A truly staggering US$85 billion of foreign money gushes into the US each year as multinationals fight for a share of the lucrative market through new companies or acquisitions. And then there are also the billions of dollars of new business local US firms generate. What chance do pipsqueak (by comparison) New Zealand companies have, not just in the US market but competing worldwide? Is it mission impossible?

Enter Greg Cross: “The question for us is, ‘how can we put our companies on at least the same footing, if not better, than the local companies?’” Cross is deliberately ambitious. He’s a private-sector businessman who chairs an initiative smoothing the way for wannabe exporters — the so-called Beachheads programme under the umbrella of the government’s economic development agency, New Zealand Trade and Enterprise. Helping Kiwi exporters gain traction offshore sounds a worthy aim yet a Ministry of Economic Development report released in November concludes it’s difficult to measure the programme’s return on the government’s annual $3 million investment. A refocus was initiated last year following the report and the programme’s focus is now on providing help through a network of slick international business leaders rather than bureaucrats.

Cross, a 20-year ICT-industry veteran, has plenty of first-hand experience of exporting, including at Fact International — one of the first New Zealand software companies to venture offshore. For the past three years, he has headed the New Zealand advisory board of the Beachheads programme, which helps guide selected Kiwi companies out in the global marketplace.

Beachheads helps companies overcome bureaucratic and cultural hurdles and to understand the nuances of the local commercial environment. Crucially, it connects New Zealand exporters with networks in their target country. “What we all find out when we arrive in Singapore, the UK, the US, or wherever, is local competitors are better networked and have strong connections to the local business network,” says Cross.

Its main tool now is overseas advisory boards; UK/Europe (headed by expat Kiwi and former Deloitte partner Eric Tracey) and the Americas (led by experienced director Bridget Liddell, based in Seattle with husband, Chris, since his shift to Microsoft in 2003) are the first of what will be a string of groups comprised of high-calibre business people.

Companies get assessed by Cross’s board for acceptance into the two-year programme. When it began in 2002, Beachheads was aimed at the ICT sector. It expanded into marine, and food and beverage and is now open to other industries including manufacturing, clothing and biotechnology. Presently, it’s limited to 85 companies while sufficient advisory board members are sourced, but there are plans to expand to 120 by 2009. Companies range from established firms branching overseas, to startups hitting foreign markets first. Two participants are $100 million companies, nine earn $20–$50 million, but most are much smaller, with 16 in the $0–$2 million range. “We don’t have a rulebook saying, for instance, you have to be a $5 million company,” says Cross. “One in every couple of hundred startups has the management teams, vision and the capability and they present a compelling case.

“Quite clearly, one part of this programme is about picking winners — the companies with the biggest potential to succeed.”

Ah, yes, picking winners, the expression separating the public and private arms of Beachheads. For the programme’s commercial hard-heads, it’s no big deal: of course they want businesses with optimum chances of achieving major profits. But for the mandarins, it’s an uncomfortable phrase. ‘Picking winners’ is a charge critics have spat about many of the Labour-led governments’ economic development schemes. Beachheads programme manager Maurice Stilwell, conscious of such jabs, smoothes over the idea by pointing out Beachheads is only one way NZTE assists exporters. “It’s a matter of saying, ‘are people ready for this particular programme?’” says Stilwell. If not, there are alternatives.

Last year’s MED evaluation looked, in part, at whether there were double ups between Beachheads and other NZTE offerings.

The review endorses the programme, but makes several critical recommendations, including the closure of Beachheads in Fort Lauderdale and Singapore, both established in 2002. The report says services offered there were similar to those available through the Growth Services Range. The programme is better offered through the new advisory boards, the report says.

Beachheads offices remain in Dubai and Tokyo, where firms operate from office space provided through the programme. But the new US and UK/Europe Beachheads are less geographic specific, instead offering the advisory boards to virtually support companies continent-wide. North Asian and South-east Asian boards are planned in the next year.

The programme revamp and continued government funding comes despite a struggle to ascertain Beachheads’ dollar impact. “At present, it appears as if the Beachheads programme is making little impact on firm performance,” the MED report says. For example, average individual firm exports into the Beachheads markets increased only 1.13% to $1.6 million after one year in the programme. It concludes, however, this is due to the short time period since the programme started and expects a clearer picture when the next review is conducted in 2009. You wouldn’t find many private-sector companies content to wait that long to get a firm assessment on the return on cost of capital.

But there are some obvious benefits. The programme’s most effective outcome, the report finds, is the networking opportunities, especially through the advisory boards. While in the programme’s early years companies’ access to networks was haphazard (not all firms had had contact with their board mentor or even knew who they were), the evaluation says the programme is now better managed.

Liddell, who has energetically expanded the US board, recruiting 30 new advisors, strongly agrees networks are the most important thing on offer. “Networks happen without trying in New Zealand; that is clearly not the case in the US,” she says. “Individuals are far more cautious.”

She believes the advisory boards’ strength will influence the quality of the companies signing up to the programme and has shoulder-tapped highly successful business people to join the board. Thanks to the pulling power of New Zealand, she says, (and Liddell’s own persuasive powers) no one has refused.

Advisors are not paid to be on the board, but receive per diem payments for one-on-one work with companies. Liddell says she tries to find advisors with specific skills to suit the individual companies. “It’s a highly customised service.” The advice and help required by an education company, for instance, is vastly different to that of a biotech startup.

The boards also offer general advice about likely complications. One recurring risk is having the capacity to handle potential demand. Sales can grow rapidly, piling pressure on production and capital requirements. Liddell says she recently saw two companies in which US business quickly outstripped combined Australia-New Zealand sales. “And that can cause problems,” she says.

Eric Tracey sees the same concerns in the UK. “Quite often, the A plan has been done, but there’s not enough strategic risk planning done,” he says. Another key issue for Kiwi firms venturing offshore is recruitment. If you don’t have local contacts, how do you know who to headhunt?

Helping resolve these problems is a delight, says Tracey, “but it’s not all sweetness and light. We often have to tell people things they don’t want to hear.” Tracey says the boards have a duty to ensure exporters have robust structures. “These are usually pretty sensitive things to be discussing — strategic governance, ownership, exactly what the strategy is — and it’s tough, but it’s hugely cheaper to get that advice from us than to go bumbling around.”

Sometimes, that guidance can come when a company gets rejected for the programme. SPM Consultants, which advises asset and property managers, postponed UK expansion plans in 2004 after hearing (and implementing) what the New Zealand board had to say. Instead, it continued its domestic growth, building revenue for future offshore opportunities.

Many of those that have been accepted into the free programme praise its value to them, despite having different target markets.

Global Career Link, a specialist in international career management for professionals, joined Beachheads in May when venturing into the UK. General manager Simon Swallow says the board’s advice led it to restructure and refine its operations there. “We had got quagmired, doing things in the UK that didn’t need to be done in the UK,” says Swallow.

He believes the company has enjoyed many intangible benefits — such as the association with the government, which lends credibility when dealing with offshore clients. But Swallow says the company’s restructuring means it has not yet taken full advantage of the benefits he expects to come this year, such as the network opportunities.

Biotech firm Protemix, which develops therapies for diabetes and cardiovascular disease, believes connections made through Beachheads helped it expand in the US, to develop manufacturing and research, and equity partnerships. “In the areas where we didn’t have expertise, they could recommend people to us,” says chief financial officer David Pool.

“We had some existing relationships, but it’s usual to have networks of individuals that come from the same field.”

Baggage-handling systems expert Glidepath, an experienced exporter with $100 million annual turnover, joined the Dubai Beachhead to crack the Middle East market. Chairman Ken Stevens says Glidepath had been successful at winning US$1–$2 million jobs, but couldn’t nail larger contracts. From the shared office space in Dubai, Stevens says Glidepath was able to break through. “It enabled us to jump into the US$10–$20 million deals.” Glidepath has since won a US $12 million upgrade at Jeddah airport.

Maximum Availability, a disaster recovery software system specialist, signed up to the Tokyo Beachhead last year. Asia vice-president Kaz Handa says the availability of well-located office space for its two Japan-based staff helped, particularly because it faced significant costs entering the Japanese market — what he calls “Japanisation” of its software and translation of manuals, for example. Handa also values the NZTE staff support and the government link. “The fact they are helping a company like us succeed in this often very tough market gives us most-valuable credibility,” he says. Could the company have achieved what it has without Beachheads? “Yes, I believe so,” says Handa, “but it would have taken at least a year or so longer to get to where we are now after 14 months in this market.”

So, is giving exporters a head start, even of a year’s accelerated growth, sufficient value for the taxpayer dollars spent?

As you’d expect, Economic Development Minister Trevor Mallard thinks so. He calls it a good example of a public-private partnership. “There’s not a lot of government money goes in, but there’s a lot of private time.”

From her US base, Liddell agrees the payback is worth the effort. “The US market is huge and complex and very demanding — but the rewards are completely extraordinary.”