Business

As the world becomes more dependent on technology, and as trade borders become seamless, how can boards acquire the tools and skills necessary to be effective and relevant in the global market? In a time of great change, shouldn’t the boardroom transform its internal composition and address the changes that are occurring globally?

One of the board’s responsibilities is to assess, validate and oversee the company’s strategy. It has the fiduciary duty to provide the oversight, governance and platform for the company to build a successful global presence that will stand the test of change and still be on target, on budget and on time. Without the expertise in international business, how can boards today anticipate change in global decision making and execution? How can boards make decisions and assess global trends without the appropriate experience on how to respond to differences between internal corporate culture and the target culture?

How will you keep your eye on the ball if you don’t know the rules of the game?

Going global is similar to embarking on a new adventure, a bold mission, and you are the commander. Consider the Titanic’s tragic encounter with an iceberg on the Northern Atlantic waters in 1912. On a clear night, in a calm sea, under the command of a seasoned captain, disaster struck. Even after warnings of iceberg sightings, disaster struck! However, damage to the ship wasn’t caused by the iceberg’s tip, which rose visibly above the water’s surface. Rather, the fatal damage was caused by the massive section of iceberg, hidden from view, beneath the surface of the water.

This great tragedy serves as a vivid illustration of the dangers that lurk beneath the surface for businesses embarking on global expansion. While every business prepares elaborately for perceptible issues, few businesses take the initiative to develop an awareness and sensitivity to all that lies below, hidden from view, and waiting to cause chaos. It’s the same today as it was in 1912. People don’t know what they don’t know. Worse yet, no one can plan for something that has never been anticipated.

With a less than 50% success rate of middle market US companies going global, boards need to know how to successfully plan and assess opportunities for the company to thrive in a complex and constant changing global economy. If you don’t have the right experience on board to cover all bases, how can you take the responsibility to make a decision that will shape the company’s future?

The Motive By 2020, 95 percent of the world’s customers will be outside of the U.S. To reach global markets companies, and therefore the board, need to adopt a multinational mindset with the drive to not just survive, but to thrive in our ever¬flattening business world. Going global is a necessity and not a choice to ponder. The board and the CEOs need to look at the global market, because that’s the only chance for survival. And instead of feeling panic and fear, they should look at the global market as an opportunity.

Multicultural and multinational boards are the new diversity.

It is a necessity. No doubt about that. For many companies a big chunk of their revenue originates from outside the United States, yet they have hardly anyone on their board that is either a non-U.S. member or someone with global experience who can guide them through or even bring up the relevant points on global expansion strategies or how to craft successful global actionable decision making. Then there are the companies that are contemplating global expansion, but really have no one on the board to help assess and make the decision. How can companies overcome this barrier to success, and make informed, sustainable and relevant decisions on global strategic growth?

The Means U.S. boards are mostly homogenous from the point of view that members are U.S. homed and honed. Global and multicultural are the new board skills for a new global world where U.S. companies have to compete. It is not about being risk averse. It is about knowing how to manage risk in global markets, looking at the right data and making decisions that are well grounded. Boards need people with a global perspective, who have the ability, experience and expertise to question assumptions using a global prism, and dive deeper to see what’s underneath the iceberg.

Strategic planning is about leadership while matching resources match against best opportunities. Someone needs to bring the global reality to the board and provide the strategic focus in terms of clarity, cultural expertise and the ‘savoire faire’.

Whether the board is actively participating or merely evaluating the CEO’s plan, international expertise is a necessity. Would you consider having a board without the financial or legal expertise among the directors? Why do boards think that they can make it up as they extemporize an expansion strategy without having anyone from a different country or with any global experience?

You cannot predict the future, but you can position your company to be successful in a changing global business environment. Positioning the company globally, and having the right lens through which to view, forecast and interpret market developments is crucial.

The Opportunity: Looking In All The Right Places

The good news is that global growth challenges can all be overcome using the right planning and execution tools, as well as adding global expertise in the boardroom. This will help dealing with global mindset when doing business internationally, as well as managing employees and executives from another culture.

Whether that candidate possesses direct industry expertise or cross-industry experience, having this global component on your board will add a competitive advantage, and will help manage the risk and set the company on the right track. If you are not aware of the minefields you are likely to encounter, how do you then make informed decisions without people on board that can bring the knowledge, confidence and experience? Who is the person that understands not only the ‘hard facts’, but the soft skills, knowing how to navigate cultures? Since it is what you don’t know that will land you in trouble.

If companies are to flourish, their perspective needs to be global ¬not only in driving toward higher profits but in their operating principles. Only then will they find a greater understanding of their foreign counterparts, which, through mutual interdependence, can then lead to higher profits. To attain a global perspective, boards need to adapt their current operating principles to a more encompassing, more cosmopolitan viewpoint of business. Much remains to be done in both corporate and entrepreneurial America for this worldwide perspective to take hold, and much is at stake.

The very success of the economy in the United States tomorrow depends on the ability of today’s leaders to change thinking patterns by developing a global mindset and strategies that bridge the widening gap of opportunities domestically and abroad. With the right leadership, and the right people in the right places, U.S. businesses can look at the global market and see opportunities, not obstacles.

For some, the world is flat; others say it is a bumpy and curved world. Whatever the terrain, there is one major change that companies are having an extremely hard time planning for: Designing a new kind of global strategy that focuses on the ability to change in almost a moment’s notice, and still maintain the action plan as an integrated unit. Sounds like a contradiction? Maybe, but it is the new reality as events in the world force companies to redefine the meaning of strategic planning.

For many companies, successful global expansion is a new altitude they need to manage. Like high altitude climbing differs from many other pursuits because of the constant threat of danger and potential death, so do many successful leaders in national markets feel about global markets; the potential risk, the daunting idea of failure and the unknowns.

The difference is that elite high altitude climbers mentally prepare for the climb while maintaining an effective focus on the mountain. They keep their eyes open, looking up, reaching the new altitude. Part of what allows successful Mount Everest climbers to stay focused and remain confident on the mountain is their commitment to thoroughly plan for the adventure. The actual climb takes about two months, including various acclimatization stages, rest days, and the final push to the summit.

Climbers must remain focused, committed, and healthy for a prolonged period of time to be successful. Following this logic, leadership needs to focus on a set of new skills needed to master the elevated model of integration of swift action plans into the strategic planning, while redefining the role of the plan, the people involved and the means to execute.

The Hypothesis

We face a higher volume and degree of complexity, more competition and change that transcends borders, industries and disciplines. Companies will need a new kind of expertise to thrive in the new reality. How will you fill the gap? More people or a different way to operate? Today, most companies are operating in a manual like, old fashioned way: Follow the crowd, neglecting to align company capability with target market. The degree and complexity has never been greater, and it is going to grow, so how about simplifying your approach and adapting it to the new altitude? What does it really take?

• Understand your market and the altitude of your customer, decision makers, and other crucial factors.
• Know how to attach the importance of global strategic planning to some of the converging factors that are going on.
• Deal with disruptions in the business level:  How do you plan to utilize them and pull them through?
• Are you going to engage in trendjacking? Either create your own trend and deliver on it or trendjack on an existing one? Do you know enough?

For example, for W.W. Grainger Inc., a key component of expanding internationally is that the distributor has to focus on “ensuring local relevance.” This results in their business model being different depending on the market. For example, in Canada the distributor has a big presence in rural areas of the country due to the focus on resources, different from its footprint in the United States. In Japan, Grainger is mostly Internet ­based, focused on small customers.

Every Minute in Life is Precious.

In our race to accomplish and succeed we tend to forget that family and friends are a very important aspect of life. No one can “make” it alone. It is always thanks to at least one person that had a major influence on our lives; the person that either helped us, encouraged us, or someone we that taught us what NOT TO DO. These people that come along our journey are a source of guidance, support and strength. Taking the time to experience and nurture these relationships can be a very fulfilling and rewarding experience and will add a positive dimension to one’s outlook on life.  A warm and supporting nuclear environment can do wonders to one’s disposition, especially in uncertain and troubled times.

• When was the last time you stopped on your way to or from work, and looked at the blue skies, the white snow, or at the frozen lake and said to yourself:  what a wonderful world!
• When was the last time you spent time with your children?  You may be missing one of the miracles of this universe, watching your flesh and blood grow up.
• When was the last time you spent time with you parents?  For no special reason, just because you may like them as people?  Trust me, they will not be around forever.
• When was the last time you met with your friends for dinner, coffee or a drink and just talk about what is really important to you?  Without pretending or masking the true you.
• When was the last time you read a book or a magazine for pure enjoyment?  Not work related, but something that helps you wander into some wonderful places and times?
• When was the last time you took a vacation and went to a new place you haven’t been to before?  Explore new grounds and just be!
• When was the last time you asked yourself if you like your job?  Isn’t life too short to do what you distaste?
• When was the last time you pursued your hobby, whatever it may be; drawing, writing, singing or dancing?
• When was the last time you volunteered for a worthwhile cause, just because you want to contribute something to the community?
• When was the last time you laughed just like the way you used to as a child?

Make a promise to yourself to pursue some of these wonderful moments in life.  They are precious.

Many U.S. corporations have been so successful for so long that it seems now they are too slow to react to changes in global markets due to a lack of being able to see a different point of view. Successful global expansion depends on leaders who think proactively, sense and foresee emerging trends, and are not afraid to act upon them. To accomplish that, U.S. corporate leaders have to possess a global mindset and be open to new opportunities in new countries, involving different cultures.

The emerging countries decided on a global strategy years ago, stayed the course, planted the seeds, and now they can enjoy the fruit. The U.S. economy seems to have just awakened to a new world order. Overnight transformations are a recipe for failure. Successful global expansion and trade happen as a result of a long-term vision, a road map, and a timetable.

Many foreign companies that are now direct competition to the U.S. have been more exposed to global business. These leaders have learned to deal in a less structured, bureaucratic, and regulated reality. They are more comfortable with ambiguity and have developed an efficient decision-making and execution process, and this basically enables agility and the tracking of issues in parallel and real time.

Companies should stick to what works for them and they shouldn’t create change for the sake of change. Jack Welch, who wrote in his book “Winning”, advises to attach every change initiative to a clear purpose or goal, change for the sake of change is stupid and it really doesn’t make any sense. So many companies make the mistake of attempting to go global without proper preparation.

When I asked a company what made them decide to go to China, the answer was that it was cheaper. At the end of the day, when we looked at the balance sheet, I proved to them that they saved one cent per unit, and the cost to open the market will be balanced after they have sold over one million units. In retrospect it was not a smart decision on their part.

Another lesson to be learned is having a genuine, but misplaced desire to innovate. New initiatives fail to deliver when innovation focuses on management processes rather than on services and products for a changing and/or culturally diverse global market. Customers, and not authors and gurus, are the best business advisors a company can have. Do your market research, look around, and see what is needed; it’s not just, okay we need a new product, let’s do it. In many cases, engineers or the R&D division of a

company fall in love with the product and then the marketing people can’t really sell it. This doesn’t include the products that are popular in the United States but that people in other countries really have no use for or could use if modified properly.

Another lesson is the Hollywood game. Sometimes a fad is taken up by a leader to bolster the ego or to appear cutting-edge. This is caused by a “go-Hollywood” virus, complete with buzzwords, special effects, superstars, and other glitz. Many CEOs are focusing on their agenda and this is why in many cases all these fads are starting. It includes a corporate buzz that really doesn’t deliver tangible results.

Don’t discard older processes such as looking into your strengths, weaknesses, opportunities, and threats analysis. Just because they have been around for a long time doesn’t mean that they don’t work anymore. In general, do the homework. Don’t forget to apply good old-fashioned common sense, which unfortunately is not so common. Address differences between fads and success.

Focus on results, not on an elaborate vision or change process. Being internationally engaged is key to your company’s future success and competitiveness in world markets. Someone once said that what separates America from other countries is they’re just countries while America is an idea. How do you express your business idea in an actionable manner?

U.S. companies talk a lot about a global vision, but it takes commitment and “know-how” to turn it into reality. When deciding to go global, a company needs to assess its real potential, strengths, and talent and lay out a plan. Many U.S. corporations failed in their global ventures due to lack of research and information.

A company needs to understand the environment and be able to judge change versus vision issues. In this case, waiting for two years with no results or change proves the notion and the U.S. business climate that drives to “stay the course” as opposed to driving change. Not doing anything creates a limited margin of error.

In many cases the vision is not realistic. Sure, everybody wants to be the best, everybody wants to be the leader, but how is your company going to do that and achieve this leadership position? Glorious vision looks great on paper, but it’s not always actionable and many companies fail because they

follow a vision that is not looked at in the appropriate context and may not be realistic or actionable. Again, it may work in the United States, it may sound wonderful, but it is not actionable. While it may sound glorious, you have to know where you are going and how to get there following the road to success and excellence.

The biggest risk is not doing anything. By doing nothing you move from the driver’s seat to the passenger’s seat. Has it ever worked for you before?

Priority no. 1 should be the focus on growth. Not just survival. A fixing solution to a sinking ship will just delay the end. Are you willing to give up now?

History lessons are not a platform to a sound operation, especially not in this economy. Focus on the business, not just the bottom-line. Analysis of profit & loss statements and balance sheets will give a historical lesson but does little to understand the dynamics of the business.

Decisions have to be data driven. Whether you decide to adopt a certain strategy, or just change and enhance a product-line, do your homework. Get the facts. Envision and articulate the ultimate picture of where you want your company to be, and stick to it. Yes, you will have to deal with change and unexpected turns, but at least you would know where you are heading and be able to stir the business wheel in the right direction and get back on the highway.

Need an antidote for shrinking domestic markets? Consider international expansion. It’s a fact. International expansion offers unparalleled opportunity for growth, increased sales, diversified markets and increased profit. Companies should be globally aware, and not necessarily active. It may not be the right time for everyone, but knowing about what is happening in the global scene, who of your competitors is expanding into the US, and what your options are – is crucial.

Manage risk and embark on the opportunities. Remember what got you to run a company to begin with. Where is that entrepreneurial spirit?

Evaluate your team and your own set of skills while being cautious of confusing ego and personality with performance. As I said once to a client: this is not a date. If your employee is a high-performer, sometimes this is enough to make a decision, as long as it doesn’t get in the way of the team.

Look around you and understand what business you are in, who is your competition, what are your choices, what your reputation is and how you can better position you company in the market. Remember the basics of running a business.

Shareholders as stakeholders and investors are and should be looking for long term returns be it through increased share price or dividends.

CEO’s have the obligation to meet this expectation. Typically, however, CEO’s focus on short term results. Why? Because they are rewarded for short term results. Who hasn’t heard a report that XYZ Corp. quarterly results were 2 cents per share less than anticipated? The CEO’s bonus will reflect those results.

In order to create cost-effective as well as competitive global strategies, the frame consists of five main steps to follow:

Step 1: Identify the company’s edge for the strategy to exploit that edge and prioritize the investment to sustain it.

Step 2: Develop competitiveness through partnerships and collaboration. Basically, who are your partners?

Step 3: This is the innovation component: how are you going to differentiate yourself from a marketing standpoint? In a world of constant global market pressure we must focus on innovation as a key component of our competitive strategy.

Step 4:  Take an entrepreneurial approach. Think out of the box and do things in a way that were never done before.

Step 5:  Evaluate the level of competency in your company—do you have the right people on your team to make the right decisions? Why not take the opportunity of new markets and expand your business?

Are you taking advantage of these developments to get your business to where it should be?

The main mistake is not doing anything, but waiting for events to happen. Reacting to the market instead of developing a plan/strategy to lead and be proactive.

Another mistake is not having the right people in the right position in the company when deciding to take operations globally. Even your COO, or director of corporate development who enjoyed a stellar performance the U.S. is usually not equipped with the tools and skills to make decisions on global growth.   Ask yourself: do you have the right mix on your board that will help you make the right decisions on global issues?  Is your board qualified to make these decisions?  Making the wrong decision can be very costly as well as embarrassing. And these are not the worst—it may affect your chances of ever getting back into that market(s).

Another common mistake companies make is following the crowd. Target markets change rapidly and countries they may have been “cheap”, have caught up and need to be re-evaluated.  Look at future trends, understand the culture and the lay of the land, and then make an informed and sustainable decision.

There are three basics questions the leadership needs to be able to answer:

1. Is there business for me in the international marketplace?
2. Am I willing to invest time and money to get this business?
3. Can I do I want to make a long-term commitment?

To become a company with a global footprint, American business leaders need to adapt their current principles of operation to a more encompassing, more cosmopolitan viewpoint of business. Moving toward a global perspective is increasingly viewed as necessary but not necessarily easy. Today, leaders have to work in both the domestic and international environments, not in only one of them. One cannot separate these two any longer.

Let’s not forget—there is an entire world out there that needs to be looked at as an opportunity to grow your sales and expand your business.

To achieve bottom line results, the five main steps I find necessary to follow in every project are as follows:

1. Needs assessment. This stage is to identify the issues, define the scope, and audit existing resources.
2. Setting goals and expectations. Define tasks and plan the work to be done while establishing tools to coordinate and eliminate uncertainty and ambiguity.
3. Provide vision and leadership. Make sure we follow the roadmap, stay on task and implement the activities.
4. Choreograph simultaneous actions of the various players and stakeholders. Set the agenda and make sure that all parties involved are communicating and working in concert.
5. Monitor and communicate progress. Use metrics to measure results, deliverables, and progress.

Since there is no one formula that fixes all, the main objective is to understand the driving forces, value, and corporate culture and define the road map to successful global operations.