Module 1 Episode 3: 10 Common Mistakes Companies Make When Going Global
There are many reasons why global expansion initiatives fail. This article doesn’t cover every single reason failure occurs, but it does highlight 10 that came up over and over again in our research of the world’s fastest-growing companies. Even when these reasons don’t cause the demise of your company’s international expansion, it most certainly leads to wasted time and millions of dollars lost.
Here are the top 10 reasons why global growth initiatives fail.
1. When a company attempts to be “Born Global”
We heard this terminology used in our investigation of the world’s top companies, and while elements of this mindset are helpful, the core of it is not only unrealistic but can be damaging. This is because (for most industries) it isn’t possible to be global right at inception. Most companies that make the erroneous assumption that it is, often don’t end up finding true product-market fit (including proving scale and profitability). We strongly believe that it is important to find product-market fit in an initial market before attempting to “go global” and operate in multiple countries. There is no substitute for proving your business in a market that is the right fit and addresses a significant enough problem that market, and those who attempt to avoid this fact will eventually struggle and fail - companies must prove out who the right customers are, what they want, why they buy, and the viability of your solution
As we will discuss in one of the videos to come, Global Class Companies don’t attempt to be “born global,” but instead take a different approach while still considering global from the beginning.
2. Failing to establish leadership buy-in
As with any strategic initiative, opinions may vary on the best international growth strategy to adopt and implementation of the strategy, especially amongst a diverse leadership team with members focused on their own functional areas. While it is rarely easy to get leaders focused on their corner of the business to come together, openly share information, and come together to align on a cohesive approach to global growth, doing just this is imperative for the success of a company operating across a global footprint. Avoiding functional bias is imperative to mitigate the risk of failure
Companies harboring a legacy mindset operate in silos as leadership prioritizes control over their own silo and sphere of influence above the success of the company as a whole. Each department’s approach then lacks cohesion and leaders compete for resources instead of building a strategy together. This course will share effective strategies for building internal alignment.
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3. Building the wrong team
The leaders we spoke to almost universally highlighted that hiring the right people was both the most important and most difficult aspect of successfully reaching global scale. There are multiple facets to identifying and evaluating potential candidates to lead expansion efforts (most of which is covered in the Global Class Teambuilding Framework outlined in a later module) and when you don’t bring in the right team, you most certainly will waste time and resources by doing things the wrong way. Top companies repeatedly highlighted how the strength of their team was one of the most important contributors to their success. So that begs the question: what kinds of team members should companies be focused on when expanding? The answer is to find Interpreneurs, a new profile of professional that we will highlight in depth in an upcoming module.
4. Maintaining an us-versus-them mentality between HQ and local teams
It’s fairly typical for barriers to arise between teams in different geographies. Time zones, cultural differences and different market nuances lead to differing opinions. This divide is intensified when one of the teams in one of the geographies is where headquarters is located, where HQ generally holds an advantage in the power balance. Companies that don’t make an intentional effort to integrate distributed teams not only create barriers that hinder rapid growth, but they prevent themselves from taking full advantage of the perspectives to be gleaned from local teams and best practices in these markets that can effectively overcome challenges in other markets.
When an “Us versus Them” mentality takes hold, which often comes when adequate trust hasn’t been built between HQ and local teams, lapses in communication persist, HQ favors the way things are done in the initial market and local teams lose motivation and become less engaged, without channels to share how the business must be localized to win in their market. HQ is then more likely to utilize a command and control management style, overestimating the universality of the value proposition, product and operating model instead of taking advantage of local insights that can lead to innovation (two-way innovation described later in this course).
5. Not revisiting customer development and the agile methodology when localizing
Success in one market doesn’t guarantee success in another. While most companies instinctively understand this, they often lack the structure and process for how to approach changes necessary to succeed in new markets. The lean (or agile) methodology that is the hallmark of the latest generation of successful early-stage companies is often left at the waste side when it comes time to expand to new markets as structured roadmaps and insistence on global uniformity can take precedence. Instead, companies must revisit the lean methodology to succeed. The lean methodology in its pure form, however, doesn’t work effectively in a global context, since the whole focus of the lean methodology is to iterate and pivot until the right model is validated.
This is great for one market, but if this process is implemented across a multinational footprint then soon there is a plethora of models, each unique, that becomes very difficult to manage, and near impossible to build scale around. This is why the global layer on top of the lean methodology detailed later in the course is crucial for overcoming this mistake. Localization is necessary and goes well beyond language translation; business leaders must reevaluate all aspects of the company and its operating model. Retailer Walmart made this mistake when the company attempted to expand to Germany by implementing the “Company Way” of doing things, exporting the American value proposition, products and in-store culture in Germany, failing an losing over $1B in the process.
6. Not Managing Complexity
One thing that all companies who are operating in 2 or more countries know is that differences in local markets require changes to the company’s go-to-market and operating models, which breeds complexity. This complexity in running a business goes up exponentially as more and more countries are added to the mix. Most companies don’t proactively plan for this complexity (and its corresponding organizational effects), often leading organizations to hit a metaphorical wall once they have been operating in a handful of countries and they come to the realization that either the way they do things at HQ won’t work universally across a global footprint, or the realization that their flexible strategy to adapt the business to fit each new market leads to an untenable hodge-podge of disparate ways to doing things, which is much too difficult to effectively manage. Global Class companies work fast and decisively but also understand and plan for the complexities that invariably come when operating in diverse international markets.
7. Not adapting communication to fit a distributed workforce
Top down communication strategies increase the likelihood of global expansion failure. That is because company leadership is not intimately aware of the local market nuances that drive the necessary localizations required for local market success. Ineffective companies rely too heavily on direction from HQ or haven’t set up the essential Feedback Loops to gather insights within the local market.
This deficiency in communication is often mirrored in how innovation is driven, where it is either done in a centralized fashion (HQ driven innovation) or where each local team uses its own methods without adequate best practice sharing. Two-way communication and two-way innovation are crucial, and without them the likelihood of global growth success is impaired.
8. Not investing appropriate time and resources into global growth
The dynamics of how much (and when) to invest time and money into global expansion initiatives are often misunderstood, leading to failure. Investing in global growth requires sustained investment over time, not just right after launch. Companies who fail will budget for a 6-12 month timetable until traction in a new market. In fact, it often takes 2-3 years before there is any kind of return on investment. Remember that localization takes time.
Time to uncover, time to build, and time to implement. If a company doesn’t budget appropriately they tend to be more likely to “launch and leave,” as we will discuss in more detail in the Global Agile modules. Many companies give up too easily, not dedicating enough resources to the initiative or they let the next shiny object take priority. Sustained investment with a structured approach for uncovering required localizations is essential.
9. Not building the structures to create momentum
Effective growth isn’t just rooted in a common mindset and set of frameworks. It also required set structures and processes to support scale. Companies that fail do not proactively build the organizational structures, teams, playbooks, and beyond that are needed to foster growth and support it as a company scales. Setting a direction and hoping each team can implement the centralized vision in their market isn’t enough (and is a recipe for disaster). Companies must formalize structures that facilitate best practice sharing, allow for autonomy, and uncover success stories in one market that then show how they can be used elsewhere and beyond.
10. Not universalizing core values and company culture
If employees don’t connect with core values, they won’t want to work for your company, and if customers don’t feel their values align with yours, they will buy elsewhere. Many companies that fail, attempt to push their company core values, often rooted in their own market’s culture, onto new markets, expecting each core value to resonate the same as it does “at home.” This won’t engage customers or employees alike. It is important to build a company culture and core values that can resonate across the globe. Companies who fail forget this important step (which we refer to as “universalizing core values”), leading to higher attrition rates and a higher potential for unhappy customers. The solution is not just to replace core values proactively, but also to let universalized core values be discovered through mechanisms that engage local teams.
The videos in the modules to come will both directly and indirectly address these pitfalls and provide a clear path that will help you avoid these common mistakes so you can accelerate your growth while minimizing losses in time and money from doing this incorrectly.
NOTE: Don't miss out on the next episode! If you want to continue learning about global expansion strategies and dive deeper into the course material, simply click here to access Module 1, Episode 4 of the Global Growth Master Class.
