By Tony Bailetti
Entrepreneurs need access to the knowledge, approaches, methods, and tools they require to globalize their startups early and rapidly.
For the purpose of this series, globalization refers to the process by which a company meets the needs of a global market, one which integrates many formerly domestic markets including the company’s home market. A global market is the result of nation-states breaking down barriers to international trade, shifts to market economies, mobility of talent and capital, and advances in transportation, information, and communications technology.
The objective of this series (this being part one of two) is to throw the spotlight on the need to develop prescriptive rules and practitioner-oriented models that can help a technology startup operate globally upon or shortly after inception.
Technology startups that globalize early and rapidly will win over those that do not. The earlier a startup globalizes, the stronger will be its capability for exploiting growth-seeking opportunities worldwide. Early globalization increases a company’s adaptability to uncertain environments and its willingness to change.
Managers globalize a technology startup early and rapidly to:
- Increase the value of the startup
- Reduce revenue source risks
- Increase the size of the startup’s addressable market
How can a management team fill the gap between their technology startup’s need to successfully operate in a globally integrated market and their startup’s lack of resources and skills?
This series extracts lessons learned from reading the literature and examining 21 companies that globalized early and rapidly. These lessons were first published in the October issue of the TIM Review, a journal that provides free and unlimited online access to high-quality articles about technology and global entrepreneurship.
These lessons were organized into two categories:
- Lessons from reviewing the literature
- Lessons from examining information on startups that globalized early and rapidly
Lessons from reviewing the literature
The lessons learned from examining the literature can be applied to the globalization of technology startups from inception. These lessons can be organized in terms of what managers need to do to globalize a technology startup early and rapidly, as follows.
Acquire and deploy knowledge quickly
To globalize early and rapidly, a technology startup requires knowledge about:
- A problem and its solution that are important to a large and growing number of foreign and domestic organizations
- A global market
- How to globalize
We reason that, to acquire and deploy this knowledge quickly, managers of a startup need to:
- Embed the startup in the systems that create the knowledge that is critical to its success
- Engage in the exchange of knowledge, information, and other resources with international contacts
- Adjust to changes in knowledge required in terms of knowledge classification, function, network composition, and interaction patterns
Secure commitments to act jointly and quickly
There are five ways to secure stakeholders’ commitments to act jointly and quickly.
- The managers of the startup need to interact with customers and partners in lead positions in the global market who have technology knowledge that overlaps with the startup’s technology knowledge
- The startup needs to search out and mobilize individuals and organizations with specialized knowledge that are scattered around the world
- Managers need to develop a vision for the commercialization of knowledge-intensive, novel, and differentiable products
- The startup needs to quickly deliver value to potential customers and partners
- The startup needs to target large customers and partners with global reach whose requirements can be satisfied quickly and expose the startup to low risk of channel conflicts
Use web processes to create value to customers, partners and stakeholders
The use of web processes to create value is a necessary condition for globalization. The Internet provides collaboration tools, payment mechanisms, a foundation for building and delivering products, and many other value-creating processes.
Build relational capital
The literature suggests that the relationships humans have are a more important capital to the startup than the humans themselves. Strong relational capital increases collaboration with others. To build relational capital, the literature suggests that the startup’s management team should proactively leverage new and existing networks to locate and interact with potential customers, partners, and suppliers.
Gain legitimacy
The literature suggests that the startup should increase legitimacy by:
- Establishing presence in key markets
- Gaining high-profile endorsements from established companies
- Leveraging mentors and advisors to build an ecosystem around the startup
- Participating in high-profile activities related to direct foreign investment
Strengthen global capability
To strengthen capability to service customers and partners regardless of where they are located, the literature suggests that managers need to:
- Link the internal strengths of the startup directly with the definition and exploitation of global opportunities
- Increase their global competences, vision, risk taking, cross-border networks, and awareness of foreign growth opportunities
- Leverage, shape, and create ownership, location, and internalization advantages
- Shed domestic rigidities for the purpose of exploiting new global opportunities
In my next post, I will share lessons from examining information on startups that globalize early and rapidly.
