Time to change a winning game?

– why the US may be different from any other market

In 1995 (marked by the red, vertical line in the chart above), Navision Software (in blue) came off 2 years of rapid export revenue growth in Europe, doubling every year for a total quadrupling – from DKK 6 million to 12 to 24 million – built upon a strategy with locally-owned distributors in each country. Yet, the still-tiny company chose to part with that strategy in the US … electing instead to become majority shareholder in Navision US.

In his recent article, Hans Peter Bech recounts the story of how tiny Navision Software cracked the US market – later to become Microsoft Dynamics 365 Business Central. Navision is only one of two European ERP vendors that found success in the US, the other being SAP.

• Hans Peter Bech: How Navision cracked the North American market.

Finding the winning game

You know the saying: Never change a winning game. Navision's European success was built upon a stellar product, solid product marketing, and a strategy with local, country-specific distributors.

That strategy was borne out of necessity. In February 1993, yours truly was the only commercial resource at Navision – because the company had never felt the need for employing someone who couldn't write code :-) As Hans Peter Bech explains, IBM Denmark had secured a large marketshare for Navision in Denmark, and as that success became obvious, interested parties came calling from Spain, Iceland, Germany, Switzerland, and other European countries.

IBM had created the product marketing for the Danish market; thus, it was left to the independent distributors to create their own for their respective countries. Not only was that an expensive trial-and-error process, it also allowed for diverging positioning and branding – which caused the loss of several big prospects.

In fact, by 1993 total export revenues were not only meager, but actually declining. At this point, Navision could have withdrawn from these foreign ventures. But instead, fueled by our belief in the product itself, we began the process of actively creating a product identity for Navision, supported by product marketing collateral.

That turned out to be the missing piece. Navision already had a great product and a sales channel foundation in place in several countries – adding product marketing and evangelism provided the fuel to accelerate revenues across the continent.

Navision's initial entry into the US market followed similar lines – as the company set up Peachtree Software to act as the US nationwide distributor.

Before the business really got rolling, Peachtree Software was acquired by payroll giant ADP – who had no interest in the nascent US version of Navision. So this part of Peachtree was to be spun off, and Navision's default choice was to continue the "Euro" model with local majority ownership.

The call to change the winning game

But the impasse created an opportunity for Navision's owners. Just a few years earlier, it would have been impossible to imagine the small company's owning and running a major country distributor. But many things had fallen into place: the product positioning and marketing was ready, Navision US had a complete organization ready, the US operation's CEO, René Stockner, was a product marketing genius with deep Navision experience, and at company headquarters in Denmark, a complete sales and marketing support organization had emerged.

The changes also presented a long-term danger. From the European positioning debacles, we had learned about the importance of controlling our own positioning. And the US market is unique – unique in that communication in English flows from the US to all corners of the world. So would leaving communications to a minority-owned US distributor spell trouble in the long run?

Initially, Navision's owners defaulted to the existing strategy. But over a couple of weeks, filled with long discussions, continued on the golf course and over dinners, convictions began to change. And the owners and I slowly came to agree that we needed to hold the US bullhorn ourselves.

In the end, Navision agreed to acquire a majority holding in Navision US – I think something like 72 percent, the rest being held by former Peachtree investors.

This conscious deviation from our existing strategy proved to be very successful. Revenue growth was further accelerated, and 8 years later Navision was acquired by Microsoft for more than USD 1.5 billion.