Startup’s Dilemma – Globalization

From my column at Proseed http://proseedmag.pl/magazine/proseed-21

Dear Richard
I’ve been running my business (e-learning platform) for two years now. It’s doing OK, but I have an impression that I reached a point where nothing else can be done to gain more users. I am not afraid of the risks. I want to open my business to foreign customers. What would you advice (apart from making the EN or CZ or DE version of the website)? Which markets shall I take into consideration – those who are close and kind of similar, or those which are unknown and scary but huge and full of potential?
What to do, how to plan?
Pozdrawiam

“Wondering about going global”

Dear “Wondering about going global”

Thanks for the question.

I will answer this question “generically” in a way that hopefully makes sense no matter what your business is.

The news is actually rather good. Poland is not the easiest market in the world in which to to “make it”. If you are making a profit here, then remember the line from Frank Sinatra’s “New York, New York” paraphrasing “if you can make it here, you’ll make it anywhere”

Many Polish companies find that they can make more money from international clients than local and therefore do not even think of dominating the local market first, so the issue of going global was solved from the very beginning. However from the sound of it this is not your approach.

Before we start opening the champagne, let’s think about this from the strategic point of view. Remember the “three Cs”. (costs, competition and clients)

Let’s start with clients. Several questions about them.
Who are your clients and users? Most web based businesses have some people who use your site without paying anything at all and some who are the source of money. It depends on the business model. You should have a clear idea of all your users and clients, especially the people who are sending you money – your clients. If you don’t know your clients well, then you are making a fundamental mistake. Pick up the phone and call them, Skype them, survey them, ask what they like and don’t like about your site, if there are any features that you should have that they would pay for, and if there is anything that annoys them. Ask them what other sites they visit instead of yours to address the need that leads them to your site. Call it “client relations, market research, whatever.” any business that does not focus on what its clients want and like both now , and what they will want in the future, is probably doomed. If you have 10,000 clients, don’t call them all, just call 250. Start by saying “Thank you” (and that you don’t want to sell them anything) You will be amazed at how much you can learn. If you don’t know about telephone interviewing try clicking here

Next, figure out what the foreign equivalents of your Polish clients are. It shouldn’t be hard. If it is going to vary by country (there are going to more clients in Germany than Iceland, you will want to start by ranking countries in terms of their potential attractiveness). Big and rich is often better than small and poor (but not always – sometimes you can dominate smaller markets while rich global competitors are spending a fortune in places like the USA, UK Japan and Germany and it is very hard to compete)

Remember the 3Ps (Product (or service) People and Process).

Product
Reviewing the potential clients in foreign countries for your offering leads to a natural question “is your product/service ready for it.” it’s more than just translating the web site. You will soon figure out how scaleable your product is. VCs and on line Start Up gurus obsess about scaleablity, and it is important. It is also true to note that many business are highly profitable, have sustainable competitive advantage and are not particularly scaleable. Lack of scaleability can make your business model harder to copy, so don’t despair If going global means hiring a person or two for each market you are going to address that is a fact, not a disaster.

If you do E-learning, are there linguistic, cultural, regulatory or other reasons why what you offer here will not work in other countries ? If yes then you will start have to factor in the costs of modification of your product to suit one or more international market. In many markets you will find that you need to take care not just of the web site but also the legal requirements of doing whatever you do in that country, including local language instructions, safety certification, approval from local regulators and compliance with recycling or guarantee requirements, so make a check list and work your way down it.

Is your service bundled with local service providers, who provide support, face to face training, or integration with client platforms? If yes, then your strategy for that market will include identification, qualification of, and forming partnerships with, those local service providers. This costs time, money and someone who speaks the relevant language.

Competition
This is the counter argument to the Sinatra song. Sometimes the reason you can make it in Poland is that the “big boys” in the market place have focussed on the world’s big markets (English speaking plus – FIGS, CJK, BRICS* (see if you can work it out) without cheating * Footnote France Italy, Germany Spain, China Korea Japan Brazil Russia India)) . If you never did competitive intelligence research in at least English, whoops 🙁 at least you are thinking about it now..:-)

You need to be aware that if your foreign competitors are doing well and making money then it is only a matter of time before they enter the Polish market. either through localization of their web site into Polish and (maybe) hiring your best people. You cannot assume they will ignore your market if you are making money here.

It may well be the case that you find that while you are ahead in Poland you face strong competition in larger international markets. What to do about this depends case by case.

You might want to sell your business to the international market leaders. If that is the case then it can be a good idea to establish yourself in markets where they are not present to increase the logic of an acquisition. if you are not making money (and worse, neither are they) then your chances of an exit are very much reduced.

You should try to figure out their strengths and weaknesses, in what ways you could compete. Decide how you can be better and hire their best people, or use their sub contractors. Obviously this requires money. but if you have decided to go global then it will cost something.

People
Another “P” is people (team or staff) Do you have the right team to go global? If you are going to take enquiries in foreign languages you must have some who can respond to them. How strong is your brand? If your brand is high quality then they need to be able to communicate in high quality English. If you need to visit clients then do you have someone in the team who is willing to travel, and if they do travel will they do a good job with partners and clients? You may need to hire someone for this position or else take on board the fact that you will be travelling a lot so make sure you’ve explained this to your boy or girlfriend, husband/wife kids and friends.

Costs
Another of the three Cs is Costs. As will be clear if you have read this far, you are going to have some costs from trying to go global. You are still likely to be in the fortunate position of being in a lower cost country than some American and West European competitors, but you for sure will find there are well organised and clever competitors in other developing countries who are also hungry for the same revenue. As in any business, you need to cover your costs in the long run, If you are going to go into foreign markets for free to get a reference or two, that can make sense, but you have to charge enough to make a profit in the longer run. Generally speaking if you do not have arguments other than price to get people to buy from you you will struggle. Most clients want a good product or service first and foremost and will not switch just because you are cheap.

The third P of the three Ps is “Processes” Do you have good processes and are they suitable for international business. This will be true across a whole range of issues from:
Payments (suppose an American wants to send you a check),
Logistics, you want to send some CDs educational materials and workbooks to Korea, what is the import tariff and postage?)
Tax so what exactly are the rules about VAT when invoicing a Russian company that wants to pay you out of Cyprus, and what exchange rate do we use to calculate our taxable profit?

I always emphasize the importance of good processes in a business no matter how small (or big). well designed processes leave more time for the brain work that really matters.

Localisation – I have to declare an an interest here because I am a shareholder in Argos Translations which makes its living from helping companies go global. It is not cheap to get documents, web pages, instruction manuals and the like translated professionally, and good translators make good money. This means that going to a professional agency is going to cost more still. Many businesses start by trying to do translation “on the cheap”, using students and untested translation services and learn the hard way when native speakers of the target language tell them that standards are not professional, If you are a high quality company, your web site and marketing materials must be of high quality in target languages, and it is not a one off cost. Every time you have add new content in your source language (probably Polish), whether on your blog, or in the news section, you will need to update across the site. It is not rocket science but you need to develop a process, and automate it, probably with a Content Management System

Marketing
Marketing in most web businesses is the process by which a business generates sales leads, to whom there is a chance of selling something. Having very little experience of branding in consumer goods markets I am not going to comment on classic issues like logo colour and image other than to argue that it should be consistent and authentic. if you promise high quality reliable and professional services then not only should your web image be consistent but the people you have should meet the specification.

So when considering going global you must review your client acquisition process at home, and think about the equivalent in foreign markets. if you are somehow driving traffic to your web page(s) in Poland and then selling to people who visit, how are you going to do that in foreign markets? If you have lots of organic traffic from search engines, it’s going to be hard to generate that overnight, so it may be worth spending a relatively small amount of money on landing pages in foreign languages, and driving traffic to them using Google adwords. The process is described in detail here

The 3 Ps and 3 Cs – Costs, Competition, Clients, Product (service), Process and People are the building blocks through which to analyse any business, on line or off. An awareness of where you are now, where you want to be, and how you are going to get there under each of those headings will give you a clear view of your strategy.

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