The 14th annual SME Development Conference is organised by DP Information Group. The conference continuously seeks to supports Singapore SMEs’ development and growth needs by addressing current key challenges businesses face, in the midst of rising competition resulting in a loss of market share. It proposes initiatives and strategies for SMEs to shift their focus and embracing the concept of client-centricity by forgoing traditional product / business-driven strategies while adopting a more client-driven strategy.
Client-centricity seeks to understand the clients’ current needs and wants and ensure that businesses are equipped with the right strategies, processes and marketing initiatives to satisfy them. Client engagement and acquisition through branding efforts, customised services and advertising & promotional activities are increasingly part of businesses efforts in securing and retaining loyal clients, who are ultimately responsible for a company’s success.
2Sherpa’s co-founder Patrick Nelissen was one of the expert panelists. This presentation is a summary of his questions and answers regarding business expansion abroad.
Q&A with our co-founder Patrick Nelissen - panelist of this SME Event:
What are the top 3 nuggets of advice, would you say, that small enterprises need to understand before going abroad? How much work is required?
We’ve just published a Global Benchmark Report for SME Companies. And when asking what they want to do, this is the top 3 according to approx 200 participants:
⇒ first of all: market research
Understanding the market you want to enter is super important. What are the demographics? What is the buying behaviour? Cultural differences? Price levels and of course the competitors. Is my product unique enough? Many information can be obtained by calling an Embassy, Trade Organisation and or even use Google.
⇒secondly a good investigation for a sales and distributor partner
Most companies don’t know what the new partner will bring to the table and are relying on chances and opportunities instead of strategic choices. Be clear what you re going to invest in this relation. And how solid this is. You will not be the first one who spend a lot of time and money travelling overseas and experiencing that they ran away with a competitor who outbid you at the last moment.
Do you have any advice for SMEs who have failed in previous attempts at internationalising? And further, what could they be typically blind-sighted by?
My advice is to start a conversation with staff, stakeholders and business partners. What did go wrong? What did go right? Many companies don’t have a feedback loop in place and don’t learn from mistakes. That’s something I noticed in The Netherlands, but also in Singapore and other ASEAN countries.
And not only SME Companies don't use a feedback loop. Lets give an example about trade missions. Do you know how many trade missions fail? The fail rate is 95%.That’s because participants don’t look back. And that’s because in general the KPI is quantity and not quality of the participants.
And typically SME companies are blind-sighted by 2 things:
⇒They are successful in their home country and think that this can be copied to the new target country as well;
⇒They see an opportunity and do. A typical SME business owner is a doer and not a thinker. That’s his strength, but also his weakness. And that’s why they are often successful in their home country.
Much has been said about collaborating for success? Could you elaborate on how smaller enterprises can consolidate their strengths and be more competitive as a group?
Let me give you an example about a private trade mission earlier this year to Kuala Lumpur. 6 Companies from 3 countries joined forces and went to KL. They offered comparable goods for the health care industry. Before they went a dedicated business developer made appointments and arranged meetings. All 6 came back home with a hot leads and/or even a sale.
If SME Companies start collaborating or even if they create a “mini-consortium” like a joint venture, than they are much more successful. They can share costs and revenues and selling power. Hence you can also consider collaborating with MNCs.
How much do people play a role in a strategy to expand abroad? How can small businesses afford an internationalisation expert?
According to international studies 88% of the exporting companies don’t achieve their goals. The reason is often that management doesn’t have a long term commitment to support the export initiative after a period of 18 months. And 50% of the companies don’t have an export plan and strategy in place. And I can tell you that this is even more according to a round table event we had recently. Even 75% didn’t have a strategy in place.
So looking at the facts a solid strategy is crucial to be prepared and successful abroad.
And yes, an international expert costs money, but if you know that on the average an expansion abroad will cost a SME Company around S$ 250,000; than S$ 10-20,000 is not that expensive if this expert can save money, time and stress. And increase the success rate.
It seems that 18 months is a crucial tipping point when it comes being successful or not. This is also depending on the capital position and cash flow.
How much does business culture play in accelerating and growing your business abroad?
Business culture plays a huge role. How many Western companies underestimate the impact on doing business in Asia? Many of them. We think that they are aware of the differences, but going abroad for a holiday is completely different than doing business abroad. And again, a business owner goes and is used to deal with differences along the way.
And if you aren’t sure how to tackle this, do a lot of research/interviews and start with a license partner abroad. They know the tricks and can start building up your network. And along the way you get used to the differences and know how to handle.
Do the traditional rules still apply in internationalisation or is this a whole new world where rules have changed?
Companies are still depending on ROI, Solvency ratios and Liquidity. And resellers, staff, suppliers don't respond that fast when it comes to changing your organisation. So yes, traditional business rules still apply.
A SME Company needs to be more flexible, agile and mobile when it comes to sales and marketing. This landscape is changing in a very fast way:
⇒ The impact of social media and the ratings and reviews, brand image, etc. are huge compared to 3-5 years ago. Look at TripAdvisor and booking.com.
⇒ e-Commerce —> selling online combined to offline is growing in a fast pace. In a couple of years there is no difference in offline and offline. It's 24 hrs omni channel distribution.
⇒ Online and instant payments & cyber security are more important than ever.
⇒ Block chain will disrupt the way we deal with ownership and agreements.
⇒ Usage of mobile will go much faster —> Indonesia skipped online and most of the consumers are using their mobiles and services. You need to have your website scaled and UX friendly.
Do you have any advice for internationalisation specific to Southeast Asia?
Don’t be dependent on Government Grants from IE Singapore and other Subsidies only. I know that many Singaporean SME Companies are looking at the MRA Grant and other grants before conducting a market research or assessing their company. But if you cannot put S$ 50,000 - S$100,000 aside to start your business abroad, than you really should consider why you want to expand your business abroad.
And I know that many SME Companies struggle with cash flow, so looking at earlier collaboration possibilities I would like to urge companies to investigate the possibilities to create a mini-consortium or joint venture. You split the costs, reduce the risks and have designated business developers selling your products and services abroad. And if you can get the grant, perfect. That’s extra capital to expand faster.