Discover the hidden faces of the USA

You might even be surprised by Charleroi, Pennsylvania or come across Antwerp, Ohio, small towns offering an off-the-beaten-path familiarity to the Belgian tourist tired of the Yellowstone and Times Square.

Some 200,000 Belgians emigrated to this vast country since 1820 and left their mark; farmers, miners, crafts people, and skilled workers from the Walloon glass industry or the Flemish textile mills.

Just like all other settler groups, they stuck together at first, and so gave their region a unique character, a culture and appearance as different from other US regions as the Balkans are from Scandinavia.

Look at the State of Virginia, a member of the Union since 1787, a slave state then, known the world over for its prime tobacco, the proud home of the earliest (1607) settlers and of George Washington.

How could this state even remotely resemble Oregon, a northwestern state four time zones away, covered by huge forests, shaped by the imposing Rocky Mountains, producing some of the best wines I have ever tasted, and under British authority up to 1848?

While most people familiar with the vast expanse of the United States understand its geographic diversity (landscape and climate), they find it very comfortable to deal with just one currency, one language, one cell phone network, credit cards welcome everywhere and familiar benchmarks (from Burger King to Starbucks to Hampton Inn) in the most remote places.

For the Belgian entrepreneur, however, seeking to emulate the spirit of the earlier settlers, the hidden diversity of the various American states often comes as a surprise.

us states

50 Shades of USA

For starters, every single state, has been crafted by its history, natural resources and climate. The latest one, Hawaii, only joined the Union in 1959, 172 years after Delaware, the first state to ratify the Constitution.

Next, every single US state has a republican (with a small “r”) government, meaning one with three branches of government (executive, legislative and judicial). In all 50 states but one (Nebraska), the legislative branch has two chambers (House and Senate). Importantly, all states handle their own affairs, except for those delegated to the federal government.

In other words, if states reluctantly tolerate the federal government, they still influence a wide range of affairs: education, health insurance, most of the laws, economic development, welfare and employment rules, financial institutions, environment, energy, consumer protection, housing, agriculture…

Shaping the health, welfare and education of their people, steering the economy, stimulating or hindering businesses and in countless other ways, the 50 US states have achieved success, failure, and everything in between.

To illustrate how every state tells a story quite different from the America stereotypes prevailing abroad, 19 states have abolished the death penalty, with more to come. The life expectancy at birth is of 86.2 years in Minnesota, and 74.1 in Montana, a full 12 years less. Median household income is $70,004 in Maryland, $36,919 in Mississippi and on average, $50,502 for the entire United States.

Even more important than the present day disparities, in every American state and region things are changing fast and in different directions. Housing prices are recovering in a spectacular way in Florida, Arizona, Nevada… after the real estate meltdown of 2008. Employment in 2014 grew over 3% in states like Utah, Texas, Florida and Nevada, and more than 5% in North Dakota.

Some states see their population shrink through aging and emigration, while others attract certain categories of people: senior citizens in Florida and Arizona, young workers in North Dakota and Texas, high tech specialists in California or Colorado.

Oklahoma’s economy grew 4.2% in 2014, while Wyoming’s expansion was 7.6%.

If average weekly wages remain stuck at a low $794 in Montana and $826 in Maine, workers make $1,321 in New York and $1,315 in Massachusetts.

Why is this important to the Belgian entrepreneur?

Whether you are looking at a first-time US market penetration, the expansion and consolidation of your US “beachhead”, investing in logistics or production assets, setting up a joint-venture or the acquisition of a US company, your decisions need to be based on knowledge, not on fortuitous encounters.

Even if people or potential partners you have met coincidentally in the United States may help, your best decisions are usually made when you have a choice, when you can line up several options, and are able to choose the best ones among them.

Some distribution channels cater to the suburban affluent, others to progressive big city environmentalists.

In some areas, low wages could mean very low productivity, while high wages might reflect a crucial shortage of qualified workers.

In some regions your family or employees will thrive, in others a harsh winter will shut down your business for weeks.

Virginia, North Carolina and Georgia, all on the east coast, are among the top 4 US states ranking best in “regulatory environment”, a crucial component of the business friendly climate you would like to operate in. Do you really want to go through California’s jungle of earthquake-related rules and specifications, easily adding 20% to the cost of your greenfield production plant?

New York, arguably the most expensive US city, combines high labor costs and powerful unions, an unwelcome familiarity among a wealth of more attractive features.

Decisions, decisions… they are not that difficult to make once you possess all the relevant information.

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U.S. gas export boom

It would be difficult to replicate U.S. shale boom, expert says

The shale boom will remain uniquely American for years to come, thanks to the combination of capital, talent, legal system, infrastructure and market that cannot be easily replicated, geopolitical strategist Peter Zeihan said. “This is not something that your average state-run thug can do.” He added.

I spent a full week attending the 2014 OTC Show (In Houston) early this month on behalf of a client distributing its offerings in the energy sectors. I have been quite impressed by the industry dynamics and how big is the boom. The past ten years has seen the global offshore industry bring on stream some of the largest and most complex projects ever attempted. (See more)

The International Energy Agency (IEA) and other expert sources expect oil to remain the fuel of choice up to at least 2035, with a 27% share (down from 33% today) whereas gas is expected be the only fossil fuel to increase its share. Global demand for natural gas is to grow by 64% by 2040. At the same time natural gas prices are to remain strong evidenced by a near term price increase, settling to $4.38/mmBtu in 2020, in the long term prices are expected to rise to $7.65 by 2040. Importantly, the US is projected to become a net exporter of LNG by 2016, spurring the development of new LNG terminals – currently 6 have been approved and 22 are under evaluation.

Whereas the market for Exploration and Production of fossil fuel is recognized to be very much an offshore operation, recent push towards both smaller and more remote fields have seen the growth of floating production systems: 154 new FPSO (Floating Production Storage and Offloading) ships have been identified as well as 5 FLNG (Floating Liquefied Natural Gas) projects that are fully financed.

Furthermore, LNG facilities that have been traditionally built onshore are moving offshore – under pressure of cost – with the increased use of Floating Storage and Regasification Units (FRSUs) located just offshore and connected by pipeline with the distribution facilities. This option is up to 50% cheaper than current onshore solutions.

It is important to note that the use of LNG has grown much faster outside of the US than it has domestically, therefore much of the research and development, design and testing activity has occurred in other countries. Consequently, the international standards applied to LNG operations – wherever they are located – have been heavily influenced by policies and regulations of countries such as Japan, South Korea and some European Nations. In the US LNG is regulated at a federal, state and local level, as well as by non-governmental regulators and standards organizations.

The market for the design and build of the FPSO and FLNG is dominated by a relatively small (but still …) number of players (KBR, TECHNIP, JGC, SBM Offshore, Modec, Bechtel, Teekay, Technip, Samsung, …) who are capable of delivering complex projects of this size, often operating as a consortium. Although often vertically integrated these FEED (Front End Engineering and Design) and EPIC (Engineering Procurement Installation Commissioning) capable companies rely on engineering specialist companies to actually deliver all the specific systems.

See you at OTC 2015!

Please contact me with any questions you might have,  phil.jafflin@cognegy.com

It’s not the carpet, it’s the value proposition…

Successful entrepreneurs spend their scarce time developing a value proposition for their business, and are not mesmerized by the administrative side of bringing their business to the US.

The quagmire of administrative questions has bogged down numerous entrepreneurs with its lure of choosing: the nicest office building, the best CPA, the fastest internet connection and cheapest phone provider. Selecting the new phone system, printer and copier or even the first receptionist will not improve the odds of your business start in the US.

Instead you should spend your precious time finding out about your (potential) customers and their needs. Who are they, where are they, what do they buy today and why? What do they need that you can offer?

American businesses and consumers alike are very much into asking ’what’s in it for me?’ Why should I buy from you and not from my current vendor?

Have a crystal clear answer to that question, and do not get stuck with just thinking in product or service terms. Think total solution package (sales, customer support, technical support, price, marketing, supply chain,…) through the eyes of  the customer.

A sharp definition of what your business’s value proposition actually is, will set you not only apart from competition but on the right path towards US business success.

Then you will have plenty of time to select the carpet…

Is it a client or a customer…it is a ‘clustomer’!

A while ago I entered into a debate on the difference between a ‘customer’, a ‘client’ and a ‘consumer’… Was my debate partner selling to ‘clients’ or rather to ‘customers’?

Very quickly we agreed what a consumer was: the person at the end of the supply chain who actually consumed the product or the service…

It got a little trickier to define the difference between a client and a customer…

Webster says: ‘a client is a person who engages the professional advice or services of another’ and in the same breath confirms that ‘a customer is one that purchases a commodity or service’.

Well, that did not really help because my debate partner was actually selling marketing services to a niche market. It got even more confusing considering the fact – although they too offer a service – that doctors, dentists or psychiatrists do not have clients. They have patients. We quickly agreed that calling his clients/customers patients did not seem a good business idea.

We then decided to look at it from the perspective of the client/customer – would they have different expectations? Both buy a solution to their need and will become loyal if it fulfills or exceeds their expectations.

Again, this did not provide a differentiation, because both clients and customers tend to come back for more if they are happy. Although this is also dictated by the laws of offer and demand, because I cannot imagine Oliver Twist, whilst exclaiming ‘Please, sir, could I have some more…’ considered the food to exceed his expectations.

But we are digressing.

Clients, customers, consumers and patients alike will come back for more if you provide the right solution to their needs. So, have regular conversations with your clients, customers or consumers because their needs change, and find out how you are doing…

PS – we settled on calling my debate partner’s client/customers from now on ‘clustomers’. And he is still my client.

Fill in the blank …

I want to share with you a reply email I just sent to a European company who are looking at an opportunity on the USA market…

Fill in the <blank> for your product/service/solution and see if it also applies to you…

In this client’s case, having established that the market opportunity really exists, I observed that <blank>’s market is fast growing and therefore very attractive to many other players. In turn creating an environment prone to increased competitive pressure. Sounds familiar?

The <blank> opportunity

As a starting point, let us assume that the product/service/solution is competitive in its features, advantages and user benefits… Realize this (only) provides <blank> access to the market as a player, to become successful <blank> will first have to answer two key questions…

What is <blank>’s VALUE PROPOSITION

It is crucially important for <blank> to identify its differentiators versus its competitors

  • What makes <blank> a better total solution
  • Do not only think product or service – think solution package (sales, customer support, technical support, price, marketing, supply chain,…) through the eyes of  the customer

How does <blank> ACCESS the MARKET

  • What are the market segments with the highest return (depending on the company goal this can be profit, market share, volume, revenue, …)
  • Who are we talking to – who is asking, who is buying, who is paying, who is deciding, who is setting the selection criteria, …
  • What structure needs to be developed to access these markets, what channels are needed – an importer, a distributor, a fully owned structure, …

Formulate the answers to these two questions in a crystal clear manner and will know where to aim and how to get there.

Remember, there is no point worrying about execution (sales collateral, supply chain solutions, marketing, price, promotion, websites, import regulations,…) before these have been answered.

Do not draw a blank – come prepared!

To skimp or not to skimp…

Many European companies enter the US domestic market on a shoestring budget, making them look anemic and quickly out of (budget) breath.

This is the wrong time to skimp. Prospective clients in their decision process to replace established domestic competition compare all your touch points with the reigning players in the market. Touch points are products, people, proposed pricing, marketing collateral (think print, website, brochures) etc… that should send the same consistent quality message.

In most cases the ‘budgeteers’ (those who have ‘zero’ responsibility over the Business Development effort and who are there to ‘protect’ the company) score easy points in two areas: marketing costs and people costs.

Marketing & Sales budget for a continent

Very often when a (too) quick return needs to be shown, ‘budgeteers’ skimp on the Marketing and Sales budgets. These are very easily cut, and unrealistic token budgets are left behind in the plan as sore reminders. Sales and Marketing budgets are treated as an expense/cost not as an investment to open a huge market.

To avoid the ‘inbound investment hangover’ one should earmark enough budget to be able to run a smart strategy at your laser targeted (by the market entry strategy) market segments. You will be unable to outspend established competition, but there are no rules against outsmarting them!

Budgets to hire the right people

European companies can struggle with the compensation requirements of high quality domestic players. We have heard the remark too often: “I cannot hire someone who makes that much (more) money (than I do)”. Most likely this indicates that the US project is not handled at the right executive level, it has become an operational effort and the manager responsible makes the wrong hiring choices. Opening a new market, building new business, displacing entrenched competition is hard, it is very hard and it should only be entrusted to the best candidates available.

So, in conclusion…Firstly, identify the right partners to help you budget realistically and spend specifically; and secondly, budget to invest – because it will take longer than you think/plan.

Who cares?

It is an eye-opening moment when an honest prospect tells you  “I do not care”…

Consider yourself the lucky one: you now realize that nobody cares about your successes in England, your market share in Germany, your loyal client base in France or your achievements in Europe. No prospective client in the US cares unless you have a unique value proposition for him.

The fact that a ‘proposition’ is not available on the US market can indicate three things: there is a massive opportunity (among the 312 million Americans nobody has thought of it), it is out there somewhere but you have not detected it or it does not fit the market needs.

Forget about how you do things at home, ask yourself why you do it that way and what customer needs you fulfill. Then think how to transpose these unique attributes to one of the most competitive markets on the planet and provide a unique answer to the market needs here. A thorough competitive market analysis will unearth what needs to be done to build a winning value proposition to beat the entrenched local competition.

Keep in mind that you will have to be better – equal won’t cut it.