliant but also secure enough to know that he doesn’t know everything and is eager to learn.  Similarly the advisor has to demonstrate a depth of knowledge and apparent ability that is consistent with the recommendation of the referral.  If these views are mutual the stage is set.

Step three: Can the advisor add meaningful value? In some cases the foundation is there but what the company needs is outside the scope of what an external advisor can deliver.  Some cases it might be a limit of the advisor (we don’t know much about improving semiconductor device yields in old fabs for example…) and in others a major industry shift and/or management turmoil has left a company in very bad shape.   In the latter case an advisor might be able to provide some advice on the potential workout options but it’s not the type of value add we seek out.   In this case the company had little knowledge of the U.S. enterprise software market (one of our strengths) and while their marketing materials were in the English language, they didn’t exactly play to the American style.  It was clear that what the company needed, and what we could provide were a perfect fit.

Step four: The swag. Although it can happen earlier it is at this point that a small moment of truth has to occur where the client and the advisor touch on what this is going to cost and if there is budget for it.   This is also a moment to see how you both respond to a little serious mutual discussion.  So this is a critical test of your ability to work together on more than one level.   Our services are not inexpensive but we divide them into phases and tie them to milestones so that the costs and benefits are matched and measured.  Our goal is to add the maximum value that the company needs and then let the company move on.  In this case there was a substantial amount of work so it was easy to create a Phase I with a number of activities and deliverables.  We do an estimate of how much time is involved and then just put a price on it.  We don’t track hours or phone calls or how many times we thought about the company while we were doing something else.  As a rule of thumb any prospective client should figure that a phase I is likely to cost $10-20K and last from one to three months.

Step five: The company visit.  Typically the writing and approval of the formal contract takes a week or two.  During this time it’s a good time to have the company visit.  There are lots of ways to approach this financially but we generally like to meet in the middle which for us means that the company pays for the trip and we donate the day without any consulting fees.  Obviously both sides only want to do this when they are pretty sure that an engagement is forthcoming. This is the day for the advisor to meet the other members of the management team, potentially the board and begin to get some of their initial work organized.  This is a fun day and it should feel great.  If it doesn’t both sides should reevaluate.

Step six: Doing the work.  The first phase of this project was very active.  The first thing we did was set up a large number of meetings for the CEO to talk to potential customers, investors, industry experts and even facilities providers.  During the trip we used all the non-meeting time to actively build the US marketing message and the business development plan that would be presented to the Board of Directors.  In this case our efforts focused on:

  1. What do potential customer environments look like and how ready are they to invest in this technology?  Basically an anecdotal analysis of how market readiness.
  2. How does the message resonate with U.S. prospects, potential investors and partners?  This is valuable input in terms of how much tweaking the positioning will need and what direction our initial steps should go in.
  3. What’s would our U.S. operation look like?  What budget figures should be used in building the board presentation?  This is the operational piece needed for the board to decide if it makes sense to make the investment in developing the U.S. market.

In this case we finished up the first phase and got a green light to proceed by the board.  We’ll save the next two phases for future updates here.

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