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Global Expansion

Many companies set their goals to safe targets from a sales perspective. Selling in the local geography or to one or two narrow customer segments is not uncommon. Over time, the pace of growth slows to the point where new avenues for selling need to open up. Expanding globally is often the best approach.Many challenges arise though, the least of which is overcoming the unknown of selling farther away from the home turf and to segments of customers the team is less personally familiar with. Travel, communication, cultural differences, marketing reach and more are seen as impossible to tackle. The fear of failure overcomes the desire to expand -- the business risks settling into somewhat of a stagnant operating model.

This section identifies many of the challenges to overcome when faced with the desire to expand globally. There are many challenges beyond what is identified here, but the following highlight many of the key ones that you should consider and prepare for as the business leader.

Overcoming the Unknown

For most CEO's, expanding a business to operate on a global foot print is full of unknowns. This is especially true for North American based businesses where the business leaders are rarely intimately familiar with the business nuances of operating in other cultures and geographies such as Europe or the Far East. Businesses already operating in those regions often have prior experience working with other countries, other business practices and other employment cultures. Overcoming the unknowns tends to be the best place to start -- once demystified, you quickly realize how to succeed.

Protecting Intellectual Property

A good place to start tends to be in the preparation steps needed prior to operating globally. A simple one is the protection of corporate intellectual property. Although this should be done regardless of where your business operates, it should certainly be done in earnest if you will be operating in regions where IP is not protected with the same laws and practices as your home country.

Registering patents, copyrights and trademarks is a good first step but not necessarily sufficient to stop someone from leveraging your technology without remuneration for your business. You'll typically also want to have the team implement sufficient license management features in the products themselves (assuming it is software), use encryption and code obfuscation where appropriate to prevent decompiling of source code and provide restricted access to public download sites so you can track where the software goes (in some cases, you will legally need to be able to track downloads anyway (see sub-section on Technology Export Permits below)).

You can spend a lot of time, money and people resources trying to protect intellectual property. You can also decide to assume the people you are trying to do business with would not steal IP without proper licensing, so protecting access from the people you are not targeting is not worth it. It is not uncommon to put some effort into IP protection but not make it the sole focus on the R&D team at the expense of implementing differentiating customer features and functions.

Technology Export Permits

A large portion of industrialized countries are signatories to a treaty that limits access to secure IT technology (e.g. contains cryptography). In short, if your product contains any type of encryption, from simple password encoding to sophisticated encryption of data, you may find you need a government export permit to be allowed to ship your product outside of your home country (including via web download). The export permit laws are somewhat consistent across all the member countries, but you will likely need a local expert to help with the application process. For example, you can freely ship software between Canada and the United States but would need an export permit to ship from Canada or the United States to the UK, Germany and France.

Most people glance over this requirement thinking it does not apply to their product and find out too late that it does (e.g. heavy fines are at risk when exporting is occurring illegally). The permit application process can be a bit onerous, but once they are in place, you are way ahead of any competitors that did not abide by this process. The permits help track where cryptography winds up and who is the owner in case of any national emergencies.

Oh yes, don't forget to keep in mind that larger companies will look for the permits to be in place as part of any acquisition due diligence. Don't miss this one, as it can scuttle a deal and in the worst case, halt your business.

Establishing Distribution Strategy (e.g. channel programs, etc)

It's common to need a different distribution strategy when going global. For example, you might have a mostly direct sales model operating in your local geography, a model that might not be feasible to expand globally (e.g. you would need too many local hires with relevant cultural experience to cover each territory). In general, some form of partnering is the best approach -- which is often why expanding global seems so daunting to most emerging businesses.

It can take some time to properly think through the right strategy. If you follow the typical route -- choosing a reseller model -- you need to make sure it lines up properly with your current sales model. Pricing may need to be restructured, how discounting will occur has to be decided, how many levels of distribution will you be able to tolerate, etc. The good news is that most regions away from North America are well structured to operate a reseller model on your behalf. Experienced distributors are in place, true value-add resellers exist and many are very familiar with taking on products from other locales. In fact, that is mostly why the reseller model often works better away from North America than within.

Take the time to formalize a program before approaching the global market. Pick your first partners carefully, go deep with a few to gain some experience than go wide with many when ready to scale. One thing to keep in mind is that a functioning global sales model can act as a competitive barrier -- if operating smoothly. Partners tend to stay loyal to someone they can make money with.

Finding the First Global Employee

It's going to be hard to get away from hiring people in the major geographies. You can do a lot remotely, but there are many regions where face to face contact is still a valued way of doing business. From a North American perspective, finding a regional sales manager based in the UK to help build out an EMEA practice is a good place to start. Similarly, finding someone in Australia or Japan to cover the base of ASIA is also a good way to start. A second hire is often a technical resource to provide local sales support (e.g. an SE).

You should not underestimate the need to find someone with relevant experience. Some of the things to look for include:

Some areas have very stringent hiring and firing regulations. They can be so onerous is it not uncommon to want to find ways to work around creating permanent employee commitments wherever possible. Consult the appropriate legal and accounting resources when considering this.

As CEO, you should consider spending at least 1 week each quarter in each of the major regions. You will be surprised how valuable a CEO visit can be.

Willingness to Spend (more) Money on Compensation

Many of the key geographies outside of North America have higher compensation package standards than those within. Differences include:

You might find yourself budgeting 10-15% additional cost (beyond salary) per employee for North America and have to consider as much as 50-60% additional cost for employees in other regions. This alone may make global expansion something to think twice about -- if you can't make money at it, don't go down the path. If you make less money at it, it still may help the overall growth plan the company needs to get to the next level of success.

Supporting Remote Customers, Partners, Staff

Once global expansion starts, you take on a whole new set of challenges. Customers want local contacts to address technical issues -- and want that contact to speak local languages (although you can often get by with English depending on your product segment). You can staff global support in the home office, but the shift work and language requirements make this a challenge -- but it can be done. Centralizing support is probably one of the bigger achievements that companies can use as a source of competitive differentiation (assuming you provide support excellence).

Partners and staff want to hear from you regularly. Fortunately, the web provides numerous methods of working remotely with partners and staff -- regular web casts early early in the morning or late at night may be needed to overlap properly with local time zones.

Don't forget to visit -- bring other corporate folks with you so they both get the exposure but also communicate the importance of the global internal and external relationships.

Business Localization

Once globalization of the sales strategy is in place, it often draws attention to various localization issues that might arise:

Deciding to spend money on localization is a big step deep into a globalization strategy. It can work for you and it can cost more than it is worth it. Make some effort to measure the returns before you start and while you execute to decide how far you need to go before additional investments have little to no impact on expanded sales.

International Business Reputation

Building a solid business reputation is worth doing. Companies like doing business with companies who do business fairly. Companies like partnering with companies who share common business goals. When operating globally, your reputation -- both personal and professional -- can go a long way to helping your business (or hurting it if a poor reputation is apparent). Don't be afraid to formalize the commitments of a partnership -- both yours and theirs. Don't be afraid to challenge partners to step up to new challenges. Don't be afraid to succeed.

You Can Compete Anywhere!

Most executives who experience operating a business on a global scale quickly realize it was not as big a challenge as first thought. If done properly, typically 50% of your business can come from away from home business pursuits. Although often less profitable, growing the top line by 50% through reaching a global market is a worthwhile goal. One that is valued as you step to new levels of competitiveness and overall business excellence. All the challenges you take on are the same ones your like competitors take on -- there are rarely any short cuts so the sooner you put your head down and take the first steps the sooner you can tap into new markets in an exciting way. At least you will get to see more of the world, experience new cultures, taste new foods and as is often the case, learn to appreciate your home more.

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