Playing an International Game
Todd Hays, Founder, InterAct Accessories Inc.
STD Entertainment was founded to make video game peripherals—the joystick you buy when you or your kids break the old one, or the extra cable or memory card you need, or anything else related to your video-game experience though we don't make the games themselves, or the playstations. When I started the company in the United States, its overseas backers already had manufacturing facilities in Hong Kong and China, so we were international from the beginning. InterAct Accessories, our brand name, was bought by Recoton in 1995 and now operates as a wholly owned subsidiary.
Our most popular item is a series of products called Game Shark that allows you to reset the parameters of the game—in other words, to cheat. If you've never been able to get to the end of a particular game, Game Shark will let you have more power, or start at a higher level, or whatever you need to help you achieve your goal. It's the kind of thing that enables parents to catch up with their kids.
The company was founded in 1991 and now does just over $200 million in sales worldwide. InterAct is the global leader in accessory sales, with 60 percent market share. But, that's a problem. Less than two years ago, we had 80 percent market share. I believe the reason for part of our recent decline is related to our difficulty in conquering foreign markets.
InterAct has offices in Maryland and Florida, teams in Hong Kong and thousands of workers at our factory in China. Many of our most popular products are designed, engineered and manufactured in several different countries. Managing this process can be difficult. To bridge the time zones, we use e-mails, faxes and nighttime phone calls. Sometimes it's easier to take work home—after you've had dinner and put the kids to bed, you can pick up the phone and talk with an office that's just opening for the day's work.
In the past, we had some miscommunication problems. Dealing with different languages can make that happen, and at times we've had what I'd call a misfired design. It's easy to say, "I want six buttons," but trying to explain exactly where you want those six buttons can be much more difficult.
To alleviate the problem, we exchange teams whenever we can. We like to give people opportunities to visit their colleagues in other countries and to spend some time in their shoes. We also manage to get some of our people together about every month or so. There always seems to be a trade show or other event where we can meet and exchange our most recent ideas.
It's also important to remember that in this business, money is not enough of an incentive to keep employees loyal. Working with creative people in a creative industry can be very exciting, but it does produce conflict, especially with the cultural diversity we have within the company. When we win an award for innovation, sometimes designers think they were solely responsible for the success and forget about the manufacturing teams, and vice versa. All of us love recognition—the designers want to be praised, the marketing teams want to be thanked. It's a small thing but it can really make the difference between keeping and losing key staff members. To keep employees happy, you have to figure out the best way to recognize people's achievements within the culture they're familiar with.
Concentrating on a Target
When you're growing a company, choose your target market and concentrate on dominating it. This company dominates its market because we're the only company that specializes in game peripherals. Our rivals are businesses like Sony, which has 65 different companies, or Nintendo and Sega. It's actually quite easy to recruit employees from those companies in the United States, because we're an entrepreneurial organization. The big guys are incredibly bureaucratic and don't give people much authority.
Even our smaller competitors view the peripherals market as a short-term strategy. They're usually thinking about quickly moving on to the bigger market of software development. But, no matter how glamorous the software development industry looks, we've never been tempted to go there. We don't worry about software, we don't worry about hardware. We are successful because we focus. We've developed new products that have attracted interest, and invented new accessory categories. People can buy only what's available to them, so if we make the range bigger, we expand the market and also increase our dominance.
The global gaming business can basically be divided into three markets—the United States, Japan and Europe. We have done very well in the U.S. market, but in order to be a $500-million company, we need to improve our efforts in the other two. Right now we're putting much of our marketing and sales efforts into the overseas areas.
Identifying Appropriate Strategies
It pays to be aware of the culture of the market you're hoping to enter. We have learned that lesson the hard way. For example, we've seen very different sales results in different countries for computer games and products like Game Shark. Game Shark has been a huge hit in the United States and has sold very well in the United Kingdom and Japan. It sells okay in France, but not in Germany. I think that's because German parents are less interested in letting their children use a computer as anything more than a study tool.
What works here may not work elsewhere. The first few times we entered foreign countries with our products, our opening line was, "We're Number One in the United States, so we want to be your Number One." It was a mistake. No one liked that. There are already local companies in these countries. They know their local markets and understand their customers. Who says a U.S. company is going to know more than the locals? We need to "think globally, act locally."
The same applies to sales. We used to assemble a local sales team in a country, then train them to sell our way. That's where we've screwed up—twice! So now, we're doing a lot less talking and a lot more listening to our local sales teams, trying to master the strategy. We're determined to get it right the third time. It may take years, but we're going to continue trying.
Recoton, which has always been predominantly a North American distribution-based company, became much more global when they bought us. Recently, because they've shown a strong ability to handle our pick, pack and ship as well as some of the back-office functions, we've started to coordinate and synergize some of those functions with them. We share some distribution, logistics, importing and customs handling resources with Recoton, and we hope it will help our efforts to double our size by expanding our overseas markets. Global diversity is truly the key to long-term success.