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The International Entrepreneur – Keeping that Entrepreneurial Spirit in Growth Stage Companies

The International Entrepreneur discusses how to keep that entrepreneurial spirit alive in a growth stage comapny

 

If you have ever worked in a startup company, then you know…

  • Entrepreneurs are normally in a constant fight for the survival of their fledgling venture. They offer high risk with the potential for high reward if the company succeeds.
  • Entrepreneurs are always stretching the boundaries of what is possible – in terms of innovation, business practices and often sanity.
  • Early partners and employees are bound to have a variety of offbeat and somewhat awkward bonding experiences.
  • While for many professionals, this sounds like a stressful and uncertain work style, entrepreneurs tend to thrive on this combination urgency, risk, and constant string of problem solving.

The good news for workers at more established companies is that every successful mid-sized and large company has survived its initial startup stage. Sure, larger companies can still fail (and they do), but finances are much more stable because larger companies have much more access to capital for financing growth and weathering economic downturns.

Entrepreneurial energy and engagement often gets lost in that transition to growth stage. It can happen when a charismatic founder leaves the company as part of a negotiated investment deal. Maybe it’s when the pressure to “make payroll” is no longer a driving motivator for high productivity. Or it could be the hiring of new employees who just weren’t part of the earlier struggle. But something happens between the nearly full engagement required to get a startup company off the ground and the low employee engagement that dominates larger companies. Gallup’s annual report shows that consistently 33% of American workers and 13% of workers worldwide consider themselves engaged in their jobs.

How do you hold on to that entrepreneurial sense of engagement after the company succeeds?

First, I wouldn’t wish a lifetime of startup entrepreneurship on anyone. Yes, it’s a thrilling ride. Yet it can be utterly exhausting and often requires untold sacrifices born not only by employees, but their loved ones. Some entrepreneurs love the adrenaline rush that comes from beating the odds. If that is your personality type, then I wish you well in all your endeavors. But for the rest of us, there is some relief in finally making it the company’s growth stage. Even dropping down a few notches in effort is still a far cry from the unengaged masses.

Now here is my advice on how to keep that entrepreneurial spirit while moving forward as a company:

Hire Engaged Employees

Everyone is enthusiastic in their job interviews. No one is going to tell you that they spent the final six months of their last job surfing the Internet or playing Candy Crush. Ask interview questions about someone’s final project with their last employer. An engaged employee normally gets challenging projects. Staff that have “checked out early” are often given routine, reactive assignments. Ask for examples of how the candidate proactively improved their company’s outcomes. And also consider hiring former entrepreneurs. They know how to work hard, are proactive and are excellent creative problem solvers.

Share the Vision and the Greater Context

Many companies create some kind of a vision statement, but then file it away somewhere to rarely be mentioned again. One of the reasons why entrepreneurial ventures are so engaging is that everyone on the team knows exactly what the company is trying to accomplish and what part their own efforts play in serving that vision. It’s powerful. Every employee in your organization of any size needs to know that the company vision is worthy of pursuit and that their efforts help move the whole organization towards that vision.

Set High Individual and Team Goals

While not the same motivation as surviving another month as a entrepreneur team, higher productivity comes when goals are set high enough for employees to stretch to reach them. Encourage creative problem solving and initiative as core traits you want from your staff. Then support your staff with resources to help them achieve their individual as well as the team’s goals.

Ideally you want to leverage the positive aspects of those startup months, but settle them into a longer, more sustainable employee engagement strategy. Leaders who spend time and efforts to cultivate an effective work culture will always outperform their competitors in the global marketplace.

The International Entrepreneur – How to Respond to International Business Opportunities Outside Current Markets

Business Opportunities in New Countries

 

Michelle looked up from her computer monitors and directly at her business partner, Brian.

“Japan? Do we even know anyone in Japan? How did they find out about our company?”, asked Michelle.

Only 9 months ago, Michelle and Brian had launched their software startup. Things were going better than they ever dreamed it would. They were right about the need for their product in the market and the company was now hurdling forward at rapid pace – doubling size roughly every month. It was all that Michelle and Brian could do to keep up with the growth.

There had been some sales in Canada and then Ireland, but Japan? That meant non-English clients and many more unknowns. This would be a large client, but was it the right time to expand to a market not yet covered?

 

How do you respond to a sales lead in a market you do not yet know?

As with most international business questions, the answer is… it depends.

Companies that seek out products and services not yet offered in their country are normally seeking competitive advantage that they hope your product or service will provide. This is also true for distributors wanting to represent your product in a new market. They often want your product as is with little or no negotiated concessions, no trips to their country for sales presentations or other costly outlays. They are willing to pay in your currency and sign your contract terms. That’s probably how Michelle and Brian so quickly sold product to new customers in Canada and Ireland.

There are clear business risks for selling products to clients in markets where your company has no presence. Entrepreneurs need to watch for risks, including these:

  1. Intellectual Property Protections. For anyone relying on newly developed technology or a brand with growing market recognition, protecting your IP is paramount to long-term success. Trademarks, copyrights and patents can still be infringed upon, but at least if they are internationally registered you have the means to legally defend them. Once the damage has been done, it’s too late to register and try to recoup any losses.
  2. Compliance with Regulations. Sure, you can sell products or services into a country. But that does not mean that it was done in compliance with local, national and regional laws. International trade is governed by trade agreements, your own country’s laws, as well as the rules governing your customer’s location. Rules may govern your product’s packaging, tariffs, import restrictions, computer server locations, etc. This is an area where arming yourself with knowledge is smarter than learning through fines, penalties and bans.
  3. Logistics and Support. For products that need to be transported or assembled to the overseas location, logistics can be a costly part of the sale. Once a market is established, often shipping costs can be reduced with larger volumes and long-term contracts. But for early sales, be sure to fully understand logistics costs and build them into your price quotes. For Michelle and Brian looking at Japan, they need to consider how will they support their product with this customer? Will time difference be a challenge? Language? Discuss these issues up front so that there are no misunderstandings.

There are more risks, but this is a list of some of the most critical early considerations.

Entrepreneurs tend to approach their early international sales opportunities in one of three ways:

  1. Throw Caution to the Wind. This is a very common approach for young companies. The pressure to quickly show top-line company growth outweighs the perceived risks. Michelle and Brian assumed that all would be fine in selling to Canada and Ireland without checking for any issues. Normally this subsides around the same time as the first foreign fines are levied or IP piracy surfaces.
  2. Stall the Sale & Do Your Homework. This is a smart approach IF the sale’s margin is larger than the cost to pay for any in-country trademark registrations and to check for any cross-border regulatory issue. TIP: check your own country’s exporting resources first because they are often free or nearly free. Arming your company with knowledge also prepares the company for its impending growth into new markets. If further international expansion is imminent for Michelle and Brian’s company, this may be the best approach.
  3. Stick Your Head in the Sand. Ignorance can sometimes be bliss… if you need focus on a critical path to success that has no room for deviation. International can be a catalyst for intense revenue growth. But if your staff is tiny and your product development list is large, you may not have the bandwidth to research Japan or any other remotely located opportunity until your company grows larger. It’s not ideal, but sometimes it’s temporarily the smart choice. Since Michelle and Brian seem to have a market-ready product with traction in their home market, they should try to learn all they can about how to intelligently move forward into new markets.

No matter which approach a company takes to leads from new markets, it is important to start learning about where to find new high-growth markets overseas, how to enter those markets, and how to stay steps ahead of the competition.

Good luck to you in all of your international business efforts!

Becky DeStigter

 

For more information about growing and supporting your international company, join the International Trade Tribe:

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The International Entrepreneur – Trump and other Branding Issues in International Business

 

International Entrepreneur, Branding Issues in International Business

Prime Minister David Cameron of the United Kingdom, President Barack Obama, Chancellor Angela Merkel of Germany, JosŽ Manuel Barroso, President of the European Commission, and others watch the overtime shootout of the Chelsea vs. Bayern Munich Champions League final (Official White House Photo by Pete Souza)

I was waiting on the platform for the train from Bedford to London Heathrow. It was October 2004 and I struck up a conversation with a local businessman (staying true to my American stereotype of perpetual friendliness). After a few minutes, the gentleman asked me what was really on his mind…

“What could Americans be thinking to not only have elected President George W. Bush once, but to be poised to reelect him for a second term?” To most Brits, it seemed… well… ridiculous.

I remember standing on the platform trying to explain how our media had splintered into audience segments where an American could hear and read literally only the point of view that they already held. That the United States was politically split in half – sometimes leaving friends or family members on the other side of the opinion divide. My new British acquaintance seemed generally satisfied with that answer. But I was left to ponder about the effect that my country’s leader was having on American business in overseas markets.

Four years later I was in Beijing and was surprised by the adulation Chinese openly felt for Barack Obama. I see the same widespread enthusiasm for leaders like Canadian PM, Justin Trudeau and Pope Francis. It’s the type of branding that helps to open doors to new diplomatic relationships and in the case of the pope, new ideas.

This country “branding” issue/opportunity is not universal. Larger countries garner more regional and  international attention than their smaller neighbors. Every country has local and regional issues whether they be fishing rights or an upcoming presidential election. As Americans traveling internationally, we notice that our presidential elections receive press coverage literally all over the world. When a candidate like Donald Trump says something controversial meant to keep him as the top news story in the U.S., it is heard around the world and interpreted in many ways.

 

If all of this sounds like a distraction to most international business – it is.

 

Most of us avoid talking about politics, religion, and certainly any hot button issues when doing business abroad. We want to achieve our business goals. And alienating potential clients or partners with strongly-held contrary opinions is a recipe for disaster on any continent.

 

Here is advice on how to manage country branding in business:

  1. Most important: Do no harm. Don’t bring up controversial topics that need not be breached. No conversations about the refugee crisis with Europeans. No conversations with Brazilians about their recession. No AIDS talks with Africans. The list goes on, but this is where controversy stays in personal conversations rather than in business talks.
  2. Don’t take offense where none was intended. The temptation to react to statements about your country’s leaders or issues is understandable. It’s much more personal to a German to talk about Angela Merkel than for me to bring her up into conversation. Your German counterparts likely had a vote for or against her party’s election. When you would normally react, stop and first gauge the intention of the offender.
  3. Ask about the filters that color someone’s opinion. When an entire business dinner in Jordan stops talking and eating to hear your opinion of gun violence in the U.S., you can answer with the universal truth – it’s complicated. Then immediately start asking questions to learn what your fellow guests have heard and what they think about the issue. This will help you to carefully frame your answers to stay true to yourself and diplomatic to your fellow guests. If this sounds like too much hassle compared with a direct answer, remember that media, culture and personal experiences frame all of our perspectives. Do I know what a Jordanian thinks about this issue? Not until I ask.
  4. Always learn a country’s basic information before travel and doing business. This includes the country’s leader, their economic and social top topics and hot button issues. This takes the pressure off of your own country’s branding (if it’s negative) because you can ask questions about topics that your hosts should appreciate. It also is a signal that you have a basic respect for places where you do business (for more on showing local respect, please read my articles on Respect and also Social Corporate Responsibility).
  5. Pull the conversation back to how the subject impacts business and trade. As business professionals, this is usually a common area and one with less friction. And most leaders and topics can usually be tied back to it. For example, “Are new immigrants helping the U.S.? Immigrants represent a greater number of working adults in our economy. Most are bilingual with the capability to serve multiple markets. While there are adjustment issues, the U.S. has always absorbed immigrant populations successfully. So I would answer yes.” It’s a business answer to a question that has social, political and cultural implications. If the topic is a tricky one, then this business focused answer is a helpful bridge into another business topic that furthers building the business relationship.

 

No matter your political, cultural, social or economic views, managing key conversations helps further your international business dealings. Remember to (1) do no harm, (2) avoid taking offense, (3) ask for others’ opinions to understand their perspective, (4) know a country’s basic information and (5) pull conversations back to business topics as needed.

For more information about growing and supporting your international company, join the International Trade Tribe:

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The International Entrepreneur – Improving Employee Engagement in Your Global Workforce

Improving Employee Engagement in your Global Workforce

I knew from the way that Pedro in the Mexico City office the phone that something had turned for the worst. Pedro’s voice sounded low and muttled – preoccupied and low energy compared with our recent interactions. Pedro and his colleagues had recently been missing key details in our shared projects. They just seemed… well… disengaged from their tasks. I picked up the phone to call someone I knew from the company’s leadership team.

 

A Pandemic of Disengaged Zombie Workers

Pedro and his colleagues are not the exception. They are unfortunately the norm. Studies by Gallop, Deloitte, Dale Carnegie and others all point to the staggering lack of employee engagement in the United States. These studies all show 70%+ of workers surveyed consider themselves unengaged at work.

As a company breaks through from startup to growth stage, its leaders often discuss how to preserve that “entrepreneurial culture” – its key success factor. Translated:

We don’t want to lose that sense of individual employee contribution and drive to beat the odds.

We’re talking about the essence of employee engagement. According to Dale Carnegie Training, U.S. companies with engaged employees outperform non-engaging companies by 202%.

 

Globally The Disengagement Issue Compounds

Most growth-stage companies eventually start taking global markets seriously, opening overseas offices and hiring local staff. Here is where the employee engagement challenges start to compound. A disappointing 13% of international employees feel engaged in their jobs according to Gallup’s State of the Global Workplace.

There are factors to consider to improve global worker engagement, productivity and accountability:

  1. Motivators Vary – Money is often a strong work motivator world wide. If paid what we feel is a fair, market rate for our efforts, then we are likely motivated. But most of us want more than that. We may want opportunities to learn new skills, job stability, and career advancement. Most of us want some work-life balance and a good work environment.
    But beyond that, motivators may be quite different. For instance, in group-oriented cultures where team projects are preferred to individual efforts (Japan). Some cultures expect a relaxed atmosphere (Jamaica) while others want intense work time and a shorter workweek (Germany).
  2. Management Styles Vary – For most Americans, the most energy-draining management style is being closely supervised while also verbally reprimanded in front of peers over seemingly minor mistakes. Yet this is common in India. Indian managers overseeing non-Indian staff learn to modify their style via coaching or negative results.  Likewise, American managers are not always viewed in the same way as they would be in an American-only environment. Engaged employees normally trust their leaders. Building trust changes based on culture. Know what’s expected.
  3. Language and Communication Styles Vary – “Are you sitting in your seat?”, is a curious question at the onset of my colleague’s international team calls. While an interesting way to ask if everyone is ready, there are other linguistic challenges that cause breaches in trust and motivation. One of the bigger challenges in communications is between indirect and direct communicators. Direct (ex. Dutch, Israeli) often say what they are thinking and value sincerity. They find indirect communicators annoying. Indirect (ex. Japan, Ghana) typically avoid saying anything embarrassing to themselves or the other party. They value courtesy and respecting others. They find the direct communicators often rude and untrustworthy. Working with those you can’t trust reduces engagement.

 

Who in the Organization Should Fix This Issue?

Disengagement is often a company-wide issue, affecting operations, financials, customer engagement and other key functions. It needs to be discussed at the executive level. The Chief Human Resources Officer (CHRO) has a key role to play in offering solutions in terms of hiring criteria, employee onboarding, cross-cultural communications training and conflict resolution. And finally, local office managers need to be coached on global management skills.

 

How to Increase Employee Engagement Worldwide

All is not lost to office zombies! Here are my ideas to re-engage:

  1. Hire the right people overseas. Even within an overseas market, there is always a wide candidate pool variance. If your company values high energy staff or a connection to your mission or customer focus, then search for that match in international hires too.
  2. Ask the right questions and then listen to the answers. When an office or staff member seems out of alignment with the rest of the company, it’s the time to ask: “What do you think about…:?” “Can you see a better way to do…?” “What would help you to feel more engaged in your job?” If it’s possible to fix the situation by conversation, then it saves the company the cost of replacing another employee.
  3. Learn the cultural basics of your global offices. Instead of assuming sameness, find out what the differences are to head off future conflict and energy drains. An easy Internet search will provide basic information on a country’s business culture.
  4. Take input from all locations for company goals and employee reward systems. Part of employee engagement is ownership in the company’s outcomes and processes. Solicit input and credit great ideas from outside of the HQ office.
  5. Explain why decisions are being made and how a decision fits into the long-term strategy. Since business rules change from country to country, it helps to explain that context in which your company leaders make their decisions. Decisions that don’t seem to make sense are a major demotivater.

 

Often executives of growing companies assume that global offices and employees are all from the same home culture. Few international employees will speak up when they feel that internal culture clash for fear of losing their jobs. Instead, disengagement sets in. Instead of accepting zombie employees as an inevitable byproduct of company growth and success, it’s time to use knowledge and communications to engage and inspire throughout your organization.

 

Onward and upward,

Becky DeStigter

 

For more information about growing and supporting your international company, join the International Trade Tribe:

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The International Entrepreneur – Is your company still an Accidental Exporter?

Accidental exporter, international entrepreneur

Joe rolled his chair over to company founder, Mary’s desk with a quizzical wrinkle in his brow…

“Can we sell our security product to someone in Romania? We just got an email basically ordering 50 software licenses from somewhere called Timisoara”, said Joe as Mary looked up from her multiple computer monitors.

Mary was just as surprised as Joe. The company had launched only a few months ago. How could someone from Romania have heard about their product, much less have decided to buy it? Their small team of developers were focused on a few potential clients in the United States.

Mary hadn’t even considered when international would enter into the company’s plans. But 50 licenses was an order that was difficult to ignore… So Mary and her company became “Accidental Exporters” – taking orders from foreign clients without any real understanding yet of their global markets.

 

International Clients Always Arrive Before You Expect Them

A byproduct of the world’s Digital Revolution is that anyone anywhere can read your company website. As a consultant, I don’t travel to over 200 countries… but this article will. Businesses and consumers now have access to product options and pricing information allowing them to make more informed choices. If you have something of value like Mary’s security software product, then clients from other parts of the world will begin to make contact.

Mary and her team will likely weigh the revenue of 50 licenses against the risks of doing business with these Romanian clients. Will the clients pay in dollars? How much interaction is needed for software implementation and service?

If like much software today the delivery is a SaaS model, then allowing access is easy. But are there any regulations related to doing business with Romania in terms of taxes, data location requirements or other restrictions? Most companies ignore compliance issues at first and focus on the money. (Tip: Always know what you’re getting into before you just move forward.)

 

Timisoara, Romania (photo courtesy of wikipedia.org)

Timisoara, Romania (photo courtesy of wikipedia.org)

 

Accidental Exporting Becomes the New Normal

Mary and her company take on the Romanian client… then soon a Canadian client… and on it goes. The company figures out ways to serve these foreign clients in the same way that they serve the domestic base – home country language, home country currency, home country customer service hours, and home market expectations. In my experience, this directionless approach is the international growth path for about 98% of small and medium-sized companies.

The surprising part of reactionary-based international expansion is how long this phase typically lasts – for years and sometimes decades. Companies often seem content to continue on building their international client collection with little thought to the larger markets left untapped.

An extension of Accidental Exporting are overseas distributors who find your company through the website or a trade show; and offer to represent your product in their market. Now you have a distributor based in Australia who gets to build business for you in the APAC region for a 25% discount margin. Most companies just accept this new extension to the reactive model without any visit to the distributor’s offices or 3rd party background checks on their reputation. That’s just crazy and irresponsible.

 

What’s the Alternative to Accidental Exporting?

International expansion planning is the answer. And it needs to start almost as soon as your company initially opens its doors for business. In the start-up phase, a company needs to decide what it can and cannot handle in terms of orders from international clients. Can you convert foreign currency? Can you deliver your product compliantly using the Internet, air or ocean freight? Are there regulations for your product or industry that you should be aware of? For instance, you may decide that Canada is a market you can serve but that Germany’s laws regarding cloud data residing in servers located on German soil rule that market out for now.

Despite anecdotal evidence that startups can be “born global”, few are actually capable of true international market entry from Day 1. Instead, internationalization works best when a company plans for overseas market entry years before the first foreign subsidiary office is opened. Incorporate international considerations into:

  • Product development – Are there any additional product requirements to be compliant internationally (CE Marking, etc.)
  • Company talent recruitment– Are we looking for candidates who also have international and cross-cultural experience?
  • Key outside resources – Can our accountants, attorneys, bankers and PEO providers also advise on international tax, legal issues, foreign exchange and international payroll?
  • Financial capital – Are we budgeting for our initial global market research and first market expansions?

Preparing for that eventual international rollout will make the transition much smoother.

 

When Should We Get Serious About Internationalizing?

There is no specific milestone that marks when a company should proactively begin its international expansion. But here are some general guidelines:

  • If you have a profitable company providing value to your home market clients
  • If international clients have found you and you are able to successfully serve their needs
  • If your home market is a small one, then you will need to internationalize earlier than large home market companies
  • If you have 100+ employees (this can vary by industry, but IT companies should heed this criteria)
  • If you have earnings, loans or outside equity to fund early expansion efforts

 

My hope is that by writing about accidental exporting it will prompt business leaders to examine their own company’s approach to international markets. With luck a few more “accidental exporters” can reach their greater global potential.

 

Onward & upward

Becky DeStigter, The International Entrepreneur

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The International Entrepreneur – How to accelerate global expansion

accelerate global expansion, international entrepreneur, international business

It’s ironic. Anyone who has spent time and energy expanding their company into international markets can tell you that the process is anything but fast. Global expansions are notoriously slow, especially when compared to what American and Canadian companies are used to as their domestic time to establish a new business. Registering a new business in some American states can take 30 minutes online and US$50. In contrast, some business registrations overseas can take over 2 years and cost US$20,000+.

In North America, we build our business processes and expectations around speed. Speed to market. Speed up the sales cycle. Speed in product development. Anything that slows us down is the target of constant complaint. Ask anyone who has been through a U.S. Food and Drug Administration’s approval process.

Despite frustrations, there are many compelling reasons why a company would still choose to expand internationally. There are new markets and customers overseas. The market may be global and market share requires doing business internationally. Global markets may balance out seasonal or economic cycles to keep the company’s revenue and growth on a steadier path. There may be strategic advantages for global talent, cost savings or a whole host of other reasons to go global.

 

REALITY CHECK: No matter how compelling the reasons to keep expanding into new global markets, you still need to expend the necessary time and resources to bring success. If you can’t commit to at least 2 years’ worth of work to get a new market off the ground, then I recommend that you don’t take your company global.

 

Here’s my advice for speeding up the international expansion process:

  1. Consistent Commitment. Nothing (and I mean nothing) will slow down your company’s global expansion more than the mixed messages of wavering leadership and financial support.
    This happened earlier this month to an international expansion director in the southwest United States. He had made all of the arrangements to meet with potential Middle East partners on a crucial trip. His company’s Board of Directors froze all travel and other international expenses for a short-term gain.  Now when this director can finally return to this high-potential market, he won’t find the same level of welcome or interest in doing business.
  1. Travel to Your Markets. If you truly want to expand quickly, then put your company leaders and expansion staff on planes to your chosen target markets. Face to face meetings with potential partners, clients and other influential stakeholders in country dramatically speed up the time taken to form these key relationships.
  2. Consider Strategic Partnerships or Mergers & Acquisitions. While partnerships and M&A take substantial time up front to establish the relationship and agreement terms, they can expedite market entry where they already have established client base. So for instance, let’s say my company wanted to enter the Thai market. I don’t speak Thai or know this culture which is quite different from my own. But if there were a compatible partner company, I could reach potential Thai customers by piggybacking on the partner’s products or services as a point of entry. I could learn from my Thai partner about the market and the best ways to sell my offering.
    On the M&A side, buying or merging with a company in a key market means that you buy their assets and also their internal processes and market knowledge. This, of course, is also dependent on keeping existing staff happy post-M&A so that the knowledge stays with the company. Obviously M&A requires support from your current and future financial resources.
  1. Laser Focus Normally Beats the Shotgun Approach to Market Entry. Many companies take the reactionary approach to international markets – they wait for foreign clients to find the company online and approach them with business. I am not saying that this is necessarily a bad starting point, but at some stage serving customers in 13 countries is less efficient than focusing on the 3 best markets and doing it at higher revenue and profit margins.
  2. Practice Agile Processes in Your International Expansion. Instead of starting and stopping every time there is a new challenge in a global market, I recommend using an agile process. Agile is a leading approach in software development where changes are made to code frequently to constantly improve the quality of the product. Marketing adopted agile because it allows for incremental performance evaluations and changes instead of annual reviews. I think this applies just as well to global expansion, where incremental changes can vastly improve results and speed up the process rather than waiting for a review from a large country roll-out.

While international expansion is an investment for companies with a longer investment time frame, there are definitely steps that can speed up the process. Consistency in support is a required foundation. Armchair expansion is much slower than sending staff into the field to meet and develop relationships with key in-country contacts. Focusing on key markets and partners is faster than waiting to see what drops in your lap. And always be ready to make changes based on the new insights you pick up during the new market entry.

I wish you all the best of success in all of your markets.

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The International Entrepreneur – The Globalization of American High Tech

international trade, information technology, globalization, international entrepreneur

This week I wrapped up a 3-week project researching American IT companies that expanded into international markets. Normally my clients hire me to focus on markets outside the U.S., so it was interesting to study the industry I serve.

Honestly, I thought I knew all about the American IT industry. I have spent the better part of the last 22 years working for American IT companies as an employee and contractor. What I learned about my home market and industry surprised me and I wanted to share it with my readers.

 

Market Insights from Studying American IT Firms

I identified 200 American IT companies that had less than 1,000 employees worldwide and were actively internationalizing into new foreign markets. Most of the companies picked for my study were recruiting staff both in the U.S. and in overseas offices. I did not choose any companies that were clearly locked in a 2-country model for outsourcing or similar purposes, with no plans for global domination. I did not target specific states or metro areas. I understand that this is not a study with full academic rigor, but still it was hard to ignore the trends.

Here’s what I discovered:

  1. Not all American IT industry clusters are producing internationalizing companies. Almost HALF of the internationalizing IT companies were based in 2 metro areas: Silicon Valley/Bay Area (68) and Boston (26).
    Then came Tier 2 Clusters of internationalizing tech companies: Los Angeles/San Diego (18), New York City (16), Seattle (8), and Chicago (6).
    What was just as interesting were the metro areas considered to be strong in IT companies that are disproportionately low in internationalization: Denver/Boulder, Phoenix, Portland (Oregon), Philadelphia, North Carolina, Twin Cities and Washington DC.
    Two notable additional bright spots were Manchester, NH and Salt Lake City, UT both coming in with 4 internationalizing IT companies apiece. Here is a map showing where the U.S. high-tech markets are. Clearly the internationalizing clusters are a subset of the whole.

  2. Internationalization seems to take place between 100 and 200 employee counts across a wide variety of IT markets. This includes companies doing everything from developing gaming platforms to offering SaaS business processes to security networks to storage technologies. There are 2 noteworthy exceptions: healthcare IT and B2G (business-to-government) industries. After reviewing dozens of both types of companies, neither internationalize until much later in their product cycles. It’s a shame, really, since both government and healthcare technologies are bought and sold all over the world.
  3. IT services offshoring companies rarely made the list of 200 companies even though their entire business model is based on globalization. The truth is that these companies may have Indian or Mexican operations, but they don’t sell into any market except the U.S. Opportunities are being missed.
  4. There is no standard international expansion market pattern. Companies literally had a patchwork of offices and operations around the world. While there are definitely popular overseas office locations: London, Singapore, Toronto, Sydney, Amsterdam; companies seem to be weighing options in various markets instead of following a predetermined step-by-step rollout. In my option, that’s proactive and positive.

What is internationalization?

For quick reference, here’s my practical definition of company internationalization:

  • A company that is PROACTIVELY entering new foreign markets to sell products and services. This also applies to the supply management side – sourcing materials and services from around the world.
  • A company that is actively engaged in understanding the market potential in various parts of the world.
  • While many companies begin their international expansion using in-country local representatives or distributors, I think true internationalization is when companies begin to expand directly to new markets with new offices and hiring in-country staff.

Why is internationalization important?

Globalization is a defining force of our time. Its momentum rides right along with the other primary drivers – technology and entrepreneurship – as changes that will affect our grandchildren’s grandchildren.

For companies, internationalization is a game changer. It means:

  • Having the choice to expand into international markets (“internationalize”) at much earlier stage than ever before.
  • Increasing your overall market size by somewhere between 100-500%.
  • Learning industry advances and operational efficiencies in one market that can be applied to the rest of the company’s markets (called “arbitrage”).
  • Access to investment funds and other resources not necessarily available in your home market.
  • Country portfolio risk reduction – not all markets go through downturns and upturns at the same time. Multiple markets balance out the risks.
  • Access to the global talent pool to help drive smarter decision making and better leadership and management.

As I often discuss with IT company leaders, internationalization is like your planet developing “warp drive technology” on the TV/movie series “Star Trek”. Pre-warp-drive planets have a single planet view of what is possible. But once the planet’s scientists and engineers develop this high-speed capacity for travel, Star Trek sends an envoy to meet your leaders and welcome you into the larger intergalactic realm. Internationalization in a similar way opens up the business environment to the other 95% of our planet’s population.

So if you are an IT company leader or someone invested in a local IT cluster’s success, what does all of this mean for you?

  • It means that clusters like Silicon Valley and Boston have investors/VCs who expect internationalization as a company’s “Warp Drive” when they reach their growth stage. These industry clusters cultivate available resources to help make that happen. This can be developed in other markets as well.
  • It means that if your company has a headcount of 200+ and you don’t yet have international operations in at least 2 foreign markets, you may be late to internationalization and should actively be researching the advantages and risks involved. To expedite this, hire outside international business expansion consultants.
  • It means there is no one best way to expand internationally. Use your own competitive advantages and market research to optimize this process.

Now, in the immortal words of Star Trek’s Mr. Spock: Live long and prosper!

Becky DeStigter, The International Entrepreneur

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The International Entrepreneur – Interview with Safeguard World International’s CEO, Bjorn Reynolds

Bjorn Reynolds, Safeguard World International, GEO, global HR, This week I have the pleasure to interview company founder and international entrepreneur, Bjorn Reynolds. Bjorn started his international payroll and HR management company in the UK. Now the company has grown to serve 165 countries.

 

The International Entrepreneur (TIE)- Bjorn, since many may not know about Global Employment Outsourcing as a fast track to foreign market entry, can you describe how it works? 

Bjorn Reynolds (BR)- GEO allows our clients to outsource their international employment responsibilities. From local employment contracts, to paying the actual employee and managing the statutory payroll deductions and managing and providing guidance on any HR issues – all managed through our network of carefully vetted and in-house partners in over 165 countries. What this means for the end client is that they can outsource the entire employment responsibility and process to SafeGuard, all without having to register a local entity and navigate the bureaucratic headaches that such a process typically brings.

 

TIE – As the originator of the GEO employment model, can you tell us how you and your team at Safeguard World International found this market need and innovated the GEO solution?

BR – Our identification of the GEO market was primarily two fold:

1)      We observed a demand from our clients for contingent labour that they could deploy on their medium and short term projects. Historically multinationals have turned to Independent Contractors, particularly in countries where they do not have an entity established, agreements of which frequently fell foul of employment law due to unfamiliarity with local rules and regulations. We devised the service to help our clients hire individuals on a temporary basis and in a compliant manner, removing them from any potential risks and fines associated with the utilization of IC’s.

2)      Clients were encountering difficulties going global and expanding their business into new countries. Expansion into new territories if often a daunting and complex task – setting up bank accounts, registering entities with the local authorities and navigating local rules, regulations and cultures is a considerable undertaking for any organisation, no matter their size and amount of available resource.

 

 

TIE –  What is the biggest challenge you currently hear from companies expanding their global talent teams?

BR – The biggest challenges that we continually hear pertain around “how to” and navigating the local rules and complexities that are frequently encountered when expanding into a new country for the first time – even for large multinationals. From an appreciation and understanding of cultural, time zone and language barriers to understanding what needs to be provided to employees both from a statutory and customary perspective in order to attract and retain the best talent. Coupled with the daunting prospect of completing all the necessary registrations and tax remittances, companies are often deterred from following through on their intentions to expand into a new country.

 

TIE – As a leader in your field, can you give any advice to companies who are planning their first international expansion?

BR – Many organisations often feel like expanding internationally is out of reach – they don’t have the resources or expertise in order to grow their business on the international stage. This simply isn’t true. While it’s certainly worth noting that international expansion should be a carefully considered and evaluated decision, especially when exploring the time it would take to expand and register your business in a new country, by partnering with the right expert, such as SafeGuard, SME’s and startups should no longer fear taking their business into new territories. With GEO the world becomes truly borderless and I love helping companies not only make their first foray into foreign markets, but also reap the benefits that international expansion can bring to an organisation.

 

About Bjorn Reynolds

Bjorn is the Founder and Chief Guardian of SafeGuard World International. A recognised industry leader and strategist for the global payroll markets, Bjorn’s passion for payroll is the driving force behind SGWI’s vision, strategy and culture, instilling his enthusiasm for Service Excellence and success throughout the organisation. His entrepreneurship led SGWI to a prominent position in the U.K. Sunday Times “Virgin Fast Track 100″ and he has been personally recognized in the “Payroll Top 50″ by Payroll Magazine and as a “Game Changer” by WorkforceMagazine. During his early career, Bjorn worked for HFC Bank (part of the Global HSBC Group) where he was quickly promoted to branch manager after one year in post – the youngest ever Branch manager at HFC in its history.  He later ran marketing and channel functions within the HR and payroll space for one of the top three global payroll and HR service providers.

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The International Entrepreneur – Keeping Your Global Project Staff Locally Compliant

global HR, international compliance, international trade, GEO

Tim was a chemical engineer just starting his career.  He was working for a beverage additive company in Milwaukee, USA. Having already studied abroad for a year at the Instituto Tecnológico y de Estudios Superiores de Monterrey (México), Tim was open to the idea of moving to east Germany when his company proposed it. He and his four engineer colleagues went to investigate setting up a production facility near Dresden. Why Dresden? The German government was providing incentives to foreign companies to invest in the former East Germany to build up the economy.

Tim was excited about this opportunity to help his company expand internationally, but one thing kept nagging in the back of his mind. The company hadn’t done any paperwork to get Tim and his colleagues work visas for Germany. Even as a novice to the work world, the lack of proper documentation was a clear risk to Tim as a project engineer. Tim brought it up to management and to the HR department. “We’re working on it” – was the response.

Tim stayed in Germany for six months helping the team to evaluate facility options. But the company still didn’t seem to care about the glaring compliance issue. Tim decided it was time to move on to another job at a company where he wouldn’t be put in this type of compromised position.

Later that year, the German authorities confronted the American team, asking to see work visas and other registration paperwork. The company was issued hefty fines. A few of the staff had returned to the U.S., but the German government caught up with the last two engineers as they were leaving. They were initially detained and individually fined and required to leave Germany.

 

Why would a company not issue work visas to staff working overseas?

This beverage additive company was obviously negligent of their duties under local laws as well as to their employees. But up until a few years ago, companies had to form an in-country subsidiary to legally employ workers in Germany or any other country for that matter. That involves registration processes, a series of fees, legal work, and who-knows-what-else. It can be a time-consuming process that also locks a company in to doing business in that market until the entity is dissolved (which also costs time and money).

The Milwaukee company was not sure if the Dresden project was going to even be successful. It turns out that it wasn’t.  So they took a chance with their employees to avoid registration. But it was a big risk not only for the company, but for those employees as well. This was in Germany – a country of clear-cut rules. What if this had been Bolivia or Egypt where government application of rules is not so consistent?

 

GEO can keep your global project staff compliant

Now companies don’t have to register a foreign entity to send their project engineers and other staff to work overseas. They also don’t need to know the exact local employment laws either. A few years ago a new service was born – GEO (Global Employment Outsourcing). In this service, the GEO company hires your employees in the foreign country where they’ll be working and assigns them back to your company. The GEO company is the Employer of Record, providing payroll services. The employees are paid in the local currency and your company pays in one of the major world currencies like US dollars, British pounds or Euros. The GEO makes all the proper payments to local government for any social costs and stays fully compliant with local requirements.

The cost of GEO is typically far less than country subsidiary registration and eventual country exit. It’s ideal for implementation projects and researching a new potential foreign market. GEO was pioneered by Safeguard World International, and has spawned a new industry.

 

Final word to internationally deployed project staff

If you don’t already know, be sure to check your employment compliance. All countries have rules related to how much time someone can stay in country working without applying and receiving the right work permits. Most companies do not yet know about the GEO compliance/payroll option, I encourage you to share that with your employer if you suspect a compliance issue.

Tim, the young chemical engineer, did the right thing. He told his superiors and HR department. In the long run, it’s not worth working for a company that would put you at financial and legal risk in a foreign country.

 

As a footnote, today Tim is a successful Vice President of Marketing and Sales for a growing US Midwest engineering firm. He travels extensively for work around the world.

 

Becky DeStigter, The International Entrepreneur

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