I was invited to conduct a Strategy workshop with the management committee of a leading Vietnam technology company. The objective of the workshop was to develop the company’s market entry into the US. The company currently has a number of US customers and the US market makes up 25% of revenue. Up until now, their marketing strategy has been word-of-mouth, referrals, and direct contacts initiated by the customers. The company owner now wanted a strategy for a formal entry into the US market.
I collaborated with the company owner and the CEO on the agenda and confirmed their expectations for the workshop. Listed below is the final agenda we agreed upon and I will be addressing the following sections topics in three parts: 1) Visioning session, 2) “As Is” & “To Be” discussion, 3) Wrap-up with plan of action.
- Visioning exercise – “How do you see yourself and your company in 5 years?”
- “As Is” & “To Be” discussion:
- Market/Customer segmentation
- Existing customer strategy and/or New customer strategy
- Pricing strategy
- Sale & Marketing
- Delivery capabilities
- HR (recruitment, training, compensation)
- Market position strategy for the US
- Plan of actions
Arrival in Vietnam
I arrived late Sunday afternoon.
You can tell that you are one in SE Asia by the high-pitch screech of thousands of motorbikes, the wet humid air and the smoky cooking smell.
Ahhhhh…(sigh)…ahhhh, I am back in Vietnam. I took a taxi to the hotel.
Monday morning at the workshop, I was introduced to the management team: Owner, CEO, CFO, COO, Sale, Delivery/Operations and HR heads. I have high expectations for this workshop.
The business breakfast was amazing. I was served Pho (Vietnamese noodle soup) and Banh Cuon (rice crepe) for breakfast. This beats bagels and doughnuts for me any day.
We started the workshop with some introductions. I shared with the team my background, the opportunities and experiences I had of conducting similar strategic sessions with Fortune 1000 companies around the world.
I went around the room and asked individuals their view of the future in a couple of different ways. I purposely left the owner and the CEO out since I didn’t want their responses to bias the other team members. Some of the questions I used with the group included:
- What do you want to achieve in 5 years, personally and for the company?
- Describe for me how your company will look in 5 years, e.g. number of employees, revenue, what segment will you be doing, who are some of your key customers, etc.
- In 2020, assume there is a major article about your company in an issue of the Economist. What would the article say?
- What does your brand tell potential or existing customers?
- What benefits does your company deliver? If you didn’t deliver them, who else would or could deliver them currently?
- Who are your top three competitors? Where will they be in 5 years?
- Who will be your competitors in 5 years?
- I also included the Owner and the CEO into the discussion toward the end of the session
The owner and CEOs were included towards the end of the session to round out the overall perpectives. All in all, the visioning exercise was challenging. Some of the reasons were obvious, e.g. I am a little rusty in Vietnamese and the workshop was conducted entirely in Vietnamese, and a visioning/strategy workshop is a “foreign” concept to the team.
Ignoring those obvious difficulties, I had two interesting observations:
- The executives were so focused on the day-to-day operations and the constraints of the current environment that they were unable to visualize an “unconstrained” vision of the future. It is almost a fatalistic mentality. Don’t get me wrong, I noticed similar issues among managers in the US but not at such a senior level and certainly not as debilitating as this case.
- The expectations of the executive team were very low in terms of growth rate, their ability to drive change, their organization’s ability to adapt (lack of self confidence). In some ways, it makes sense from their perspective. They achieved so much compared with a generation before them that they want to make sure they don’t lose what they have.
I wrapped up the vision session with a word of caution. I told them that it is not the past that they should fear but it is the future. The opportunity cost to their company is huge. If they don’t prepare themselves to face the future environment then the up and coming competitors will overtake them. If they are happy with 10% growth while the market is growing at 30 – 40% then they must accept being ok as a niche player and moving from the Top 3 down to number 30 in the market by 2020. There were some defensive pushbacks against the statement but this “prophesy” hung in the air as we took a break.
After the Break
For this section of the session, I asked the team to share with me their perspectives on the current environment within their companies as well as the external environment.
Market & Customer Segmentation
The company is doing relatively well. Historically, a high representation of their clients is comprised of technology firms – 70% of their business is with tech companies. In the last 2 years, they have been making progress with gaining more businesses from non-technology clients, e.g. retail, education and financial services. In particular, the company’s recent focus into mobility and BI/Big Data has more appeal with non-tech clients.
There were no conscious strategy or focus in terms of market segment or services. The company merely responded to request for proposal or expanded services to support existing customers. The implied strategy is the success of the business.
When asked, the executive team was uncertain of the value to customer segmentation. Their focus is to respond to request and not to plan for or market to future requests. I shared with them the various opportunities with Financial Services companies based on my experiences and the potential opportunity to sell to these companies based on my discussions with them. They expressed a keen interest in exploring these opportunities but when I asked for case examples from their financial services clients, the executive team was unable to come up with a coherent set of capabilities.
This became apparent when I shared with the executive team a simple observation about working with non-technology clients. That is, to be “more” successful with non-technology client they will have to change or adapt before they can win those new clients. For example, unlike with technology companies, financial services companies do not provide well-written requirements or specs. Application development is more collaborative. It’s generally a process of trying out new ideas and refining them before the specs are clear. Therefore, the requirement on a Vietnam firm is to have more BA with a financial services background and the business skills to be able to collaborate with the client team. They will need to be able to provide more onshore resources to collaborate with the customers.
I suggested, as a follow on, a work stream to develop a few key industry verticals. To look back into their history and talent pool and determine 2-3 areas that they consider their strengths. Also, conduct a service review with some of their existing customers to determine if there are more they can do as part of their strategic account management.
On this note we broke for lunch. Only four of us were available for lunch so we walked to a popular local lunch place. Do you remember the typical Chinese buffet (many of them in the Midwest) with 20+ items on steam tables? Well, this Vietnamese buffet looked similar (no steam tables) but here you get freshly cooked authentic Vietnamese cooking. They only open for lunch. There were lots of office workers at the restaurant. The food options were amazing and my lunch only cost $2USD.
After lunch I spent sometimes catching up on emails and notes. There was a slow start after lunch as I think some people took naps. Once people started regrouping, a round of Vietnamese iced coffee was consumed and we were ready to pick up the discussion again.
This discussion was fascinating. The company had one pricing model. They used a cost plus a fixed markup model … globally from Australia to Japan to the US. I asked them whether they benchmarked their rates with their competitors recently. The answer was no, as in never. They had no idea how much their competitors charge for different services.
This was a heated discussion with broad participation from everyone. I guess this area is more concrete and direct vs. the strategic nature of the previous topic. In summary, I challenged their thinking around a few key areas:
- Market driven prices vs. production costs – I took the discussion to “how much more they could have achieved!”
- Perceived value from different price points – They did not know that they could have lost businesses by pricing too low.
- Pricing as an element of resource allocation (A team vs. B team) – Do not use the “first come first serve” principle but allocate your best resources to your best client. There is a better chance of winning more business from your best clients.
We agreed to set up a couple follow on work streams to benchmark Vietnam and India rates and to determine whether their current rate is appropriate. Also for the US, they need to determine what the “appropriate market entry rate card” is.
I added this topic to highlight the key requirement for onshore capability. This was discussed at length but the decision was made to address this on a client-by-client basis. The primary reason, in my opinion, is due to the cost. I think their US sales effort will suffer due to the lack of onshore presence but it is not worth beating this dead horse.
Sales & Marketing
This was a shorter discussion. Currently the company has a few partnerships around the world (e.g. Japan, Australia, Europe, Canada and US) where they do “white label” work for technology consulting companies. The biggest marketing tool they currently use is their website where they get inquiries from customers.
I shared with the team multiple marketing strategies to develop their sales and marketing effort in the US but suggested that they revisit this after they complete work streams on vision, segmentation, and pricing.
HR (Recruitment, training and compensation)
The head of HR provided an overview of the current resource pool. The company has between 1,000 – 2,000 engineers with experiences level up to 10+ years. In the last two years, there was a big demand for Japanese speaking resources due to the tremendous growth of the Japanese market. They implemented strong initial training program with elements around professional skills, English language fluency, client communication etc.
The company advertised and recruited at all the HCM City universities. The turnover is manageable at around 7-8%. They attributed the low turnover to generous benefits such as subsidized mortgage/loan, scholarships, healthcare for parents/extended family, etc.
I didn’t really have much to add in this area except suggesting that they may want to explore some non-traditional sources for resources such as technical colleges and consider more internal training to further develop talents.
Market Position Strategy for the US
We discussed the uniqueness of US customers. Some key insights are:
- Outsourcing is more mature. The transition is to move from one supplier to another.
- US companies has a tendency to review their supplier relationship every 3-5 years. Therefore, there are opportunities to “get your foot in the door”.
- A US client is more open to give a new supplier a chance. But, they will watch you more closely and be less forgiving if you don’t meet expectations.
- US customers have higher expectations, e.g. faster response, better quality.
- The scope of work in the US can be bigger and more complex so the needs of US clients will need to be determined since these needs are different than those seen in Europe or Japan.
There were a few major themes discussed for the US market entry strategy.
- Identify 2-3 industry verticals to focus their sales and marketing effort around.
- Develop marketing materials around these industry verticals including case studies, brochures, presentations, white papers.
- Develop a phased approach based on existing customers in those verticals.
- Benchmark existing pricing strategy and decide on the new pricing model. In particular, consider the decision whether to develop a separate pricing model for the US market.
- Soft launch in the US. Leverage Viet, if necessary, to provide business development support, conduct business review of existing US clients, and identify additional business opportunities.
Several work streams are to be completed to further develop the workshop discussion.
- Identify 2-3 business segments/industry verticals to focus their efforts.
- Benchmark pricing model and determine the future state.
- Develop a plan to enhance/expand business with existing customers
Based on the workshop results and multiple follow up discussions, a final market entry strategy has not been defined.