Read the full script of Module 5, Episode 5 of the Global Growth Master Class below. Want to get certified on global expansion? Simply click here to access the complete course today.

Let’s dig into case studies from the early international growth of Spotify, Google, and Evernote to explore some of the insights shared in this module in more detail. First, let’s start with a Case Study of the music streaming service Spotify.

Case Study: Spotify

Spotify, a Swedish company, was founded in the early days of music streaming. After Napster had changed how people share and consume music, and with improving internet infrastructure, streaming music services began to pop up. Most of them selected the largest music market, the US, as their initial market. This led to stiff competition and high prices for music rights from record companies who were very skeptical of how streaming services would disrupt their business models. Spotify, on the other hand, took a different approach that offers a great window into why whale hunting, selecting markets based primarily on Total Addressable Market size, is not always the best approach. 

Even though many Swedish startup companies would see their home market as too small to build the foundation of a company in, the team at Spotify saw many advantages to selecting Sweden as their initial market. 

As Niklas Lundsberg, Head of New Markets at Spotify, explained, Sweden was a perfect initial market: from the local culture accepting piracy (in fact there was a political party whose platform focused on eliminating intellectual property protections, to the fact that iTunes did not launch in Sweden until much later than other countries, to the strong internet infrastructure that had the bandwidth to support streaming music), all of this made Sweden a great initial market.

Moreover, while competitors fought and paid handsomely for US streaming rights, the record companies didn’t pay much attention to Sweden and didn’t negotiate as hard on terms, making the process easier for Spotify to secure Swedish streaming rights. Spotify let competitors exhaust each other and validated its model in Sweden before expanding across Scandinavia and eventually globally. 

This strategy helped Spotify build its international growth muscle before attempting to take on a large market that required extensive localization. Nikolas and the team thought about target markets on a spectrum from where the biggest challenges existed to where the market opportunity was more accessible. They expanded the criteria to consider infrastructure, like internet bandwidth instead of just customer desire to have their product. The Spotify team thought holistically about their growth instead of country-by-country, and they considered cultural criteria beyond typically quantitative metrics. 

Case Study: Google

In the words of Elise Rubin, Global Head of Program Management, Internationalization & Product Launch for Google Nest, here is an example of how Google approaches market readiness analysis: 

For Nest, initially being “Another Bet” part of Alphabet in our first waves of international expansion we operated independently from Google which added complexity to our expansion efforts. One such example is we did not have sales entities established in several regions of the world, nor did we have teams on the ground outside of the US and EMEA. These 2 constraints made many of our market research efforts very costly and time-intensive as we began to prepare our 5 and 10-year country roadmap. 

As a first step, we created a proprietary data matrix that included all countries in the world (as noted in the United Nations list of nations). This data matrix evaluated hundred of data points from a number of healing and cooling days to GDP and it allowed us to land on an “internal score” for each country and create a prioritization ranking by that score (which varied by product category ie. Energy, Security, etc). From there, we looked at other factors, proximity to our teams, the complexity of the launch, and with other data available to us, we created a long-term roadmap that mapped directly to our strategy to increase TAM and overall breadth of the Nest brand and access for people globally to our portfolio of smart home products. 

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The next step was first-party research (akin to the localization discovery we have been discussing that is part of the Global Agile Methodology). For Nest, this proved both costly and challenging as we were limited by budgets and time. However, this research was essential for us avoiding significant pitfalls down the road. We sent a small team to each country we intended on expanding to in the next 2+ years.

In each of these countries we conducted focus groups in each region visited. In many places this requires both a moderator (to lead the session in local language) and an interpreter translating the information in real time. In addition to focus groups which gave us directional indicators of what mattered to customers in the smart home space, we also visited many homes of residents that were recruited based on a set criteria we established upfront. These were the people we identified who would be most likely to be future Nest customers.

We went into dozens of homes and took pictures, and spoke with homeowners/renters on what devices they use most, their connectivity, and overall what was important to them. We also visited all of the top consumer electronics and other relevant retail stores to understand how products are merchandised and any accompanying collateral. We often recruited volunteers, hired professional installers, and watched how our US/EU products were installed in international homes helping the team identify part/accessory discrepancies (screws, terminal blocks etc) and wire types.

We filmed these installations and were able to share them with our core Product and Engineering teams. For our top priority markets, where we had identified that success would be dependent on strong partnerships, we sent VP-level executives to meetings and began relationship-building years in advance of planned expansions. 

Also, it is critical to physically spend time in any country where you are considering expanding. While reading books and speaking to people who live and work there is a great start, it is absolutely essential for you (or delegates from your company) to go in person. For products sold in the homes, it is also important to visit homes and get a first-hand look at the products within the home, how they are used, how frequently, and by whom. As a best practice, when conducting research we rent and spend time in local homes in each country to get a firsthand feel for living in homes in the country, you don’t get that same experience or information at a five-star hotel.

That firsthand experience provides a clear understanding and allows for comparisons to the home country thus helping better predict any product adaptations that might be necessary (at a high level). It is important to visit and spend time in multiple regions, visiting various types of homes, both in large metropolitan areas as well as more suburban locations, and even rural ones if appropriate, to get a full picture of how people live in their homes and use the products within them. From there, you can identify many of the differences in your customer user journeys that need to be addressed as part of the expansion effort.

All of this exposure and data enabled the US-based team to have a much deeper understanding of the culture, the specific market needs, and the technical requirements as we prepared the technical specifications, the marketing plan, and the GTM strategy.”

Through this process, Elise and the Google team developed a robust set of criteria to evaluate markets, went in-market to validate learnings that came from in-office research, and took their time going through the process, not conducting a one-and-done trip, but making multiple trips, leveraging local resources.

Case Study: Evernote

An excellent illustration of the advantages of localization discovery was provided to us through Troy Malone, the former General Manager of International at Evernote, who engaged in conversations with locals. During his initial research in 2014 on India for the purpose of evaluating market entry, he interacted with everyday people in taxis and in various social settings such as restaurants and hotels. Through his remote research, he discovered that the young, upwardly mobile professionals, who constituted Evernote's primary target demographic for its premium product, had a high credit card penetration rate, which was a positive indication for Evernote as credit cards were their primary payment method. Surprisingly, during his interactions with everyday people in India, he frequently heard what he referred to as "Auntie Stories."

He observed that almost every young professional had an "auntie" who would recount tales of a relative who had obtained a credit card, accrued significant debt, and ultimately ruined their life. Although many Indians did have credit cards, they refrained from using them due to the fear of falling into debt and suffering the same fate. While initial "behind the desk" research suggested that credit card payments held great promise because of the high market penetration, the on-the-ground reality proved otherwise, rendering the data unfounded. This type of in-market discovery not only validates or invalidates existing market research but also reveals novel ideas for localization.

In the case of Evernote, Troy's interpreneurial cultural curiosity and local market expertise were combined to develop effective marketing tactics that enabled Evernote to stand out from the crowd by doing something unexpected. While exploring the Indian market with his local colleague, Anirban Mukhopadhyay, Troy noticed workers carrying large crates full of buckets balanced on a wooden plank on their heads. Upon inquiring further, he discovered that these workers (dabbawalas) were delivering lunches (known as "set boxes") to white-collar professionals (Evernote's initial target customer base) in the area. Troy got the idea of a hyperlocal marketing tactic by printing a card with an advertisement promoting Evernote's premium service, which would be distributed with the set boxes to augment the other digital advertising the company was doing.

This strategy proved successful and would not have been discovered without Troy's interpreneurial mindset, which led him to explore the local market and experience it firsthand, as well as Anirban's local knowledge. This clearly underscores the importance of possessing both local market knowledge and company knowledge when expanding to new markets (discussed further in module eight). It is worth noting that the localization discovery process should persist beyond the initial investigatory phase. In fact, Global Class Companies recognize the need for ongoing localization discovery even after initial market entry to gather additional insights about the local market and accelerate finding company-market fit.

The role Troy’s local leader, Anirban, played in influencing Evernote's strategy in India highlights how local knowledge is crucial for building the right understanding and foundation in a new market. Troy’s approach didn’t involve outsourcing market evaluation but instead was an engaging in-person effort that he and the Evernote team were fully committed to. 

Moreover, as validated in the stories of Evernote’s expansion into India, the Global Agile process all starts with asking the right question. Developing a list of questions is an important step in this first part of the process, to fully grasp the potential of a new market and determine the best go-to-market strategy.

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 5, Episode 6 of the Global Growth Master Class.