Giles Whiting, COO & Managing Director of Forsta and US Operating Advisor for Verdane, started off his SaaSiest 2023 presentation with a dream: a simple checklist of go and no-go tasks and decisions for how to expand internationally. Unfortunately for all of us, international expansion is not that easy and this checklist, even if it existed, would be a recipe for failure. But fortunately for us all, we have some battle-tested words of advice from Giles to help us in our expansion endeavors.
- Expansion is a strategic issue, not a tactical problem. Approach it with a strategic mindset.
- There are three key dimensions that ultimately lead to the success or failure of your go-to-market: product-market fit, the ability to execute, and resource tradeoffs and burn rate.
- Make sure you have a strong product-market fit in the new market. Just because it’s similar doesn’t mean you’ll be successful if your differentiators aren’t delivering enough value or solving a big enough problem.
- Don’t undervalue what knowledge your existing team brings to the table. Focus on getting them to scale versus hiring a brand-new team for the new market.
- Approach your expansion plan with an investor mindset. Will your plan yield a return or is your investment best used in another way?
GTM expansion is strategic, not tactical
When you’re thinking about international expansion and going into new markets, you’re not dealing with a tactical problem. You’re dealing with a strategic problem. Your questions aren’t going to be when and how. They’re going to be why.
There are three key dimensions that ultimately lead to the success or failure of your go-to-market:
- product-market fit
- ability to execute
- resource tradeoffs and burn rate
Giles shared the key theory behind those dimensions, some of the questions you should ask, and a story for each.
You need to have product-market fit in the new market as well
We all know that product-market fit is critical for our business, but too often in international expansions, we don’t give it enough consideration. People say, “Hey, look, we’ve been really successful with our product-market fit here. There’s an adjacent market that’s similar to ours. Oh, look, it’s even bigger. Isn’t that exciting? Our product worked here, so let’s go over there.”
That thinking essentially boils down to this: if there’s a product and if there’s a market, we should go forward. However, what it misses is the keyword here, which is fit and the overlap between the product and (new) market that will ultimately enable you to be successful or not.
- What are the unique, distinctive aspects of our product that have enabled us to be successful thus far?
- Are those aspects the same in this new market?
- Is the need/problem relevant in the new market and can we deliver enough value to be successful there?
Starbucks got this wrong in 2000. They saw a thriving coffee culture in Australia. It’s a big market, and it’s English-speaking. And they thought that was enough. It wasn’t. What they missed on the product side is that the Australian coffee culture was started by Greek and Italian immigrants who brought espresso to Australia in the 1950s and adapted it to make local drinks. They also brought a culture of socialization to their coffee shops, which was very different from Starbucks, which prided itself on convenient, quick service at the time. The drinks were more expensive, and there were multiple local options that already provided socialization and a relationship with the barista at a lower price. After opening almost one store a month for eight years, Starbucks realized $100MM in losses and closed two-thirds of the stores in Australia. They had gotten product-market fit wrong.
Your existing team’s ability to execute has to scale
The second dimension is your team’s ability to scale. When expanding into a new market or country, many people think that all they need to do is find the right team. But with your existing team, what you start with on day one is a team that’s aligned on strategy, product-market fit, and an operational cadence for how to execute. If you decide to put a whole new team in place, you’re essentially setting up a new company. And that’s not scale. Think about the knowledge your team has. You have a group of people today that know why you’ve been successful, how you operate, what works, and what doesn’t work. What you need to do is scale that to the new market, not try to create a new company.
Scale is also much more important than connection. Too often, folks substitute connection for scale. They appoint a new go-to-market leader in the new market who shows up to executive calls, and the new leader has new team members who participate in their respective team meetings. But that’s a connection, not scale. They’re doing things in a totally different way if they have a different go-to-market approach, a different way of serving customers, and marketing messages disconnected from the business’s core marketing. That’s a different company.
Finally, when you’re going into a new market, you have to have a convicted perspective, which is the realization and thoughtfulness around what has made you successful before.
The best story of taking a disaster and bringing that convicted perspective to it was the joint venture between Toyota and General Motors. GM said, “We’re gonna give you our worst-performing plant.” It was dysfunctional. The assembly line was putting out more defects than anyone else. Absenteeism was off the charts. Toyota knew how to manufacture cars efficiently and how to scale. So they went in and changed the entire culture of that manufacturing plant. They didn’t accept “it’s different here” as an excuse. What they did was lead. They went from an individual work environment to teamwork, with a focus on continuous improvement, and a focus on quality. And the results were beyond expectations. The absentee rate dropped and it became the plant with the highest quality and lowest manufacturing defects in the U.S. at a 50% cost savings versus doing it the old way.
Think like an investor
As you’re going through expansion, think like an investor and ask the same questions an investor would ask, like:
- What is my cost to acquire customers? How can I get that lower?
- How can I accelerate the payback period?
- Is there something better I could do with these resources that would drive more value?
Spotify was extremely thoughtful and successful in its go-to-market approach, and it did it in a cost-conscious and strategic way. In 2010, Wired magazine in the U.S. wrote an article titled, “The Coolest Music Services Company You Can’t Use.” At the time, Spotify was only available in Europe. They had spent 2,5 years planning their expansion into the U.S. and knew they needed to 1) generate demand quickly because it had a low conversion rate of users to paying customers (7%), and 2) have a way of keeping costs down.
Spotify decided to leverage partners as their primary go-to-market channel. They recruited some of the coolest brands as partners and used exclusive invitations to generate metered demand. Spotify was also thoughtful about deploying a highly focused go-to-market team on day one that included a head of content, head of licensing, and head of advertising to meet core focus areas. And they built product features designed to accelerate the conversion from free to paying users. Conversion rates exploded from 7% to 25% to 40%.
Focus on these three key dimensions to ensure success
Combine all three go-to-market dimensions – product-(new) market fit, ability to execute, and resource tradeoffs/burn rate – to build an expansion plan that has the best chance of success. For more insights, head over to SaaSiest TV to see and hear Giles present “Here’s why your go-to-market expansion is failing” in his own words.