You have a great software product used by customers in many countries all over the world. Fantastic! It’s thrilling to see your baby grow up, leave home, and make a name for herself out there in the world. You might think, “We’ve made it!” Having users all around the globe is the dream of most companies, after all. But don’t celebrate too fast. There are global speed bumps ahead.
At some point in the typical software company’s global growth path, they hit a revenue roadblock if they don’t take intentional steps to address product-market fit in a more nuanced way, at the local level. In this article, I’ll explain why this so frequently happens, and how you can prevent your company from falling into the same trap.
Software Companies Cross the Chasm One Country at a Time
I’ve written before on this blog about why I’m a huge fan of Geoffrey Moore’s classic book Crossing the Chasm in the context of international growth. It’s a particularly useful model for “disruptive” software companies who are assessing their international strategy. It’s not only a familiar reference, but one that rings really true for people who are charged with international expansion or those who are trusted to run a local team.
Why does international growth feel so hard sometimes? It’s not just you! It actually is very difficult to cross a chasm in a foreign market. The distance you have to travel is even further when you’re crossing both a geographic border and a market chasm at once. And the more countries you try to do this in simultaneously, the harder the struggle will feel.
When you’re building a product for a particular market, usually in your home country, you cross the chasm, make your product better, hear lots of tough but helpful feedback, and then you level up. You start to get a motion going in which you can improve what you’ve built until you truly can address that early majority. Then before you know it, you’ve crossed the chasm! For years after that, you might feel like your growth is simply on fire. But go into any new country, and you’ll have to cross the chasm yet again. And again. And again for each new market.
Companies Usually Either Pave the Road or Ride the Wave of the Market
If you haven’t felt the pressure of an international chasm just yet and things seem easy so far, you might assume that your international success is due to the combined strength of your product, sales, marketing, customer service, and your ability to hire great talent to address your market. These may all be true, but these are all very inwardly focused reasons, and they are definitely not the complete story.
Remember, you’re operating in a market with competitors, and this provides important context. Too many companies stay insular in this regard. If your company has been seeing tremendous early international success, before you’ve even really thought about local product-market fit outside your domestic market, chances are that:
1. You are the category leader actually developing the market for your product for the first time. If the product you are building is truly a new one, and you don’t have many real competitors just yet or you are competing with “the status quo,” then you might be paving the way for a new tech category, which is why your international growth will naturally be higher. Early adopters will seek you out and rave about your product and boost your confidence (not too much, I hope!) This can take you to the edge of the chasm. But to avoid falling over the edge, you’ll need to develop new growth paths via smart channels that won’t consume too many resources and can boost your brand credibility along the way. Market development can be seriously resource-intensive and time-consuming without the right channels and relationships in place to reduce friction and help you grow faster, at scale.
2. You’re capturing your share of the underlying market growth for an established tech category you are in. If you’re in a category that is known and the market has already been sized, you might just be riding the wave of the overall growth in your market, the rising tide that is lifting most boats including yours. Chances are you will obtain a share of that market growth no matter what, even with a business that isn’t impeccably run. Take a look at your company’s rate of growth and compare it to the underlying market growth, along with the growth rates of any similarly sized competitors. If your company’s CAGR is higher than that of the tech category itself that you’re in, your business is probably pretty well run. If you’re at the average, chances are your business is average. If you’re below average, definitely take the time to address business fundamentals and your domestic performance before you proceed any further with international markets.
Crossing Some Chasms Proves Easier Than Others
Some countries will be faster than others. For companies that speak the same language and are culturally similar (such as a US-based software company entering Australia, or most US companies going into the United Kingdom or Ireland) you might even leap across the divide without much effort.
But with many others, you’ll bang your head quite a few times. It might even remind you of your early days, when you were figuring out your product-market fit in your home country. You might be tempted to give up entirely. Just remember, it isn’t the market that’s the problem. It’s that you’re not adjusting your product for that market in order to achieve product-market fit — or perhaps you are, just not as quickly as you need to.
Take one of the examples that is best-known to Westerners — Japan. Is Japan a “tough market?” No, not if you address local product-market fit. If you have a strong strategic partner strategy — especially in a country like Japan where big well-known brands and relationships are viewed as long-term investments — you can go into a market much faster and easier than if you try to go at it alone. From a pure business point of view, Japan is not a “difficult market.” It’s simply different from markets that are more familiar to us as Westerners.
It’s not Japan that is the problem. Which sounds more rational, to blame an entire country for your company’s lack of product-market fit, or to realize that it might be the way you’re approaching that market? It’s very difficult to convince a US-based company that if they want to succeed in a new market, they need to swallow their pride, evolve and adapt. Otherwise, they simply will never cross the chasm to meet their Japanese customers on the other side of it. Put the responsibility to change on yourself, the company. Don’t blame the market if you really want them as your future customers!
Get closer to the customer, seek to understand their needs in detail. It’s the only way you can cross the chasm, in Japan, or any market! By the way, Western companies, don’t feel bad. Japanese companies often face similar struggles when crossing the chasm in the other direction and trying to achieve success in the US market. It’s a big leap no matter which side of the pond you’re on.
Achieve Product-Market Fit Faster with Continuous Deployment
Good news if you’re using modern software development practices. The newer, more modern companies are in a better position to “move fast and break things,” to pivot, and to otherwise figure out the needs of a market, achieve a better fit faster, and incrementally work toward meeting the needs of local customers, receiving valuable customer input at every step along the way. You can be more responsive to local voices when you’re agile. Believe it or not, agile is one of your best assets that will help you cross the chasm faster in each market!
Can you still achieve product-market fit for a local market with waterfall development? Yes, and many companies have. It actually still works fairly well for large, established companies — for now. It’s just that you’re making bigger bets each time when you decide what features to include. By the time you do your next release, the market might have actually moved on, and you’ll always be a bit further behind than the same company using a continuous deployment model. And, you need to remember that your competitors might out-develop you at some point, even if you started the game long before they did.
Talk to Local Customers to Truly Understand Local Needs
The beauty of talking to your in-market customers, if you’re open to their feedback, is that they’ll actually tell you exactly what you need to do in order to achieve product-market fit. And they’ll tell you in order of top priority. If you take the time to survey them, or better yet, talk to them, you’ll start to notice recurring themes in what they are saying.
The best news? Often, you won’t need to drastically re-engineer your product in order to meet local needs. More likely, you’ll need to consider adapting some of your processes and the way you go to market. In many markets around the world, the fastest path to market is via strategic partnerships. Even if direct sales worked great for you in some countries, often, the fastest way into a market is to be carried in on the backs of other brands and companies that already have the relationships and the trust of your target customers. They know your customers already! They understand them and can be a great “bridge” for you as well.
Prioritize Partners to Speed Up the Process of Finding Local Product-Market Fit
What I love about partner channels for international growth is super simple: velocity. They help you obtain greater market share, much faster than you could on your own. For most companies, it takes much, much longer to build brand awareness directly, and to build up the necessary level of trust in your company within a foreign market, even if you have a physical presence there. An entity and an office, and even feet on the ground mean nothing in overall scope of a local market if they are unaccompanied by brand awareness.
It will always be harder for you to cross the chasm if you try to do it alone — even with the best talent, the most money, and the best product — than if you partner with native players who already live, work, and breathe the local market you seek to target. I won’t go so far as to call partners a way to obtain “instant” local product-market fit, but I will say that in most markets, they can get you “rapid” local product-market fit for sure, especially compared to a world in which you try to capture local market share without them.
In summary, crossing the chasm while also moving into a new market is difficult. But the sooner you realize that’s what you’re doing, the easier it is to open up, listen to local feedback, and fill the gaps to enable your company to achieve local product-market fit and make the leap across!