Founder, CEO and CIO of HGM Fund, managing investments in the financial technology, health technology and communications industries.
It’s always been a given in business that companies may need to go international with their operations to drive growth and expansion beyond a particular stage in their business journey. The potential benefits of having a global presence are manifold: Companies could increase revenue, sales, investment opportunities and diversification, as well as reduce costs and dip into unexplored talent pools.
However, having an international presence does not automatically equate to a globally present business. In my experience, when I visited global offices in the past, employees were more than delighted to share their lives and stories with me, be it in the form of a shared meal at their homes or proudly showcasing the handiwork of their 5-year-old. But it’s up to us, as leaders, to find the time and the humility to craft a special bond. It goes a long way in bringing employees together—no matter where they are located.
With this in mind, I have a few recommendations on how to start building a company that is truly globally present.
Pay attention to international markets.
This step is nonnegotiable. Consider, for example, that in the second quarter of 2021, around 67% of Apple’s revenues came from overseas markets. Asia Pacific, Europe, the Middle East, Africa and the Americas (not including the U.S.) together accounted for roughly 55% of Alphabet’s revenues in the first quarter of 2021. McKinsey has found that only 70% of U.S. domestic demand is currently met with locally produced goods. And, in the current environment, with many companies looking to mitigate supply chain challenges and potentially slower domestic demand, the percentage of American companies considering their growth prospects to be situated outside the U.S. has grown to 49%, according to survey by Ideas and Action.
To state the obvious, much of the value creation that American companies have achieved and will drive in the near future is fueled by a complex chain of global links. This can range from meeting demand in international markets, driving research and development, and recruiting global talent to source and/or manufacture critical parts of the supply chain. If you are not paying attention to global markets, you cannot adapt and react to the ripple effects that economic spikes and dips can cause worldwide.
Close the disconnect between international offices.
While having international offices might stand to confer a stamp of honor or legitimacy to businesses, being truly globally present is a whole other ballgame. The list of hugely successful American companies that have failed in international markets (either in specific regions or as a whole) is long and varied.
However, digging just beneath the skin of business failures reveals similar patterns. From my observations, businesses often have a lack of understanding of the international market, the target audience, cultural norms and even business and societal ethics and etiquette. While it might be true that the identity of being an American business can help open doors in certain countries and markets, companies must recognize that they are expected to live up to the American values they espouse. Every time I meet leaders and managers responsible for leading and overseeing key locations who have never set foot in a factory in that region, I’m amazed.
Give back to the local value chain.
Prolonged collaboration generally results from mutual understanding and respect. In America, apart from the hotly discussed widening wage gap between CEOs and line workers, I find the pay scale disparity between American and international CEOs to also be jarring—even in cases where the company’s global performance might have overshadowed its domestic performance.
As such, I believe leaders should contemplate whether a better use of company resources would be to fortify the local value chain that produced those results instead of shifting it back to the parent company and American executives’ salaries. Reinvesting at least part of those profits into R&D or fortifying operations or brand presence in the offshore wing might also have a ripple effect of engaging local workers better. I believe it’s far easier for offshore teams to trust a company actively contributing to the local scene than to work for a faceless entity that mines local talent and resources and hoards the profits.
Harken back to your responsibilities.
From my perspective, despite many well-diversified supply chains and operations, American companies haven’t scratched the surface of what’s possible through true international collaboration, knowledge-sharing and wealth creation.
Companies need to ensure the profits from specific regions go back into building the company and culture there. More importantly, as a leader, you must ensure the respect you show at home is also shown to regional offices. This means equitable treatment for all employees, regardless of which office they might work at. Not only will this go a long way in ensuring company ethics, but it also could potentially be returned a thousandfold by employees who stay loyal to the company through thick and thin. Just because you might be able to get high-quality work done at a lower price from another country does not mean you should treat those workers differently than an American worker.
Being a superpower might open doors for U.S. companies, but in order to keep them open, you need to stay competitive in the international markets. A softer, humble approach with a global vision based on equitable wealth creation, sharing and making the local value chain stronger with significant investments is necessary for companies to build international industrial teams. Sustainable wealth creation in overseas U.S. companies requires a long-term commitment to move beyond operations to give back to those countries, communities and charities for holistic development and growth.