Our blog today is by guest blogger Mark Buss.
Many companies today rush into new categories, products or services without the common sense of recognizing core competencies. This is doubly true when organizations seek international expansion, too often producing discouraging initial results, damping the further commitment required as a significant growth driver.
Like most business investment decisions, the approach to finding and engaging business partners outside your home market is 80-90% homework, followed by common sense implementation (and 10-20% luck). What most executives forget is that seeking partners for growth overseas is not a matter of cloning your own personality, knowledge and organization structure. It is first, understanding what you are good at and then finding a partner, distributor or agent that complements your company’s core competencies with their own strong capabilities.
The Eight C’s
Examining potential partners using criteria we call the Eight C’s allows management to assure they have balanced strengths in their company as the principal with those of their potential partner. Each “C” has a measureable upside and downside. The C’s are: CASH (in a day-to-day working capital sense), CAPITAL (financial structure/asset structure, longer term business investment), COVERAGE (geographic and specific to targeted customers, not just reach, but frequency), COMPETENCE (as to product/service knowledge in today’s sense and the market’s economic dynamics ), CONVICTION (principally integrity, often the most important criteria), COMMUNICATION (internal, external and in-between), CONTINUITY (the past can be but is not always a measure of potential for ongoing success) and last but not least, CUSTOMER (sometimes referred to as Consumer, the understanding of wants and needs, culture and marketplace priorities).
Keeping it real
Common sense and willingness to carefully compromise is also important in this process. Remember that when you “score” a potential partner across these “C’s” you will rarely get 100% of what you want. That means making sure the balance is acceptable, while always emphasizing the likelihood of success. So, for example, you prefer to have cash in advance or short terms with a potential partner. Who wouldn’t? What if your potential partner is less capable than you in that respect, but they have strong access to the market and a solid understanding of the customer base? In that case, you may choose to balance your strengths against their weakness. The reverse may be inappropriate.
Many executives will travel and agree to international distribution agreements, exclusivities, or other transactions based on a meeting and a dinner using their time-tested business intuition and the cordiality of that interaction. “I liked that guy in Mexico City we met; he sure knows the best restaurants and really knows his way around a wine list.” This sounds quite shallow, but happens more that most want to admit. We want to feel comfortable around our potential business partners and sharing common interests is great, but don’t get distracted. Of course, gut feel is an important measure, but they will tell always you how great your products or services are. They want the deal too! Make sure they are willing to share this delicate balance of “C’s” to measure the relative contributions you must make. Your company is unlikely to have 100% rating in the eight “C’s”, and neither do they. Both sides have an Achilles Heel; agreeing how to leverage a team approach is critical.
Read the tea leaves, but be aware
We have all heard horror stories of not understanding culture and brand. As North Americans, we can be bit arrogant and poor listeners. Be true to yourselves in knowing what you don’t know. It is important to step back and be willing to learn. Another key is that different “C’s” are more important in different world areas. For example, conviction to a high level of integrity has widespread implications to your business and its CEO (FCPA) not only in practice but perception from country to country.
Structure a potential business venture abroad against these Eight “C’s” and any more you can come up with. I learned these originally from a Lebanese manager of mine 20+ years ago and they have never failed me. I added some along the way and so should you. In fact, as I sit here writing this, my ninth “C” is now coming into play, which is CHANGE. A partnership must have the willingness to grow and mature and that often means the discomforts of change.
Set benchmarks for areas that you are willing to compromise on, absolutes where the partner must score high and find your balance. You may not always have all the data points you want from an initial meeting or discussion. Carefully looking for subtle signs and directing the discussions and follow-up through a measurement process makes it likely you will not get caught up in the enchantment of merely making an international deal. Expand internationally, but remember, beware actually means being aware!
About The Author: Mark Buss is currently President MB Consulting Inc., a company he founded in January 2005. MB Consulting is a private firm specializing in assisting businesses in accelerating growth domestically and internationally including market analysis, business & financial plan development and interim management.
Mr. Buss has thirty plus years of experience in private and public companies including sales, marketing, business development, strategic planning, M&A, and manufacturing finance. His B2C and B2B global and international business experience encompasses Consumer Products (Durables and Personal Care), Pharmaceuticals, Tobacco and Wine.