Do your homework Featured

8:01pm EDT November 30, 2011

For all the pride a company may feel once it achieves success in a chosen market, there is also a serious risk of stagnation. The pursuit of new markets can keep a company operating at its highest level of profitability and productivity, but the path can be deadly for the uninformed. Author, entrepreneur and strategy consultant Stephen Wunker provides a steady course to success in his book, “Capturing New Markets: How Smart Companies Create Opportunities Others Don’t.” In this interview, he discusses the fall of industry giants, why failing smart means failing fast (and cheap) and why your company needs to do its homework before attempting to break ground in India and China.

Is there a company that serves as a good cautionary tale for the perils of ignoring new markets?

Blockbuster had a wonderful business. It was minting money and had great cash flow. It had thousands of branches throughout the United States, and while it was enjoying this terrific situation, this company called Netflix took root. Blockbuster ignored what Netflix was doing until pretty late in the game. It tried to copy it, but it did it in a halfhearted way. The Blockbuster online rental program never caught on.

It was the same story with Blockbuster and Redbox. Again, Redbox did phenomenally well, and Blockbuster copied it too late. Ultimately, Blockbuster got caught in this death spiral of having a lot of the most attractive renters be taken from it by these other competitors, and yet it was stuck with all these high-cost locations. As it shuttered the high-cost locations, it also lost most of its renters and had a very difficult time making ends meet.

Tell us about some of the factors that lead businesses to ignore new markets. Is this often the result of a desire to continue appeasing shareholders by focusing solely on dominance in one market?

You want to know what your core competencies are. But if you stick solely to what those competencies are, it’s like driving by only looking in the rearview mirror. The politics in a larger-sized company tend to get people to stick to what they know. They don’t want to get caught out taking bold risks that turn out not to pay back the investment. But they also just don’t want failure.

Ironically, that is completely ignoring the lessons that venture capitalists would teach you. VCs, on average, earn about 25 percent higher returns on their investments than public companies. That’s even adjusting for the type of industries in which VCs tend to operate. Yet, they fail far more frequently than the average public company. In an average VC portfolio, out of every 10 investments, six or seven are going to be total write-offs. The secret to VC’s success is that they fail very quickly and very cheaply.

You cite in the book that the World Bank has China ranked 79th and India 134th in terms of ease of doing business. What are some of the potential problems of which businesses may be unaware?

Try to find companies that have really made significant profits by expanding in those countries. It’s a very short list. That’s not to say that you shouldn’t be there. It’s critical to be there and understand these two countries, both from an opportunity perspective, as well as from a defensive perspective because a lot of your future competitors are going to be coming from those two countries. But if you really want to make a go in emerging markets, going to China and India is like saying you want to start playing basketball and your first step is to try to join the NBA. It’s a very tough place to get your start.

If you look at companies that have really been successful in emerging markets, Walmart is a good one. They cut their teeth in places like Mexico, and they’re now in South Africa.

“Capturing New Markets: How Smart Companies Create Opportunities Others Don’t”

By Stephen Wunker

McGraw Hill, 260 pages, $30

About the book “Capturing New Markets” breaks down longstanding methods of attempting to succeed in a new marketplace. The pace of today’s markets requires a unique approach that leans on collaboration rather than competition. The book combines extensive research with multiple case studies and the author’s own experiences as a successful entrepreneur and consultant.

The author Stephen Wunker is an entrepreneur and widely published strategy consultant who has created successful ventures for his own companies and clients across six continents. He is the managing director of New Markets Advisors, a firm dedicated to helping companies find, enter and win in new markets.

Why you should read it Without the right amount of preparation, research, strategy and timing, businesses face a steep uphill climb when attempting to enter new markets. “Capturing New Markets” is a compact guide from a successful entrepreneur that offers new ideas tailored for today’s global, high-speed marketplace. Wunker outlines the challenges a business will face and offers the best methods to overcome them in bold, yet simple, moves. His recounting of the missteps of other organizations provides critical reminders of the importance of understanding new markets before a company attempts to enter them.

Why it’s different Wunker breaks down business models and rebuilds them in memorable, effective ways. He does an excellent job of balancing the technical details with the real-world examples that cross a variety of industries. The book is a welcome change from the stream of titles that rephrase the same message of “Be more like Apple.” Wunker’s advice on the Indian and Chinese markets will be eye-opening for many organizations who assume that a large population translates into more money from a smaller percentage of market penetration.

Can’t miss “Entering at the Right Time.” In this chapter, Wunker provides information on the single most difficult challenge faced by any business attempting to enter a new market: when to make an entrance. Arrive too early and your company’s mistakes can be your competitors’ new selling points. Arrive too late, and you’ll risk being too far behind to catch the leader.

To share or not to share While “Capturing New Markets” should be on every entrepreneur’s reading list, its impact will likely be best felt in the C-suite. For the occupant of a company’s corner office, it’s a can’t-miss title.

How to reach For more information on this book, visit www.Summary.com.