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September 1, 2004 

Tech Elect

 Q&A: Prairie Angels Founder Bob Okabe on International Adaptation 9/1/2004
The mission of Going Global is to educate and inform Midwest technology companies on what local technology companies are doing internationally so other firms can learn from the successes of like-minded peers.

CHICAGO Ė ePrairie international expert Michael Muth continues his Q&A with Bob Okabe, a founder of Prairie Angels in Chicago and a General Electric veteran, by delving into adapting products to meet international needs.

Michael Muth: To which countries were you extending banking or consulting products development?
Bob Okabe: The British were receptive, the Germans cautious and the French wanted to proceed in their own way.

It makes sense. Because a lot of U.S. law is derived from British common law and the financial markets are the most alike, itís easier to translate. Itís harder when language, law and market attitude are further apart.

MM: Which extensions worked and did not work? Why?
BO: Transfers of American methods to local workers didnít work. Weíd rather act and ask for forgiveness later than wait for permission.

Itís the opposite in other countries. Letís wait for the ministry of finance to authorize it before we do the deal. Though I canít point to a seminal event, countries have been relaxing their rules and becoming receptive to it. Still, there was not a benchmark or turning point.

There were a lot of close followers. Financial markets want extreme liquidity. Investors want to own what people want to buy. People wonít be interested unless thereís a market. While itís great to have share, there wonít be a market unless thereís liquidity there.

There wonít be a market if youíre the only player, too. They need to be liquid. The U.S. learned that with junk bonds in the 1980s when Drexel Burnham collapsed.

MM: How much did you have to adapt products to meet international needs?
BO: It was extreme. We had to modify to account for the legal, accounting and regulatory systems. They were all constraints. Though international accounting standards do mitigate this, itís still not great.

We had to modify significantly. If you wanted to sell a loan in the U.S., youíd go to a county court house to file a lien using a uniform commercial code filing. There used to be a requirement in Germany that you had to notify each borrower individually and in some cases get consent.

Autos are the best example. A car sold in Germany canít always be sold here and a car sold in Chicago canít necessarily be sold in California. While GM sells cars in China, they were accepted in part due to the Buick brand because Buick was big before the revolution.

Mao rode in a Buick and GM has used the Buick name on any number of other cars that arenít Buicks here.

MM commentary: Again, just like the positives mentioned above, many of the same difficulties transfer to other industries as well.

MM: How did you manage the product development to ensure international consistency versus local needs?
BO: It wasnít as much an issue because branding in financial markets doesnít have much to do with the product. Everybody had a credit rating. If you do a derivatives transaction, the credit rating goes along with the counterparty.

It doesnít matter who executed it. Take Citigroup, for example. Theyíre looking for consistency. Itís like the line in "Pulp Fiction" that says: ďWhat do you call a Big Mac in France? A Royale with cheese.Ē Itís the same product with a different name.

MM: How is working with international financial products different from other products?
BO: Financial instruments are a hybrid between a product and a service. While thereís a tangible aspect to them, you donít handle or use them every day. Branding is an issue that comes into play and so is liquidity of global markets. People will arbitrage anything.

You need some level of core consistency to allow them to think of it outside the home country. A derivative transaction in Germany is not that different from a cell phone. You do have to make them similar enough so people recognize them.

MM commentary: The eternal international product development dilemma is: How much should a company adapt its product to address local differences? It can be expensive to make changes, but if you donít, you might not sell anything. Itís a fine line. Finding out how to do it profitably is the key.

MM: How was working with relationship managers in other countries?
BO: There are different norms and customs in different countries. The actions and strategies from relationship managers are a reflection of that. Weíre more free-wheeling in this country. Think of the stereotype of the Japanese salary man. There is a certain consistency and narrower range of extremes.

MM commentary: There are also laws that regulate how relationship managers may interact with customers in different countries. In Germany, for example, unsolicited mailing and phone calls are forbidden so ďcold callingĒ was very different there.

MM: You have completed a capital markets study for an affiliate of the World Bank. You presented findings to finance and economy ministers and central bank officials in the Middle East. How did you get the gig?
BO: Someone I knew previously in my career (after I left investment banking) recommended me for this project in Beirut. It was a relationship call. Multi-lateral institutions like the World Bank hire from every culture. The melding of cultures creates a process that is distinctly unique.

The World Bank isnít in it just for the money. Itís financed by governments and they have goals beyond the bottom line.

MM: Working in London, Munich, Paris, Tokyo and Beirut, whatís different?
BO: The most interesting thing is the way companies manage their relationships with visitors.

For example, in Germany, Switzerland and Japan, there will often be floors of just meeting rooms. Theyíd all be clustered together away from the business units. You have to have a pretty strong relationship to have access to the work areas of employees.

I turned down a job in Zurich partially because I thought it would take a long time to be accepted there. I didnít want to be there for just one to two years and I didnít want to go through a 10-year process. Thatís a big challenge.

MM commentary: Having lived and worked in Germany for two or so years, I never came across floors filled with just meeting rooms. Then again, I never welcomed or entertained any foreign visitors there either. I worked pretty much as a local with other locals.

What surprised me was that I did work on a million-dollar project at Siemens where we consulted internally with people about marketing and engineering on the viability of a particular product. Still, we never spoke with anyone outside the company to make a decision.

It struck me that thatís a very insulated way to make a decision. Though theyíre getting better, big companies can still be like that. It just reinforces the separateness of internal versus external relationships.

Join us next Tuesday for part three of this three-part Q&A
where we delve into how to approach international markets.

Michael Muth is managing director of GATA, an international business development consultancy that helps technology companies build international partnerships. He can be reached at mike@intlalliances.com.
Click here for Muthís full biography.

Previous Columns:
Q&A: Prairie Angels Founder Bob Okabe on Managing U.S. Subsidiaries (8/24/2004)
Q&A: Origin Ventures Founder Steven Miller on Investments, Angels (8/17/2004)
Q&A: Origin Ventures Founder Steven Miller on the Canadian Way (8/9/2004)
Q&A: CPCP Founder David Baeckelandt on Multilingual Importance, Mentoring (8/3/2004)
Q&A: CPCP Founder David Baeckelandt on Japanese Disclosure, Due Diligence (7/27/2004)
Q&A: Chicago Pacific Capital Founder David Baeckelandt on Overseas Funding (7/20/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on the Art of Partnering (7/13/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on BP, AstraZeneca Wins (7/6/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on Global Software (6/29/2004)
Q&A: CEO Terry Howerton on Why Chicago, Ukraine Made FastRoot (6/22/2004)
Q&A: FastRoot CEO Terry Howerton on Blended Chicago Approach (6/15/2004)

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