Should the UK be first up for your global expansion plan?

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Another in a series of articles aimed at helping budding software entrepreneurs avoid some of the pitfalls that are out there waiting for you!

New Zealand is a great place to develop software. 

There are some really clever “super star” developers here and if you have a great project and a great “global domination” story – they would love to work for you. And work hard.

The other great thing about New Zealand from a development perspective is the market. It is perfect. Particularly for business software it is a great market to learn from because the companies are small enough that you can talk to people who know how their whole company works. In the bigger markets the companies are so big – no one person has that degree of understanding. And because the New Zealand market is so small for them too they need to manage their business tightly to survive. This makes them very receptive to time and cost saving innovations. When it comes to implementing your software the companies are small and nimble enough to make the changes often – ideal for your tuning your proposition.

But New Zealand is a tiny market and any software product company worth its salt will think globally from day 1.

But where should their expansion plan start? Australia? USA? UK? You will have picked up from the title of this article that I would choose the UK!

People have had success and failure (in varying degrees) in all three markets, so I am talking from our personal experience only, which was selling a large “mission critical” business system using a direct sales strategy (We were selling a practice management (ERP) system to large law firms). It had a disruptive differentiation from its competitors (a must have requirement), and being able to articulate the vision of the software was critical to the sale – as was, it turned out, being kiwi!! (but more about that later!)

So given that qualifier – why the UK?

  1. Australians don’t like buying off Kiwis.
    Their big brother attitude seems to make them think something the little brother has done will be inferior to products from the US or elsewhere. Even though Australian firms clearly understood our differentiation, they just could bring themselves to sign on the bottom line…until we succeeded in the UK. After that validation, we actually owned the Australian market – I don’t think we lost a sale!
  2. New Zealand can be a problem too!
    We had a couple of fantastic early adopter customers here that saw the advantage of that opportunity (mainly price and huge influence on the direction of the product), but then we lost a couple of sales to the US competition. Very similar to the old saying “Nobody ever got fired for buying IBM” – they justified to themselves that technology leadership inevitably came from the US. I still remember their IT Manager saying “They have the advantage of being closer to Microsoft!” (They were based in Tallahassee – which is 8 hours flying from Seattle with horrendous connections – but it was a good story!). Again, after the UK validation, we never lost a sale.
  3. The US is a difficult market.
    For many reasons

    1. They are parochial – and especially if you are competing against a US company – it is hard to break into the market. They fundamentally believe that if it is made in the US it must be better.
    2. They don’t buy into the kiwi “we are great to do business with” story (see point 4 below). In fact if you try using that as a differentiator they will look at you like you are some kind of weirdo.
    3. Because of the size of their market businesses don’t need to be too efficient to make plenty of money, so software that brings efficiency is not as compelling as it is in tighter markets. Also, because the companies tend to be bigger they are more reluctant to change.
    4. It’s a very geographically disperse market and committing to the US market is committing to a life of planes and airports.
    5. Related to the first point, they really like to buy off other Americans, so you need to employ an American to sell to them. And they really like dealing with the top dog – so you better make them CEO and President!
  4. The English love Kiwis!
    This is huge. People buy off people and the English view of Kiwi’s is that we are innovative, hardworking and reliable. Once we understood this we pushed it hard in our sales pitch as a differentiation. Our American competitors couldn’t claim that – everyone knew they were first and foremost focused on the American market. It wasn’t hard to convince prospects that we saw our big market was going to be the UK.Here is a copy of the slide we used to hammer this point home:

    blog-image-1

  5. The innovation is not only technology.
    For the reasons I mentioned in the introduction – the business ideas that we got from working with New Zealand firms and instantiated in the software was way ahead of business practice in the UK and even more so the US. This meant that we were presenting business innovations and opportunities that our US based competitors had not seen before, so couldn’t compete with.
  6. The UK is geographically compact.
    If you can base yourself in London for not only have direct access to the main commercial hub of the country, but it is easy to jump on a fast train to make day trips to many other cities. At worst you are around an hours flight away, and that includes Ireland, which is another whole “easy to deal with” market.
  7. In the UK, when you say
    “Good morning Ladies and Gentlemen”
    – it will be true! In my experience they are indeed Ladies and Gentlemen in the way they conduct business. Yes they want a good price and excellent service – but they are always fair and easy to do business with. Not such a strong trait in Australia or the US!

When we first went to the UK we thought we would need to make “noise” in the market for 18 months or so before we would make a sale. In fact we made four big (each multiple hundreds of thousands of pounds) sales in the first 12 months. Our dominate US based competitor made one, compared to six the previous year.

I already said that I am biased by our experiences – and things may well be different for different products. Here is a list of pros and cons that I have come up with – you may like to consider any others and weight them considering your product and where it fits in the market.

Pros and Cons

Pros

Cons

Australia

  • Travel Cost and Time Low
  • Time Zone differential small
  • Medium sized market
  • Easy to visit/relocate to
  • Possible to service from NZ
  • Legal and Accounting similar
  • Similar Business innovation

 

  • Australians don’t like buying off Kiwis
  • Lesser business ethic
  • Employments costs high
  • Really need to employ Australians to sell
  • Medium sized market

 

United States

  • Huge Market
  • Time Zone – some overlap
  • Tend to be behind in business innovation
  • Employ at will makes employing people easier

 

  • Parochial
  • Less efficiency imperative
  • Geographically dispersed
  • Travel Time medium
  • Time zone – some overlap
  • Big travel commitment to service from NZ
  • Visa required to work there.

 

United Kingdom

  • Large Market and close to Europe
  • Like buying off Kiwis
  • Compact market
  • Good base for Europe
  • UK T&I / NZTE very helpful
  • Strong NZ community
  • Selling Price higher
  • Attractive for NZ staff
  • Behind in innovation
  • Similar business ethic
  • A great “validation” market

 

  • Travel Time long, cost a bit higher than US
  • Time zone difficult
  • On ground costs higher
  • Big travel commitment
  • Visas required to work there but many kiwis qualify

 

 

I make it sound easy! Of course it not, here some recommendations for dealing with the market.

  1. On your first visit start finding a local representative.
    The time zone is just too hard, and why should a big prospect or customer only ring you earlyish in the morning or in the evening? You need to make it your problem and get someone to run interference in the short term. We found a local consultant that would take on the title of our UK GM and be the go between and make the late night phone calls. You need this person for the local contacts too.
  2. Commit to the market.
    This is the biggy – you are not going to be able to make big sales if you only fly in every 2 months. You need to be promising that you will establish a proper office and that you personally (if you are the visionary) will relocate as soon as practical. If this sounds like too big a commitment – don’t start.
  3. Relocate Kiwi staff where possible.
    It’s hard to get good British staff when you are a small startup. It’s hard to get good British staff no matter who you are! In contrast you can employ excellent kiwis who want to use the job as a great way to go overseas and get the OE they always wanted! This also helps to retain the kiwi company “can do” ethic that you have been selling, and if they work for you in New Zealand first they can hit the ground running.
  4. Use the Kiwi contacts.
    On your first visit to the UK – have a meeting with the New Zealand Trade Commissioner. They are really helpful, may be able to lend you an office when you are visiting, and will consider hosting a function if you want to have a launch. They will also introduce you to their network – including a whole lot of very successful and well placed kiwis that are happy to help, providing that you can demonstrate to them that you are the real deal and you won’t let them down. Kea is another good tool for getting into that network.
  5. Use the Kiwi novelty value
    . Ironically if you are in Australia or the US you should play this down, but in the UK you should play it up. Whenever the All Blacks are playing – take a group of prospects and customers, everybody has a great day and you get to watch the Blacks wallop them! And the customers don’t seem to mind! Always have Steinlager in the fridge, order Kiwi wine in restaurants and if you are celebrating a big order, take the customers to Peter Gordons restaurant. Be proud.
  6. Leave the development team in New Zealand.
    Your UK office should be sales, implementation and support only. You’ll never get a great development team there like you can here. You may need an emergency break/fix person in the UK – but in general overnight fixes are OK. One thing we did, though was “the London Experience” – which was bringing developers to London to work for a few weeks directly with customers. This helps them understand who is at the other end of what they are doing – and how high the stakes are if there is any lack of quality.
  7. Deliver on your promises.
    Your kiwi connection will buy you a lot of trust – but you have to deliver to keep it. I guess partly because we dealt with large law firms I hated meetings when software was late or missing functionality. Just do what you promise and this won’t be a problem!
  8. Have Fun!
    Why wouldn’t you? You will be doing lots of big deals in a country where everyone seems to like you for being you! Unlike Eleanor Cotton, I always felt that I was a bit representing my country and I was proud to do so. When you are in the UK you realise just how good being a Kiwi is.

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