The future is local: why cultural alignment is the key to successful global expansion

A Q&A with Guidant Global's COO, Brian Salkowski.

International expansion used to be the preserve of mature businesses looking to build on local dominance by expanding into global markets. This expansion used to require significant investment. But with the rise of technology, even small startups with a slim share of their own market are searching for global opportunities. Geographic borders are not what they once were. The world is getting smaller.

A key challenge of expanding into international markets, is finding the right talent during the expansion phase. Not just technically, but culturally. Whilst businesses in the United States share a lot of similarities with Australia, expanding into the Middle East, for example, is a far more complex affair.

As a leader who has recently managed the strategic process of global expansion, we spoke to our COO, Brian Salkowski to understand the potential pitfalls and the undoubted potential of taking a business global.

Tom Brooks, Marketing Manager, Guidant Global:

Hi Brian, first of all, I’d like to ask what, in your opinion, makes businesses choose to expand internationally?

Brian Salkowski, COO, Guidant Global:

Hi Tom. Good question. More often than not, business leaders make the decision to expand overseas to diversify risk and income streams, reducing their dependence on a single market.

Many organisations want to expand internationally, but desires and readiness aren’t always the same thing. To evaluate if their business is in a solid position for global expansion, leaders must question if they have developed a compelling business case, as well as a number of other factors such as change management, compliance, market maturity/readiness and organisational governance.

The potential rewards of harnessing international revenue streams are huge. But there are, of course, many challenges, which can sometimes become lost in the planning process.

Tom Brooks, Marketing Manager:

It’s easy to see, when you think of the potential short and long term financial gains, why even small businesses are thinking globally. But as you say, international business is not always plain sailing. What are the challenges you’d expect businesses to encounter?

Brian Salkowski, COO:

There are a number of factors, but the ones most businesses encounter are local legislation, cultural contrasts and time and language differences. All of which need to be considered.

Business decisions must be based on opportunities, profitability and a country’s political/regulatory situation. But the availability of skills and wage differentiation are factors that also require close consideration.

In emerging markets, in particular, scaling talent to business demand can be a challenge. For this reason, due diligence should be undertaken to ascertain the local landscape – especially with regards to the extended workforce, where local employment rules may differ from those in an organisation’s domestic market.

Established strategies and resource allocation models do not always align with the diversity of markets, customers, and channels that come with the expansion from local to global markets.

Tom Brooks, Marketing Manager:

One of the principal reasons why businesses are thinking globally before maturation is the rise of technology. What impact do you see technology having currently, and into the future, specifically in terms of talent management?

Brian Salkowski, COO:

In terms of talent management, HR technology is increasingly being used to plan and manage workforces strategically. Almost everyone in business is talking about the impact of big data. Our industry is no different. People analytics specifically, is enabling leaders to see the whole picture. From global resources, workforce mix, and international talent mapping, using big data effectively allows leaders to use their resources in the most efficient way.

Tom Brooks, Marketing Manager:

Interesting. And what impact does this have on managing international workforces?

Brian Salkowski, COO:

The insights harnessed through people analytics means that the location of a business function can be determined by the availability of local skills.

However, there are, once again, some challenges that we face when using technology globally.

Tom Brooks, Marketing Manager:

But isn’t technology meant to enable global workforces? What kind of challenges are there right now?

Brian Salkowski, COO:

In theory, yes. But there are, like I said, some challenges. Programs built for the specifically for the US market, for example, rarely work in the UK market. And these two regions share the same language and are relatively culturally aligned!

Vendor Management System features may be business critical in one country, and next to useless in another. Some markets they could even be prohibited due to legislation or regulation.

Take another example - the way data is harnessed. In the UK and EU, with GDPR regulations, businesses have to be very careful when collecting the data of individuals. And then there are differences in contract law, employment law -- it can be a minefield if there’s not a thorough, strategic approach.

Tom Brooks, Marketing Manager:

I see. It makes one wonder when hearing this, why would a company even think about global expansion? Of course, that’s a rhetorical question, as financially it makes a lot of sense! But logistically it sounds like it can be a real nightmare. Are local businesses more suited to their market than a global business could ever be?

Brian Salkowski, COO:

It’s interesting you say that. Research by McKinsey shows that 40% of executives at global organisations feel that their product or service are stronger than local options. Yet other research shows the opposite - that local organisations are more effective at forging relationships with local partners and governments.

For this reason, companies which are entering new markets must adopt a ‘local’ approach to business, so that they are culturally aligned with the market they are operating in.

Tom Brooks, Marketing Manager:

Are there any best practice advice you could share for anyone reading this interview who is planning to take their business global?

Brian Salkowski, COO:

Best practice is different for different locations. There’s no one-size-fits-all approach that can be taken. What’s commonplace in one country might seem absurd in another, illegal even. For this reason, it’s critical that you have a team of consultants working on localisation. To be a success in a new market, you need a full grasp of the laws, culture nuances and social norms.

I’ll give you a few examples in our world of talent management. In the US it is best practice for a Managed Service Provider to pay suppliers. In China, on the other hand, it is often not within regulation for most worker types.

In the Netherlands, freelancers are a driving force in the labour market. But they also need to register with the national government, which can sometimes take up to 800 days! In the US, freelancing is hindered with regulatory uncertainty for the contracting organisation.

And these differences present themselves even more vividly when it comes to local cultures and customs. In the UK, having dinner with a client is a nice touch, but not compulsory. In South Korea, it’s incredibly rude not to have dinner with your clients.

In both regulation and culture, it is critical that businesses do their homework before even thinking about global expansion.

Tom Brooks, Marketing Manager:

Do you have any final advice for executives and business leaders with regards to achieving a successful global expansion?

Brian Salkowski, COO:

In short, successful global expansion relies on a solid strategy and a plan of action around talent management. But it also needs a forensic and authentic understanding of local culture, so that workforces can be managed cost-effectively. Though this sounds like a contradictory thing to say, for a business to have a successful global expansion, it needs to think local.