Cross-posted (with a slight adaptation) from Forbes, June 9, 2011.
Puerto Rico is one example of a small market- a four million person island- that is close to the mainland US market, yet far from economic prosperity. The only way for Puerto Rico, and other smaller countries, to create sustained prosperity and sustainable growth is to generate a large number of export-driven enterprises. And to accomplish that, and to realize the ambitions of the upcoming generations of entrepreneurs, it is absolutely essential to get your ventures ready for global markets a lot sooner than you might think. In fact, it’s best to start with a global entrepreneurship “DNA” from the very conception. Here are a few reasons why:
- Although there are many examples of ventures that grow to scale
in domestic markets (e.g. Russia’s Yandex and China’s Baidu), even
in large markets such as China, Brazil or India, it is a risky bet
to rely on language barriers, cultural idiosyncrasies, or special
connections to protect you from competition from the big global
players. When the GEs, Ciscos, and Wal-Marts of the world
eventually enter your market, they will be resourceful, rich and
ruthless. They play to win, not to be nice. Basking in the comfort
of a small, cozy market is an illusion, and when it ends, it ends
painfully, as many small retailers have learned when powerful
chains came along.
- Forcing yourself to be global makes you tough. Out in the big
world you will be forced to engage with demanding partners and
customers with world-class expectations, not to mention
competitors. This process will harden you and your company, will
improve your sales and marketing, will strengthen your operations,
and will boost your customer service. Scitex, an Israeli company in
the 1980s in the pre-press graphics, set up its first subsidiary in
Japan, where the big competitors were, in order to be strong. The
result: The company achieved global leadership for almost two
decades. Indeed, one of the big problems that some Chinese ventures
are having as they enter export markets is that they are flabby
from growing up in protected markets. That is true of heretofore
protected, out-of-the-way markets such as Puerto Rico, where local
entrepreneurs prefer to hide in the shadow of mainland USA.
- There are also strong offensive arguments for going global early. One is that presence outside of your local market gives you better access to the latest information about fast breaking market trends, products, customer needs and competitor moves. A second is that you get access to opportunities that you could never even envision by staying local.
Being born global is not easy: you need to reach beyond your grasp, be fluent in more than one language, be open to other cultures, travel extensively, and hire globally-minded people, often with very different cultural backgrounds. If your management team all has the same passport, you may not be ready for the major league. But by embedding a “global DNA” early on, even if you decide to take new markets one step at a time, you will find the transition from local to global a much less painful one.
For you government leaders, consider the policy implications. Economic policy for exporting can have a major impact, ranging from keeping currency from being overvalued, to providing training and support to new exporters. From a policy perspective, it is critical for public leaders to place exports as a high priority. It is nearly impossible to be competitive as a nation by having an economy based on domestic business.
Only ten years ago venture capitalists were local local local. They adopted the “stone’s throw” strategy, only investing in companies around the corner, and pushing their portfolio companies to focus on local customers and markets:. For a Boston VC, selling in Texas or California was like exporting. But the times they are a-changing, and now going global early is not a luxury, but a necessity. And it is no coincidence that the top tier VCs are investing in Eastern Europe, China, India, and Brazil, many for the first time.