Learning may be the single greatest challenge when entering offshore markets. Few, if any, employees have in-depth knowledge of markets other than the one where they live. Faced with the need to learn quickly about a foreign market, many companies employ a variety of approaches, in a variety of sequences.
How does the sequence in which a company applies learning approaches affect performance? To assess this question, we observed nine companies in the high technology industry. To minimize geographic and cultural bias, we selected companies with headquarters in three culturally distinct markets: Finland, the U.S. and Singapore.
Our studies show that most organizational learning results from four direct and two indirect approaches to learning:
Direct Approaches to Learning
Trial and Error: In this approach, companies engage in particular actions and then assess the outcomes to determine whether those actions produced the desired result.
Experimentation: Experimental learning occurs through deliberate small-scale tests in controlled settings to help managers gain understanding. Management takes specific actions while manipulating variables to learn how each affects the outcome.
Improvisation: Many companies learn on the fly by improvising. They devise solutions as problems arise and revise their products, concepts and beliefs to capture unanticipated opportunities.
Deviance error: Unlike trial and error, the deviance-error approach starts with a successful action or product that the company subsequently varies. Executives then discover that as a result, performance declines, so they revert to the prior state. This process helps them understand why their original action or product was better.
Indirect Approaches to Learning
Vicarious: Executives often seek to learn vicariously when they lack appropriate experience of their own yet need to move quickly. They study what other companies have done to enter an offshore market and then apply that learning. If the subject company’s entry is perceived as successful, management tries to replicate their model. But if the subject encountered difficulties, management adjusts its own model in an effort to avoid them.
Advice: In many cases, companies learn from low- or no-cost advisers such as investors, business partners, trade associations and governmental foreign-trade agencies. In addition, retaining international business consultants is one of the fastest ways to learn about foreign markets.
Soloing vs. Seeding