Showing posts with label international expansion. Show all posts
Showing posts with label international expansion. Show all posts

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.

Tuesday, March 23, 2010

What kind of international business experience background you have?

Some of you might have noticed that I enjoy thinking about international business. I have been exposed to international business from various angles: living in another country, participated international expansion initiatives while living in home country and even consulted international expansion/growth initiatives.

What is very interesting at least to me is when you can be personally self-confident that international business is really one of your strengths areas. How many years you need to live abroad, does living in different countries provide the same required experience (living in Sweden vs. Malaysia), days per year travel, living abroad vs. traveling from your home country, expatriate contract vs. relocation on your own, big company vs. small company experience, how transferable is the competence both from regional exposure to changing company and last but not least how much international business competences are industry related vs. functional competence related?

When starting backwards - how much competence is industry related vs. functional related? I think many have opinions for this depending on the background they are coming from. Those who have experience from single industry and especially with engineering mindset tend to highlight industry and product experience over everything else. Even hard boiled manufacturing managers are given international sales/business responsibilities without proper international customer interaction experience when product focus over runs functional competences. Of course this competence is relevant when managing a manufacturing facility but my personal experience is that international marketing and sales management is more related to functional than industry competence. And industry plays actually rather small role - more relevant is the business model or similar customer characteristic.

So how about transferability of international competence from one region to another? For this my personal experience is from Northern Europe and Asia-Pacific. What I have found to be transferable are related to processes and general management - same processes and methods can be implemented across the globe (here I am not talking about theoretical process mgmt. frameworks) as well business and marketing management concepts. Less transferable competence is the interaction with people especially if the cultural differences between countries or regions are considered to be noteworthy. With this interaction I am referring to customers, partners, personnel - all the people one needs to influence, to trust (or not to trust), to understand manners, to negotiate, etc. Someone has said it is always easier to move from more culturally different environment to less different. Sounds common sense.

Big or small company experience. I have personally wondered relevance of experience from big company international main street businesses - how much competence is from surfing with the wave vs. entrepreneurial business development. Surfing with the wave - how in large corporations one can be successful when understands how to manage main street business just as one wheel of a big machine (and enjoying the ride). Gained competence is more internal processes in another environment than living and breathing new business culture. In this case how much of the experience could be utilized in totally different company and environment? Closer to small company experience is the case when one is expanding business to new territories or managing a business venture with a zero or a small revenue base. Then one is exposed to challenges of international business development: capabilities development, finding customers, partners, developing sales model, go-to-market assets, service level assets, etc. One clear benefit of working in bigger companies related to small ones is that you learn much faster the benefits of defined processes and methods - the relevant ones so the business becomes managed in more systematic way... and transferred to new locations.

What is the value of moving to new geography on your own vs. with expatriate contract? This is something I have thought about a lot because of having personal experience - working abroad for a foreign company without any business connections to home country. Afterwards it was easy to summarize that personal moves... well they cause lot of excitement, worries what you cannot even imagine if you have been sent with a contract. First of all you need to show your performance from day one without easy landings and responsibility transfer periods. What is the value of this in years? Most likely some people with contract expatriation experience would argue no difference and I would have my counter arguments - only way to find out is to try both models personally. Someone who has both experiences is very welcome to comment.

One thing is very sure. Living abroad is hard to beat experience comparing to just flying to destinations and then returning always back to home base. It is like continuously tasting a cake time after time but never actually eating it. Useful experience anyway as well and sometimes the first taste is better than the whole cake.