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Technological Niche Propels an Australian SME

Idea Generation

Surfacetech Pty Ltd. was formed by Tom in Queensland after he retired in 2007. He worked as regional sales manager for European company Techglobal specializing in development of technologies for construction sector. Tom was responsible for business development in Asia Pacific region and he often traveled to Asian countries to explore possibilities of introducing technologies to developing countries.


During one of his market exploratory trips to India, he observed the condition of road surfaces and sensed an opportunity to not only to use Techglobal’s road surface technologies in road maintenance but also in large industrial townships. He tried finding a partner in India to join hands to take Techglobal’s technology to potential customers but with little success. Painstaking task of convincing an emerging economy which was highly price sensitive, and lack of support from his employer did not allow him to make any progress.


A few months after, Tom reached superannuation stage and returned to his hometown in Queensland to start a new part of life. He cherished his memories as a traveler and thought it was the right time to show some of Asian countries to his wife. He decided to take a tourist trip to South East Asian countries followed by India. He was visiting India after five years and was pleasantly surprised by the rapid progress it was making in infrastructure. Many modern buildings were visible now and pot holes on roads were slowly disappearing. Some astonishing structures were coming up in large metropolis. He traveled from Mumbai to Pune on the newly built highway and that gave him good idea about how road network was developing and spreading in India. He found the road surface to be of good quality yet lacked international standards, probably due to gaps in technology. He made a decision then.

On his return to Brisbane, he met with Pete, his long time friend who was toying with an idea to start a distribution company in Queensland. Over the weekend dinner, they discussed in details possibility of doing business in India and concluded to get into an agreement whereby Tom would explore possibility of getting a franchise for road surface technology from Techglobal for India and Pete would start business operations and they would both pooled in the money.
 

Technology Niche


Road surface technology was developed to maintain evenness of road surfaces but this technology was not known to most users. The technology involved raising levels of sunken road or concrete surfaces due to soil loosening up. The technology entailed injection of certain resins using pressurizing machines having injection nozzles, beneath damaged concrete or a tar road surface which needed to be raised to smoothen out the sunken level. The resins settled down below and ensured that the surface stayed there and would not sink again. Current practice in India to repair sunken surfaces was rather old and surfaces were simply filled up with bitumen or cement mortar but with a sure chance that it would sink again as main problem of soil loosening was not addressed. A little expensive, Techglobal technology ensured permanent solution on a long term basis.

This time around, Techglobal agreed and allowed Tom to sell technology in India under its license. Tom and Pete started the company Surfacetech Pty Ltd.
 

Next Step


Company was formed in Queensland but question still remained how they would sell technology in India from Brisbane. Tom engaged me as consultant to advise regarding best entry mode. It was decided that Surfacetech would need on the ground presence in India. A private limited company was incorporated in India in Gurgaon near New Delhi and Pete shifted to India to initiate and oversee its operations. For Pete, it was a shock, cultural and infrastructural. It took a great deal of time for Pete to settle down and to get started. He recruited couple of assistants to help him in business development and technicians in rendering services. He operated his office from a room of his residence to keep costs low. He was aware that revenues would not come for a few months and he needed to keep fire burning.
 

Market Entry


Pete identified some potential customers like Airport Authority of India, National Highway Authority, Delhi Metro and large industrial corporations. He started approaching potential customers one by one. Customer response was good but conversion of interest into business was nil. It was frustrating to see customers seeing the need and the benefits but not discussing further. Pete participated in seminars and exhibitions pertaining to road and building construction but did not progress much on business development. Tom joined him at this stage in India. It was nearly six months after the company was incorporated and they were yet to see any confirmation of orders or business. Expenses were mounting but revenues were nowhere to be seen.

Being a small company, Tom & Pete felt that they were missing the brand and resources of a large company. As they could not muster resources required to promote the company with potential clients, frustrations grew and Pete started discussing option of winding up Indian company.
 

Niche Technology and Perseverance Pays Off


Tom called me up one day to discuss the business status and spoke to me at length about company’s business situation, as I had advised him to incorporate the company. He was keen to wind up as he could ill afford expenses without a dollar of sales. Hearing his story, I analyzed that expectations of Tom and Pete were different from Indian businesses and they had following impressions and expectations about business in India: 

  • Returns would start coming in 2-3 months irrespective of type of business and market
  • Customers will spend on a product/technology which is better and has clear advantage
  • Customers can be easily won if they showed referrals from foreign companies who have used this technology successfully
  • Tom and Pete could do business without local help as can be done in many countries.


I analyzed the situation and had to clarify that all above expectations were not entirely true for Indian markets and one needs to keep in mind that:

  • It takes a huge amount of patience to start seeing results of business development efforts, even if the technology is unique and has clear advantage over competitors or current technology
  • Indian customers are price sensitive. Large Indian companies are also price sensitive as some of personal values of executives creep into working culture. Positioning of product and market segmentation exercises need to be done carefully.
  • Buyers shifting to a new product/system may take lot of time to decide on an order even if they are convinced.
  • Involvement of Indian manager/s is a must to understand local practices and buyer behavior
  • If the business model is good, product/technology is sound and marketing strategy is in place, it is only a matter of time that business clicks. One needs to wait only for the first order and once it comes, life becomes much easier for subsequent business.


I was convinced about they had a good technology which would be in demand if they get a breakthrough with some reputed customer. I strongly pleaded with Tom and Pete to continue the efforts and try to seek a breakthrough even for a small order but from a reputed company. Since this technology was apt for Indian conditions, there would not be dearth of orders after first few had come in. I urged them to use Indian faces as front line salesmen.


Tom and Pete agreed to give another 3 months as per strategy discussed and tried to get small order on trial basis from L & T Ltd., which had a name in India and was one of the largest construction companies. Tom discussed the technology with engineering department of L & T and had conducted a demonstration at one of their sites. L & T agreed to place a small order on trial basis. Pete arranged execution in the best possible manner and result was evident. Seeing the difference between what they were doing and what Surfacetech had done, L & T started considering using this technology at other sites as well. However, they informed it would take some time to finalize the policy to shift to new technology. L & T however, gave them a letter of satisfaction which could serve as a testimonial for Surfacetech.


Tom used the testimonial with Airport Authority & National Highway Authority and insisted they visit L & T site to see the difference their technology had made. Some more potential customers visited the site and they were all impressed. It was only a matter of a few weeks that trial orders started coming from other customers. Success of trial orders led to regular and large orders. It was Airport Authority who gave the largest order. On hearing that Airport Authority has placed order, National Highway Authority did not take long to follow. After more than one and a half years of setting up the Indian company, Surfacetech was fully loaded with orders. During the next 6 months, company started making cash profits.

Orders kept flowing in from all directions and from customers they had never dreamed of. Within two years, Surfacetech had to procure another injecting machine in addition to one they already had imported from European company. Surfacetech today has an order book which will keep them busy for next year, as most of the potential customers have now converted to regular customers. The Company is contemplating to add third injecting machine in near future.

As they say, if you have the right product or the technology backed by an attitude of adaptation and perseverance, you have arrived in India.


Case study was prepared by SP Joshi, New Delhi based senior advisor to Australian Business, International Trade, NSW Business Chamber, Sydney. All names in the case study have been disguised.

 

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