Don’t compete with locals on the same service!

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I work a lot with international B2B services companies in the software and IT space that want to enter the German speaking market (Germany, Austria, Switzerland).

One issue that comes up a lot is this idea of “don’t compete with locals.”.

Here’s an example:

A German IT services company (prospect) to a Croatian IT services provider (seller):

“We need one CISCO networking engineer onsite at our customer’s premise in Frankfurt for about 6 months.”

That IT services company from Croatia has many of such engineers in their team.

Still, they have no realistic chance to convert the prospect into a happy customer.

Here’s why. Drilling deeper…

That line above came from the mouth of a Project/Resource Manager.

The Resource Manager expects that this Croatian company can deliver in the same quality but hopefully cheaper way than his preferred suppliers. His other suppliers for this kind of work are all local companies.

Why did the Croatians lose against a local company despite the fact that they presented an extra-ordinary good candidate for that job?

The prospect did not require an extra-ordinary good candidate. They already have a senior engineer in their own team. They want additional average skills. The requested skills and experience levels are not very hard to find — not even in Germany, where they lack a lot of available IT experts. Obviously at least one local company was able to present a matching candidate.

By sending a candidate from Croatia to Frankfurt for 6 months the total costs for this engagement (travel costs, accommodation costs, daily allowances) are not cheaper than the offer from any German company.

So, why would the Resource Manager go out of his comfort zone (language, risk of new supplier, no significant advantages) and select the Croatian company? I have no idea…

So how should a Croatian company enter the German market?

I was lying when I said you should not try to compete with the locals. Of course you must! But not in a comparable way. Don’t compete one-on-one with their offer. You’ll lose it – always.

Let’s get back to the case one more time and see what we can do differently:

The Resource Manager in our case has a very short term (tactical) goal. He is part of the delivery and the project is already sold — or is very close to being sold — and just needs to be staffed. To do his job right, he needs to deliver his project with the most convenient option. Identify one external guy with the right skills, onsite in Frankfurt for 6 months for the lowest possible costs because his company has to make some margin on top of that costs. Very unlikely that this Croatian company can satisfy those personal needs if there’s a similar local option.

But what if we have unique strengths like a bundle of rare skills, valuable experiences from other innovative projects or any other unique advantage that can help that prospect to get projects they wouldn’t get without those unique strengths from the Croatian company?

What if we could offer “CISCO collaboration and communications in a box” to the prospect to help them win additional business instead of support to deliver their existing business?

Would the Resource Manager listen to such a sales message?

No, of course not! He is in charge of delivering projects — not creating the demand for new ones. He doesn’t even see CISCO collaboration and communication projects on his to-do list.

But guess who should see such projects and opportunities?

Yes, Sales and top management.

What could be a good value prop for this Croatian company?

We have to extract the expertise from several other projects and bundle that in a valuable and relevant offer and put it in front of people that have such needs (a.k.a. product-market-fit).

I’m thinking out loud, but a value proposition for that Croatian company might look like:

“With our previous experience and expertise in that field we help IT service companies in Germany to win and deliver their first 3 CISCO collaboration projects and we enable their IT department to deliver the 4th, the 5th and the 6th on their own”.

Does that sound like a compelling offer for the prospect’s Head of Sales without making their IT an enemy? Could be.

Will local competitors try the same approach? Yes, some of them are capable to do that but most of them will not even try because they have a good product-market-fit in the current setup – deliver matching skill to IT service companies. Will those few companies pick the exactly same value proposition as you do? Probably not.

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Understanding product-market fit here

Could this approach work for the Croatians? It depends on how you frame the product-market fit:

Does the offer [CISCO communication and collaboration in-a-box] fit to the needs of Head of Sales [does he see such opportunities in their markets and do they want to increase their chances to win those?] of those companies [are the type of companies ideal? Industry, size, etc.]?

I don’t know. The Croatians don’t know either. But it’s worth testing. If it works it’s a very scalable way to export your service internationally…

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