Bloc party: U.S. consultants find a ripe market, Eastern Europe's fledgling entrepreneurs - Global Vision

Entrepreneur, Sept, 1996 by Nicole R. Achs

EVERY COOK KNOWS that even with the right ingredients, a cake can still fall flat. In the ripening markets of the former Eastern bloc, many new business owners have the products, demand and commitment to see their businesses rise. What they don't have is a recipe.

In the past few years, the former Eastern bloc has stabilized politically and economically. According to 1995 figures from the Polish Agency for International Investment, since 1994, all countries in the region have experienced gross domestic product growth. Inflation, while still in the double digits for most countries, has fallen steadily over the past five years.

Even with economies on the upswing, without friends, family or acquaintances who have ever run a business, new entrepreneurs are full of uncertainties: How should they market their product? Where should they sell? How do they draw up long-term business plans and find financing?

So, while American megacorporations flood the market with products, Eastern European companies are hungry for another import: experience in a market-based economy. Numerous U.S. entrepreneurs have gone there to fill that need and sell the ins and outs of running a business.

"There is a much bigger market here," says Zdenek Reimann, who moved the bulk of his sales training and consulting business, Palamar International S.R.O., from New Hampshire to Prague, Czech Republic, in 1991. "There were 40 years during which nobody told people how to sell their product to a client. Then, virtually overnight, companies landed in a market economy without the slightest experience."

That has given many U.S. entrepreneurs opportunities they might not have had back home. "There's no way I could have done this in the States," says Brian S. Piper, whose Czech-based consulting, financing and trade firm, International Business Development Associates Inc. (IBDA), is his first entrepreneurial venture. "I wouldn't have been exposed to the [same] needs and demands."

Piper set up IBDA two years ago and works as a "consulting broker," referring clients to specialists who can help them. He makes his income from referral fees charged to the companies to which he directs business. IBDA has been so successful in Prague, Piper plans to franchise the concept throughout Eastern Europe.

BEWARE THE PITFALLS

But for every success, there is an operation that failed-often from trying to graft an American way of doing business onto the local market. Consider Zygmunt Szczepanski, a Polish-American who moved to Warsaw in 1993 as part owner of Apple Computer Poland IMC, a separate organization that Apple markets in developing countries. "We tried to Westernize their operation, and it was a total disaster," says Szczepanski. "[We] learned the hard way that things are done totally differently here."

Szczepanski, who later left Apple and started Power Business Associates to provide motivational and management training courses in Eastern Europe, contends many Western consultants approaching the market don't realize how deeply cultural differences are rooted. Independent initiative, decision-making skills, customer-oriented service and long-term thinking were discouraged for generations; nurturing these skills today requires sensitivity and diligence. "A lot of the [consulting] companies over here are using off-the-shelf approaches that train people how to run, when they might not know how to walk or even crawl," Szczepanski observes.

Consultant Jim Van Bergh agrees. The New York native established Company Assistance Ltd. in Warsaw, Poland, in 1991 with partner Steven Buckley to provide advice on marketing consumer goods. Says Van Bergh, "People want simple solutions to simple problems, quickly."

IN THE MARKET

Van Bergh, like most other American consultants here, looked to Western firms locating in Central and Eastern Europe to establish his initial client base. These companies are familiar with the concept of using outside help and are often seeking someone to bridge the gap between their own culture and the local one.

But the fastest-growing market for American expertise is likely to be midsized, locally owned companies. After the fall of Communism, governments held fire sales to privatize many of their industries. Aspiring entrepreneurs were virtually handed the deeds to businesses they had been managing. These companies have absorbed the cataclysmic shift to a market-based economy and are now looking at how to survive long-term.

Mom and pop businesses also need help. Unfortunately, these businesses have the least cash to spare. While many advisors find it particularly gratifying to work with small businesses, most do so through contracts with development agencies like the U.S. Agency for International Development.

There are deep pockets of opportunity all over Eastern Europe in helping small companies approach American firms for trade partnerships and venture capital. "It can be a matter of speaking 'American' rather than just English," says Piper, who helped a Czech entrepreneur find U.S. export partners after the manufacturer's own attempts had failed. "The smallest language barrier can put doubt in [U.S. companies'] minds as to whom they're dealing with."