More than ever before, today’s entrepreneurs have the opportunity to build globally-minded businesses from day one.
For many companies, the hyper-connected business world means physical location is no longer a barrier to global growth. This levelling of the international playing field creates major opportunities for ambitious entrepreneurs, but also brings with it a new set of challenges that need to be addressed at the earliest stages of company growth.
Until a few years ago, there were three key questions that dominated any European business’s thinking when exploring the prospect of growing beyond its home market. And most of these revolved around a physical presence of some kind:
1) Where should we set up sales offices?
2) How will we expand into the United States and balance the risks and rewards of that move?
3) Where should we locate the top management team over time?
These questions continue to be relevant, especially for companies where the sales organization needs to be close to customers, both to sell and to be on hand for physical maintenance and support of the product. They are also particularly relevant where the strength of the American ecosystem (customers, capital, acquirers) can have a significant impact on the success or failure of the business.
For an internet-driven business, however, the impetus to think and go global starts from day one. Instant online globalization is within the grasp of any entrepreneur, based anywhere in the world, who has an offering that appeals to a global audience of connected users.
With 80 per cent of internet use coming from outside the US and with the emergence of new distribution platforms like Facebook, Google’s Android, Apple’s App Store, or Salesforce’s force.com, if the company starts thinking globally from the outset much of the legwork has already been done.
This might all sound obvious, but it is easier said than done. Having a global mindset means ensuring you have the right infrastructure, the right people and the right partnerships in place to support your ambitions.
The online gaming industry serves as a great example of how this instant online globalization can work.
Case in point
One of our portfolio companies is Innogames, an online game developer and publisher with over 100 million registered players. Despite the fact that the company was established in Hamburg, Germany, and still has the majority of its 230 staff there, less than 10 per cent of customers come from Germany. The other 90 per cent are scattered across the rest of Europe, the Americas and Asia.
Innogames has a very light presence outside of Germany, focused on few key areas. Notably, these are very different from the more traditional elements of global expansion outlined earlier:
1) A deep network of community managers around the world who serve as Innogames ambassadors, getting feedback from local players and assisting in the localization of games. These people are often freelancers and power players excited to serve the company and extend the community
2) A lightweight, and flexible, physical presence in key expansion markets. To aid local distribution, payment processing or localization, Innogames is setting up local offices in countries like Brazil and Korea to drive even further penetration of its games in those markets
3) A big international footprint in head office (in this case Hamburg) which constantly evaluates and works closely with the likes of Facebook, Google and Apple in order to optimize the global reach of Innogames titles on those platforms, and to internationalize existing products. Innogames currently has 20 different nationalities represented in the company.
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The company also adopts a global mindset when it comes to running the business. Business is conducted in English and products are never developed purely with the German market in mind.
Innogames is just one example among many. Companies from countries like the UK, Finland and Serbia are among some of the biggest global gaming companies on Facebook and on mobile, having eclipsed the likes of Zynga and Electronic Arts from the US. They have achieved hundreds of millions of dollars in revenue globally while most of their employees are highly centralized in their home countries. You might call it the democratization of entrepreneurship.
21st century business
Not every business lends itself this type of instant globalization. Our marketplace and e-commerce investments have an inherent local component, both from the consumer and supply perspectives. However, the opportunity to sit in any location in the world and reach a global audience is bigger than ever. Even more local-focused businesses can create a scalable platform that can be tweaked for new, growth markets.
Global thinking should be the new normal for any business that wants to grow in today’s market. If you are considering expanding beyond your local market, these are the key issues to consider:
- The size and nature of the opportunity versus the local market when it comes to consumer need, context and the competitive landscape.
- Is the business proven in the local market, and is it resourced properly for expansion (people, funds, scalable operational infrastructure)?
- Can expansion be done from head office, or is a local presence needed? And if so, how can people be closely integrated into the HQ?
- For the right type of business, global expansion is within every entrepreneurs’ grasp. Understanding the mindset that will get you there is just the first step.
The third part of Davor Hebel’s three-part look at building a high-growth business will be out on 29 May. To view his first entry, click here.