The Newly Born Global Players
03 Sep, 2014
By Mona Pearl
Companies created to serve global markets are beating large corporations to the punch.
Large-scale firms are synonymous with bureaucracy, which tends to stifle innovation. In response, the business environment is shifting to accommodate the needs of its rapidly changing market players. Global innovation and entrepreneurship are beginning to flourish around the world and will likely take the form of much smaller, yet bolder companies. Knowing and catering to this is how entrepreneurial ventures beat corporate giants to the punch. Any company, large or small, that continues down the same path it has always taken will find it to be a losing proposition. The landscape is changing and the doors are opened for opportunities not only for the multinationals, successful with resources, but to a new league of players that enter the global game with a mindset of global success.
The Born Global Advantage
Traditional business models can no longer deliver optimal results. If entrepreneurs are going to be an integral part of the answer to the world’s turbulent times, if they are destined to be the opportunity diggers and job creators, then it will probably come from those who lean more to the creative side. Creative entrepreneurs can weather economic crisis better than traditional companies can, and they are typically less challenged due to their nimble nature, focused strategy and their team’s innovative mindset. Creative companies can survive any condition.
World economies are becoming more and more interdependent. Communication via the Internet has never been easier or more accessible. Easing trade barriers, increases in entrepreneurial mindsets, the eroding confidence in established institutions, shifting business environments, and environmental and technological advancements are collectively opening doors for U.S. businesses to engage not only with the world’s consumers, but also with the world’s businesses. Born global entrepreneurial companies have identified this opportunity and are leveraging these changes to gain unprecedented growth.
Who Are the Born Global?
More and more firms have operations that bridge national borders soon after their founding. Penetrating and developing an international market requires an entrepreneurial philosophy and drive; it requires a panoramic view and working with experts from other cultures from the get go.
The phenomena of born global companies comes to bridge a need, which was created based on recent technological and economic developments, with globalization and present exponential opportunities for the creative, innovative and nimble visionary entrepreneurs.
Global startups are companies that from inception want to build a global presence and therefore a brand. They understand, either intuitively or through past experience that one of their competitive advantages may be acquiring human capital from other countries. This is done not only to save costs, per the thinking of traditional companies, but to gain perspective, professional expertise, different angles on project development and target market knowledge.
The phenomena of born global companies comes to bridge a need, which was created based on recent technological and economic developments, with globalization and present exponential opportunities for the creative, innovative and nimble visionary entrepreneurs.
How do they make it? What is their secret sauce? Where do they come from? What resources and capabilities do they need to put in place?
Understanding the Crucial Success Factors
The type of services and support born global companies seek and need is actually creating a whole new industry, and elevates the need for human capital around the world to be part of this trend. We are looking at new players with more specific skill sets to embark on new opportunities globally.
- Acquiring the right talent to do things right. A global startup is harder to launch and manage than a purely domestic company, taking into account the differences in culture in various regions in the world and therefore the different sales, marketing and modes of entry into these markets. This also includes possessing the right chemistry with existing management, and embodying a natural entrepreneurial spirit. In a global startup, the focus is on talent with creativity, vision, and rapid innovation capabilities. It requires a team that is flexible and can cross borders while using their business ideas and adapting them to the different markets effectively and efficiently to be successful.
- Entrepreneurial collaboration. Also on a global scale, there needs to be a platform to facilitate more entrepreneurial collaboration, which in turn will make shared innovation between countries a far more common occurrence at the company-to-company level — not just at universities and research institutions.
- Funding. Getting funding from traditional sources such as banks, and even venture capitalists for international operations isn’t readily available. These ventures require a new breed of funding and investors, which are starting to mushroom. They require different types of investors which have a global mindset and understand the risks. There are several innovative structures such as global crowdfunding that invest in startups and early-stage companies, which is a pretty new phenomenon globally. This used to happen only with mature and large companies.
After a first stage of development and proof of concept, born global companies need additional cash infusion, and due to their unique structure and future planning, they need outlets that understand their needs. For example, FruitionTechFund LLC, located in the United States, is investing in technology companies in their initial revenue stage (Series A), with small increments of capital, which is typically only available to larger investors. The board is comprised of professionals with deep execution expertise and a focus on global markets. This is an example of where technology, a global mindset and know-how meet in order to provide the platform necessary for global success from infancy.
- Assembling an effective board. An effective board has the entrepreneurial mindset and operational experience and know-how, as well as the global skills and practices to help companies reach the next level. These board members have to be committed and be a match to the fast pace, ever-changing global growth environment.
One of the board’s responsibilities is to assess, validate and oversee the company’s strategy. It has the fiduciary duty to provide the oversight, governance and platform for the company to build a successful global presence that will stand the test of change and still be on target, on budget and on time.
As a big chunk of the operational revenues of these companies originates from across borders it becomes crucial to have members with global experience who can guide them through or even bring up the relevant points on global expansion strategies or how to craft successful global actionable decision making.
Last but not least, selling in different languages to different cultures puts the company in the major leagues, and this converts to sales. Global organizations love to buy software from vendors that can supply a multilingual solution that has a proven track record of working in different countries and according to different laws and compliance.
The Story of a Born Global Entrepreneurial Company
Xpandion was established in 2007 in answer to the growing frustration caused by overly complex permissions models and an overpriced licensing model — both derived from uncontrolled user activity in large ERP systems. After two years of product development, it was clear that the direction the company should take was to target global organizations.
The thinking was focused on technology solutions and not borders. The more complex and multinational an organization is, the more they need to find a way to control their systems, and the more they are repeatedly and expensively audited. Xpandion has particularly focused on SAP systems, where SAP Authorizations are known to be very complex, and SAP Licensing is not only known to be very complex, but also confusing and expensive. Therefore, there was no question about the type of customers that the company wanted to serve with its products — all SAP customers are enterprises and most of them are global. This definition of the market set the goal of global sales.
The downside of selling to global enterprises is that the sales cycle is relatively long. From Day 1, the focus must be on dozens of sales processes simultaneously, continuously adding more and more, and then finally signing the agreements after many long months. On the upside, though, is if the product is good, sales can last indefinitely, at least in terms of software. Global organizations tend to make decisions and stick to them, so if they buy software at the onset, including a yearly maintenance fee, the sale is probably for years.
Another great benefit in selling globally is diversifying risk. If sales decline in one region, then it’s possible to invest time in another part of the world with a better economy.
Last but not least, selling in different languages to different cultures puts the company in the major leagues, and this converts to sales. Global organizations love to buy software from vendors that can supply a multilingual solution that has a proven track record of working in different countries and according to different laws and compliance.
Mona Pearl is a strategic advisor to entrepreneurs and top management in companies wishing to fully tap into their global potential but are not there yet.
Mona speaks six languages, has lived on three continents and has been involved in more than 20 startups, as well as with the expansion of many established companies. She has served as COO/CMO for three companies and helped build and scale ventures in Asia, Europe, Latin America and the Middle East, while establishing an international network of contacts which helps ease the path in many overseas operations. She can be reached at MonaPearl@BeyondAStrategy.com.
Includes excerpts from Grow Globally: Opportunities for Your Middle-Market Company Around the World. Copyright (c) 2011 by Mona Pearl. Reprinted with permission of John Wiley & Sons, Inc.
Illustration by sheelamohan at Free Digital Photo.net
