Bridgehead Cluster Ventures – A New Model for Successful Expansion in the Middle East
By Hugh Fraser, managing partner
Welcome to the first in my new weekly series examining a new and innovative project being pioneered by HFI – the bridgehead cluster venture (BCV). Just as the name suggests, BCV is about bringing business together and collectively working towards success.
In many years of supporting firms expand into Middle East markets, I’ve learned that there are common themes that prevent success. As I’ve discussed in previous articles, very few ventures fail because of a poor quality service or product: largely it’s down to factors such as a lack of in-country presence, management shortcomings, unrealistic timelines, financial constraints or selecting the wrong local partner.
These issues are compounded for businesses that are at the SME end of the spectrum, as the costs of launching in a new market can often be prohibitive. As much as US$500,000 can be needed to fund the venture in the first year with no guarantee of a revenue stream in return.
What the BCV does is to bring together a group of synergetic and non-competitive companies to collaborate with a local partner, mitigating the start-up risks of an individual approach, consolidating costs and overheads, and maximising the prospects of success. In comparison to the US$500,000 going it alone would require, a joint approach through the BCV would require an investment of just US$60,000 in the first 12 months.
Each cluster will be overseen by a full-time general manager, who will work with the participants and local partners to bring the venture to fruition. Having a dedicated manager ensures that each cluster has consistent and effective focus and leadership.
We have opted to focus the launch of our first BCVs in Abu Dhabi because the market continues to offer significant expansion opportunities for advanced technology in the energy sector. It is also often used as a springboard for wider expansion throughout the Middle East.
Three well established and well-respected local partners - Al Yaseah Group, Leaders Oilfield Services and SAMCO – will be involved in the BCV and will play a key role in assessing and accessing market opportunities for participants.
We have already started a consultation process to assess the level of interest among companies with a North Sea focus – and from the wider UK – and the results so far have been encouraging.
We hope to bring the BCV a step nearer fruition at Offshore Europe later this year and in the run up to one of the world’s largest oil and gas events, I’ll be looking at different elements of our innovative model each week.