Growth Regions Hold Key to Global Expansion for Europe’s Tech Companies
Europe’s innovation companies need to wake up and grab the opportunities for rapid international expansion that growth regions provide, according to Alexander Banz, a partner at independent investment and corporate finance company Niton Capital Partners SA.
Alexander is a keynote speaker at this year’s Annual Investment Meeting in Dubai (30th March to 1st April), which is on the general theme of Sustainable Development through FDI-Induced Innovation and Technology Transfer.
He explains that, due to Europe’s current economic situation, there is limited funding for innovation and therefore limited opportunities for growth. This means that innovation and technology companies – not just start-ups but even companies that are already up-and-running with a successful product, have difficulty expanding.
And yet there is huge potential for expansion in the world’s growth regions, such as the Middle East, Russia, Kazakhstan, Brazil and Africa – potential that, at present, remains largely untapped.
“Growth regions hold the key to fast international development for Europe’s innovation companies. And those same growth regions often have a pressing need for the technological products that these companies provide. We just have to get the two parties together – it’s a win-win situation!” says Alexander.
As Alexander goes on to explain, the main problem is that many of these companies are afraid to venture into growth regions because they appear so different and exotic. While potential investors – both public and private – in the growth regions are afraid to invest in Western technologies because they seem so different and exotic to them! “The solution is first and foremost to start getting people together, to cross the cultural divide. It’s just like an intercultural marriage. Before the two parties meet, the other seems impossibly different and exotic. But once they get together, all those preconceptions just fade away. It’s exactly the same in business – first you make love, then you make money!”
Alexander is convinced that the best model for expansion into any growth region is one where local investors provide the capital, contacts and knowledge of the overall context, plus some personnel, and the innovation company brings its specific technological and marketing expertise. Both then need to work together as part of a four- or five-year initial plan. Other keys to success include a considerable local need for that specific product, and the early launch of a pilot with a real client.
“It always works much better if there’s a pressing need for that product within the region”, says Alexander. “It’s like painkillers! The greater the pain, the more you want to take a painkiller. In the same way, the greater the need, the quicker people will grab a viable solution”
One good example of this is the development of new air conditioning technology that uses up to 80% less electricity. The leading potential market for this is Saudi Arabia, where huge amounts of the country’s oil reserves are currently used to generate all the electricity required for its air conditioning. But now, thanks to this new technology, 80% of that oil could be saved for profitable export.
“Any potential Saudi Arabian investor can personally relate to the need, both for air conditioning itself and for a system that saves energy, because s/he feels the pain on both levels. It’s the same everywhere – people prefer to invest in things that have relevance to their own lives, and that they can talk about to their friends. They want to see the prototype and experience its advantages for themselves. This human element is vital and it’s what technology companies need to look at when deciding which growth regions to target. They have to go where the need is really big and where their specific product will make a major difference. It can’t just be a ‘nice to have’, it has to be a ‘need to have’. This is key to success and to sustainable development.”
The human element is also vital in terms of addressing the potential obstacles and constraints involved in expanding into growth regions, in particular excessive or complicated red tape and poor infrastructure.
According to Alexander, growth economies do need to improve their infrastructure and simplify their processes, and many actually have the resources to do so but need a change of mindset. The first step towards changing mindset is human contact, because bringing people together, like at Dubai’s annual AIM Meeting and similar conferences and workshops, goes a long way to bridging the cultural divide. Next, innovation companies need to actually go to growth countries and talk with their governments, companies and investors, who in turn need to be open to dealing with them. And then innovation companies need to take the plunge, through the development of a real product for a real local client. Once the success of this pilot project is there for all to see, then everyone is much more motivated to deal with issues such as excessive red tape and infrastructure problems.
“The whole process is difficult, that’s true, but it is also great fun and extremely rewarding!” Alexander concludes.
Alexander Banz will be a keynote speaker on Day Two of this 5th edition of the Annual Investment Meeting, which runs from 30th March to 1st April and is organised under the patronage of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President of the United Arab Emirates, Prime Minister and Ruler of Dubai.
Last year’s Meeting attracted more than 11,000 visitors (nearly double that of the previous year) from some 112 countries—figures that are expected to increase yet again this year.
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