How Localization Premium Can Help You Find Company Market Fit
A battle is fought every time a company decides to enter a new market—a fight over which aspects of the business change and which stay the same. This is where localization comes in, but not just in through mere language translation.
Localization involves adapting all aspects of your business to fit the culture, regulations, and other distinct nuances of a local market. It is both problematic and broad in scope. Besides getting you traction in new markets, localization also adds complexity to how you operate your business.
Localization has two parts:
1. Changes to a company’s go-to-market
2. Crafting an operational strategy that makes sense at a local level
As Chang Wen Lai, CEO and Co-Founder of Ninja Van, puts it, “Localization comes in two forms: how you win local demand, and how you craft an operational strategy that makes sense on a local level.” In reality, it is better not to define localization solely by a language or cultural reference point but instead by outcomes.
To succeed in reaching global scale, companies need to use a modified version of the agile methodology (a term we call, “global agile'') that helps them navigate the localizations required to achieve product-market fit in a new market and ultimately company-market fit.
The Localization Premium Analysis Tool
Conducting a Localization Premium Analysis (LPA) can help you achieve company-market fit and scale faster in a new market. It directs you to the changes you need to make to your current model to be successful in the new markets and helps scale these changes across multiple local markets.
“Defined as, “Localization Premium Analysis (LPA) - is the main tool Global Class Companies use to complete step two of the global agile process, which maps out, tracks, and manages the complexities (localization premiums) that come along with entering and scaling within new global markets and is the main facilitator to reach company-market fit.”
When the authors of Global Class interviewed hundreds of executives on this topic, it was clear to them that the discussion around localization and complexity was often more of an abstract conversation rather than a concept that was easily understood. Another important finding was that decisions on what to localize are often biased towards an individual's function rather than considering the business holistically.
How do you map out localizations considering all aspects of the business?
We found that using a spider chart can visualize the various subcategories of localization premium and help you understand how far the changes in each area pull you from your current way of doing business.
Each of the premiums in the analysis represents an area of the business that may need to be localized to achieve company-market fit in the new market.
At the center of the chart sits your core model, which could also be referred to as the product-market fit in your initial market. As previously mentioned, having product-market fit and proving scale in an initial market are essential stepping stones to achieving effective international expansion.
Surrounding the core are various layers, which you can think of as standard deviations or degrees of difference from the core. The larger the overall surface area among the points on the chart, the more localization premium is being accumulated.
Each point on the chart represents an area of your business and its operations where premiums can accumulate. The subcategories on the top half of the chart represent elements that are part of a company’s go-to-market strategy, while the elements on the bottom half represent a company’s operational strategy, scaffolding that supports local operations—both sets of which need to be localized to gain traction in a new market.
In the video above, Troy Malone (fmr Head of International at Evernote), shares how the company localized for the Indian market.
You can easily create your own Localization Premium Analysis and go through the exercise yourself
When planning your international growth strategy, go through your own LPA exercise and integrate your completed canvas into your business plan. If your business is already operating, going through the exercise is just as valuable. You’ll have the opportunity to assess your business plan using actual data and refine your strategy to get closer to your goals.
Here is a breakdown of the six subcategories that make up the localization premium tool and how to think through each one as you create your own canvas.
-
Sales Premium - refers to the changes companies must make to sell, distribute their product, and support customers. This includes changes to channel distribution (direct sales/local retailer/ value-added reseller), pricing/revenue model, sales model, sales/support teams, and customer service.
-
Product Premium - is accumulated when you have to make changes to your product or service, including adding/subtracting features, bundling or integrating with other solutions, and product localization to fit cultural differences. Changes can be as slight as adding or subtracting a feature or as vast as revamping an entire product.
-
Marketing Premium - includes differences in target customer, changes in value proposition, changes to use cases, market segmentation, competitive landscape, differences in demand generators, brand changes, differences in customer purchase decision-making criteria and marketing strategies/advertising channels (user acquisition, retention, and growth), public relations and branding changes, as well as language translation and beyond.
-
Administrative Premium - often overlooked and the most complex. The category includes government regulation and compliance, payroll, taxation (including tariffs), customs, licensing, legal entities, protecting intellectual property, political considerations, corporate real estate, utilities/ communications services, and everything related to operating a local office and having employees (human resources policies and otherwise). Reputational risk, accounting differences (such as separate profit and loss statements), and other financial implications fit here as well. Even company systems like productivity software fit here.
-
Infrastructure Premium - Infrastructure enables the delivery of your product or service and can require more adaptation to fit a new market than is often considered. Infrastructure Premium depends on whether you are selling a physical product or a digital one.
-
Organizational Premium - includes the costs associated with bringing on a new team (i.e., training, hiring, and team building), the resources needed to build and manage structures and processes established to support global growth, differences in local business culture, and the time the team at HQ dedicates to supporting a new region instead of working on their core responsibilities in the initial market.
The Localization Premium Analysis Tool is your key to mapping out the wide scope of potential premiums incurred when entering new markets
In sum, it’s imperative that you balance the localizations required to get traction in a new market with the complexities that come along with making these changes. The LPA tool is critical to all of these aspects because it’s:
-
A prioritization tool in terms of what markets to enter
-
A communication tool to get internal buy-in
-
A tool that can analyze past localizations that can be scaled in other markets
Localization is the key activity and focus of the world’s fastest-scaling companies. It spells the difference between success and failure. Think about the potential dollars that could be wasted on a failed new market entry by not ensuring beforehand that you take into account the complexities that come along when branching out internationally.
About Global Class
The Global Class team has developed THE playbook that teaches organizations the right mindset, culture, and strategies to successfully build global businesses. Through consulting engagements and practical tools (+ case studies built from conversations with over 400 executives from the world’s fastest-growing companies), we help executives with companies valued at $1B to $100B reach global scale. From market entry to global scale, we help companies build the foundation for successful global growth through management consulting services, customized platforms, and more.
