Despite the growing importance of globalised business strategies and the potential to successfully expand abroad, there is a range of emerging challenges that can impact the ability of ambitious organisations to succeed on the international stage.
Take the increase in regulation around data protection and privacy, for example, or the current global semiconductor supply shortages. To a greater or lesser extent, these issues are influenced by the interests of governments who want to assert their local control over strategic technologies and governance.
As this ‘technology sovereignty’ becomes a greater priority for national governments and political/economic regions such as the EU, businesses are faced with the challenge of increasingly complex and heavily regulated trading environments.
Tech sovereignty is becoming more important for governments around the world. They see technology as an influencer and a solution to a lot of critical challenges, particularly sustainability and climate change. These interconnected issues mean businesses need to focus on regional and local differences more than ever when moving from national markets to international growth.
Identifying the priorities
As companies think about their global expansion plans, top of the list are going to be questions about where to focus and why one territory may offer advantages over another. For instance, a UK business looking to expand to the US should understand that, in practice, the US is often not one country but 50 states. Organisational leaders need to understand a range of diverse issues, including the jurisdictions, regulations, and the tax situation in each state – some of which is being influenced by their national focus on tech sovereignty.
Next, come questions about how the business will implement its expansion plans. Does it, for instance, have investors to fuel its growth? Businesses should also plan so they have an exit strategy in line with their growth plans. Startup and fast growth technology businesses often place themselves in a market ecosystem where being acquired by a bigger, established brand is their number one exit goal.
So, organisations working with this as a feature of their business model should evaluate whether what they are building, on an international scale, is relevant enough for a big tech company to acquire. Considerations can include where a company chooses to base itself, an organisation that feels it’s building a proposition that is particularly relevant to Microsoft, for example, might choose Seattle as its US base.
There are many UK startups who have tried to enter the US market without a full understanding of the potential costs involved. As many will testify, getting established in Silicon Valley can be an extremely expensive investment, so it’s vital to be aware of the risks as well as the potential rewards before making a decision and commitment. This includes assessing how their plans could be affected if they operate in a sensitive technical niche where sovereignty issues may come into play.
Be clear on culture
These considerations grow in complexity when a business is dealing with major cultural and language barriers. Expanding to China, for example, is a classic example of the huge learning curve an organisation faces when balancing the potential of that market against the totally unfamiliar business, regulatory, financial and cultural environment.
This is where working with an established and experienced local partner can have a transformational effect on the ability of a business to hit the ground running in an unfamiliar market. Working with local experts who can help navigate rules and regulations is vital, can help avoid both minor and serious pitfalls and significantly accelerate the ability of a business to grow quickly enough to meet its objectives. What’s more, the availability of employer of record solutions such as the Globalization Partners global employment platform enables startups and fast growth companies to build their international presence by employing the best talent in the world and beating the competition to scale and to market.
Looking closer to home can also bring significant challenges where sound advice will be required. Post Brexit, the relationship of UK companies with the EU has become more complicated, but some important issues remain unchanged. Any business focused on the collection, management and use of personal data, for instance, must still ensure it is GDPR compliant if it has customers within the EU region.
However, in focusing on EU-wide rules and regulations, businesses dealing with specific countries in the region should balance this against the need to adapt to the huge business and cultural diversity across the 27 individual countries.
Understandably, businesses will prioritise the administrative tasks required to get a team up and running in a new country. What can often get left behind, however, is the importance of cultural norms that play a huge role in determining whether a new venture will be successful or not.
For example, the factors that build sales momentum at home will often be quite different from those required abroad. Similarly, when hiring staff to build a local team, there can be significant cultural differences that will make the business more or less attractive to potential employees. Failing to take account of these local norms can be an inconvenience at best, and in the worst-case scenario, it can cause an international expansion strategy to fail.
This is why Global Tech Advocates aims to create an international community of tech leaders – so businesses can improve their understanding of different ecosystems around the world and access informal networks of local experts as they scale and expand globally.
As the world continues down a path towards highly connected, digitally transformed economies, the opportunities for global growth will accelerate. While the influence of tech sovereignty has the potential to complicate matters for businesses putting expansion plans into place, careful planning can help navigate the pitfalls to build successful international teams.