“The Homestead Act”: A White Paper on the Processes Involved in Rep’s Pioneering US Products & Services into International Markets
“Sui generis” is a “legal classification that exists independently of other categorizations because of its uniqueness or due to the specific creation of an entitlement or obligation”.
My kingdom for an analogy. In the midst of the northern and southern states cutting each other to pieces in 1862, the Lincoln administration, to help compensate for the commercial losses stemming from the massive diversion of men into the armed forces, and to promote agricultural development for the overall good of the Northern economy under the great strain of financing the Civil War, encouraged the migration of people to the western states and territories of what is now the United States. Without any up-front cash payments to these intrepid entrepreneurs, the HOMESTEAD ACT offered people the risky proposition of pioneering new enterprises into unfamiliar lands in exchange for the novel compensation promise of 160 acres of property. Given that precedents are so valued within United States commerce and jurisprudence, the HOMESTEAD ACT is an appropriate, microevolutionary example of how a “Homestead Rep Contract”, more commonly known as Life of Part-Life of Project (LOP/LOP) agreement, between a principal (the USA manufacturer or Service Provider) and the independent, hybrid, professional, international, manufacturer’s agent (the risk-taking rep company that would be pioneering the principal’s products or services into foreign countries by subsidizing the principal (i.e., working without market development fees) can simultaneously provide a novel commercial agreement with enhanced, worldwide commercial opportunities stemming from the cooperative teaming of the two parties.
Working on the theory that context is everything, on a micro level here is a parallel example of how the Homestead Rep Contract can come into play between USA manufacturing companies and professional independent manufacturer’s representative companies. USA manufacturing company “A” starts noticing the narrowness of its overall sales stemming from brutal competition from both domestic and foreign competitors here in the USA. To attempt to remedy this, they spend the bulk of their time and money on R & D, patent creation, patent protection, trademark registration, trademark protection, ISO certification, clinical studies, repackaging and various other 3rd party certifications to supply the value-added dimension and oomph that objectively separates themselves from the manufacturers of an earlier generation of products and/or commodity goods or services. With their new, unique and highly differentiated technological product, products, or services they are now in the enviable position of being able to theoretically peel off buyers of older generation technology. But because of the significant amounts of time and money they spent to put themselves in full possession of this new technology, they find themselves in a capital, and human capital, squeeze.
In general, US SME’s operate with a bare bones staff whose formidable talents usually lay in the field of research, engineering, design or domestic marketing. Since they have both an imperfect understanding of professional, independent, pioneering reps and are clearly unschooled in knowing how to go about systematically freeing their products from relative anonymity in international markets, what follows in this white paper is not a superficial, 30 seconds or less elevator pitch. Instead, you will be reading a deep context of the dynamics that are involved in internationally pioneering US-Made products and services with woven-in notes taken from various gnashing of teeth independent, professional rep council meetings that I have attended over the years. This helps bring a necessary realism to the narrative and enables the building of a composite sketch of small to medium-sized US manufacturers or service companies who are, or could become, rogue versus the ideal, fully conscious, aspirational, micro-multinational companies outsourced to the hilt but with a mensch-bench management team fully grounded in the type of ethical behavior and disposition towards virtue that professional, independent reps rave about. At the international scope I am writing about, it is impossible to overemphasize that a pioneering rep is taking a gargantuan risk in working with a US SME of minimal international experience companioned with their minimum experience in working with professional reps; there could be a chance that said US SME might, in the future, become forgetful and/or ungrateful regarding the aforementioned subsidy the rep supplies the principal (the upfront, market development money that never had to leave his or her company’s bank account), and even try to game the system and shoot dice with a reps retirement money (by not only trying to keep the reps commissions and the reps foreign customers for themselves, but even using that ill-gained money to pay for the legal costs to fight the rep over the remuneration layout that was accepted and agreed from the outset of the contract). So, as you will read below, trying to get a real handle on the depth of the ethical roots of the US SME ranks rather high in importance and is always a particular, and ongoing, preoccupation with pioneering reps.
It is not enough to simply notice that the eyes of the of the US SME’s CEO seem to glaze over when the subject of moral philosophy comes up or that the US SME’s management team’s “amen” is clearly perfunctory to the pioneering international rep’s Holy of Holies admonition that thou shall not poach and attempt to annex any customers. When it is clear that, for the US SME management, truly partnering with the pioneering rep is as foreign a concept as perpetual gratitude for letting them off the hook from paying market development fees, significant character points must be deducted in the final, aggregated scoring system on whether a rep should take on the line or give the entire US SME a wide berth. Since imitation is indeed the fundamental mechanism of human behavior, it is natural to expect that US SME principals not fluent in the rep/principal language, the pioneering concept, the baked-in amortization of the subsidy in exchange for LOP/LOP commissions, the procuring cause doctrine or what a Code of Ethics are (MANA, a non-profit, horizontal organization for reps and principals that focuses on the ongoing need for education and learning regarding the rep/principal method of going to market, has a Code of Ethics which is on SPAP COMPANY LLC’s website) will tend to have psychological, emotional and ethical gaps not only regarding their financial obligations but what is actually involved in pioneering products worldwide. Thus, if US SME principals are, by reflex, likely to try to use corporate steamrolling on the pioneering rep, does the rep want to be always looking over his shoulder wondering if part of its enlarged set of tasks will be to also try and rehab, awaken and/or jump-start moral impulses in a US SME’s management’s collective flawed character if they are rooted in the type of malignant perpetuity that imitation enables? As any pioneering rep will tell you, pioneering products in and of itself requires such creativity and connect the dot focus that the rep is ill-advised to also get sucked into the unpaid side-job of trying to graft a conscious into some principal whose ethical and moral immune system would most likely reject it anyway. Whether the US SME is profoundly unethical, or just profoundly obtuse, them giving any rep the sense that they are bored and want to scrap a deeper conversation about ethics should be a clear signal to the pioneering rep that false assertions, deceptive and deliberate misconduct by the principal are all probably going to inevitably manifest.
THE BURDEN OF UPFRONT COSTS:THE INTERNATIONAL REP UNDERWRITING THE US SME
Unless a US SME has seed, institutional or VC money coursing through its veins, profligacy is not an option open to them. They usually have so depleted their respective resources that they are not in a position to hire a prohibitively expensive, in-house, international promotion and marketing specialist. The reason is that this outside person, now an employee, would have to be paid up front and ongoing compensation for the duration of their mutual contract without any guarantee of successfully “pioneering” their virtually unknown products and services – and creating new revenue streams – into new foreign markets. While the professional rep is NOT an employee, in order to lower the rep’s obvious risk and give him some monetary shelter in introducing a new line into a given territory, the natural order in the professional repping business is for the US SME to pay the rep market development fees for 12-24 months. Instead, if the US SME does a really good case of pleading poverty, and if the product is objectively extraordinary, with an eye on the all-important, long-term Return On Investment (ROI), the rep can step into the risk-rich, upside-down world by now subsidizing and underwriting the US SME’s international outreach. Not wanting to assume anything, it must be made clear here that this shifting of the monetary risk burden completely to the international rep is not to be confused with a domestic pioneering rep forgoing market development fees from the US principal. Although the domestic, pioneering rep would also be doing the US SME a big favor, the absolute scale of what the foreign, pioneering rep is doing swamps any attempt at rational comparison.
It could be argued that part of the reason that the USA economy is chronically entrenched in the red of grim, foreign trade deficits is because even those US SME’s making really dynamic products sit on the export sidelines because they cannot figure a way around their very real financial constraints. Like boatloads of other USA companies new to the option of systematically bringing scope to their exporting program, they reflexively become non-participants, sit on their hands, take no initiative and, through omission, cede export markets to their savvier foreign competitors. Although they recognize the potential for supplemental revenue streams coming from foreign markets, they also vaguely understand that in order to appropriately staff up they are looking at having to put up some significant, front-end, hard cash. To lay this out and make it tangible for the US SME, here is a comparative, estimated cost of a Direct Field Sales Employee (DFSE) for the USA marketplace* that MANA published in 2005:
- Fixed Salary $80,000.00-$100,000.00*
- Variable Incentive Compensation (Commission on top of salary – average is $25,000.00)
- Payroll Taxes & 401K Contribution $10,000
- Paid Vacation, Insurance & Worker’s Compensation $14,000
- Company Automobile $10,000 Travel & Entertainment $18,000
- Postage & Office Supplies $6,000
- Computer & Communication Equipment $8,000
- Inside Sales Support $3,000
- Recruiting, Hiring & Training Expense $16,000
- (*add a minimum of 40% for a DFSE for the foreign marketplace):
- Based on employee turnover once every two years
With such stark, obligatory, upfront, payouts of precious resources staring small principals in the face, instead of having their international aspirations dashed, US manufacturers can now consider an alternative way forward. If the US principal is truly Export Ready and Rep Ready, they can have the rare privilege of abstaining from the DFSE model by working with a hybrid rep company that, if the product or service is unique enough, and the principal’s management is adequately export and rep adept, might be willing to take the extraordinary risk of systematically pioneering the principal’s products or services into countries outside of the United States borders.
DEFINING THE PIONEERING OF US PRODUCTS & SERVICES
The word “pioneer” is the key, predicate verb here, and it does not appropriately apply to a person pulling in ongoing fixed and regular payments from the principal’s payroll. However, the term in the modern day commercial sense does fit with the independent professional rep whose personality and livelihood are more reminiscent of the type of pioneers that the original HOMESTEAD ACT spawned. Just like the principal who pioneers the creation of its new technology and expects to retain all of its Intellectual Property (IP) rights and advantages, when the rep firms takes the equal risk of spending massive amounts of upfront and ongoing time and money to create a methodology to pioneer a product into foreign markets, the Homestead Rep Contract agreement acknowledges the corresponding privileges and entitlements that accrues to the rep from his backbreaking work and intellectual infrastructure that he has created and brought forth. By using a hybrid, independent, professional rep to pioneer its products or services, the principal is able to prune most of these upfront, heavy DFSE employee costs from its overall operations; thus, through the pioneering rep’s self-evident sacrifices, another part of the Homestead Rep Contract is the principal having the luxury and advantage of being able to significantly monetize international rep labor (the rep’s subsidy, the loan, to the US SME) on the front-end and then use these saved funds to create a kind of deferred compensation plan paid to the pioneering rep on the back-end for a duration of the time that the rep’s foreign customers continue to buy the rep’s principal’s products or services.
RECONCEPTUALIZING MARGINAL RISK FROM EXTREME RISK
There is no doubt the Homestead Contract will be a hybrid concept to some US principals that remain unconsciously nostalgic for the overlord-serf world of yore. But because the long-term financial stakes are so high, and because the rep is so intimately involved in creating and thus widening the scope of foreign principals that might desire to import the US SME’s products or services, the Homestead Rep Contract is a recognition and reflection of the reality of what the rep’s creativity, skills and drive has made actual. With this in mind, just as the rep would have no firm legal ground to stand on in claiming custody of the IP that the principal has pioneered, the principal itself, through the Homestead Contract, is similarly making the obvious statement that they have no firm legal ground to stand on in claiming singular custody of the foreign customers for themselves after the rep, in subsidizing the US SME, and through the pioneering reps own resources, has created a system that facilitates the pioneering and procurement of the principal’s products and services into foreign markets. While it is hoped that ethical and moral concerns should constrain principals from trying to make rep’s foreign networks into house accounts, the purpose of long term contracts is twofold:1.To help guide those principals with possible underlying character issues that might not be strong enough to resist caving into house-account impulses as they start to see the outlines of the international market that the rep has created for their products or services. 2.Unless it is a morals issue, the lack of a termination clause is to deprive the US SME a perfect platform for going on a pretext binge to try and justify the annexation of the foreign customers. When a huge, front-end, pioneering effort of promotion and marketing is required of the rep by the principal in overseas markets, this long start-up period almost by definition equates to lean financial times stretched out over many months – even years. As an inducement for the rep to take on such a self-evident risk, a long term contract is the big carrot that can make it worthwhile. Without such a long term contract, referred to as a Life of Part-Life of Project (LOP/LOP), and without ongoing market development funds being provided to the rep by the principal, it is simply non-sensical for the rep to take such an extreme time and monetary gamble if he is only going to surrender sole custody of the rep’s foreign customers back over to the principal right at about the time that the significant revenue stream starts to kick in.
When a international rep firm sees great potential for an emerging, disruptive technology or service from a United States company and decides to gear up to promote, market and rep liaise the product/technology, there are formidable and quantifiable hurdles to overcome. With sometimes virtually zero name recognition, and limited skus, in the US marketplace, let alone the international marketplace, the international rep firm must try and figure out unorthodox ways to get it wired into the consciousness of companies and institutions that could make use of such a product, component, technology or service. With the principal preoccupied with essential things like basic survival in the US marketplace, the enterprising rep agency that decides to pioneer the new product or service worldwide can use his or her entrepreneurial skills to create tangible, international opportunities that would not have otherwise existed. Since the pioneering rep might also be deprived of a promotion and market development budget from the principal, the only alternative is to create novel, guerilla-marketing techniques and linkages through the digital highway that allow the rep to cast a brighter light upon the principal’s own products and services amidst a glut of putatively similar, competitor’s products and/or services. But, as one might well imagine, it is a massively time-consuming project to interlock the various, formerly obscure, pieces that eventually are acknowledged as relevant, important and occasionally even taken for granted by some US principals. In other words, even though the rep builds out a special infrastructure systems to facilitate the movement of the products and services to the foreign market, more often than not it still does not fully register with perpetually distracted, small United States principals. They are usually too preoccupied with the United States market to realize what it actually takes to persuade ambitious foreign importers, and sometimes Key Opinion Leaders, to notice, let alone become immersed in, the process of creating awareness about US principal’s products or special services in their own country and/or region of the world.
RATES OF PROCESSING INFORMATION
Ironically, because of the LOP/LOP’s pure-commission basis, it is not just how distraction-prone management of the US SME is that the rep has to be concerned about. Since this is not just a US phenomena, for the professional, pioneering rep the whole repping process must be handicapped with the knowledge that with cross-border social media players like FACEBOOK and Twiiter, much of the rest of the world is also preoccupied with and voraciously multi-tasking on a scale never seen before. Then there is the inescapable component of physiology and how that comes into play with all procurement people. Research on Critical Flicker-fusion Frequencies (CFF) rates, and how this links with the whole change-blindness paradigm, is telling. The CFF speed has to do with how quickly any animal can refresh an image and process information attached to that image. Sentient beings with smaller body masses and accompanying faster metabolic rates allows them to have a CFF that refreshes images and process information at a much more rapid pace. Essentially, the smaller size means that there is less signal wiring that has to be traversed to get to the brain for central processing; the higher metabolic rate means that it allows for the availability of the extra, needed energy to mentally process the information (to more clearly juxtapose known and studied examples of this:the CFF for flies are at 250 HZ; for normal sized humans, their CFF are at 60 HZ).
When one combines the phenomena of human context-switching with intrinsic CFF challenges, it becomes more clear how this actually hinders the ability of most people to discern significant differences – for example, from me-too products to truly game-changing technology. In short, this 21st century social habit of multi-tasking, because of its inherent ability to distract, has dulled the vetting process for consumers and procurement departments alike. Since this obviously puts manufactures of cutting edge products at the disadvantage of not having their products properly distinguished from earlier generation products, consequently mis-grouped and thus not seriously considered for importation, the theme of what Stanford Prof. Clifford Nass termed “discerning significance” is of no trifling concern to a pioneering rep. If the buyer of the procurement office (already severely yanked and pulled by the very nature of his or her’s stressful job) also happens to be interacting with multiple media platforms, cannot rely on the usual mental shortcuts and/or emotional nexus that a branded product would usually confer and on top of that has underlying metabolic problems of their own, there is a real possibility that some level of cognitive diminishment is going to be present and negatively impactful on whether or not they can properly assess the pioneering rep’s product line. Although the US SME is probably not anticipating these variables in the foreign procurement people, the pioneering rep has to consider if the US SME’s products is jaw-dropping enough to draw and focus the foreign buyer’s eyes and also whether the US SME has the type of seasoned, jaw-dropping, Export-Readiness/Rep-Readiness, foreign market entry/foreign market acceptance competencies to help usher their unique products or services through the entirety of the process. All of these factors have to be assessed via the pioneering rep’s version of the SWOT analysis (the ERRRQ, explained below).
With the wired, and wi-fied 21st century promising round-the-clock systemic distraction, the pioneering rep cannot assume mental acuity from a foreign buyer in being able to pick up the subtleties of his client’s products described in the english language which there is a good chance is not native to him or her. Thus, to try and break through all of the internal and external chatter that usually envelops the buyer in the foreign procurement office, it is not only a matter of factoring in the negligible chance that the buyer will himself be a clinician that has a trained ability to detect and understand the underlying hard science and the novel concepts built into the US SME’s products. What becomes readily apparent is that in order to separate oneself from the multitudes of other vendors, the US SME must realize it is not the bonafides of the specialized, international pioneering rep that is going to force the procurement people to issue purchase orders. Instead, it is the absolute necessity and importance of obtaining and then deploying the sharper tools of distinction from those other worldwide companies that cannot qualify:The gold standard of CE marks, FDA marks and clinical studies – great lead-in credentials that foreign buyers will have a much more difficult time overlooking. If the US SME has really broken new ground, if they have also created a new category, with these type of credentials in hand, at the introductory stage this is the closest a pioneering rep and his US principal can get to a subtle salute from skeptical, foreign procurement people cynical about usually being pitched all manner of cockamamie products and services.
Such credentialed products, so unique and transformational, the scope of the commercial and health-giving possibilities so stimulating, should, in and of itself, via remote electronic presentation, help lift up desk-bound buyers who know all too well from having already interacted with slick vendors that something does not have to be true to be persuasive. While it is not necessarily true that all people who sit 8 hours a day and think for a living are dopamine-deprived, I humorously work on the premise that without real novelty, without bringing in something truly innovative for the procurement people to consider, I will not be contributing to that procurement person’s mental or physical well-being. Likewise, if the procurement people are reading the medical literature on neuroscience that the neurotransmitter dopamine gets quickly summoned and released in the consumer’s brains when novelty is beheld, this shared satisfaction should have a ripple effect on their procurement person’s decisions on what products to issue PO’s for. It can be a real boost to the souls of those in the international supply chain that products, or services, do not have to have dark clouds hanging over them from the manipulative marketing and can instead be replaced with coop ads that help focus consumer’s minds on the underlying science, IP, differentiating functionality and verifiable effectiveness. All of these things have to be considered. To be practical, the idealistic pioneering rep, conscious of limited landfill space that commercial junk might quickly find residence in, has to take keen notice if a US SME’s product line can positively alter both the world and worldwide consumer’s lives; to be brutally practical, the pioneering rep also knows that no matter how good and novel the product is, allowing a US principal to simply try to self-regulate, to simply verbally attest to their collective integrity, to their collective international competency, to their real knowledge of how to work with professional reps, is quite simple not going to cut it. That kind of sop chewed up large portions of the US financial industry in the late 20th century; it also almost did in the world economy in 2008.
PREEMPTIVE DAMAGE CONTROL
Suffice it to say, it is vitally important to have some type of formal vetting process in place to determine how intellectually engaged the small US principal is willing, or able, to become regarding the whole professional rep/principal dynamic and the principal’s current, if they exist, export bona fides. It simply cannot be over-emphasized. In fact, because the Homestead Rep Contract is predicated on the US principal being both export-ready and rep-ready, my company requests the potential US principal to pay a one time, cost-recovery fee to go through the diagnostic “Export Readiness, Rep-Readiness Questionnaire” (ERRRQ). The reason for this is because without the pattern feedback from the ERRRQ, the pioneering rep would essentially be compounding his risk by working on blind faith that the small US principal’s self-attestation is all that is needed to assure my company that they have the needed bandwidth to work with a professional rep, foreign principals, bankers, forwarders, KOL’s, oversight of and financial participation in foreign coop ads, foreign Custom’s challenges, etc. The reason for the context build-up by the pioneering rep with any new, potential, US SME making really unusual products/services is purposeful:To let the US SME know that since the pioneering rep is seriously considering reversing the normal process – with SPAP taking a partial or full risk in subsidizing the US SME – there is such an enormous unpredictability to the pioneering rep that the US SME must be willing to go through special processes of mitigation. No matter what a game-changer a new product or service is or could potentially be, since no professional rep wants a US SME client to possibly go rogue like some character in a picaresque novel, my firm cannot possibly consider pioneering a product unless I know what I am getting into.
The ERRRQ can also be seen as a kind of Adaptive Optics in that it helps compensate for, or correct for, the entrepreneurial Kool-Aid ingested by most US SMEs that many times at least partially distorts the information feedback. If the US SME can be candid and truthfully answer the questions, this can lead to a more subjective-free image of the company’s actual, versus imagined, export readiness and rep readiness. The ERRRQ embodies the tautology that I face with virtually all US SME’s:no matter how many ways I say it, the US SME doesn’t know what they don’t know about efficiently and systematically accessing international markets and how to competently engage with hybrid, professional, international reps. After the company goes through the ERRRQ, they start to realize, sometimes grudgingly, how much else they need to consider weaving into the compensation/support package proposals and/or what they will need to do to keep their products from piling up and collecting dust in the warehouses of my foreign importer/distributors. Although the rep has to perform first (in bringing the foreign customers into formal, triangulated, business talks with its US SME principal), absent the feedback from the ERRRQ there is no assurance at all that the small US principal is actually ready and able to efficiently perform all of the moving parts necessary in working with the rep in the lead up to, actual fulfillment of purchase orders and the backside support of the branded product when it is trying to gain traction in the foreign country. The ERRRQ, whether the US SME and SPAP end up working with each other or not, amounts to about 6 hours of invaluable consulting work as it not only focuses in on a principal’s current export-infrastructure and level of savviness in working with professional, independent, manufacturer’s representatives; by also incorporating the Gartner Hype Cycle into the process, it also helps both parties see how much of a hype hump will have to be surmounted and traversed.
Combined, the ERRRQ and the Gartner Hype Cycle provide a way to quietly drain away slogans, bombast and cliches, show how and where optimism is probably out-lapping realism and generally helps both parties displace any dead weight, blue-sky world views that the US SME possesses in earlier self-appraisals of actually being able to systematically go after multiple dozens of foreign markets. The multi-layered ERRRQ gets at competency gaps, estimated time needed to fix or cure international processes, estimated inclination to default to domestic perceptions, ethical gaps, clarifies possible pressure coming from impatient seed, institutional or VC-related funding sources to produce results, amount of resources the US SME will make available to support their product, formation to exit timelines, infrastructural export capacity deficits and other points. All of these need to be addressed to help better prepare the principal to not only work with a professional rep for the future exportation of their products or services into the hands of the rep’s foreign customer networks; all of the feedback helps shape and modify which of the international service options, rep-principal contracts will be the appropriate to work together under.
Consider this another way:If a hybrid, international, manufacturer’s rep firm is being paid monthly market development fees by a US SME who is neither export-ready or rep-ready, the monthly remuneration can also have optional, add-on, services to compensate the rep for consulting work the US SME principal obviously badly needs. Conversely, a hybrid rep firm NOT being paid monthly market development fees by a US SME who is export ready but not rep ready, or vice-versa, or neither, is essentially a blueprint for a time-sink as tutorials to and for the principal would have to be created and put into place. Since the LOP/LOP is what is called a “success contract” (the rep only gets paid commissions on the come from actual sales to the reps’ foreign customers), a non Export-Ready and non Rep-Ready US principal cannot seriously expect to also have free consulting work thrown in prior to, or after, the LOP/LOP contract is signed. The ERRRQ diagnostic helps pick up the deficiencies and illuminates them for those particular US principals in advance who, as the foreign customer impatiently waits, would be likely to call for a time-out from the export process as they go through a remedial export/rep crash course. As one can imagine, this not only further pushes out the actual payment of the commission cycles for the pioneering, commission-only reps; as objectively bad as that is, and to add insult to injury, since foreign principals will be inferring that the pioneering rep firm is vouching for the US SME’s competency, the rep is also then forced to spend precious time doing damage control with its overseas networks who were working on the assumption that the rep’s US principals not only manufactured very unique and highly differentiated products but were sufficiently staffed with astute employees who would be prompt and know how to professionally engage in and actually do international business in a coherent fashion.
PIONEERING REPS WORK WITHOUT A NET
The ERRRQ is not sensitive enough to detect in the principal the presence of a shrunken right amygdala (the seat of altruism) or the absence of the much discussed, and possibly mythical, moral molecule. As alluded to above, it is also unable to spot and graph Prof. Kevin Healy’s insight that the higher a person’s metabolic rates, the greater the maneuverability and the physiological ability of a person to more quickly process new information. When those same packets of photonic information hit the retinas of different people, if there is underlying metabolic mayhem, or lack of ethical ambition, or both, there is no telling what, if any, action will occur from one person to another. Thus, the collective weight, co-morbities and metabolic rates of US SME’s management team provides too many variables for the ERRRQ to pick up and digest (the firing-rates of the inter-neural circuitry enabling communication across the brain’s hemispheres, also known as “recurrent processing”, might in and of itself equal, or indicate, consciousness is also well beyond the scope of this business diagnostic tool). A third admission is that it is not sophisticated enough to be predictive of the whole litany of professional repping community’s concerns regarding a principal’s fondness for speciosity, chutzpah, collecting pretexts, mental hooky, a sense of entitlement in trying to convert rep’s customers into house accounts or their own belief in a special immunity from gratuitously breaking commercial laws and the moral embarrassment that should normally ensue. It would be wonderful if US SME’s would be willing to go through the type of more-comprehensive moral audits that large companies subject contract manufacturer’s to here in the USA. But given the time and resource constraints of US SME’s, the best the pioneering reps can hope for is that the ERRRQ can approximately summarize the US SME’s present state while also counting on the principal’s own upbringing being sufficiently broad, diverse and deep enough to build the type of character that can demonstrate to others that there are some ethical braking systems in place and that their own base desires are not running the whole show. Knowing how real the impact can be for a pioneering rep in working with an out of their depth, US principal, the immense risks makes the ERRRQ not just utterly practical but commonsensical in trying to predict not a company’s strategy, but discernible inclinations and tangible and verifiable capacities to professionally perform and fulfill foreign customer’s orders. It’s usage as a necessary, front-end, diagnostic tool was borne from my own company having permanently lost a couple of foreign customers in South America, South Africa and the Middle East, that my company was growing and nurturing, due to a US principal’s consciousness lapses, creeping distraction and incompetence partly arising from small US principals taking some of my foreign customers for granted.
While the forfetiture of time and market development fees clearly amplifies deprivation under the LOP/LOP and thus is always a constant worry for the pioneering domestic rep that this immense gamble will all pay off, because of the sheer scale and effort involved in foreign outreach operations the risks to an international pioneering rep are magnitudes higher. Failing to resist the siren call from potential, plentifully understaffed US principals about coming commission riches are not only plentifully noted in the annals of rep lore; without the US SME going through the sieve of the ERRRQ it should automatically make pioneering reps worthy candidates for case studies in extreme risk management as it would simultaneously deprive a pioneering rep of any type of what I affectionately call the “Ingrate-Index” (“II” – see graph below) which could highlight the likelihood and innate willingness of some US SME’s to, as time goes by, discount and disremember the ample loans/subsidies that they were getting from the pioneering rep while baldly trying to grab the pioneering reps foreign customers for themselves. The consequences of succumbing to the US principal’s verbal enticements to allow them to skip the ERRRQ in exchange for their own enigmatic, heuristic process (with the rep and the rep’s invaluable foreign customers as guinea pigs) would do nothing more than create additional and unnecessary suspense and set new standards in commercial irrationality and short-sightedness. Essentially, the ERRRQ not only helps some US principals realize that they were inadvertently talking through their hats; it also shows intent that the small US principal is serious about rep/principal education and wants to learn so they can smoothly work within the already in-place protocols that the professional rep expects its US SME clients to know, exhibit and live up to. In attempting to avoid the consequences of their actions, some US SME’s might try to invoke some type of 21st century version of the divine right of kings. But that is not going to cut it. The British, American and French Revolutions, slowly, steadily, literally and figuratively brought violence down upon and destroyed that royal dodge by essentially clay-footing one and all; earthly authority, expressed through the club of US commercial law, and channeling Hobbes contention that without the strong hand of the state directing human civilization towards a higher trajectory, human life can be “nasty and brutish”, make companies accountable for the negative externalities that their decisions create for the pioneering rep. In other words, the laws attempt to dissuade company’s from bald, bad behavior like skipping out on their financial obligations or trying to shake down reps to reduce their commissions (a supplemental request by the principal to the rep to provide another subsidy).
Since the great majority of US SME’s do not possess the resources to have an in-house Human Resources Department that could create an equitable code of ethics that can guide principals to avoid wrongdoing, the ERRRQ asks the principal the following:Instead of the US SME just trying to wing it while simultaneously eroding their reputation as a reliable supplier that knows what they are doing, can they possibly see the wisdom in having both parties be guided by, and adhere to, the codified MANA Code of Ethics – precepts that can be seen as an extra-contractual guide path that dovetails into the overarching legal layout of the LOP/LOP. If it is true that character is fate, there should be no illusions that these 2 steps of references will, by themselves, magically transform some US SME from moral midgetry into objective noble behavior. But without the necessary redundancy of these basic rules of the road, there would be little chance of attenuating the arbitrary and gratuitous nature that some principals would otherwise desire to operate under. Since the chances of US SME’s having a separate Compliance Department are virtually nil, even with the possibility that they will sign on to the MANA Code of Ethics is meaningless if the US SME is so famished for delusion that they will resort to the type of laughable, disingenuousness and tortuous sophisms that reps talk about, and write articles for, in AGENCY SALES Magazine. Knowing that it is not really realistic to believe that a US SME will have had the time to actually have made a dent in reading the literature written by penetrating writers whose works are contained within the Great Books series of Western culture, and thus might have gained ethical insight by osmosis, with the pioneering rep taking such an extraordinary risk of working purely on a partial or pure commission basis in multiple international markets, out of pure practicality, and for self-preservation, the ERRRQ also has an ethics audit section. All reps must enter into discussions with any and all US SME’s with the precept that of all the university classes that the esteemed management of US SME’s might have (literally) slept through, those dry, ethics and philosophy classes were probably at the top of their list. The goal of all of this is to attempt to ferret out the type of character issues within the principal’s management that might cause problems downstream. It is also to see if the US SME’s accounting department is, or could, as the gag goes, be doubling as the US SME’s ethical compliance department.
FACILITATING THE “TIPPING POINT”
Why is it that the convergence of Export-Readiness, Rep-Readiness and ethical depth matter so much to the pioneering rep considering formally working with a US SME? If humans are, in essence, cultural beings, future principal behavior might best be determined by how wedded principal management is to outdated domestic ideas and perceptions that, by a strange combination of momentum and inertia, their business culture and management models perpetuate. Charitably speaking, in doing pre-damage control the rep always has to consider the possibility that any stunts, any trust-shattering, debilitating operational habits and behavior by a principal, might very well be birthed by the usual unearned, ill-applied, domestic hubris. For the partial or pure-commission, pioneering rep, being able to spot a US SME that has no predisposition towards ongoing learning, where at a minimum self-education is not considered a priority in a company’s business culture, means there is probably going to be conflict and trouble downstream. As inimical as a principals actions are to a healthy rep/principal relationship, they might simply not know what they do not know; they also probably never considered the necessity of supplementing their domestic syllabus that they presumed was adequate to cover all of the economic, cultural, ethical and marketing needs. Foreign procurement people need to know the US SME is not only conscious and savvy about what is needed; they need to also know that implementation of what is needed to support the brand is not just part of the rhetorical flow.
For example, in trying to attract what the late scholar Everett M. Rogers termed “early adopters” to a unique product or service, what is painfully obvious to the pioneering, international rep firm is many times not commonsensical knowledge to a US SME that mostly possesses domestic business chops. To get its unique product or service idea widely diffused and embraced within a given foreign country or region, it should be abundantly clear that just showing up will NOT work. In fact, with some exceptions, an export flatline can be counted on if the US SME insists on domestic margins for foreign sales while at the same time resisting the idea of paying a share of the coop ads with the foreign distributor. In order to keep the pioneering rep’s foreign distributors from smoldering in frustration (a common phenomena in back channel communications that the rep has with his foreign distributors), the US SME must discipline themselves to not only tone down the pride they have in their unique product or service but to also come to one of those belated satori moments that all reps wish for their respective principals:it does not make sense for the foreign principal to be solely responsible for paying promotion and marketing dollars for the foreign brand-building of a product brand or service that the foreign distributor does not own and whose distribution rights could be yanked for the flimsiest of reasons. Although almost all US SME’s have never themselves been an international distributor, it is necessary for them to ask themselves if they would like being told that it is their sole responsibility to budget and pay for the promotion of an asset that they do not own.
How can both parties proceed? If the US SME’s products remain deep in anonymity in foreign countries, and thus cannot qualify for “earned media” (sometimes referred to as “word-of-mouth”), shared, financial inputs put towards coop promotion and marketing must be done by the US SME and the foreign distributor. Absent a hugely expensive Key Opinion Leader (KOL) with the type of pull (i.e. their ability to shape and influence editorial content about a product or service) that can help shift a market almost by themselves, what is really needed is a mass-audience focused Above The Line (ATL), niche-focused Below The Line (BTL) and/or Through The Line (TTL) advertising techniques of the US SME’s branded products/services. To get these early adopters to start a buying eruption, roughly 2.5% of a given (in this case, foreign) population must make transactions of the branded product or service. If such awareness building messages can be put in place, cooperatively paid for by both the US SME and the foreign distributor, to either help shape and build brand awareness and/or drive sales through specific offers or promotions in a particular country or region where SPAP’s foreign customers have import and distribution rights, and if roughly 13.5% of the foreign country’s population buys the unique product or service, there is a real chance that the anonymity of the brand can be diminished, demand for the products or services can increase and reorders by the foreign distributor for the products from the pioneering rep’s US SME’s factories can ensue.
This priming the pump will allow the product to have a much better chance of being more widely bought by foreign consumers, lead to increased frequency or reorders from foreign principals and start to supply more reliable data to enable both principals to set realistic minimum purchase orders that can be projected out and written into the distribution contracts between the principals. All of this takes not only mental engagement, but situation awareness by the US SME to realize two broad ideas:1.The need to monetarily participate with the foreign distributor in getting credible information to the foreign buying public. 2. Acknowledge that even through a US SME believes its assertions are correct and based on hard science, the worldwide spread and accessibility of information technology is also arming consumers worldwide with the tools to undermine brand messages by digitally posting comments skeptical of health, medical and beauty claims – all of which will be very hard for a US SME to combat or counter. The US SME needs to hold, accept and work within these fundamental precepts or efforts for wider market acceptance will essentially be handicapped from the get-go. For the US SME to blithely think that by starving the foreign distributor of coop promotion and advertising funds they can actually reach and influence a deeper and wider set of foreign consumers in a country or region is breathtakingly unenlightened; for the US SME to also blithely think that on top of starving the foreign distributor of coop promotion and advertising funds he can simultaneously request minimum orders of the pioneering rep up under the LOP/LOP is definitionally ludicrous. Why would the pioneering rep spend all of that energy on the US SME’s international buildout, get no coop buy-in for ads in the foreign country from it US principal and then give that same US principal a backdoor path to trying to make the pioneering rep’s foreign import network into house accounts?
These are the type of rep/principal, and principal/principal, dynamics of international trade that a pioneering, professional, international rep needs to thoroughly take into consideration before taking the enormous opportunity costs and risks in internationally pioneering a US SME’s products or services. If the export and rep/principal knowledge-flow in the rep/principal relationship is disproportionately coming from the rep, the challenge is to, at a minimum, get the US SME to see MANA is the definitive inculcation hub to help educate the principal from making fundamental errors in judgement with its resultant, ill-informed action or inactions that will affect both the rep and the rep’s foreign import and distribution networks. If that does not work, if a principal still does not see any compelling reason to avail themselves to the behavioral information that MANA membership can impart, and if their management team are not populated by eager, autodidacts all wanting to sincerely know about professional repping, let alone the many varied mechanisms involved in the international trade of their own unique products or services, the primary burden of the overview, re-explication and even the pre-explication process (i.e., the white paper that you are in the middle of reading right now, and the ERRRQ, which is the next step) is and will always be on the professional rep.
Smart exporting is a long game and the pioneering rep, if non-tariff barriers or overly burdensome registration issues are not involved, tries to work with his foreign customers to facilitate ways to punch through the inertia that was preventing market entry. But a clear distinction must be made here. If both the pioneering rep and the principal know that a small US client’s product or service is just a gimmick for spot business, another pet rock momentarily starring as the latest commercial junk soon to exit over the cultural transom, then a short-term rep contract makes more sense. But once a principal is making long-term truth claims, especially medical or health claims, about its products that are going to disrupt a conventional wisdom – and likewise put a lot of foreign customer’s procurement people at professional risk with their own management – the severity of the foreign scrutiny of the product line gets compounded by the strength of the US principal’s assertions. This is not simply a matter of already established economic interests reflexively trying to protect an older generation product that is about to be displaced in a particular country; the reality is that many times foreign companies really do desire innovative products that can genuinely enhance human physiology and appearance, but essentially feel much more comfortable when it is vouched for by the empiricism of Key Opinion Leaders in their country or region. Thus, with this as background, with the need to spend the additional time to find and sign a KOL being obvious, there is a real possibility that foreign customer’s decision-making can become protracted as they wait for the thumbs-up from a local KOL and an all-clear sign from their own Custom’s officials about the US principal’s claims and assertions. The length of any hybrid, international, manufacturer’s rep contract must not only reflect those realities; they must also be looked upon as a realistic and just reward, and an obligatory pact, for the immense monetary sacrifices and multiple layers of built-in delayed gratification that the rep must endure in pioneering unconventional, new-category, products and services into multiple foreign markets.
MOVING EFFICIENTLY AND NOT BREAKING THINGS
Although a US SME’s worldview, ethics, staff and knowledge impediments are a professional rep’s preoccupation, they are not the only possible obstructions. Because many of the products I rep are consumables that go into, or interact with, the human body, clinical studies, or lack thereof, can be highly determinant in the importer’s own estimates of the levels of regulatory scrutiny the product will draw. Time-wise, it can be similar to selling a component to a car company:A thousand eyes (the importer’s staff, governmental agencies, medical associations, medical education associations, etc.) must thoroughly vet and/or weigh in with opinions before the product is given the collective green light and a PO can finally be issued by one of SPAP’s foreign customers. It is mistake to assume that all US SME management will be aware of these points and that The HOMESTEAD ACT’s requirement to actually plant seeds (the concept of the products) and farm the land (communications with the foreign customers) will immediately be graspable to them. Contrary to reality, in trying to force through and make the transactions happen, what is likely to occur is that most US SME management, ensconced in their own silo, will go with what they know about the US domestic market and then try and impose, or transpose, its own inner logic and pretense onto the realities of international markets. Predictively, there is a high probability that the understaffed and time-constrained US SME will think that how things are done in Baltimore are how things are, or should also be done, in Beijing or Baku. Thus, the possibility for conflict and fallout becomes self-evident:In the long game of international trade, the US SME, instead of having the awareness of, focus on and skills needed to attract and retain mindshare of SPAP’s foreign customers, with usually no parent company’s financial cushion to fall back on, can be prone to prematurely asking for unrealistic order quantities. The result is that, unless constrained by experience, they will move unilaterally with a product timeline that usually angers, even sometimes frightens, foreign customers considering the pioneering reps’s US SME’s products or services. The jeopardy is that the pioneering reps foreign customers will not only take a walk from the pioneering reps’ US SME’s; the double jeopardy is that the pioneering reps foreign customers might also permanently take a walk on the pioneering rep for all other future business because of the mistaken belief that the pioneering rep somehow is able to control a US SME’s ungovernable behavior. The reality is that we are separate companies and thus can’t really control the actions of our US SME’s. A tornadic US SME will simply move onto another country while the rep is left trying to work through the wreckage, resuscitate and rehabilitate the human relationship with the foreign principal that took years to build. In the basic relationship between scarcity of valued foreign customers, and the foreign customer’s freedom to choose who can pitch them unique, US-made products, the opportunity cost of a US SME client insulting the pioneering rep’s foreign customers, while incalculable, are still very real.
The ERRRQ is designed to break through most obscurant tactics and search for indicators that, while the US Made product or US provided service might be truly original and magnificent, the principal’s management is currently not up to the operational or ethical task at hand. When this conclusion is reached, the rep can pass on pioneering the line not to only save its own invaluable time; the ERRRQ will also provide much needed insight and feedback to the US SME about what they will need to fix and upgrade so that they can eventually fully participate in helping reduce our country’s gargantuan international trade deficit. My company’s own business model was constructed to allow me the built-in flexibility to move from one particular foreign country to another not just based on my own existing built-out foreign import networks. In the internet era, my company’s ongoing commercial intelligence collection management work must be able to sift and lift out predicate and non-predicate signals from the raw, voluminous data revealing both the KOL’s that can supply needed juice to a US SME’s one of a kind product or service and, from these shaded, data crevices, the international importer/distributor whose hunger and ambition to be associated with innovative products best aligns with who my US client might be able to contractually partner with. My company’s emphasis or direction also comes from reading the work of academics providing crucial insight as to what macroeconomic shifts are occurring mostly unnoticed by my clients and their competitors. The competitive advantage of knowing the general demographics of a country or region, the medical demographics of a country or region, discreetly working commercial back channels, seeing the gaps in importer’s portfolios and recognizing the patterns and/or the unrealized synergies where my US client’s products or services might fit all can be done under the pioneering contract if the US SME credibly qualifies. Even though extra evaluation points are always given for IP, FDA marks, CE marks, ISO compliance and clinical studies that could conceivably leapfrog entrenched products and established brands, if a US SME still does not qualify as Export Ready and/or Rep Ready, or if on a country by country basis registration for the product could get stretched out over months or years, the hybrid, international rep’s skills can still be used by a US principal under a normal market development fee program with regulatory milestones built in. In addition, if a US SME is super, skeletally staffed, and/or overly founder-dependent, as another part of the risk-premium package, a personal guarantee has to be considered.
MACRO ECONOMIC & MORAL CONCERNS
The long-term remuneration of the LOP/LOP anticipates, and bakes in, the real possibility that the product might be outright rejected, or greatly delayed, by the Custom’s officials in any respective country because they believe it does not credibly align with the US client’s claims and assertions. This is not merely an academic point regarding the credibility of a manufacturer’s products; this also has to do with a proliferation of recently stood-up trade barriers since the 2008 economic collapse, the worst worldwide recession in 80 years. The Global Trade Alert (GTA), a worldwide, multi-institutional initiative created by the Center for Economic Policy Research (CEPR), helps provide up to date data on individual country’s laws restricting trade made amid the current global downturn that continue to affect US companies wanting to export their products or services. As foreign import and distribution customers have to take extended amounts of time to try to figure out how they might be able to maneuver the US client’s unique products past the their own country’s sometimes ossified Custom’s gauntlet, if they cannot find a way to do so until months, or even years, later the US SME must also see the deferred remuneration to the pioneering rep as not only rightfully due but obviously less than it would have been if non-tariff barriers had not been put in place.
With this additional context, with the preamble to the ERRRQ and the ERRRQ itself, the Homestead Rep Contract agreement not only embodies these realities but provides practical awareness tools to harried presidents of US SME’s to adjust their expectations and assist in getting nuanced about how to work with professional reps amid the realities of virtual strip-searches of certain types of health, medical and beauty products by Customs officials in foreign markets. The signing up for any of my company’s international service options is the US principal anticipating these realities and acknowledging in advance to the rep that not only do they recognize the reality of the feeble world economy and the resultant obstructions that can go into keeping foreign competitor’s products out; they also realize that once the rep’s built-out, importer networks in dozens of countries are added into the equation – thus simultaneously emancipating them from their core, commercial reflex, and their sole reliance, on the US domestic marketplace – if the US SME’s product line or service penetrates and is accepted by the foreign markets the US SME has added tangible, dimensional overall monetary value to their company. If the US SME can convince a larger company with deeper (market-development) pockets to buy them out, and to also get them to ignore the realities of the well-established procuring cause doctrine, these extra resources would enable the new, deeper-pocketed management to do the type of coop advertising with SPAP’s foreign networks that the original US SME could not, or would not, do. Obviously, in US SME’s attempting to lessen financial obligations to attract suitors, these types of situations would also be ripe for the traditional principal sport of throwing pioneering reps under the bus with all of its accompanying irony:figuratively speaking, the very bus that the US SME, through the rep subsidy to the US SME, was getting a free international ride on. It is hoped that prospective US SME’s looking for a systematic approach to acquiring international distribution customers can better understand the reasons pioneering reps not only have the above mentioned moral audits, but the type of LOP/LOP contracts that anticipate the possibility that certain types of US SME management might feel they have some type of special immunity in wanting to try and covet the pioneering rep’s ROI money that the whole LOP/LOP bargain was premised on.
THE “PARETO EFFICIENCY” – THE ALLOCATION OF RESOURCES
Because of the US SME’s stripped-down operations usually lacks, or is short on, international research, promotion, marketing and media expertise, the pioneering rep, out on the point, like the first homesteaders out on the plains, gives the principal a real edge by taking up the slack with an international expertise that the principal could not do by themselves, or afford to pay for, from the outset. Both parties go into the LOP/LOP agreement acknowledging this axiom:Since the pioneering rep is abstaining from the upfront market development fees, since the US SME’s international outreach is the recipient and beneficiary of this interventional, gift-financing subsidy (aka “a loan”) from the pioneering rep, the excessive burden disproportionately falls on the pioneering rep. Because the allocation of the pioneering rep’s resources to the US SME is so lopsided, and because the principal can only bring equilibrium to the pioneering rep’s huge, front-end largesse and risk if, it is presumed, they first had, and then retained, the needed integrity to honor the LOP/LOP contract, it is not even a debatable point. In short, the pioneering rep is always having to fret that an unscrupulous US SME just might be tempted to prematurely renege on the contract, illegally close the LOP/LOP circuit and willfully grab entirely for themselves the income distribution that is rightfully the pioneering rep’s long-awaited ROI for the creating the US SME’s international, distribution networks from scratch. While the scarcity versus abundance concepts are still being worked out by academics, with the United Nations estimating that for every 60 people on the planet there is 1 company (thus, roughly 115 million companies) this is what is baffling to professional reps:Why don’t US principals consider this an abundant supply of alternative companies they can contact themselves withhold blatently violating the EXHIBIT A exclusive customer protections of pioneering contracts.
This is not only an existential threat to the rep’s company because the principal has illegally pinched the rep’s remuneration for themselves that the LOP/LOP was not designed for, and does not allow, the principal to legally do; it is definitionally an egregious act by the US SME because given the subsidy gift the rep already bestowed on the US SME, to in addition keep what is owed the rep constitutes a part of what the 20th century Italian economist Vilfredo Pareto’s called “excess burden or allocative inefficiency”. Also known in the 21st century as a “deadweight losses”, it can be explained this way:If the US government intervenes in subsidizing a US company that cannot, in the end, pull out of its nosedive, those subsidies, now losses, can and are absorbed by multitudes of US taxpayers. For the pioneering rep, since no other party is around to backstop, intervene and underwrite the prosecution of the theft, if the principal succeeds in making a mockery of the very predicate the agreement is based on (the rep’s extreme risk in return for long-term remuneration) in stealing the pioneering reps foreign customers, the subsidy, the owed back commissions and the overarching ROI LOP/LOP commissions all could vanish. It is impossible to overstate the magnitude of any US SME angling to get a rep to take a financial bath; any rep inaction would just inspire the morally marginal principal to assume that the rep would always acclimatize to further principal infractions thus sending the US SME onto even greater recklessness. The possibility of such gaming by the US SME should essentially remove any lingering moratorium on professional reps from formerly having felt somewhat constrained in taking the time and effort to candidly ask themselves the philosophical question:what is the nature of commercial man that could allow such disintegrative forces to not only bring about such a moral collapse, the manifestation of the Pareto efficiency and, incredibly, the US SME being dismissive of how the hijacking of the reps customers will look to others while even trying to shamelessly appeal for understanding. To all pioneering reps, the illegal termination, the deprivation of the rep’s rightful ROI, the feigned situational ignorance and inability to grasp the full meaning of paradox by the US SME of what they are attempting to do would not only easily place such a US SME in the intersecting, meaty part of the “II” graph (aka “The Attempted Grab” – TAG):
Graph is to be inserted here****
It is also a safe bet to say that it would be a profound betrayal to any pioneering rep. Since extraordinary theft will usually be accompanied by attempts at extraordinary justification, for the US SME it would require them to dig deep for a kind of distilled chutzpa which the late teacher and academic, Leo Rosten, defined as “that quality enshrined in a man who, having killed his mother and father, throws himself on the mercy of the court because he is an orphan.”
In the absence of market development fees, and with the need to conduct commerce with consciousness, the pioneering rep not only has the right but the moral obligation to pose the ERRRQ program to principals. It can help unearth the presence and/or combination of traits (i.e., problems with understanding and practicing the concept of delayed gratification, suspicion of rationality and sublimation, love of corporate fiat, inability to blush from shame) that are necessary and might already be in place in the US SME’s character to possibly transmute into future fraud. The ERRRQ also attempts to take into consideration the fact that there are certain types of people that are members of faith-based groups that are in it for the organized social activity, for the cultural short-hand that comes with familiarity and communal ties, who can ofttimes profess piety but, in the trance of their particular belief, think there is a certain amount of fluidity to the ethics it can exhibit towards non-members. Their membership was never really going to be for any real and sustained depth of understanding of the rules governing ones behavior and its potential transformative powers – for some reasons never clearly understood, nor deeply absorbed. I think all of us, including both principals and reps, can understand the human psychological desire of large institutional backing to deliver a package of metaphysics to abate the anxiety of existence that simply being a member of some type of larger, organized truth-claiming group professes to able to really provide and deliver on. Its everyday omnipresence in our world is hard to miss.
But when the company culture of a US SME is so disconnected, so unfamiliar or so estranged from a generally agreed-upon ethical behavior of the faith-based group to which it is a member; if they consider ethics as having some type of molecular weight and dimension that, because of their own ethical asthenia, is too heavy for them to carry; if they think that all this talk about ethics would crowd-out ill-gained prerogatives and burden them with the logistics of back-hauling any of their respective faith’s ethical teachings to their business dealings; if they see ethics as nothing more than a rhetorical flourish that in no way obligates them to observe and practice at least the moral imperative against theft, it is better to take this information as a preemptive cue for any pioneering rep to get out before they get in. Sure, the pioneering rep would be curious about how desperation might have attenuated, or even flipped off, the normal ethical signals within the collective US SME’s management team. The pioneering rep would even be intrigued by how the enabling mental infrastructure and life experiences of the management team could gladly take a sizable subsidy from the rep but then try and rationalize keeping the commissions for themselves earned by the sales of products to the rep’s foreign customers. When moral reflexes go missing, a warped physics does seem to allow craven acts to fill the vacuum. Since setting up a clinical study on why a particular US SME management was not preoccupied with generating, disseminating, let alone reading, ethics memos is well beyond the scope of the LOP/LOP contract, the pioneering rep should always remember this:be less impressed with whether the Principal’s President/CEO is a prince in his place of worship and more concerned about his behavior when he reenters the profane world. What I am proposing here is not some type of ethical tyranny where a US SME principal is being held to Bonhoeffer-like standards. It is instead unheroic, even prosaic, generally accepted legal and ethical principles that should not necessitate the threat of a legal tomahawk to get the principal to abide by what was contractually agreed upon. Without any evidence of ethical inculcation going on company-wide, it is much too high a risk to give so much up front only to see the rug pulled out from underneath the international distribution network system that the rep has created by subsidizing the principal’s international distribution buildout.
This white paper, the preamble to the ERRRQ and the ERRRQ itself acknowledge that because the US SME’s and hybrid, international, pioneering rep companies work within a complex adaptive system where the economic stakes are high, the necessity for the use and mutual advantage that a 21st century diagnostic tool can provide is, or should be, self-evident. This new, necessary tool, to better illume the US SME’s commercial, cultural, ethical and learning capacity, will help both entrepreneurial parties see down the road to not merely determine whether a US SME is export and rep ready. The answers and replies also help cut through the normal, entreprenuerial-principal load of obfuscation and hype to hopefully highlight markers of integrity, or, regrettably, its inverse. The international pioneering of US SME’s unique products or services, already a risk-filled, arduous trek for the hybrid rep, is made all the more a precipitous bargain when having to work with a US SME that the ERRRQ shows is out of their operational or ethical depth. With this as background, and with so much best-behavior placation present in the principal-rep courting process, the pioneering rep has to be particularly concerned that such feel-good, in-person get-togethers might be creating a lulling effect. Thus, to prevent the possibility that the US SME might actually be disdainful of high-minded ethical behavior, the deeper aim and goal of the ERRRQ is also to receive the type of thoughtful, written feedback that a simple face to face business meeting, or meetings, between the pioneering rep and the US SME, would never be able to provide.
ACCOUNTING FOR REMUNERATIONS
New to export, US SME’s have lots of capacity issues and tendencies that can be worrisome to pioneering, professional, independent, manufacturer’s representatives. For owed remunerations, especially for those US SME’s that go to market with a mixture of in-house employees and outsourced, professional, international companies, twenty-five years of experience has shown me that payment to outside reps is usually late and sometimes even purposely withheld. The owed payments to the outside rep can get lost in the shuffle by overwhelmed, skeletally staffed principals; or, an ethically challenged US SME will even try to take advantage of the information asymmetry and hope the rep will not notice. How can we account for such laxity? On the macro level, the first decade of the 21st century can be characterized by the drowsy regulatory climate that facilitated an accounting malfeasance hall of shame where we all got to see the train wrecks of Enron, the dissolution of Arthur Andersen, Worldcom, Tyco, Lehman Brothers and Bernie Madoof. Need I really give more examples of why outside reps are perpetually concerned with the veracity of what US principals collectively tell all of us? The Sarbanes–Oxley Act helped bring much needed scrutiny to public companies, but it does not legally require audits on privately run businesses – the usual types of companies that independent, manufacturer’s reps rep. And even those private companies that do voluntarily submit to audits are tainted by this fact: the nominally independent sub-committee of the Board of Directors of these companies gets to choose and hire the usually obscure, low paid audit companies that have reputations for quick and clean “opinions”, not verification of facts that could assure the rep that he os she is getting a square deal. I use the word “nominally” because it is well known that these sub-committees are all really on a very short leash and can be easily manipulated by the Board and overall management out of view of the public.
Since all reps have had experiences of being shorted on payments from US principals, and because none of us are holding our breath hoping that the regulators are now in a hurry to protect or buffer auditors from any of the possible colorful machinations of management, I have found that I have to insist that the payment commission checks mailed to my company come enclosed with the actual hard copy invoices of the sales to my foreign customer networks. In the busy accounting cubicles of US SME’s, these tangible, now in hand, paper-trail steps helps not only focus the mind of the principal’s person charged with accurately putting the commission checks together for mailing to the rep; from the rep’s perspective, it allows us to be able to match enclosed invoices in talks with my foreign customers to see if a US SME had made any attempts to illegally change the numbers. For context about this, Gerard Zack has written a book called “Financial Statement Fraud” in which he estimates that two-thirds of book-cooking surrounds revenue from companies that should never have been recognized as proper. That’s obviously is not the edifying information reps a looking for. Since I could find no rep software that can automatically detect the different schemes of how financial statement frauds are perpetrated (let alone ping an independent rep when foreign customers TT’s hit my US client’s banks, when exports goods are shipped from my US principal’s docks, etc.), and because Benford’s Law to detect accounting fraud presupposes that the actual local hiring of people whose deep knowledge of this particular law may be non-existent, we have to prophylactically improvise with protocols to keep everyone on the up and up. Spreadsheets themselves, because they are so widespread, and because they are NOT required to follow a standardized software development lifecycle of agreed upon and diligently applied requirements, code review and testing processes, are wonderful tools for committing fraud and/or for inadvertent material errors – the perpetual weak-link in financial statement or operational data analysis. With these inherent flaws in worldwide accounting and spreadsheets, independent research and investment outfits like Gotham City Research, Citron Research and Muddy Waters are out there on the hunt for public companies gone bad; but since private companies are not required to disclose the type of hard data needed to scrutinize commissions, unless the US SME agrees to pick up the bill for the forensic accounting and spreadsheet expertise of the rep’s choosing, whenever reps see anomalies that cannot be rationally explained, it is much more practical for bother sides to stick with the hard copies of invoices with commission checks.
PARADIGM SHIFTS COLLIDE
As mentioned above, there are real challenges to people, including procurement people, in being able to adeptly and coherently slide in and out of informational contexts when looking at sophisticated products or services. Nonetheless, as a general rule, there should be no mistake that the constant, free-flow of of widely dispersed media coverage of health and medical research information and stories about the products that emerge from hard science does have its advantages. One is that foreign procurement people are becoming more and more aware that there is a new generation of consumers more attuned to health issues that are already emerging in certain respective world markets. These consumers are better informed, flush with more discretionary income and able to spot and recognize that there are real health implications to be found in daily life. A simple example of this would be how much time a person posture-allocates to his or her own lying and sitting versus standing, walking and running, can help indicate the well-worn paths to chronic diseases they are odds-on favorites to head down. Likewise, these consumers are starting to shake free of the emotional clutches of filial piety and the lifestyle habits that they would have otherwise absorbed from their parents; with the soft inheritance of observed and absorbed familial habits interrupted, it means that their own hard earned money will not necessarily be destined to buy the same products needed to service the subsequent knock-on dissipations that would have been his or her birthright. And willingly or not, with Hubble and Kepler giving mankind the Director’s cut, the alternative footage of the real dynamics of the physical universe, subsequently knocking off mankind’s blinkers and sticking cultural constructs down humanity’s throats, their combined, mind-altering, big data is not only putting up for grabs how civilizations going forward can try to use our currently inadequate, dualistic, symbolic language to credibly frame various metaphysical assumptions; with the liminal windows of Hubble and Kepler aloft, by not only confirming but expanding on Scottish geologist James Hutton’s concept of deep time, the former human tendency to rush to the exits, the death impulse helped along by traditional cultural/religious narratives of a non-atomized eternal reward to believers that some organized belief systems asserted was a lock, just simply no longer looks so astute.
The ontological realization that we’ve been had, that our own culture has been fibbing to us by giving us massively abridged versions of deeper, far more nuanced truths, is hard to take; planet earth and its sentient passengers were not assembled as conventional wisdom has been taught. Yet the history of confusion still rumbles on unvanquished no matter the fervency of the various assertions; although breakthrough research has had its dispersive moments, ambiguity has still not been brought to its knees. In earlier centuries, before advanced knowledge had a chance to pool and be shared with others, tag teams of tradition and obsequity, intimately forged together over the fire of small data, for long stretches of time pummeled those who dared question Nature too severely or publicly noted that the prevalent metaphysics of the time did not really cohere. No more. As hard science becomes commonplace and gets built into more and more products, as Google, Twitter and blogs enable the type of counter messaging that earlier generation manufacturers and purveyors of junk products, services and ideas did not have to worry about or contend with, international procurement people are also concluding that in the digital era their profession will have fewer places to hide crappy goods. In our own present era, with UC Berkeley Prof. Geoffrey Marcy and his colleagues finding hundreds of planets outside of our own solar system, our dash forward, plateauing, retreating, dash forward species have gone from utter incomprehension, fuzziness, blurriness, incipient literacy, force-fed, molten lead cocktails, diminished incomprehension, the Dark Ages, partial sight, auto-da-fe, refined light, mass executions, increased light to now, right now, at this very moment, without any of the usual cultural garnishes, all of us having a real crack at hanging a new narrative on the ineffable. One of the positive externalities for us in the commercial world is that the magnitude of this type of seminal, bunched together, scientific research is that it allows us reps to be less inclined to try and ply, bore and distract the procurement community with piffles. They, too, having read what is occurring, want to be inspired and draw into their decision-making process value-added products that have migrated down to us from research labs scattered around the USA. In short, with the widening of expectations being mutual, with growing consumer awareness of what hard science is doing, it is also creating a shared demand to have access to products infused with the latest breakthroughs that science is able to make commercially available to US manufacturers. This very real spillover, this heightened consciousness, is bringing with it an educated scrutiny that the products that procurement people make available in their stores, clinics, hospitals, on-line and in-person better not only come in with clear differentiation to what has come before; they also better be able to live up to the actual claims the manufacturers make about the products they produce.
Here is why all of this is relevant. All of these things will, and already are, unwinding traditional religious transferences – which will itself also have health and wellness implications as people start to take more personal responsibility for their own homeostasis. Instead of reflexively mal-adapting to new, objective, science-based information for no other reasons than because it is both xenographic and falls outside their respective faith’s core curriculum, with the ongoing buildup of secular, explicit, metabolic instruction, the carefree, metabolic promiscuity that is currently plaguing multiple millions of people, and national health care systems worldwide, is destined to also start to lose its seductive allure. Out of all of this, with the growing realization among people that orthodox faiths never really had a metabolic component and were thus likewise never in a position to provide any meaningful, step by step, insight on achieving physiological wellness, in a nod towards the growing cult of salubrity a new generation of consumers are permanently changing their lifestyles and slowly reducing their former abdication of the maintenance of their own physical and mental health. With the company named “Statistic Brain” noting as of 2014 that there are now 153,000 gyms and health clubs worldwide, vigorous, heart-rate raising, aerobics exercise and weight lifting are no longer considered merely one-dimensional endorphin transactions for westerners free from daily time-scarcity problems; there is a growing awareness and concern that all of us have to quit this adversarial relationship with their own bodies and see exercise as essentially transformational, a give back, a daily, devotional thanks, an effort-filled, holistic, physiological gratitude to life for the gift of existence that new, international adherents are learning it no longer makes sense to reflexively ignore. The purposeful ruining of what nature has issued to us has got to be seen as not necessarily inevitable behavior; by interjecting daily reassessments and readjustments of what we thought we once knew about the concept of health we all should no longer think it a completely natural act to prematurely start booking appointments with disease management medical professionals.
This new set of international consumers, like their brethren in the US, are now growing conscious of not only how the lifestyle habits and chow-hounding allowed in some religious practices can spike the scores of their respective Body Mass Index (BMI)*. They are also starting to intuit that BMI itself is also pointing at something much deeper, a theoretical cipher, the mystical compiler of weight and woes, that helps cement in “hunger” at only the physiological level. Stuck at this level, if the person is unable to ever make the bigger transition to a psychological reset of emotions, to delayed gratification and broadened sources of striving for and acquisition of meaning, it is a foreshadowing of at least the onset of chronic diseases with significant, even more systemic, problems ahead. In parallel, all of us, some more quickly than others, are coming to understand how our own consumptive role in bioaccumulating pharma products, antibiotics, pesticides, neurotoxins, natural and synthetic hormones in their bodies, and then further contributing to the problem through their own excretions into the very water that we drink and cook with, is getting at Dr. Strangelove’s General Jack D. Ripper’s own prescient notion that it will “sap and impurify our precious bodily fluids”. With the physicists at the Large Hadron Collider finally getting Nature to give up the Higgs boson, this definition of break-through, this incredible milestone, is adumbrating the huge shift of world economies becoming much more knowledge-based. And it is also migrating down to international consumers:perhaps encouraged by, or goaded by, the superlative finds that the scientific communities are racking up, they too are starting to reawaken their own respective mental tumblers and forsake the easy, cultural shibboleths to enthusiastically ride this historic knowledge wave piped right into our homes. This learning about and insisting on being able to buy US-made products that reflect a do-no-harm, science-based, regenerative lifestyle bodes well for those US companies manufacturing cutting edge products not yet readily available or produced by manufacturers in their own respective countries. This, in turn, is forcing international procurement people and new business development folks to turn to us here in the US for the type new-gen products that the massing presence of a 21st century, sophisticated, international consumer is open to and seeking:innovative, value-added, credible, clinically studied, holistic and efficacious products that his or her less-informed forebears would have been culturally conditioned to not even consider the existence of such products as possible.
To properly position themselves, the dynamic that precedes being able to participate in this process is this:
- A hungry and ambitious US manufacturer, who has created game-changing health, medical, life science, aesthetic, wellness, fitness and other IP-dense products while also being able to break free of domestic preconceptions that can be seen on “The Principal Looks At Its Operations” page on my website.
- An innovative, international rep firm, conscious of the negative and dangerous implications of handling commodity goods – that have no obvious, hands-down advantage – in an era of commodity products flooding our planet. This partnership can be advantageous for both parties, but it can only be accomplished in a spirit of heightened and shared awareness of the primacy of being Export-Ready, Rep-Ready along with an unforced acknowledgement that “Partners In Profits” is not just some corny slogan used by professional, independent, manufacturer’s reps and principals at MANA.
In order for the Homestead Rep Contract to find housing in the principal’s mind, in order for them to really grasp the full-risk to the pioneering rep offering to subsidize the US SME, or the shared-risk market development fees over the first 1-2 years of the pioneering contract, short of MANA issuing honorary doctorates in the “Really Real” to principals that work with pioneering, international rep firms, the old MANA mantra about education endures and is acutely relevant to the principal being able to comprehend the overall concept. USA companies whose products or services have not yet fully gone through the gauntlet of commercial acceptance in the USA marketplace, let alone the foreign marketplace, are the risks international reps weigh in positioning ourselves to be on the ground floor when the products or services finally gain real traction and trajectory from the pioneering rep’s efforts and ingenuity. An extraordinary strain rides upon the shoulders of the professional, pioneering rep to find ways to build-out foreign import networks and, through relationship-building with in-country multipliers along with an adept US SME, hopefully shorten the usual lag time between foreign market introduction and a wider foreign market acceptance of the principal’s unique products or services. For professional reps, occupying the tertiary sector of a modern economy, and for US SME’s, bringing forth offerings that can change the world for the better, this in-depth white paper reframes and repurposes the pioneering process and the rep/principal agreement into a full or shared risk platform which can culminate with a business partnership whose article of faith is justifiable, long-term, mutual profitability for both parties.