Harnessing the Best of Globalization
Traditional strategies for going global start with a mindset of taking the company’s best products or services to other countries. But some companies are taking a different tack — one that involves a business model grounded in globalization.
Executives in large companies are seeking to harness globalization in new ways when launching their ventures — and for good reason. The opportunities for global businesses are expanding thanks to rapidly emerging product markets, the worldwide race for talent, and the widening impact of digitization. Moreover, success stories such as Airbnb Inc., Uber Technologies Inc., and Rocket Internet SE are spurring the imaginations of new entrepreneurs while highlighting the vulnerability of many traditional businesses.
For the last two decades I have researched and consulted to global ventures, studying their business models and the leadership and managerial challenges aspiring global companies encounter. (See “About the Research.”) While the idea of globalization is top of mind for many managers, the practical lessons about how companies can harness global opportunities into their business models are not well developed. What can new ventures, either de novo startups or internal ventures in large companies, learn from successful ventures such as Airbnb, which has shaken up the lodging industry, and Uber, which has challenged the way millions of people think about local transportation? And how do new business models for globalization compare with the traditional strategies for multinational expansion?
References
1. W.R. Kerr, “Launching Global Ventures” (Boston, Massachusetts: Harvard Business School Publishing, 2015).
2. A growing chemicals manufacturer, for example, might try to sell its products in new overseas markets while sourcing some of its inputs from another location.
3. C. Carr and D. Collis, “Should You Have a Global Strategy?” MIT Sloan Management Review 53, no. 1 (fall 2011: 21-24); D. Collis, “International Strategy: Context, Concepts and Implications” (Chichester, U.K.: John Wiley & Sons, 2014); P. Ghemawat, “Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter” (Boston, Massachusetts: Harvard Business School Press, 2007); M.W. Peng, “Global Business,” 3rd ed. (Mason, Ohio: Cengage Learning, 2013); and S. Tallman, “Global Strategy” (Chichester, U.K.: Wiley-Blackwell, 2009).
4. D.J. Collis and J.I. Siegel, “Introduction to International Strategy,” Harvard Business School module note 706-481 (Boston, Massachusetts: Harvard Business School Publishing, 2006).
5. Disclosure: I have done paid work with Alvogen.
6. D. Isenberg and W.R. Kerr, “Alvogen,” Harvard Business School case no. 816-064 (Boston, Massachusetts: Harvard Business School Publishing, 2015).
7. Two-sided network effect models bring together two groups (such as buyers and sellers) that each benefit from the other’s size, in contrast with one-sided models where the focus is on the size of one’s own group (for example, users of PayPal). Global ventures such as Airbnb and Upwork bring together the two parties in many countries. These global features can be especially powerful in an automated and digital setting where the size of the platform can scale up dramatically without huge increases in operating requirements. The opportunities and challenges of these models are discussed in A. Hagiu, “Strategic Decisions for Multisided Platforms,” MIT Sloan Management Review 55 no. 2 (winter 2014): 71-80; A. Hagiu and S. Rothman, “Network Effects Aren’t Enough,” Harvard Business Review 94, no. 4 (April 2016): 65-71; and T. Eisenmann, G. Parker, and M. van Alstyne, “Strategies for Two-Sided Markets,” Harvard Business Review 84, no. 10 (October 2006): 92-101.
8. For additional best practices, see Kerr, “Launching Global Ventures.”
9. J. Farre-Mensa, W.R. Kerr, and A. Brownell, “Entrepreneurial Finance Lab: Scaling an Innovative Start-Up Financing Venture,” Harvard Business School case no. 814-073 (Boston, Massachusetts: Harvard Business School Publishing, 2014).
10. W.R. Kerr, “How Local Context Shapes Digital Business Abroad,” June 24, 2015, Harvard Business Review website, hbr.org; J. F.P. Santos and P.J. Williamson, “The New Mission for Multinationals,” MIT Sloan Management Review 56, no. 4 (summer 2015): 45-54; W.R. Kerr and H. Motte-Munoz, “AVA.ph: Growing a Filipino E-Commerce Company,” Harvard Business School case no. 813-188 (Boston, Massachusetts: Harvard Business School Publishing, 2013); and W.R. Kerr, M.T. Torfason, and A. Brownell, “Blink Booking,” Harvard Business School case no. 813-121 (Boston, Massachusetts: Harvard Business School Publishing, 2013).
11. T. Khanna, “Contextual Intelligence,” Harvard Business Review 92, no. 9 (September 2014): 58-68.
12. L.M. Applegate, W.R. Kerr, and D. Lane, “Home Essentials: Building a Global Service Business With Local Operations,” Harvard Business School case no. 811-078 (Boston, Massachusetts: Harvard Business School Publishing, 2011).
13. W.R. Kerr, D. Isenberg, and A. Bozkaya, “TA Energy (Turkey): A Bundle of International Partnerships,” Harvard Business School case no. 807-175 (Boston, Massachusetts: Harvard Business School Publishing, 2007).
14. W.R. Kerr, “Cherrypicks,” Harvard Business School case no. 807-106 (Boston, Massachusetts: Harvard Business School Publishing, 2007). The partnership of SK Telecom and Cherrypicks also helped address the soft side of country perceptions and national politics. Large government-owned telecom operators are reluctant to purchase products from large operators elsewhere. Working together, the companies learned to balance their sales and marketing pitches based on whether the decision maker was more focused on quality assurance (in which case they emphasized SK Telecom) or political sensitivities (in which case they emphasized Cherrypicks). Disclosure: I have done paid work with the SK Group.
15. T. Neeley, “Global Teams That Work,” Harvard Business Review 93, no. 10 (October 2015): 74-81; W.R. Kerr and D. Isenberg, “Take Advantage of Your Diaspora Network,” HBS note 808-029 (2007).
16. Calculations with data from the Orbis database, produced by Bureau van Dijk, suggest that about three-quarters of U.S. businesses with a multi-country presence span two or three countries.