In a recently published article on The 7 Deadly Sins of US Market Entry, I called out lack of “Customer Problem Fit” as the second of the deadly sins. In this article, I will elaborate further. The sin was defined as follows:
“Often the problem companies solve in their home market doesn’t exist in the US, or exists in a much different way. Hailo from the UK learned this the hard way when it brought its ride hailing app from the UK to NY. It left the US again a few years and many millions of dollars later.”
Thousands of companies have made this mistake. And it is an easy one to make. You are selling in your home market with several million dollars in annual recurring revenue and hundreds or even thousands of customers.
Validating the customer problem and the solution happened a long time ago for you and your company. You identified a real problem in your home market. You built a solution. Your target customer was and is willing to pay for it and you have been growing ever since. It is easy to assume that this will work the same way when you come to the US. But it often doesn’t. There are many examples of this.
A company we worked with a few years ago had developed a unique scheduling optimizer it was selling to home health agencies in its local market. The software enabled really effective matching of patients and caregivers taking into consideration specific caregiver skill sets, language, culture, location considerations and more.
But in the US it turned out that scheduling was not the main problem. A bigger problem than scheduling caregiver resources was FINDING them. There were too few people available agencies were more concerned with being able to fill the required time slots than anything else. They were in pitched battle with one another for resources and they were constant afraid that their employees and contractors would leave to work for someone else. This required a so-called “pivot”, which the company was able to make in advance of market entry.
In the case of Hailo
A better known case is the ride hailing company Hailo. The consensus is that this UK based company failed in the US because what worked in London didn’t apply in NY. In NY, finding passengers was not a big problem for drivers. Anyone who has ever tried to get a cab in NY has learned this the hard way. But this was the core of the value Hailo offered drivers in London.
In NY, the problem Hailo solved in London was not important. The problem in NY was finding a RIDE. That was not a problem for drivers. That was a problem for passengers. Uber solved that problem by bringing a previously untapped “army” of cars and drivers into the market. This solved the real problem in NY and many other US cities, and Hailo and its taxi-centric solution eventually exited the market.
Failure to adapt the sales strategy
Coming to the US, the inclination of most international founders is to assume the problem they solve exists in the same way. This is a dangerous assumption. As the Hailo / Uber war shows, even the dynamics of a market as ubiquitous as taxis don’t work the same way everywhere. Heavily regulated markets like healthcare, financial services and education are even more likely to have significant differences that can that can require major adjustments to business models.
A Saner Approach
A saner approach when entering the market is to assume that the target customer, the customer problem and the required solution will vary from what you have seen in your home country. Revalidating the customer problem and the solution fit is an important step to take before you go all-in on sales and marketing.
In fact, you should not assume that any of the elements of your “business model canvas” will be the same. When working with companies, entering the US from other markets, we usually start things off with a step-by-step process to re-test the entire business model. We use the lean canvas to do this, but you can use other models as well. The main thing is you need to do it! . If there are significant differences in the US market, you will want to figure that out sooner rather than later!
Interested to learn more?
Download our FREE ebook “7 Deadly Sins to Avoid When Entering the US Market.” Download Now
