Read the full script of Module 10, Episode 7 of the Global Growth Master Class below. Want to get certified on global expansion? Simply click here to access the complete course today.

While the structures we have outlined can help facilitate global growth, organizations have to constantly balance between global aspirations and the needs of core markets - so, how can an organization effectively prioritize at global scale?

Recall that, as we outlined in Module 2, the role of HQ is changing, and Global Class Companies understand that HQ must not just adapt from not being a singularity physical location, but also must shift in purpose from being a command-and-control mechanism, telling every function and local team what to do, but instead must be an enabler and supporter of the localizations that must be implemented to get great traction and scale in international markets. This doesn’t just involve removing obstacles but also involves setting the right organizational structure to allow for the organization to blossom into a global company. A big milestone occurs when a company no longer treats its initial market as a super-region, but just like all other regions across the globe.

An often overlooked but crucial step for companies moving from market entry to growth and beyond in international markets is to separate the initial market's organizational structure from the HQ's structure

During the early stages of global expansion, the team leading functions such as sales, marketing, and engineering in the initial market are often the same individuals who will oversee these functions globally as the company expands.  - Top executives from HQ often have a double duty, leading their function in the initial market AND overseeing the function in global markets.

This, however, can create a bias towards the initial market and hinder local market initiatives from receiving the necessary resources for success. In other words, focusing solely on the initial market can deprioritize localization efforts required to achieve company-market fit in new markets. Therefore, it is important to establish separate teams to handle each market and prevent initial market bias from becoming a hindrance to further expansion. 

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Global Class Companies recognize the importance of treating initial and new local markets equally. This means separating the initial market operations from HQ and structuring this initial market just like any other local market. The initial market should have the same organizational structure as other local markets. For example, if local markets have a general manager, the initial market should have its own general manager, and if local markets have their own marketing teams and customer service, the initial market should have those too.

This separation accomplishes a number of things, including the following:

Removing the us-versus-them mentality

As we discussed previously, an us-versus-them mentality can be detrimental to international expansion efforts. It's common for HQ to deprioritize the needs of the initial market, given that the same leadership oversees both HQ and the local market. However, this can result in the needs of local teams in international markets being overlooked. To address this, it's important to separate the initial market from HQ and establish the initial market team as equal to local teams. This helps to avoid any biases towards the initial market and ensures that local teams receive the necessary resources and attention to succeed.

Activating distributed work

As previously discussed in this book, the definition of HQ has evolved for Global Class Companies due to the rise of distributed work. Separating the initial market from HQ means that HQ is no longer tied to a specific location, which is advantageous for organizations with a distributed workforce. No single location is given priority, and team members outside of the initial market are not at a disadvantage. Canva's decision to remove the HQ label from communication channels is an example of this separation, putting the initial market and local teams in international markets on an equal footing.

Allowing HQ to become an enabler

By separating the initial market from HQ, the role of HQ transforms from being an operator with a staff focused on the initial market to a separate internal structure whose primary objective is to enable and support multiple local operations, including the initial market. This means that after the separation, HQ is no longer responsible for operating the initial market region, but rather a distinct group solely dedicated to global enablement.

To ensure a company doesn't entrench its initial market into HQ, it's crucial to make the transition to a separate internal structure soon after entering multiple markets. This step is a prerequisite for achieving company-market fit. Jan van Casteren stresses that the roots of the initial market should not grow too deep within HQ.

How to Separate HQ from Your Initial Market

There are 4 key elements of separating HQ from your initial market, thereby positioning your organization for deeper global market penetration. These 4 elements are the Organizational Chart, Metrics, Allocation of Resources, and Decision Rights.

First, the organizational chart, or org chart, must match global ambitions. Instead of the functional leaders at HQ being in charge of that function in the home market AND for the whole company, the org chart in the initial market must match that of other regions. If each region has a General Manager, then the initial market should have a general manager as well. These regional leads can then report to a global leader. To take this one step further, ensure that global leaders in charge of each function are from different regions, not all just from the initial market/HQ.

Next, metrics must be aligned with the org chart alignment. While there will be some local variance, the types of KPIs measured should be the same for all regions, and all metrics should be reviewed and tracked the same, even for the initial market.

Warning

The mature initial market and more nascent local markets should not be measured in the exact same way. Metrics should be different earlier on in market entry, and this should continue in later stages of growth given the head start the initial market had. Eventually, when international markets are more mature, the metrics and targets can be more similar.

Then, resources must be properly allocated. This means not giving favoritism to the initial market region or to regions where the leadership team has strong relationships with HQ. Each region should be able to unlock resources by reaching certain milestones. Think of the parallels to raising rounds of funding. Companies have to show progress toward product-market fit and reach other milestones to convince investors to invest additional capital in the venture. Each market, including the initial market, should be evaluated based on performance and established benchmarks and not just given a yearly allocation.

Finally, Decision Rights for the initial market region should match that of other regions (we will discuss Decisions Rights in more detail in the next module). If responsibility for a certain aspect of operations rests with the local leads in the initial market, for example, hiring, this same setup should be implemented in the other regions as well. 

Separating HQ and your initial market is a huge and necessary step in positioning yourself for global scale, and for being able to maintain continued growth.