Monday, May 24, 2010

Few additional thoughts on international expansion

Writing a blog has proven to be time consuming but first of all interesting - already readers from 22 different countries Finland naturally leading the pack and US coming second. International expansion seems to be the most interesting topic when over 30% of readers have chosen that text from all others. Actually I think my experiences and ideas related to business models have more insights (for example how energy industry and tech. industries have similarities) ... but it is better blog on something which resonates with the audience... so I continue my thoughts around international expansion.

Those who read the first text can easily identify that international expansion is more art of its own than industry specific competence. To me the most valuable insight in the last text was lego brick structure - How you understand your business and operating model as lego bricks. Everyone knows lego bricks how you can build, rebuild or modify the model again and again. In the last text it was just one topic but actually it is something much larger. There has even been academic research and HBR articles on modular business structure and how different companies have gained business benefits from it. Personally I have simplified it as lego bricks model what I was developing when one business I was involved did its international expansion in Northern Europe in the late 90's.

So what is this approach in a nutshell? You just simply break down your go-to-market model and offering delivery assets into pieces which can be built and transferred one by one (as lego bricks) until you have the required total shape and form in place. Precondition is that you have defined what is executed and managed in global vs. local level, identified these pieces (some would call them assets), documented required shape and form for each piece and for the end state model and have the belief structure in place that you need to avoid too large dependency on certain individuals and their skill sets.

Few examples of these potential pieces: product delivery, call center operations, customer care, customer acquisition model, key account annual care taking model, partnership management model, sales agent model, PR process, legal support model, marcom model, etc. You get the point - all of these can be built individually and at the same time they have certain role in end state country operating model which was to be established... when some one had designed the end state model with required pieces which need to function together.

Benefits: All countries talk the same business language, faster international expansion to multiple countries, less dependent on individuals, it enables best/good practice sharing, clear global vs. local responsibilities, more efficient country business reviews, more efficient and value adding global meetings or teleconferences, less required human resources in expansion phase, etc. All these benefits highlight that model is not only for newcomers of international business but also for established businesses to improve their global/international business management.

Downsides: Time required to define and document your lego bricks structure (for many idea of documentation is misleading due to all administrative quality and process development initiatives which in many cases provide no real benefit for business, at least according to my own experiences). Actually there are no other downsides and approach fits both large and small companies biggest gainer being small ones because large ones can afford more resources.

What about traditional model that you send the best man or woman to do the work and this person uses his personal skills to build the business in new territories. Problem with this model is that it is highly depending on individual skill sets, international expansion is much more slower (and time is money), people start to build their own kingdoms, no common business language between countries or regions - to me it is just old-dated model despite being the dominating one. Of course you still need these skilled people but how you use them just changes.

Another traditional approach in pure sales related international expansion is that you hire one local manager from target country, agree sales targets and hope for the best. Sometimes they deliver but how they deliver and behave you have no clear visibility. Sooner or later if the person is successful in selling there is a threat that the country or region starts to live its own kingdom life and you wish to have tools to better manage this "rebel" yet successful manager. Then it is another time to consider lego bricks approach.

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