"Birdseye's frozen-food breakthrough took shape as a slow hunch, but it also emerged as a kind of collision between several different geographic and intellectual spaces. To imagine a world of flash-frozen food, Birdseye needed to experience the challenges of feeding a family in an arctic climate surrounded by brutal cold; he needed to spend time with the Inuit fishermen; he needed to inspect the foul containers of cod-fishing trawlers in New York harbors; he needed the scientific knowledge of how to produce temperatures well below freezing; he needed the industrial knowledge of how to build a production line. Like every big idea, Birdseye's breakthrough was not a single insight, but a network of other ideas, packaged together in a new configuration. What made Birdseye's idea so powerful was not simply his individual genius, but the diversity of places and forms of expertise that he brought together." Steven Johnson, How We Got to Now; Six Innovations that Made the Modern World
Innovation grows from a 'stew'
Have you read Johnson's book? It was recently recommended to me, and as one of about 5 that I'm reading simultaneously, I'm taking it in chunks. So far I've made it through "glass" and "cold." It's insightful and I'd recommend it. The theme is great - that confluence of technologies, perspectives and intellects collectively combine at certain moments in time, and create fertile conditions for surges in our societal development. Who would have known frozen peas were so fascinating!
That 'stew', or combination of unrelated factors that meld symbiotically, has to exist for ideas to coalesce and then to get traction.
What it means to export growth
As I read, I kept thinking about what feels to be the intractable problem of how to grow US export sales. So many of the necessary conditions are present.
- Malcolm McLean made it possible to move products anywhere in the world - and today, as imports fuel US consumption, outbound freight rates remain low as steamships move empty containers back to be filled.
- Treaties, trade agreements and conventions promulgated by organizations like the International Chamber of Commerce have largely harmonized global commercial transactions.
- Communications are essentially transparent in a world where more people have mobile devices than toothbrushes!
- Growth in income and consumption is essentially ubiquitous around the globe (as cool graphs from the OECD illustrate)
And yet, the enormous investment by the US government in the National Export Initiative failed to achieve its goal. Some will say that the hesitance of US companies to export vigorously is rooted in the virtually limitless opportunity which the 350MM strong domestic market represents. But there's more at play - indeed the UKTI (UK Trade & Investment) analog to the NEI has also failed to achieve it's goals - and that's among companies with a much smaller captive domestic market, and even despite strong historical and cultural global trade inclinations.
So there's something missing in the global sales growth development formula. As Uncle Sam ventures forth extolling the benefits of export, his exhortations are received by American manufacturers with the same bemused indifference as those of the young Frederic Tudor whom Johnson describes frantically wandering the streets of Martinique trying to hawk his load of New England ice before it melted. (Ironically a convenient example of export aspirations foiled by poor market understanding.)
It may be good; it may help; it may offer benefits. But it's a bit too radical as a stand-alone idea.
The frustrated merchant
Too many potential global sales growth success stories fail - ultimately turning on relatively small details. It's often not a problem for companies to produce product, move it, receive payment, etc. But there's a fundamental miscalculation in their planning - like NASA's mars lander lost to confusion over metric and standard units.
The traditional model of export expansion almost forces these errors. Companies undertake a process of research to identify potentially fruitful markets. That research incorporates a number of assumptions, each of which can be faulty. Errors in the theoretical are then compounded by any number of chances for cultural, market and commercial miscalculation - like differences in buyer scrutiny levels in different markets. And the fundamental optimism and restless impatience of American entrepreneurs becomes frustrated when results aren't quickly (6-18 months) impressive. There are many, many, many steps along the way where an error in judgment can doom a program.
Of course that's not different than domestic market innovation - and that's why many companies opt for a 'me too' business model. Innovation is risky, resource intensive and often fails. But there is a mindset hurdle as well - the core belief, often unjustified but nevertheless widely held, that 'international is different.'
Islands of success
And yet many SMBs do successfully export. What's different? Why do some succeed? Mostly by accident!
Statistically most companies that export only do so to a single market. And typically it's not a situation where they set out to export and then ran out of energy. Rather they ended up in a single market because their existing domestic customers finally prevailed on them to provide global supply chain support. They didn't set goals for global sales growth - instead they were defending their core business at home.
So the challenge is to create the circumstances for more companies to stumble into a rewarding export relationship in some market; and to help those active in a single market stumble into similar opportunities in other markets. Of course nobody can force their domestic customers to drag them along overseas, but it is possible to identify international buyers who will drag US companies into those markets. And even if the first efforts are grudging, they'll normally flourish eventually.
The 'adjacent possible'
Johnson draws on lots of examples simultaneous invention. Advances in understanding of core science enabled inventors, separated by vast geographical distances and with no knowledge of each other, to simultaneously innovate remarkably similar solutions to problems that hadn't yet been clearly understood. But one always quickly established dominance - and normally that was not because of a superior design, but rather because of other coincidental factors. Those tangentially related factors, which he calls 'adjacent possibilities', created value momentum around one of the inventions while the rest remained cool technical solutions.
For the first time there's an "adjacent possible" in the export growth space. Digital marketing and the ubiquity of the internet means that there is no barrier to research for solutions to our business and private challenges. While companies used to have to invest enormous sums in building global brands, market-by-market and person by person, that's no longer a prerequisite. Today prospective buyers anywhere can search for value - and companies which can provide it.
Interestingly, the very same fundamental steps which well managed companies are undertaking for domestic success (content marketing, alignment of marketing and sales, leveraging data for insight into buyer behaviors, etc.) will simultaneously and with virtually no additional effort, create parallel opportunities for global sales growth. Suddenly buyers from around the world will begin to pull US suppliers abroad, accidentally, just as demanding multinationals have done for many current exporters. And the process will be simply part of a continuum of'revenue growth' rather than a large concurrent focus on 'export diversification.'
And this is a nearly risk free, costless byproduct of great domestic business development activities. The risks of miscalculation are largely eliminated from this approach because suppliers are no long investing based on their assumptions, but rather buyers are raising their hands proactively. The final hurdle is simply to make resources readily available for sellers (and their legal, finance, accounting and logistics advisors) to quickly answer transaction questions as they arise. (Key here is the fundamental inversion of the traditional approach which has been to tell companies in detail how to, for instance, handle international payments and then encourage them to go find a buyer that has to pay them!)
The missing catalyst
So the elements are in place in a way they never have been. Rising generations of managers have studied abroad and have global social networks. They are philosophically unencumbered by jingoism and borders. All that's missing is the catalyst to coalesce all the pieces and players in a comfortable and productive stew. Expreience has shown us that government programs can help with the transactional pieces, but can't foster the environment. Individuals can impact a handful of companies, transactions or markets, but can't achieve broad engagement. It seems that the conditions are ripe for some large, well-respected entity to don the mantle; to take the opportunity which today's confluence of circumstances has created.
Somewhere out there is an entity with global reach and perspective which is positioned to act on a "slow hunch."
American manufacturers will owe a great debt of gratitude (and considerable profits from incremental global sales growth) to the entity that does.
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image - foodimentary