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Many companies, particularly in the game space, have failed to match their local success in international markets. Ones that believe they are particularly data-driven have often had the worst results. The biggest single contributor is that these companies experience false negatives, negative results that they then extrapolate to the opportunities outside their home market. I refer to this phenomenon as The Exporters Dilemma, as a homage to Clay Christensen’s seminal work, The Innovator’s Dilemma.


Parallels with The Innovator’s Dilemma

In the Innovator’s Dilemma, Christensen shows that successful companies have trouble innovating because they know their customers too well. Innovating is about creating products that initially appeal to a new customer and then evolves to penetrate the existing market. The customers existing customers do not find the new offering compelling, thus the company believes it is not an opportunity.

Successful companies also have trouble innovating because they are successful and they have built a structure that does not support small opportunities. Thus, an innovative opportunity may only contribute 1 percent or less to the bottom line, and thus the company does not put any resources into growing the disruptive innovation. Instead, a small competitor takes the opportunity and grows it into a business that then undercuts the established companies existing business.

There are parallels to both these issues when building an international social games business. Great games have already optimized for the core market. A top social game team is going to be a top team because they look at the metrics for their existing players and evolve the game to generate the best metrics from those players. That could include features that will perform well or licensing IP that resonates with the players.

When the company expands internationally, features that a Frenchman might like may be unattractive to an Australian. The Frenchman might like a feature where players work together to create beautiful art, while the Australian might prefer that by cooperating you create a race course. With IP, some of the strongest IP in one market may not have value in other markets. While a science fiction game in the US around the Star Trek IP would have a strong fan base, the same IP would not generate any traffic or appeal in Italy.

As you keep developing the games, the divergence between your success in the home market and appeal in other markets will grow. If you are only optimizing for one market, it becomes a self-fulfilling prophesy that you are only strong in that market.

The other parallel with the Innovator’s Dilemma is how the economics and business structure could impede your growth. If you are generating a few hundred thousand dollars a day in your core market and your international revenue is $1,000/day, finance (and others) will push you to focus on your core market. They will argue the management distraction is not worth the effort. Again, this becomes self-fulfilling. Without management focus, the international markets are not going to grow concurrently with you building out new strategy for the home market. Thus the international market seems even less relevant and the decision to focus on the home market is reinforced.

The False Negative

I have written before about how important it is to avoid false negative, drawing a negative conclusion based on a negative result where the result is not necessarily indicative of the greater opportunity. This threat is particularly strong in growing internationally.

As discussed above, your game may not do well initially in foreign markets because the features are geared to your target market or your IP is meaningless to international players. This negative reaction (which may result into poor ad performance, less monetization, less retention or all) could prompt you to believe you do not have an opportunity outside your home market. The reality is your product may be able to perform very well in target markets if you adjusted the features for those markets or swapped existing licensed IP for ones relevant to the new users.

You also may have poor international results due to weak localization. I have seen many instances of good products localized very poorly. Sometimes it is foreign products coming into the US, where the language was created by a non-national or even a machine. Often US products do not test their foreign versions and the localizations are very poor. A weak localization breaks the experience for the player even if everything else is good (think of reading a customer service message or manual written poorly, even if the underlying information is great you leave very unhappy). It also makes players much less likely to spend (thus skewing your monetization numbers) because they will not trust a game with poor localization.

None of these negatives actually show that if you modified your product to the local market you would fail. The only way to know if your product could succeed in other markets is by creating a compelling experience for those markets.

Beware the competition

A key threat to ignoring international markets is that it could either empower your competition or create new competition. I have seen many initially small companies replicate games working in large markets by focusing on their home market initially, building the game there (both content and revenue) and then attacking the big player in its home market. As they have a protected home market, they are thus in a good position to attack as they have a steady core cash flow that they can then invest. Also, your existing competitors could penetrate foreign markets before you, leaving you to pay an expensive game of catch-up where you either need to sway their player base or get IPs from a smaller pool.

You can leverage The Exporter’s Dilemma

Once you are aware of The Exporter’s Dilemma, you can benefit by opening new markets and staying ahead of your competitors. Look at new markets as just that, new markets, not extensions of your existing market. Build out a plan to penetrate each market just as you had a roadmap to penetrate your core business. Try to lock up players and IPs before your competitors move in. The biggest companies in the world (Apple, Microsoft, EA) succeed by having international businesses, you should also.

Key takeaways

  1. The Exporter’s Dilemma shows that successful companies sometimes fail in markets outside their home territory because they expect the same results from product features and IP optimized to their home country and the initial international numbers are often not enticing enough to generate additional investment
  2. Look at new markets as just that, new markets, not extensions of your existing market. Build out a plan to penetrate each market just as you had a roadmap to penetrate your core business.
  3. If you do not compete outside your home market, somebody else will. That will either create local competitors who will be a threat in the future or give your existing competitors a head start.

Slide1I recently read an article in Harvard Business Review, “Don’t Spin a Better Story. Be a Better Company,” that highlights the value in fixing your company as opposed to trying to use PR experts to change customer opinion. Companies hire or use internal PR to sway people into thinking they are a great company. As the article says, “I know what doesn’t work: thinking you can tell a better story without becoming a better company.”

Look at what you do well and double down

First, you should identify what your company is already doing that you are proud of. In the article, it comments on Walmart’s response to Hurricane Katrina, when the company provided meals, supplies and money to hurricane victims. While Walmart had (and still has) many detractors, the company not only realized it should publicize these activities but that it should also increase the frequency of this type of corporate activity.

The key is not simply to find something good your company is doing and publicize it, but to also build off of it. If you encourage your employees to help disadvantaged children, take steps to have more employees participate, pay for the employees to have tools that improve their effectiveness when giving help, give employees more time off to help the kids, etc.

In the Walmart situation, it started when the CEO asked “What would it take to be at our best all the time [not just when responding to Katrina]?” Walmart then made a strategic decision to go where those questions led. It identified areas where being better would have the biggest impact.

The publicity will follow

Once you optimize the great things your company, or your employees are doing, the positive publicity and benefits will follow. People will naturally begin discussing it. Blogs and press will learn about your activities and want to promote it. You may want to amplify the messaging but it starts with doing something truly special. In the Walmart case the publicity is well-received because it is real.

Spin won’t undo negative behavior

Conversely, if there are activities your company is embarrassed about, a great PR team (internal or external) will not change how the activity is perceived. If you are saying 4 out of 5 doctors recommend your product while in truth most doctors think it is terrible for people’s health, hiring a firm that identifies 10 doctors and has eight of them actively endorse your product will not help. Marketing does not change the reality. The solution here if you are not going to create a healthy product, then do not try to position it as one (see why Carl’s Jr. is outperforming McDonald’s).

Think when you have bad sentiment

You can use negative customer opinion to improve your company. When there is negative sentiment, you need to explore why that sentiment exists. Rather than trying to spin it away (or ignore it), use it to understand what customers think of your company. Hopefully, it will show weaknesses that you can actually fix by changing the way you do business or build your product.

What you can do

First, as Walmart did, encourage everyone at your company “to get out of its defensive crouch and listen to its critics.” Second, act on this criticism, not by hiring someone to convince people otherwise but make changes based on what your customers and the public is saying. You will build a better company that is also more popular.

Key Takeaways

  1. If your company or product is experiencing bad publicity, the best course of action is to identify the cause of this publicity rather than hiring somebody to spin a different story.
  2. Once you have identified what people do not like, have your company focus on the good it provides and build that out or stop doing what people dislike.
  3. Good publicity will follow, as it will be based on real stories.

Lloyd Melnick:

A perfect example of great customer service and awful customer service by two competitors

Originally posted on Consumerist:

(David Transier) (David Transier)

Generally when people decide to pay it forward, it involves purchasing the coffee for the vehicle behind them in the drive-thru or covering the cost of diapers for the woman ahead of them at the register. For an employee of Alaska Airlines in Seattle it meant taking out her own credit card to buy a new plane ticket for another airline’s stranded passenger.

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