The Academy of Business Strategy – Internationalization

THE ACADEMY OF BUSINESS STRATEGY

BUSINESS INTERNATIONALIZATION BLOG
THE RADICAL COMMUTE: THE EMERGENCE OF FLY-TO-LET

AUTHOR

Luis da Silva (CBS) MA BSc BA

Those who have worked in the United Kingdom for the last decade have almost certainly noticed the change in working habits. Not least is the huge change in the attitude towards the office: before 1990 rare was the employee who accepted a job that did not involve a physical office and a desk. It was the sign of solidity, of security and of permanence. Enter contracting. During the 1990s the external consultant, office-based but with no fixed employment ties, created a mini revolution in working practices. Hugely paid while often able to dictate working hours and commandeer best jobs, this mass of risk-takers, many of whom made a fortune while they could, set in motion a much greater working practices revolution. Even the traditional consulting firms started to experiment with shared office space and part-time home-based working. With a fast-approaching Y2K and a return to the re-engineering (read downsizing) of the 1980s, suddenly even employees started to think that maybe having some form of independence from their employer might not be a bad thing. Since giving up the job was not on the cards, giving up the office and the desk was the most obvious consequence.

The change in employee mentality was matched by a shift in employer attitude, in particular driven by a need to drive down fixed costs. The two met perfectly in a situation where remote or home-based working, hot-desking and other similar techniques proved to be the perfect solution.

Fast forward ten years to the end of the noughties and senior executives find themselves increasingly mobile. Moreover, many spend so much time on a plane or the nature of the business is such that it can be run (and has to) from a car, an airport lounge, a serviced business centre or the company office on another continent. Why, then, if senior executives have their fair share of take-home work, not live where you want and travel into work when required?
Seem like a crazy idea? For a time, I lived in east Hertfordshire. To travel down to King’s Cross and up to a client in Newcastle, took me over four hours as there was no easy way I could go straight up from where I lived. When I established a base in the south of Europe, direct flights to Newcastle meant that my travel time including driving at either end, was less than four hours. I flew thousands of miles, got through border and passport control and had time to work. And the price of the return flight including taxes was normally lower than the return train trip!

Regular plane travel has become a way of life in the US, where executives spend days on end flying from city to city in different states, week in and week out. The culture in Europe, where the distances are comparable or shorter, leans towards limiting travel to typically one trip per week. In Asia, where distances are longer, trips would typically incorporate multiple stops and longer periods. However, one thing is common among all these regions: many executives and professionals are opting to live where they wish, and ‘travel’ in to work. No longer is the commute limited to car snarl-ups at the entrances to cities, or train rides cross-country, or even helicopter rides across a crowded metropolis, but now also features professionals of all descriptions who choose to fly in to work. Expanding businesses need to recognise this growing trend.

Clearly the advent of low-cost flights has enabled the start of something that as recently as half a decade ago would not have been viable. And while in certain regions, such as Asia, the sheer distance that needs to be covered is too large, the model works with variations in many regions of the world. A few examples include:

The European parliament, which sees many members return to home countries once or even twice a week ;

Northern European businesses, which see their executives and professionals travel from Southern Europe, often with working couples travelling to different destinations for work, and then meeting at home at the weekend, or choosing to meet for a weekend escape elsewhere before flying back to work;
In countries such as Brazil, where regional employment opportunities may be hugely different to those in main cities, the professional bread-winner might travel to a city for the week and return home on the weekend. One way flights may be as long as five hours!

South East Asia professionals might have a love for one of the Thai islands, or Singapore, but fly into Bangkok, KL or even Manila, for example.
In the continental U.S., travelling professionals usually return home every weekend. Due to the varied nature of much US travel, these warriors of the road tend to spend time in hotels rather than opting for an out of town second home. In the Far East, travelling Westerner professionals, together with their Asian counterparts, can often afford, as a result of the lower cost to both them and their businesses, to duplicate their lifestyles, one in the country of residence and one on the country of work. Europeans fly-to-lets tend to exhibit very different, sometimes even frugal, lifestyles in the country of work.
While analysing these aspects of behaviour and profile is beyond the scope of this brief article, clearly the growing influence of the fly-to-let phenomenon is an increasingly important aspect when planning to contract successful senior management. These individuals, often a constant target for international companies, have become accustomed to building a work travel profile around a personal or family base which must remain stable. While on the surface this might appear to be a less than ideal situation for the company and the executive, it is often proved that the ability to avoid the distractions involved with relocating a family, often unsuccessfully, allow the executive to focus on the business without the distractions of adjusting an entire family unit to a new set of circumstances. While this clearly is a challenge the first time, many seasoned professionals whose families have now adjusted to the new way of working, find that they are not only able to be more productive when working, but are slowly clawing back that quality time with family that seemed so difficult when the family was together and the bread-winner often absent.

Looking for work-life balance and the search for a greater focus of the business around the founders or executives (memories of a start-up – full circle and the circle of life?), opportunity to choose lower cost base and start a support structure at a distance.

So like many new trends emerging in the global world of business, fly-to-let executives and employees will increasingly be a factor in the competitive labour market. Whether driven by employee demands or business requirements, the ability to work fly-to-let employees into the business model, could well be the differentiator between finding key employees, or providing the right set of circumstances to allow them to flourish. And that (apologies to Frost), can make all the difference.

ABOUT THE AUTHOR
Luis da Silva (CBS) MA BSc BA is an approved Certified Business Specialist (CBS) with the Academy of Business Strategy and his specialist subject is business internationalization. He has achieved an MA, and BA from UNISA and a BSc from the University of the Witwatersrand. He has been employed as a CEO and board member of a listed company with a turnover of €250 million and value of €1 billion and has experience within the Manufacturing, Electronics, Banking, Agribusiness, Travel/Airlines and real estate industries. His clients or employers have included Fractional Villas Inc, Invest CV Limited, BGR Ltd, API Undercliffe Ltd, DMS Lda, Emeritis, Quillion Ltd, Datanomic Ltd, E-business Partners, PLAUT and Andersen Consulting. He has geographical working experience in the USA, UK and Brazil. His language skills include English, Spanish and Portuguese. His service skills incorporate business management, business expansion or turnaround and people management. To contact Luis da Silva, please contact the Academy of Business Strategy by forwarding an email.

THE ACADEMY OF BUSINESS STRATEGY

BUSINESS INTERNATIONALIZATION BLOG
LANGUAGE AND INTERNATIONALIZATION

AUTHOR

Luis da Silva (CBS) MA BSc BA

¿Habla Usted Español?

I got my first big opportunity in an international career of more than twenty years for two main reasons: I spoke the right languages, and clearly the Board thought I was performing. To this day, as I cast my eye back on how accepting the challenge meant becoming a Board member of a €250 million turnover company before turning 30, I continue to believe that the language factor was the real clincher. The fact of the matter is that if any company seeks to expand its business, one of the most critical success factors will be the extent to which its senior executives, the ones most likely to be relocated and drive international growth in the business, are likely to integrate socially and culturally into the target market, and thus succeed.

Speaking the local language is only one of several important criteria required for international success, and which may include demonstrating empathy towards the local culture, understanding social structures, gestures, facial and body movements or postures, and, of course, simply understanding how senior people like to do business (golf course versus restaurant, for example). Nonetheless, there is, in my experience, and assuming all other things being equal, no other factor that contributes as much to the success, especially to the early stage success, of a business and its travelling executives, as one or more of them speaking the local language.

Let’s take a look at a few reasons why:

An arriving manager or director is always the outsider, even if they are the boss. For this reason, the expectation is that the ‘intruder’ will build the bridges either to an existing team or with a new team. Being able to understand people in their own language is an excellent way to understand people and personalities and personalise the bridge-building approach;

The most important elements of the local team are, well, the local team. How then does one conduct an interview without being able to ask the questions or understand the answers in a local language? Undoubtedly translators or the use of head hunters can help to an extent, but for a quick integration of new team members and to facilitate their understanding of the corporate culture, it is critical to get the selection process right first time round;
Most senior executives who have worked internationally have at one point or another faced a situation where they are uncertain as to whether they are being dealt a fair hand in a negotiation conducted in a foreign language. If you ever doubt this, try to negotiate on for a rug in Kusadasi and then get a local Turkish national to negotiate down the price, paying them 50% of the saving. You will see how you will save money. Now multiply that by hundreds of thousands. Unless the negotiating parties can be convinced to use a language both understand, it is normal for the language of the customer to be used. Even small nuances which are missed, can result in the loss of millions;

Selling! All senior executives are expected to sell. More than ever, being unable to close business and calling oneself a CEO, VP, or Director, are incompatible. To clients, to employees, to suppliers, these roles have selling as one of their integral facets. If you are in a foreign country, you will not stand a chance if the local market is not open to being pitched in a foreign language. The competitors will use a simple attacking argument: “if they can’t even do a proposal in our language, imagine how well they’ll understand your business requirements!” Door shut, no business there. On the other hand, knowing the language can set you apart from your competitors and win you valuable business. When one of the businesses I ran opened an office in Bangkok, we recruited a Thai person who had lived and worked extensively in the US. She was also well connected which didn’t hurt! But what made the difference was that she was the most senior member of our team on the ground in the country, and also technically an expert in the technology solutions we were selling. When clients were faced with choosing between an expert who spoke to them in their language, or a foreigner who needed a team around them, our competitors did not stand a chance. We were quickly winning two-thirds of all business in that sector within months.

Many companies today have English as a corporate language, even if the company does not have Anglophile roots or is not headquartered in an English-speaking country. However, many still retain a different corporate language. These companies drive the use of a foreign language at senior levels for different reasons. They recognise that to find senior talent will be more difficult if language is used as a criterion, especially if the language is not widespread or particularly prevalent in the talent pool of the market into which they are expanding. Therefore they create a ‘senior management double’, a two-person team, hopefully one with the ultimate regional responsibility, but one of whom will be a fluent speaker of the corporate language so that at any moment, the Board are able to obtain a view of the business’s performance at any time. While this method may be frowned upon by senior executive(s) affected, leading to people management issues including at times uncertainty over levels of responsibility, all of which have to be addressed with some sensitivity, it can be a very effective way of information-harvesting for a Board that is remote from the business in the regions.

Whether it be to extend the reach of the organisation in an effective way, or to ensure that the ‘offspring’ don’t stray too from the motherland’s roots, the power of language as a force of expansion, and of unification and uniformity within an organisation, cannot be underestimated.

ABOUT THE AUTHOR
Luis da Silva (CBS) MA BSc BA is an approved Certified Business Specialist (CBS) with the Academy of Business Strategy and his specialist subject is business internationalization. He has achieved an MA, and BA from UNISA and a BSc from the University of the Witwatersrand. He has been employed as a CEO and board member of a listed company with a turnover of €250 million and value of €1 billion and has experience within the Manufacturing, Electronics, Banking, Agribusiness, Travel/Airlines and real estate industries. His clients or employers have included Fractional Villas Inc, Invest CV Limited, BGR Ltd, API Undercliffe Ltd, DMS Lda, Emeritis, Quillion Ltd, Datanomic Ltd, E-business Partners, PLAUT and Andersen Consulting. He has geographical working experience in the USA, UK and Brazil. His language skills include English, Spanish and Portuguese. His service skills incorporate business management, business expansion or turnaround and people management. To contact Luis da Silva, please contact the Academy of Business Strategy by forwarding an email.

THE ACADEMY OF BUSINESS STRATEGY

BUSINESS INTERNATIONALIZATION BLOG
INTERNATIONAL EXPANSION: THE IMPORTANCE OF VISION

AUTHOR

Luis da Silva (CBS) MA BSc BA

A good founder or CEO usually knows where he or she wants to lead the organisation. It is one of the defining characteristics of a good leader. Knowing where to lead his or her team. Where the organisation should be taken to ensure that it achieves both its strategic vision and makes significant returns to its shareholders, employees and other stakeholders. Another of the defining characteristics of an exceptional leader is knowing how to do it.
And one of the key ways in which visionary leaders often aim to deliver growth is to plan for, and execute, a globalisation, internationalisation or regionalisation strategy for their businesses. To ensure that this decision has the highest possible chance of being successful, aligning its implementation and execution to the very essence of the business’s strategic vision is essential.

Some of the strategic reasons for undertaking a move beyond the borders of the business’s initial market might include:

Reaching markets with larger populations. Especially in end-user driven sectors such as retail, telecommunications, motor manufacturing, and food and beverage, there can be a huge benefit in developing a route into a market that provides access to tens if not hundreds of millions of users. The focus on the BRIC economies is testament to this ambition on the part of many companies, and in some instances (see the case of Telefonica de España in Latin America, for example) evidences how an international expansion can generate multiples to the top line revenue and result in a huge impact in its valuation, allowing it to raise money on international money markets and fund yet even more growth.

Expanding the geographic base of the base of the business in advance of an Initial Public Offering. Markets and institutional investors like to see, in many sectors, the ability to be international or even global. Not only is this sound from a business perspective but it also broadens the pool of investor funds into which both the IPO and subsequent trades in the company’s shares;

Making the most of any languages or cultural practices which might be common across markets. In this sense, businesses in the northern United States often exploit the proximity to the Canadian border (retail and wholesale is a good example) just as Mexican businesses try to establish a presence close to the massive US market (manufacturing an obvious candidate here);

Reducing costs by moving a manufacturing facility to a country in which the employee cost, in particular of blue-collar labour, is lower. Thus many European businesses have been moving manufacturing bases to Eastern European countries which continue to offer significantly lower labour costs while often still delivering all the benefits of being within the enlarged EU-27 or close to it. Delivering services back into the core of the world’s largest economic bloc is thus efficient both in time, cost and distance;

Reducing the cost burden by making the most of financial incentives provided by the government of the state into which the business seeks to invest. Thus, the incentives provided by the Brazilian government (both national and regional/state) to motor manufacturers, and the low-corporate tax regime implemented by the Irish economy and which kick-started the Celtic tiger economy, are examples of how fiscal stimulus draws foreign investment and should be borne in mind by businesses who look to expand, relocate and in particular create employment elsewhere;

To participate in a cluster that provides the business with contact and interaction with businesses in the same vertical sector. While Silicon Valley may well remain the most well-known example of a cluster (the hi-tech and software sectors) relatively few know, for example, that one of the world’s most active life sciences clusters comprising almost 300 members, lies in Denmark close to the Swedish border.

The list is potentially endless but importantly in all cases, an international expansion implies the absolute need for support at the highest level of the business. A commitment from the Board, the utmost importance given to the plan by the CEO and the full focus of the senior management responsible for implementing the programme, are all essential to ensure that the business has every chance of successfully moving into a new market.

In times where it is not only top line growth that is important but also the value that such an expansion will mean to the business and for shareholders, understanding the true reasons for any venture outside one’s existing territorial footprint is a critical success factor (CSF) for the business. As in any instance when the business undertakes a significant step, it is not only the fact that the step is (successfully) taken that is important, but also the future potential business which might be generated via the expansion itself. Whether it be the size of the new market, the extent of the overlap of the installed base of existing clients or a reason such as global coverage, ensuring that there is someone on the team who is able to guide the company through the process of weighing up the pros and cons of each option, is essential to the long-term strategic success of the business.

ABOUT THE AUTHOR
Luis da Silva (CBS) MA BSc BA is an approved Certified Business Specialist (CBS) with the Academy of Business Strategy and his specialist subject is business internationalization. He has achieved an MA, and BA from UNISA and a BSc from the University of the Witwatersrand. He has been employed as a CEO and board member of a listed company with a turnover of €250 million and value of €1 billion and has experience within the Manufacturing, Electronics, Banking, Agribusiness, Travel/Airlines and real estate industries. His clients or employers have included Fractional Villas Inc, Invest CV Limited, BGR Ltd, API Undercliffe Ltd, DMS Lda, Emeritis, Quillion Ltd, Datanomic Ltd, E-business Partners, PLAUT and Andersen Consulting. He has geographical working experience in the USA, UK and Brazil. His language skills include English, Spanish and Portuguese. His service skills incorporate business management, business expansion or turnaround and people management. To contact Luis da Silva, please contact the Academy of Business Strategy by forwarding an email.

THE ACADEMY OF BUSINESS STRATEGY

BUSINESS INTERNATIONALIZATION BLOG

CROSSING THE CHASM OF BUSINESS INTERNATIONALIZATION

AUTHOR

Luis da Silva (CBS) MA BSc BA

A border is to internationalisation what the chasm is to a technology company growing up. While crossing that all important divide from a brilliant product or service idea to a mainstream offering is a must in terms of the commercial reality check for a technology product aiming to reach a large consumer market, crossing a border is optional. It’s a big difference. It means that the weight of the decision lies squarely on the shoulders of those who take it. It cannot be blamed on the market or the route to market. It is a conscious, planned and considered decision. Or should be.

Unlike a technology company whose product or service offering must now be broken in by a broad audience, taking a business beyond its initial geographic remit is not about broad acceptance but almost contrarily, about the acceptance by a key set of influential clients who can act as references in the new market. In this sense, internationalisation is about creating a new (and hopefully unique) offering for the chosen geographic market. It is about starting again, about defining and implementing a strong local offering as a first step, and only once that is accomplished, moving the offering into a broader mass offering in that market, in a second step.

To better emphasise the contrasting nature of the two situations, following are a few areas where breaking into a mass market and breaking into a foreign market might differ.

To penetrate a mainstream market means compulsorily seeking to increase transactional volume quickly. It is the fundamental measure of success. To go into new markets means aiming to build a platform on which to expand current business volumes. While an increase in business volume is ultimately still the objective, leverage is the short term aim. Almost like a catapult effect, while the elastic is being pulled back and the new markets established, growth can be slow. But when the catapult is launched (the new markets bedded in), the multiplication effect (and thus speed of business growth) is magnified times over. So while growth may not be the objective in itself, a growth strategy into new markets almost always sees a result several times that of simply moving into a mass market in one’s own territory;

To increase volume with less risk, staying at home is often best. In other words ramping up volume in a market where a product or service has already been initially tested or distributed, is much more sensible than adding the complexity of different countries or regions. If the market is large enough. This may be a consideration if, for example, there is limited resource, the end market is limited or time is of the essence in achieving revenue increases (for example, just prior to seeking a new round of finance or exit, or to close down a window of opportunity on local competitors). But to achieve long-term, sustainable growth, to generally spread overall risk and to create a platform for three digit growth in the top line, moving beyond borders is often the only way;
By its very nature, crossing the chasm implies a business in an early stage. It is not recommended that businesses tackle internationalisation until their service or product offering and procedures are reasonably well defined.

The complexity of internationalisation is its distinguishing feature while the implementation of scalability and scale is what it takes to cross that Rubicon. Scaling an operation implies being able to conduct the same process with at least the same (or better) efficiency at higher volumes. Cross-border growth implies varying the model in a new jurisdiction, with due concern for people, culture, language, regulation, distance, and many more factors. Internationalisation implies repeating previous success, from scratch;

The risks are different: crossing a chasm is life-or-death by implication. Either the product or service makes it, or the business idea dies. Going global means taking a mature business and loading it with new risk. So the risks are very large, especially because the business is in a much more advanced stage of development and so it has much more to lose. While it is not typically the life-or-death scenario which crossing the chasm most certainly implies, inability to cross a border with success can load the business with costs and failure, distract management and dilute results. This can be a risk greater than an idea dying in its infancy. It can mean the write-off of years or even decades of work.

To illustrate the above scenario, let me use an example of one of the businesses in which I worked. The Board took the decision to apply most of its IPO proceeds to buying into the US market. It is well known that this is a step that for most businesses which go direct, is expensive. Marketing, sales, salaries, and so many other aspects cost much more than in other countries. And the US is many regions, many states, many sectors. So in this case, even the tens of millions spent on acquiring businesses to gain a foothold, did not result because the size of those businesses, in a landscape as complex as that of the US, was irrelevant. When some of the Board members, seeing the inevitability of the decision, made suggestions about acquiring diverse businesses, with the potential of complementing the service offerings rather than simply repeating existing service lines which could be grown organically, the suggestions were ignored. The combination of the lack of differentiation and the little impact that the business was able to create, resulted in a huge financial drain on the global business as well as a significant distraction of the company’s senior management as it consumed much of its energy, some of which needed to be spent in other regions, into that market.

What these few, non-exhaustive points illustrate is that from a revenue perspective (cost and distribution, for example, are different matters), any business who cannot see its business volume increasing several times over due to internationalisation should seriously reconsider why it is attempting to undertake it in the first place . If a business is not mature, it should seek to conquer its own, or a single, market, first. When a business is ready to move, it should do so with due consideration to the ‘why’ and ‘where’. And it should realise that the possible risks, like the potential gains, can be significant. To assess the opportunities and risks, and to mitigate the risks and threats of internationalisation is one of the most specific and critical set of skills that an organisation will ever have to acquire. And it is the reason that many choose to work with experts to assist and guide them through this process.

ABOUT THE AUTHOR
Luis da Silva (CBS) MA BSc BA is an approved Certified Business Specialist (CBS) with the Academy of Business Strategy and his specialist subject is business internationalization. He has achieved an MA, and BA from UNISA and a BSc from the University of the Witwatersrand. He has been employed as a CEO and board member of a listed company with a turnover of €250 million and value of €1 billion and has experience within the Manufacturing, Electronics, Banking, Agribusiness, Travel/Airlines and real estate industries. His clients or employers have included Fractional Villas Inc, Invest CV Limited, BGR Ltd, API Undercliffe Ltd, DMS Lda, Emeritis, Quillion Ltd, Datanomic Ltd, E-business Partners, PLAUT and Andersen Consulting. He has geographical working experience in the USA, UK and Brazil. His language skills include English, Spanish and Portuguese. His service skills incorporate business management, business expansion or turnaround and people management. To contact Luis da Silva, please contact the Academy of Business Strategy by forwarding an email.