Today, international expansion is top of mind for most professional services firms. Expanding into new territory can not only strengthen your market positioning, help drive revenue growth and expand your customer base, it can also diversify your businesses and give you greater access to talent. That last aspect may be the most urgent need these days, as companies around the world scramble to find people with the tech skills needed for the third wave of cloud computing.
Expanding into new regions and countries can bring a host of benefits, but it shouldn’t be taken lightly. It requires capital to build a new presence in a new location, as well as time, focus and resources from a firm’s leadership team.
Global expansion can be costly and bumpy if you aren’t ready, so getting the timing right is important — something I’ve learned first-hand after two decades in professional services, leading international operations across 40 countries, and founding one of the first Workday and ServiceNow consulting firms in Europe. This 2-part blog series is meant to relay what I’ve learned about the opportunities and challenges of international expansion based on that experience.
In this blog, I’ll cover topics such as how to know when it’s the right time to expand, how to prepare for the risks that come with that expansion, and how to think about an effective strategy. In part 2, I’ll talk about how to execute an operating framework for expansion, which I call “the country playbook.”
Let’s start with the first big question.
Is it the right time to expand?
Services companies initiate global expansion for any number of reasons. Maybe it’s an opportunity that can’t be missed, like a proactive request from an important customer or your main technology partner. Perhaps it’s a need to diversify your revenue or customer base. Maybe it’s something being pushed by your board, or a suggestion from the leadership team to capitalize on your momentum and desire to become a global leader.
No matter what the catalyst is for these conversations, it’s easy to get caught up in the idea of a new opportunity and hard to take a step back and think: “Is this the right time?” or “What is the optimum pace?” So, how do you know when you’re ready to expand? There is rarely a black and white answer to this question, but consider the following questions:
- Are you currently thriving in your home base? Is your business stable?
- Have you passed a critical size in your home country?
- Do you have a strong leadership team and culture in place to be a foundation for other regions?
- Do you have the necessary financial resources or capital to expand?
- Do you have commitment from your board and broader management team to make the leap?
If you can answer yes to most or all of these questions, it may be a good time to make the move.
Are you prepared for the risks?
As you undertake international expansion, there are many challenges that could impede your success. It’s imperative that you think through each of these challenges and work solutions into your strategy and plans. Here are a few of the barriers and risks that come up time and again:
- Financial costs. Don’t underestimate the lead time and investment needed to start and build a presence in a new country. You will need at minimum an in-country team to handle the customer-facing roles (e.g. consulting leaders, sales, project managers and/or solution architects) while you leverage the rest of your organization to deliver projects. It takes time to hire your local presence and time to ramp up a minimum billability.
- Cultural impact. In a people-based business, few things matter more than culture. While there may be certain cultural nuances based on the region you are in and the region you are planning to enter, there should be some consistency in how your employees, customers and partners interact with your company. To ensure your culture feeds into your new locations, you’ll want to have a set of guiding principles and processes that in-country leaders and employees can use to ensure your culture is performing, regardless of location.
- Management distraction. You need your leaders to be focused on your business, and expanding into new markets will naturally create distractions for your management team. One way to mitigate this is by following a fractal growth pattern, expanding country-by-country and building off existing practice areas or IP rather than trying to open too many countries at once or launching a completely new service line in a new country.
- Talent sourcing. You will not establish yourself in a new market without the right leadership and team. If your company doesn’t have an established brand in the market, recruiting the right talent won’t be easy. How will you mitigate this? Will you lift and shift current team members to a new market, or pay to hire a local recruiter? If you move existing team members, how will they work within the region’s cultural norms and languages?
Do you have the right strategy to be successful?
Once you understand the risks, it’s time to create a plan for success. Below are four areas that will help you develop a successful expansion strategy, and at the same time, create an effective business case to get buy-in from your board and stakeholders.
Align with your technology partners
Most services businesses rely heavily on technology partnerships. If that’s the case for your business, which it probably is, the first thing you want to do when developing your international strategy is to align with your primary technology partners or Independent Software Vendors (ISVs).
Here are some questions to consider:
- What countries/regions are your ISV partners in today? What is their growth in those regions?
- How established are they in these markets?
- How strong are they at sales and marketing? Do they need a partner to help them bring in business, or is their biggest need on the service delivery side?
- How open or closed is your ISV’s partner ecosystem? Do they welcome new entrants to an ecosystem, or do they prefer to curate their partners? How controlling are they with who gets access to their sales teams and customers in the region?
- What certifications will you need to be marketable in the region?
- How supportive are they about you entering a particular market?
This last question is especially important. If the country GM and sales leadership for your primary partner isn’t supportive of you entering their region, it is going to be an uphill battle. They need to see how you can help their interests in the region, and know the unique value you bring to their sales team and customer base that others can’t.
Assess the market opportunities
To ensure there is room for your services to thrive within a given country or region, you need to start by evaluating the maturity of different markets, the opportunity in each market and the competition that currently exists there.
Here are a few questions to help with your due diligence:
- What is the market’s size, maturity and growth rate?
- How saturated is the market today?
- How receptive are your partners and customers to you operating in a given market?
- How easy is it to enter that market (e.g. language, timezone, understanding of the local culture)
- Would your entry reshuffle the ecosystem in the targeted country?
- Does this create possible tactical strategies which could create new opportunities and/or de-risk your entry, such as partnering with local Global System Integrators or local management consulting firms?
Consider organizing your expansion by “classes” of countries and then map out your pace. How many can you expand into at once? Some companies will want to enter a market as soon as their technology partners begin to gain any traction there, while others might prefer to wait until there is a bigger customer base to serve. There are risks in each approach. If you go in too early, you may need to invest more time and capital to build demand alongside your partner. If you wait, you risk letting competitors build up competencies and become that valued partner. Again, there may be no perfect answer or time, but it’s important to talk through these risks with your leadership team.
Refine your tactical approach
Having a clear, compelling and consistent value proposition is important for any business, but it becomes especially important when recruiting a new team and establishing yourself with a new set of customers and partners. Start by remembering what made you successful in your home country in the first place – qualities like your founding team’s credentials, your culture, your team’s unique skills and expertise, track record of success, customer network and ability to deliver results fast.
From there, outline how you’ll differentiate your business in this new market and what partners and customers value the most. You’ll want to combine your market analysis with an understanding of your strengths, and build a value proposition that reflects this combination. What intellectual property or potential sales assets can you bring over to this new region, and what you might need to rebuild? Can you localize a preconfigured solution for a specific vertical market or bring an accelerator that is non existent in your new target market?
Refining your approach to this new market requires having an understanding of the customers in that market, not just based on assumptions. There may be an entirely new set of regulations or operating norms for businesses in that region that you aren’t aware of. It might help to start small, by targeting a certain segment of customers or industries where you can leverage your existing references and credentials or launching only a subset of your services portfolio.
Develop your country playbook
Once you are certain you’re ready to expand, have narrowed in on the country or countries you know hold the greatest chance for success, have aligned with partners, and have a basic understanding of how you’ll approach the expansion, it’s time to start building your operating model.
I call this your country playbook, and it’s essentially a documented framework that lays out what you’re trying to achieve for the business at a country level. It’s a more detailed plan for how you will execute in a new market that ensures that you, the teams in your existing home base, and your country leader are fully aligned.
In my next post, I’ll dig deeper into how to create a country playbook, the areas it should address and how it can help you create a consistent, repeatable process for international expansion. Stay tuned for that in the coming weeks!