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The World Beat on Going Global
Entrepreneurs Explore International Sales, Partnerships & Outsourcing
(Washington, DC -- April 22, 2003) “Anyone can go global,” according to Jim LeBlanc, President of globalization consultancy J. LeBlanc International, “the trick is doing it profitably.”
When it’s done right, it can be extremely profitable. For example, a study by Boston-based Software Success shows that companies with more than 30% of their sales from international markets have a pre-tax profit margin that is almost three times higher than companies that are purely domestic.
At this morning’s Netpreneur Coffee & DoughNets meeting, LeBlanc moderated a panel of entrepreneurs who have recently expanded their companies internationally, successfully, and profitably. Providing personal and pragmatic stories about what worked and didn’t were John Malone, CEO of BizTelOne; E. Sanders Partee, CEO of Ecutel; Sundaresan Raja, CEO of Airbee Wireless; and Matthew Voorhees, Co-founder and President of AnyBill. The event was hosted by the Washington DC Technology Council and sponsored by Comerica, Ernst & Young, and Fenwick & West.
Why do companies make the global leap? It’s either a proactive or reactive decision.
Proactively, it’s when you’re out searching for partnerships as an element of long-range strategy. At BizTelOne, for example, the plan from the very beginning was to compete on price, and that meant holding the line on development and infrastructure costs by using off-shore outsourcers. “On both fronts we took aggressive steps,” said Malone, “because it was the only way to compete against these four- or five-year-old VC-backed companies that had raised $50 million dollars.”
Reactive globalization is when a company comes to you with an opportunity or proposition, as happened to Anybill. “We had no intention of going to Europe or Mexico in our business,” Voorhees explained, “but it was a huge leg up on the competition to give our client those territories for distribution. They were looking at buying a similar product from our competition, but that competitor could not give them exclusivity. It didn't cost us anything because we hadn't intended to go there in the first place.”
Don’t get the wrong idea, however. Reactive steps are both common and often successful, but whether you’re acting or reacting, these deals must be thought-out and prepared for. According to Partee, the most important thing is to have strategic interests and a strategic alignment with any overseas organizations you work with, regardless of the nature of the deal.
The panel examined issues from two sides: Raja and Malone mainly from the perspective of using international development and outsourcing partners; Voorhees and Partee mainly from the sales, licensing, and revenue generation side. And while many tactical issues and elements are different from one side of the line to the other, the larger issues are often the same, including effective communications across cultures and intellectual property protection. The panelists addressed a wide range of specific challenges and strategies, from the costs of sales to management issues, sales cycles to international taxation, and much more.
If there is an element of global business that unites all of the issues discussed—and which may very well determine whether your international foray will be profitable or not—it’s the effectiveness of your communications. Even domestic partners have misunderstandings, and cultural and language differences increase the odds. Whether dealing across borders with customers, partners, lawyers, distributors, or anyone else, always make sure that both sides are clear about expectations, requirements, and metrics. Malone suggested creating a communications plan, and Raja went even further.
He advised entrepreneurs, “Record all decisions in writing, because almost anything can lead to some misinterpretation. We not only tell our vendors what needs to be done, we also tell them how we are going to measure it so they know up front. Any transaction we do is in writing, and writing only.”
Good communication is not just a service to clarity, it’s the foundation for the most important element of global business—trusted relationships. Communicate regularly through email and phone, of course, and spend as much time in person as possible. All of the panelists agreed with Voorhees that, “It really comes down to that relationship. There has to be trust.”
Copyright 2003, Morino Institute. All rights reserved.