BusinessQ: Is Utah County an ideal place for an international business to be headquartered?
Scott Schwerdt, Nu Skin: Access to resources, great shipping facilities and a Delta hub make traveling around the world from Provo very simple. Utah County is a perfect launch pad for a global business because of language capabilities. Also, many of our hires have extensive experience in understanding other cultures.
Tim Provost, Blendtec: The talent pool in Utah County is better than any other part of the country. We’ve got great minds and people are disciplined with learning and with being the very best at their skillset.
Chad Bennett, Lancera: The culture is entrepreneurial. I am always having people come to me and suggesting how can we do this and that better.
Schwerdt, Nu Skin: We don’t have to beg people to go to a foreign country. They want to go and often times it’s hard to get them to come back to the United States.
McKay Brown, Novell: Utahns have been immersed in culture and that’s more than just going on vacation. They’ve lived overseas for several months or years, and it helps them relate to consumers. The language is something anyone can learn, but you have to experience culture first-hand.
Lee Wright, Kirton McConkie: Combine our cultural understanding of various areas of the world along with the entrepreneurial attitude here, and we have a successful global business environment.
BusinessQ: What types of companies are well suited to go global?
Provost, Blendtec: Manufacturing. Blendtec is trying to vertically integrate our manufacturing processes. We are reducing costs and improving quality. U.S. consumers want U.S.-made products, but internationally there is a demand for it, too.
Bennett, Lancera: Every company can do business globally. Even local plumbers and small serviced-based companies have access to talent worldwide as well as with contact centers and data entry.
Schwerdt, Nu Skin: But going international isn’t the panacea. You can only go international if you have consumers at the other end of the pipeline.
Rob Galloway, US Synthetic: True. To be a global company, you have to have global customers. If a company gets too locked into its own way of thinking, they’ll struggle internationally. To succeed, you have to understand the value of what you provide and help people have greater access to that value and productivity. When you attack these issues and determine what it costs to do business, you have context as to how to approach your business in each country. You have to be willing to change your business over time because when you reach out to global markets you can be surprised. There are differences in values, lifestyles and needs.
Clint Sanderson, buypd.com: We are a great example of making sure there is demand before you go in. We only sell U.S. investment real estate. As you see in the news, there is a huge global demand as investors in China and Australia, for example, want to buy U.S. real estate.
BusinessQ: How do companies know global expansion is going to work for them?
Brown, Novell: One thing companies do that is really silly is sit back and think they’ve got to go in big. Get in and test the water. See if it’s going to stick. Fail fast so you can learn from it vs. making grandiose plans but never actually executing.
Sanderson, buypd.com: We do small events and test the waters. It takes several times to refine the pitch and the product, so we go in with a different angle and test, test, test. We figure out the way we need to do it in each place, and then we scale it.
Wright, Kirton McConkie: There is a risk in doing a small test because there is intellectual property involved. Do you own the trademark in the country? Is the patent protected? A mistake companies often make is going international without thinking of the risks and factoring for the cost. They think they are just doing a sample test with 500 products, but now those 500 products have been reverse-engineered and are being sold out of backrooms in 15 different countries. How did that happen? They didn’t protect their IP in the first place or think about consequences.
Galloway, US Synthetic: I agree. There are people in each country you can talk to or make part of your business who can warn you early on about potential mistakes without risking your IP.
Sanderson, buypd.com: In the software space, watch out for people who say they want to do a joint venture. That should be the first red flag because all they really want is to look at your product, rip it off and start offering it in their country.
Schwerdt, Nu Skin: In the early days of developing international markets, we’d build a warehouse and spend years funding these markets to get to profitability. Now we let the market determine our infrastructure, and we do our legal homework for about one to two years by getting registrations and protecting our patents. Then we find local logistic partners rather than trying to reinvent the wheel in each country. Over 30 years in business we’ve learned how to go into a market and create a pathway to profitability where our infrastructure costs are much lower. We do a lot of our call center work out of Provo, which is another reason Utah County is amazing. We service all of Latin America, South Africa, Australia and New Zealand right here, porting our toll-free calls into Provo. We run 24 hours a day, seven days a week, and people talk to those who speak their language and are familiar with their culture. Opening a market and going big can burn cash very fast.
Brown, Novell: Keeping your customer service in one spot physically also makes it a lot easier to do training, spot problems and mitigate issues.
Provost, Blendtec: It’s essential to follow demands and trends when you open new countries. For example, people want to be healthy and there’s a green smoothie revolution. Another trend is people wanting to leave as little footprint on their kitchen counter as possible, which means they want one appliance to replace 12. Attaching yourself to cultural demands is marketing. Market the product the way it is going to meet demand in each country. In Japan, they aren’t trying to lose weight, so we market our blenders differently.
Galloway, US Synthetic: We should all think our best global partner is our customer and end user. They make it safe to go there if we engage them in our strategy building. We sit down with our customers and ask about their global strategy and how can we become an enabler. When you start getting your head around your customers’ global strategies, then you go from your own global strategy to a portfolio of global strategies.
BusinessQ: How can companies prepare to take steps globally?
Wright, Kirton McConkie: Be careful who you are dealing with. I’ve had clients who thought they had a manufacturer just to find out it was someone in a chain who went to someone else in a chain and someone else — with a middle-man markup along the way. Make sure you are looking at local requirements, whether it is regulatory or local laws. You can put your standard U.S. agreement in place just to find out provisions of that agreement are void in the country. It doesn’t matter what it says, you are now subject to their laws. Strategically, decide if you are going to consumers in other countries or if they are coming to you, and set things up appropriately to avoid risks.
Galloway, US Synthetic: Those risks have to be managed actively. For instance, you might have an agreement with a manufacturing company. A year later you go back and now they are only inspecting and shipping it to you and they have a manufacturing partner. Maybe now it’s three or four levels deep. Actively manage your agreements and your risks.
Wright, Kirton McConkie: Your agreement is only as good as your relationship. The cost of trying to enforce an agreement is sometimes so prohibiting that it can put you out of business. If you don’t have the right partner, trying to enforce an agreement is not a good strategy. The agreement is to help you understand the onramps and offramps and the way you interact. But a lot of cultures want to do business on a handshake. I would never recommend that, but the handshake has got to be there so there is an understanding of trust between you and whomever you are dealing with internationally.
Bennett, Lancera: Build relationships of trust long term — not just a phone call or a weekly meeting. Before we go into a market, we build yearlong relationships. They might not have anything to do with the business, but if they are in the city we are going into they can help us know about problems because we trust them. Without relationships in a foreign country, you have nothing to fall back on. Legal proceedings can be cost-prohibitive, so it’s important to have trusted relationships.
Schwerdt, Nu Skin: Too often, expediency can overrule legal constraints. In a publicly traded world we’ve got very strict guidelines as to how we interact internationally. A new company going into international expansion mode may not realize the ramifications in entering into an expediency relationship. They want to do it fast so they are going to find some way to do it fast. They don’t understand the long-term legal ramifications.
Wright, Kirton McConkie: What your local partner does has an impact on you legally. If your distributor is doing something wrong and you know or should have known, and they are paying kickbacks or establishing relationships with governments to get favors, for example, then the U.S. Federal Government will come after you. The pricetag can be quite large, so be vigilant or you’ll be sanctioned.
Brown, Novell: If you spin it up faster, it will take you longer to unwind vs. if you take longer to spin it up, it will unwind slower.
Schwerdt, Nu Skin: We spend a lot of time training our lowest entry-level employees the rules because — as you say — it doesn’t really matter if a problem was started by a low-level employee. If you knew about it or found out about it and didn’t do anything, then ultimately you are responsible and it has a tremendously significant impact.
Sanderson, buypd.com: A couple of years ago, we flew over to India and hammered out a contract with who we thought would be a great and straight-forward relationship. A year and a half later things still weren’t working. It takes time. If you want to expand into India, it’s not going to happen in six months, typically.
Schwerdt, Nu Skin: We looked at markets like China and spent eight years developing and investing before we sold our first product there. We had over $100 million in investments just making sure we had our t’s crossed and i’s dotted. India is another huge consumer market, but it’s clearly a market that is going to require a lot of discretion and control on our part so we don’t move faster than we’re prepared.
Wright, Kirton McConkie: What’s shocking to me is you’ve got big players and public companies, but at the same time you’ve got a family starting a business in their garage and they put up a website. They have a cool product or service and the next day they get requests from Australia, New Zealand, China, Japan and they thought of themselves as a Utah Valley-based company. Now they come to me and ask, “Are there problems with shipping to them?” We live in a global market. You can be international tomorrow.
Schwerdt, Nu Skin: You’ve got to look at tax consequences of everything you do. There are all sorts of taxes that need to be collected, and they expect to be paid. Anything under the table is going to draw attention. Even the ma-and-pa operation working out of the garage needs to understand potential tax ramifications.
Wright, Kirton McConkie: You sold that product not anticipating that there was going to be an 18 to 26 percent tax added. All of a sudden your margin is gone, but you still sold it and have to provide it. Now you have to pay tax on top of that, and you’ll be out of business in a hurry.
Bennett, Lancera: A lot of companies think they can open an office in the Philippines, for example, because they think it is inexpensive. They don’t understand the true costs of opening a business in a foreign market. When we educate them on that, we usually land that client because they don’t realize the costs involved. It’s smart to see if there is someone already doing it better so you can use his or her talents and abilities instead of building your own infrastructure.
BusinessQ: What countries are favorable right now for global expansion?
Provost, Blendtec: Canada and Mexico are the easiest and are close by. We are doing a huge expansion with Canada — they welcome it and want us to be there. With Mexico, we find the same thing. They want to be partners with the U.S.
Sanderson, buypd.com: English speaking countries are a big deal to us — the low-hanging fruit. It’s also important to know your target demographic has the income to purchase your product or there’s another big zinger. If you don’t have the right price point for the consumer as well as your profit margin, you won’t make money.
Schwerdt, Nu Skin: There also has to be technical infrastructure in place. You have to be in a country where shipping is reliable and telecommunications exists.
Wright, Kirton McConkie: For me, the Big Mac index is the coolest way of measuring prices that each market can handle. If you look at the price of the Big Mac in a country you want to go into, that will tell you how much money people have to spend. McDonald’s has done all the research and knows what each market can pay. Now, that’s food. You’ve got to look at your industry specifically because certain things are more tolerant to higher prices.
Schwerdt, Nu Skin: In our case, we have to expect the unexpected. In Venezuela, for example, we deal with currency issues. Governments can be erratic in their decision-making, and that affects global companies. You have to be willing to say, “We are in it for the long haul.”
Brown, Novell: In the software business, we’ve been seeing great success in some European countries. Germany, for example, has really been a shining star.
Schwerdt, Nu Skin: We just recently dealt with a 36 percent currency devaluation in Venezuela. This affects prices and salaries, and the money in the bank has lost 36 percent of its value and we can’t get it out. We’ve got to be willing to weather the storm because Venezuela is our largest market in Latin America.
Wright, Kirton McConkie: Countries that aren’t good to go into include North Korea, Syria, Iran and Cuba. However, I work with a Utah Valley-based company that sells medical products that has a huge market in Cuba.
Schwerdt, Nu Skin: It depends on how many gray hairs you want.
Galloway, US Synthetic: It generally goes with the level of transparency you have in that market. You need to understand how your partners make money. In Brazil, for example, they have a complicated tax code and you’re going to need 4 to 1 tax accountants in Brazil vs. the U.S. But at the same time, there can be a strategic adventure if you have transparency into how money is made and how it exchanges hands.
Schwerdt, Nu Skin: China is our superstar market; we project over $1 billion in sales this year in China alone. We spent a long time preparing. It’s not like we went in expecting a home run; we went through challenges initially to make sure our business was set up correctly. We are there for the long term.
BusinessQ: What advice do you have for dealing with language barriers?
Brown, Novell: Free tools are like free puppies. You are going to get what you pay for. The reality is we are surrounded by great talent, but you need people who actually live on the soil to influence what you are doing. For instance, with our marketing materials we always have the final say by somebody who is in the country. It may be a sales person, a systems engineer, a marketing person — but we have to have eyeballs in the country looking at it.
Schwerdt, Nu Skin: Mexican Spanish isn’t Spain Spanish. Have somebody on the ground take a look at it who ultimately is representative of your consumers. Local translation is great, but it doesn’t represent real world.
Galloway, US Synthetic: Another good rule of thumb is if you don’t speak the language, use a translator but assume everyone in the room speaks English. It forces you to give proper respect as you communicate. Having side conversations in English is not good. It can put IP at risk because often there are folks in the room who understand English even if they’re not comfortable speaking it all the time.
Sanderson, buypd.com: On the flip side, we’ve had our contact tell us that everyone does speak English so we’ll be fine, but if English is their second language it turns into a mess.
Galloway, US Synthetic: You have to remember you are not just translating a language, you are translating a culture.
Provost, Blendtec: Build relationships with translators and make sure they are on your team. Don’t get in a situation where you say a sentence and they say five minutes worth and you wonder who is really controlling the conversation.
BusinessQ: How can you successfully manage a workforce around the globe?
Schwerdt, Nu Skin: We try to make sure everyone has a Provo experience. We want our employees and sales partners to understand the heart and soul of Nu Skin, whether they are in Latin America, Europe or Asia. People are amazed at how beautiful Utah Valley is. People go away understanding there is something different about Utah Valley. I tell people that when they come here, they’re going to feel like they are home. That sells more than any printed material.
Bennett, Lancera: One of the biggest problems we’ve had to deal with is expecting competency based on a degree an applicant had or a resume. I’ve learned not to expect they are going to be completely competent. Asia is our big market where we have many employees. We have to build a strong infrastructure of management and training to get what we want out of them and for them to get what they want out of the position. Go into it knowing you are going to train, manage and follow up. It’s management on steroids.
Provost, Blendtec: Make sure they know expectations of a full day. We have definitions of what work is in the U.S., and other cultures have their expectations of work.
Sanderson, buypd.com: Always manage your relationships and your agreements — whether you’re in the Philippines or Costa Rica or India. Otherwise, what might happen is you’ll get an operation going and get everyone trained and one of the managers thinks he can take over the business and take the employees away. Have the legal structure done up front correctly because you can be held hostage.
Brown, Novell: It’s naive to think you are going to stay in Utah and everything is going to go well in Europe, Asia Pacific and Australia and you’re not going to have to be involved on a regular basis. When you throw something out there and tell someone across the globe to run with it, the person receiving it doesn’t have the same understanding of the market. Having a regular cadence of conversations is critical as opposed to just relying on e-mail communication. It’s the little things of getting on the phone at a time that is convenient for them. People will know you are tuned into their needs and they feel less isolated.
Schwerdt, Nu Skin: In China, we are a China company, not a Utah company. In Europe, we are a European company. In each of our countries, our company has a unique identity but maintains the cultural spirit of Nu Skin.
BusinessQ: Lastly, can you share the global vision for your company in the next few years?
Brown, Novell: We are focused on rolling the brand back out. We are building award-winning products that make businesses run more effectively. We’re also reinvigorating a big part of our business through added-value resellers. We’ve continued to have a strong vibrant partner channel throughout Europe. We are looking to reinvigorate that with the Americas. We are also helping companies with challenges of the everyday user bringing devices in and all of a sudden data is leaking out. We are delivering products to lay on top of their infrastructure that allow users to have mobile devices while keeping things secure.
Sanderson, buypd.com: There’s massive opportunity right now in real estate, and this year we will be in several English speaking countries selling real estate — luckily we don’t have to patent anything. We have a strategy as we enter each country, and we focus on scalable growth.
Schwerdt, Nu Skin: We are in 53 countries today, so our expansion at this point is slow and steady. We look at strategic markets like India and Brazil, but we do a lot of due diligence as we continue to build out the huge potential in the markets we are in today and we are judicious in our expansion plans for the future.
Bennett, Lancera: We’d like to be on all seven continents in the next five years, but we haven’t found the right talent in Antarctica yet (laughing). Over the next year we are opening offices in South America and in India, and we expect to be on five continents in the next five years. We build a large infrastructure and provide scalable solutions from one to 100 employees in a couple of weeks. To do that we have to be in multiple places in one time, so we’re building a strong infrastructure.
Provost, Blendtec: Blendtec is in 90 countries commercially and retail-wise five or six, so we are looking to fortify our relationships on the commercial side and work with true partners who represent our brand well. On the retail side, we are establishing partners for customer care and warranty work. We’re hoping to reach a tipping point where 50 percent of our business is international.
Wright, Kirton McConkie: Kirton McConkie now has triple the space in Utah Valley. We are committed because we see growth; the entrepreneurial spirit here is going internationally quickly. We have a network of attorneys with expertise in every country. We will continue to develop unique expertise with regard to intellectual property and stay on the cutting edge of legal issues that arise across the globe. We are committed to supporting our clients in their international initiatives.
Galloway, US Synthetic: US Synthetic’s global reach is everywhere in the world where there is a drill. Our global plans center on expansion of the breadth of our products as well as the price point of products. We have an exciting future.