Strategic Planning for Successful International Expansion

Strategic Planning for Successful International Expansion Lessons learnt from Asian failed experiences By Walter Adamson Founder & Principal Digital Investor Melbourne, Australia October, 2005 www.digitalinvestor.com.au [email_address]

The Challenge

Many small companies in the mobile and content space have struggled to expand:

Their overseas acquisitions fail to deliver

Expansion proves more difficult

Money and management effort is wasted

Typically many Japanese and Australia companies have these problems, often because of unsophisticated management approaches.

The Top Six Sins

The most common faults, with the greatest opportunity for success when corrected are:

Unclear Strategic Intent

Underestimated risk

Lack of linkage between strategy and actions

Poor balance between “tight” and “loose”

Poor project reviews of Key Result Areas

Poor alignment between strategy and structure

Business Characteristics Supports global and local customers Local customer focus, global customers only with great difficulty Local customers supported by national sales, global customers with difficulty All customers get the same treatment Customers Decisions made at centres of competence Strong national organisations, HQ plays primarily financial role HQ controls national companies Home country nationals Organization EOS of production and knowledge, and low cost/customer driven Local responsiveness Sharing innovations outbound from HQ Economies of scale in production Basis of Competition Highly networked and distributed around the globe Highly duplicated in each country Distributed but highly controlled by home country Highly concentrated in one country Value Chain Activities Flexible architecture allowing for mass customisation Customised – some homogeneous Homogeneous- some customised Homogeneous Products & Services Global Multi-local Multinational Global Exporter Characteristic

Global Assessment Investment returns support local/global balance Capture global benefits Effective common systems Leveraging IT to build global capacity Global values, compensation tied to behaviours Developing global leaders and teams Managers managing in local cultures sensitively Managing the connections Deliberately sharing knowledge and synergies Building globally scalable resources Customised offers and cultural fit ● Appealing to customers worldwide Multidisciplinary teams active in global programs ● Building global initiatives All employees aware of global vision and acting ● Commitment to global vision Managers thinking of the world as one environment ● Thinking Global Description Never --Scale-- Always Attributes

1. Unclear Strategic Intent

A lack of clarity in the Strategic Intent:

leads to poor strategic decisions,

and most importantly leads to

the wrong allocation of resources,

wrong allocation of management attention.

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The ABCD Planning process :

A is the AS IS – today

B is the STRATEGIC INTENT

C are CONTRAINTS and CRITERIA,

D is the DESIGN of Pilots (prototypes of the new business model – used to test the feasibility of the Plan).

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A clear Strategic Intent:

Drives the Mission and its

Objectives , Strategies and Actions

Which in turn require judgments about what is Loose and what is Tight , and the Tight are reported through the Scorecard.

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2. Underestimated Risk

An overestimation of the current competencies , born of success in the home market, leads to an underestimation of the risk and effort needed to cross the chasm to the new Strategic Intent.

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2. Underestimated Risk

Steps A and B are the hardest parts:

A – Must confront the genuine status and capabilities and strengths and weaknesses today – this is often threatening

B – Must develop the Strategic Intent, which requires clarity of vision and purpose, and is challenging and requires effort

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3. Lack of Linkage

A lack of linkage between Strategies and Actions leads to uncertain results.

That is, the strategic plan often does not tell a story – it doesn’t speak to the Mission and the Strategic Intent.

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3. Lack of Linkage

The relationship and transition from Vision, Mission, Objectives, Strategies and Actions needs to be clear and explicit.

Vision is the “ light on the hill ”

Mission is what you stand for in relation to your stakeholders

Objectives are where you are heading

Strategies are what you’ll do to get there

Actions are how you’ll deliver

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4. Poor Balance

Commonly, there is a poor balance , or no explicit balance, between loose and tight – between autonomy and mission-critical tight –resulting in:

management anarchy in the culture and execution

and a lack of alignment with the corporate centre.

When this happens it is very hard to deliver the corporate value proposition.

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4. Poor Balance

Once the decision about balance is made then the key to effective management is the scorecard :

If it is not on the scorecard then it is not “tight”, since the scorecard is the tool for visibility into all the selected tight variables .

Financial Operational People Key Result Areas 1 2 3 4

5. Poor Project Reviews

Key Projects, that is those projects related to Key Result Areas, are not reviewed and reported upon in a regular and effective way, by key stakeholders and independent observers.

This is a common failing.

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Projects in Key Result Areas are a “tight”:

They must be reviewed and reported on

Regularly

Independently – including Project Director

Quarterly or better

Summary statistic on Balanced Scorecard

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Many companies, especially those expanding overseas, have floundered when key global projects have surprised the Board:

Regular reviews are about risk management

Ensure ongoing alignment with the business

Ensure project does not have “a life of its own”

Ensure that good money is not following bad.

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6. Poor Alignment

The Structure and Culture of the organisation are not aligned with and continuously reviewed against the Strategy and Execution plan –

resulting in excessive friction and waste in execution - and ultimately an inability to deliver against the Strategy without extra and excessive attention and resources.

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6. Poor Alignment

Exceptional performance comes from:

Peak human performance

Peak business performance, and

Relates to clarity, consistency and commitment

Better aligned organisations perform better

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6. Poor Alignment

Once Strategy is right, and the Execution can be conceived, there must be alignment of Structure and Culture.

Overall, alignment deals with the relationships among the people, processes, strategy, and customers of an organization relative to that organization's purpose, or what can be thought of as the "the main thing” for that organisation.