Many businesses are wondering what the key to international success and prosperity in today’s global market is. Sadly, there is no silver bullet but there are modern strategies that are prevailing. Technology companies have adopted principles and methodologies to help them compete in their fast-changing environment. Notably, lean and agile are core competencies of most of the fastest growing tech companies. We find that businesses expanding internationally can integrate these same philosophies to limit exposure and decreasing time to market, therein increasing the potential for success.
What does “lean” mean and what are agile methodologies?
Lean in it’s simplest form is a business philosophy of maximizing customer value while minimizing resources. Many times this is actually expressed as an iterative cycle of constantly minimizing the effort to create the same or better value for the business. One the best practical expressions of lean a company can adopt is Eric Ries’s “The Lean Startup.” Mr. Ries proposes the idea of businesses getting into the “Build, Measure, Learn loop.” Businesses should move through this cycle as fast as possible, therein mitigating the risk of unknowns vs. over investing.
Agile was originally a software development methodology created to address the constantly changing needs when building large software systems. Before agile came about, many companies were treating software building like an assembly line; sequentially and with a complete spec built out. This process of doing a spec first, design second, then development and finally, testing is known as “waterfall development.” As competition increased and software development accelerated, companies using waterfall were finding that by the time software was ready to release it was no longer relevant to the market. Companies discovered that it made more sense to move in small steps called iterations where they released very small pieces. Then, they would test the effectiveness of these pieces to learn. This allowed development to adjust to competition, market shifts, and changing customer need.
As you can see there are similarities between lean and agile; take smaller steps, test often, stay flexible, and increase efficiency. We always say that every international expansion strategy should be treated like an internal startup, because of how many things a company must learn to operate in a foreign country. Startups are succeeding in extremely competitive environments by embracing these ideas.
How can my business use these ideas in practice to increase the potential for international success?
1. Decrease your footprint
Companies often get drawn into a waterfall approach to international expansion without even realizing it. Traditionally the only option was to invest in a foreign subsidiary company and many times this is only option accountants or lawyers are aware of. There are employment vehicle alternatives today;
- International PEO
- Foreign subsidiary as a service (FSaaS)
- Non-resident employer (Only exists in a very limited amount of countries)
Modern strategies recommend limiting capital investment until your strategy is proven. Use a method of employment/expansion that does not require exorbitant amounts of time and money. Always test your market and stay aware of what is fact versus an assumption.
2. Have a flexible exit or partial exit strategy
Companies think about the cost of entering a foreign market but put far less effort into understanding the cost of exiting. With all the volatility in today’s global market (Brexit, conflict in the middle east, and real estate market swings) it is important to be prepared. The employment vehicles listed above have the lowest level of exposure and do not require you to invest much. The idea is to invest in testing your international strategy, not invest in rigid employment vehicles like foreign subsidiaries (unless you have to).
3. Avoid time & money wasting compliance traps
One of the most crippling blows to a company in a foreign market is a compliance issue. Companies tend to lean towards using foreign independent contractors to enter a market because of the low barrier to entry. The risk lurking below this lightweight method is that your target country figures out that this contractor is effectively an employee. This can trigger audits, fines, and loads of wasted resources in legal battles. Make sure you understand how your target country defines a compliant employment relationship and follow those rules to a “T.”