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The USA
In the last issue we looked at the largest country by land
mass in the world and now it is the turn of the largest economy, the USA. Despite the economic downturn in the last couple of years the US still dominates all aspects of technology innovation and growth.
To put things in perspective over $8 billion was invested in technology companies during the month of January in the US according to “Venture Wire”. The equivalent of twice the IT spend in Russia per annum.
While we may never return to the halcyon days when VC’s could not give money away quickly enough in the Dot Com boom there are clear signs that the technology industry is recovering and that buyer confidence is growing.
IDC, further reinforced this mood with this forecast
After two years of layoffs and revenue declines, the overall IT industry grew by 6.4 percent in 2003 versus 1.6 percent in 2002, and IT sector growth was more than double the growth rate of the US economy as a whole.
Corporate CIOs expect to increase technology budgets by an average 4.2 percent during the 12 months beginning December 2003, according to CIO magazine, a decline from previous expectations of 6 percent budget growth forecast in an October 2003 poll.
Government, financial markets, services, and discrete manufacturing will be leading sectors of IT outsourcing growth through 2008 with high demand for maintenance, support, implementation, and operations services.
Succeeding in the USA - Understanding the Culture
At SSP we are often asked about how to succeed in the USA. The author of this newsletter has lived and worked in California having run both a large division of a public company as well as lived the “American dream” by starting a company from scratch before realizing a trade sale.
To succeed I believe that you need to “Be American” So what do I mean by this ?
The USA and in particular California is an immigrant culture. A culture that will embrace your ideas and encourage a puritan work ethic. It does not matter from where you are from only that you have a clear idea of where you want to go. “ A dream, a vision” .
The culture of the USA encourages experiment, trial and error, to make mistakes “the have a go attitude”
To many cultures this will be totally alien as fear of failure can be a greater motivator than expectation of success. Where you may be used to making decisions over months of careful planning, Americans can and will make decisions in weeks. Understanding this can be crucial in crossing the cultural divide.
Succeeding in the USA - Xenophobia,Insularity and Introspection
Some years ago the UK government organized a massive UK IT Show in San Jose called “Britain meets the Bay” It cost over Ł2million with Prince Andrew opening the event .30 people attended. It was a disaster. Why ?
Many Americans are not interested in where you are from other than you embrace the American culture. Most Americans think that SAP is an American company. Would Business Objects had been successful in the USA if it had traded as “Objet D’Affaire” ?, I doubt it.
Despite the events of September 11, the culture of the USA is still introspective and insular. From the outside it would be easy to say this was wrong. The USA is vast and is geographically isolated. Only 10% of the population has passports. To many the world is the USA. For many in business this is the reality.
While there are differences in culture across the USA there is a uniformity of “what it is to be an American”
Setting up in the USA
Over the years we have advised many European clients about setting up in the USA as well as being actively involved in arranging Venture Capital introductions and other potential partnerships. From these experiences we would summarize the following key steps.
The Capital Divide
Despite the downturn the US Early adopter market is still large. It can often be bigger than your mainstream market in your domestic market. This creates new start ups all the time who can be exceptionally well capitalized. To get some idea on this follow this link to find out the latest technology investments www.venturewire.com
If some of your competitors have got an initial fund of $10million and you think that you “have a superior technology with hundreds of European users it will mean nothing in the USA. You are the Startup. Can you compete financially ?
We would recommend that you speak to US Venture companies to find out how and why they fund and in particular how they estimate the market potential. You may be in for one or two surprises.
The Analyst Influence
Unlike Europe, the market analyst can have a powerful bearing and influence on the buying decision, particular if you are in a new “niche”. Buyers trust the judgment of the analysts, such as Gartner,Yankee Group,IDC and so on, because they have to do less work in their research. The analysts do it for them.
A buyer can go the board and say “Gartner believe that a product is in the upper right quadrant” and will be convinced that this will probably be a safe decision.
New entrants to the USA often totally underestimate the importance of these analysts and the costs of nurturing them.
The Start-UP
With the Dollar being so weak against so many currencies there probably has never been a beter time to create a start-up in the US.Salary expectations are considerably lower than at any time in the last ten years and infrastructure costs too are extremely competitive.
The areas that SSP see that mistakes are often made is in “exporting” a member of your domestic staff to run the US operations.In the majority of cases that person has too big a cultural mountain to climb.
Another common error is to grossly underestimate management time and knowing how to build a US business while reconciling the differences to their domestic operations.
Marketing is King
The winners in the US are always the best marketed and not necessarily the best technology. Both your products and your company have to appear American in every way. All literature in US Quarto. All spelling in American and not (British) English. The primary web site will be the US web. All contact numbers are US phone numbers as many companies are barred from making International calls !!!
Be bold and not afraid. Americans admire confidence, even it is only wafer thin. Entering the the US market is a fantastic challenge and all the nuances cannot be covered in this newsletter. If you need help or advice on any aspects of market entry then SSP can share with you considerable experience.
SSP is continuing to help companies grapple with the challenges that confront software companies in today’s markets and further details on our search services, consulting and other services can be found at www.sspltd.com
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