Jan Ulč: Think twice about expanding abroad
When is the right time to think about expanding to foreign markets?The right time is when the product and company have proven themselves in the local market, they are scalable, and the company has a strategy for expansion around the world – initially through partners who know the local market and are able to sell and deliver the product. And also when there is enough money for the expansion and a team that speaks excellent English. At least that is the case when selling a software B2B product for a specific market, such as the management and operation of telecommunication networks. The version of the product for the mass market requires a different strategy.
You mentioned a scalable product. How would you define it?
It’s a product that a local partner can easily customize for, sell independently in and implement within the local market. This means, in practice, that it must be expanded to include a standard interface for integration with the surrounding systems, have complete English documentation for users, administrators and developers, and a training curriculum – that is, a ready-made environment for partners to take over the product and work with it. The original vendor is expected to take care of marketing and product awareness. They must therefore have a perfect website and marketing materials, be a member of global professional organizations, exhibit their products, lecture at events and publish papers.
Should the product be tweaked according to the market to which it is delivered?
It depends how big the changes are. Product tuning is possible, but when you have to change the product significantly for each market, it is not scalable. Company partners should have tools available to create a local language version and a well-defined interface (API) to extend the product to local extensions and connect local data sources to it.
How do you find a good business partner, whether it is in China, Namibia or Russia?
Your partner is actually the first customer – you have to convince them that selling and implementing your product is good business. The problem is that every really good partner already has a lot of work and usually isn’t looking for another product because it costs money and time. They have to learn your product, create local marketing and train people. You must therefore have a good partner strategy, case studies, flexible business conditions, and provide sales and technical training. In most cases, however, you often have to create and run the first project yourself and the partner will verify that your product works.
But where can you find a good partner?
The ideal method is to start with target customers and find out which potential partners they like, and then connect with them. Most of us, however, take the path of the least resistance and contact the people we already know. Partners need to be pampered, including large international system integrators who are independent and do not commit themselves to contractually support one particular product. But if you make their life easier with a good deal of support before and after sales, they will tend to choose you in their projects if they have the opportunity.
Based on what criteria should a company choose which market to enter?
Each company must first verify that its product is suitable for the market and addresses a real problem, in addition to evaluating the market potential. It does not make sense to deliver the first system to the first customer-innovator somewhere far away unless you are ready to find a partner or establish a branch, make sure that the first implementation is successful and start building the market. For example, it’s not such a good idea to enter the US market unless you start a local branch there.
Okay, but what country should I choose? Many Czech startups automatically choose Slovakia and Poland and then try Austria, but they never get any further.
It is logical because it is the easiest way. On the one hand, we can behave rationally and focus on the markets we understand, but then again there are markets like China and India that have great potential even if little is known about them. You need to consider whether to go to an unknown market or not. In our case, we consider it crucial to have a reliable local partner. We recently declined one Middle Eastern order due to unusual business conditions and because we do not understand the market nor have a partner there. But even the German market right across the border has its own specifics, and it pays off to have a local trader or partner.
So a good market is one that I know and in which I have a business partner I can rely on?
I would try any market if I could meet the conditions I promised. People mostly learn about CROSS Network Intelligence through our marketing channels, because we have a highly innovative product. Then we follow up with online tutorials and demonstrations of our product. We also ask our team whether we are able to sell and deliver the product well. If the first product delivery does not go well, we will destroy our reputation in the market for the future, so the first delivery must be successful. If you have unlimited capacity to deliver, you can go to any market, but our capacity is limited and we keep having new orders in Central Europe where we are well-known, so we are a bit of a competitor to ourselves. But these are not universal truths. In short, we have a product whose implementation plays a big role. A product that puts itself into practice almost on its own is less risky.
Is it good that Czech startups try to expand in the Central European market?
Yes, it is a natural beginning, but I would quickly focus on the Western European market, which is also relatively close to us, and try to gain their trust. If you have an international company as your customer, you have an advantage because when you are successful in a Central European branch, they will learn about you in headquarters.
Is it possible for a startup to sell a global product from Prague?
If you have global ambitions, I think at a certain stage you have to become an international company based ideally in the US and have leaders in the industry who know how to transform a medium-sized business into a global business. Americans are more open and accessible to innovative products; there is also more know-how, contacts and experienced investors and managers in the US who know how to scale companies.
Is it possible to break stereotypes about being from the Czech Republic or from “Czechoslovakia”?Trust is the first stumbling block, especially when you have a relatively large project. But it's probably not as closely related to the fact that we are from the Czech Republic than that we are a start-up and customers want to be sure that we have a future as a supplier of their key operating system. When we got an investment in the company last year and started out abroad, our partners were always interested in the technical side; as far as the financial side is concerned, they always investigated us and wanted different guarantees. Openness, references, and the ability to negotiate and translate Czech finance to an international format are important.
Our plan is to become successful in the US and to act as a global company. It does not matter where you come from, but internationally, you cannot work under Czech law and accounting. Marketing must have a global standard. A lot of our competitors are also Eastern European companies and nobody knows about it. They started in Ukraine or Russia and managed to find the right people in the US or Israel who grabbed their product and started promoting it as an American or global company. Customers are not as interested in where the programmers are sitting. They are now part of the global community.Czechs are skillful, but shy and careful. How can they become more confident in international business?
It's good to stay abroad for a while. I have been consulting one company in the area of entry in the US market. After a few months in Silicon Valley, they started to talk about their product completely differently. They have found it important to explain quickly and enthusiastically what about their product will catch the customer’s attention. You also have to explain the future product with optimism because every product is like an onion – inside it is what it does today; another layer represents what the customer thinks he is buying, followed by a layer of scalability; and the outer layer is the vision of the product. Customers also buy the future, so it is necessary to sell it. It is important to learn how to talk about this.Let’s get back to you. How are you expanding in CROSS Network Intelligence?
We are in the market where the purchasing cycle takes one to two years. Last year, we received two investments. Since then, we have acquired two foreign customers and now we are about to sign a third contract. I take it as a great success, even if I would like to speed things up. At the beginning of the year we will spend three months in California, so you can ask me again.
Jan Ulč was born in Prague and emigrated to the Netherlands, where he studied Computer Science at Delft University of Technology, at a young age. He earned an MBA at California State University and then dealt professionally with geographic information systems, digital cartography, remote land surveying, and engineering and telecommunication networks. He worked at Computervision in Massachusetts and California, at Intergraph in Alabama, and at Smallworld in the United Kingdom, which was acquired by General Electric. In 2008, he came to Prague as the Director of GE Energy Sales for Eastern Europe, and since 2016, has served as the CEO of CROSS Network Intelligence.