月歌耽美文:Case study: why TomTom is a map for mastering international markets | Dominique Turpin | Commentary | Business Spectator

Case study: why TomTom is a map for mastering international markets
Dominique Turpin
Published 11:32 AM, 16 Mar 2011
“In 300 metres, turn right, then turn left.” Thecalm, measured tone of a TomTom satellite navigation device, giving justthis sort of advice, is increasingly familiar to drivers around theworld thanks to the Dutch company’s successful growth strategy.
But executives can learn much more from TomTom than,simply, how to find the most efficient route to their next meeting; thecompany’s story is also an excellent example of just how effectively newbusinesses can take control of markets.
First and foremost, TomTom produces a product thatsolves a real and universal problem, in this case: getting lost. Itoffers consumers an original product with genuine global appeal. Thecompany has a clear, simple strategy based on considering all issuesfrom the customer’s perspective, not its own. With this foundation, thefollowing characteristics have enabled TomTom to become the world’sleading provider of navigation systems.
1. A flexible, entrepreneurial approach
TomTom started life in the Netherlands in the 1990sas a mobile software company; by 2002 it had transformed itself into asupplier – but not manufacturer – of consumer products. It has developeda flexible, scalable business model that outsources many of itsnon-core activities, thus allowing it to focus its in-house activitieson the design and development of products, and on managing relationshipswith its retailers and customers.
TomTom has also managed to grow rapidly withoutsacrificing its entrepreneurial attitude. One aspect of this mindset isthe acknowledgement that good ideas can come from any level within thecompany – they do not have to be something handed down from above. Itsentrepreneurial culture also allows people to make mistakes, whichsupports innovation by allowing individuals to share their ideas withoutworrying that a failed idea will be the end of their career.
2. Focused innovation with the customer in mind
When Frans Pauwels and Pieter Geelen started thebusiness they developed all sorts of different software programs formobile and hand-held computing devices, particularly PDAs (personaldigital assistants).
“In the early days we were not focused on navigationsystems but on all kinds of applications such as dictionaries, personalfinance products, games and route planners,” Pauwels said wheninterviewed for an IMD case study.
“Our first customer was an entrepreneur who was importing wooden ducks from India and needed a barcode reading system.”
But by 2002, customer demand for a stand-alone routemapping function sharpened the business’s focus. “It was clear to usthat the need to get from A to B without getting lost went way beyondPDA owners,” Pauwels explained.
It made sense, then, to focus on developing theproducts that consumers wanted, particularly as there were few otherplayers specialising in this area.
This focus goes beyond its product line: even withthis niche attention to detail, TomTom does not attempt to doeverything. Instead, it concentrates on three things: software,distribution and building the brand. Manufacturing has been outsourcedso that the company can maintain its competitive advantage byconcentrating on innovation, thus making its products more appealing.
This sharp focus means that TomTom’s business issmall and lean, and thus able to respond fast to the changing demands ofconsumers. This is important because the internet and the global natureof communication mean today that, in many ways, speed of execution isnow often more important than strategy. A decade ago, if you had a greatidea you would patent it and protect it for 10 years; now you have agreat idea, and three months later, you will see a copy of it.
The way TomTom, and other entrepreneurial companieslike it, beat copiers and bigger competitors are with its ideaspipeline. It is very important that when you introduce the firstgeneration of a product you already have generation two ready and thethird generation in the pipeline. Combine that preparation with focusand you know that even when copies enter the market, your speed willenable you to stay ahead.
3. Global view allows access to under-penetrated markets
While the business is focused on one sector niche, itis fairly diversified geographically. By 2007, TomTom had secured morethan 50 per cent market share in Europe. Despite this, no singleEuropean country represented more than 25 per cent of TomTom revenues,while only five (France, Germany, Italy, The Netherlands, and the UK)represented more than 10 per cent of revenues each. At the end of 2007,it also had 30 per cent of the US market and was expecting this to catchup with the European market within three years, both in terms of marketpenetration and the number of units sold per year.
In other words, rather than concentrating on owningthe entire Dutch market, TomTom is looking for a significant chunk ofthe international market. This means that it has hundreds of millions ofpotential consumers, very few of whom already have a satellitenavigation system. Despite the company’s leading global market share, itstill considers itself to be operating in an under-penetrated market.Indeed, one of the characteristics of TomTom’s products is that theyappeal to any driver who wants a convenient way to find their way to newlocations without getting lost, or having to pull over to consult a mapevery few miles.
In summary
Building a global brand is not something that can bedone gradually, step by step. It has to be done fast if it is to work.It first needs to be built on offering a product or service that meets aspecific global market need. And it must acknowledge that winning in aninternational environment means making a pro-active effort tounderstand the world in global terms, which in turn requires thebusiness to have a wide range of global perspectives.
These lessons can be applied for most any company in any industry throughout the world.
Dominique Turpin is the Nestlé Professor and President ofIMD,the leading global business school based in Lausanne, Switzerland. Heco-directs IMD’s Orchestrating Winning Performance program.