International Growth - 4 Questions To Help Choose Between Buddism or Catholicism

I was having coffee this week with a CEO of a marketplace business and we were discussing the ways in which he could organise his international expansion.

Do you create local teams that are independent, can act fast and adapt well to the local culture etc. Or - do you do as much as possible from HQ and have as few people as possible on the ground locally?

The truth is, there isn't a simple answer to this question.  Either methods can and do work. 

I've had this discussion many times over the years and seen different ways of doing it first hand. 

The way I see it there are a range of functions which are more suited to being centralised and a range which lend themselves to being more localised. 

Finance for example, needs a centralised team. There may be local bookkeepers in each country but usually in finance you'd have as much as possible in one location. Reason; governance and control. 

Same with tech. Having a multitude of tech solutions for similar problems means you end up with a spaghetti like mess of code to unpick down the line. Unless there's a business case to say otherwise, tech, design and product tend to stay centralised. 

Sales, marketing and customer service are the areas which sometimes can be done centrally, sometimes they need a local presence. There's no "right" answer here because it depends entirely on context. 

What I can suggest are 4 questions to ask which might help you decide...

1. Do you need an entrepreneurial mindset to launch in the territory?

If success requires a local entrepreneurial leader to build relationships locally, they will need to be empowered to move fast and independently.  They'll need more sales, marketing and customer service resources that they can call on at will. Shackle their ability to move quickly and they will fail. 

Later, once a local business is up and running you may choose to start standardising things across territories by sharing best practice but to start with it could make sense to just go hard and fast with an entrepreneurial approach and less standardisation. 

2. Do local conditions change the proposition, revenue model or distribution channels used?

If you can use exactly the same methodology in several markets to succeed, much if what is done can be centralised and shared across territories. If it's a very local play with local relationships and local adaptations needed, the set up will be less centralised.

3. Does the business run on policy or principles?

Policy driven companies can be dogmatic and have very specific controlled ways of doing things. Success requires rolling out a template systematically to create a predictable experience for suppliers and customers. (e.g. a hotel booking website)

Other companies can achieve the same results by basing their decisions around a  set of guiding principles and giving more autonomy to a local team. (e.g. a recruitment agency). 

The difference between these two approaches can be thought of as a "Catholic" versus "Buddist" approach. Great examples can be found in the recently published "Scaling Up Excellence - Getting to More Without Settling For Less" by Robert Sutton and Stanford colleague Huggy Rao.

4. What are the risks of giving up central control?

If a business has developed strategies to reduce risk (e.g. Health and safety risks reduced through certain processes or controls), to allow a local method to manage these risks may not make sense

Finally...

These 4 questions might be a good place to start. 

Ultimately, it requires a real life test to decide. If market development approach proves successful and can be replicated time and time again, that's worth something. 

As always, test, iterate, amplify or discard. 

MVP Feedback Tactics

In lean product development, there's the concept of a Minimum Viable Product, aka the MVP. 

(A MVP is intended to prove (or disprove) assumptions made in a business model. It's a product which aims to solve the core problem with as few features as possible.   Spending time building a product is expensive and in the earliest phases of a startup that expense hurts unless there are paying customers that follow quickly. So, you build a MVP).

But just how can you test out the product and get customer feedback?

What are the feedback loops? 

How can you be scrappy and learn fast with minimal investment?

Here's an excellent article giving a few great examples; "Minimum Viable Feature Analysis" by Alistair Croll (@acroll), co-author of Lean Analytics: Use Data to Build a Better Startup Faster.

In the article, Croll gives us suggested tactics such as

• Survey (just one question though)

• Phone a friend

• Headcams and stop motion cameras

• Watch someone use a competitors app

• Button to nowhere (my favourite)

• Sign Up Form 

• Prototype

• What would Bob do?

• False payment (sneaky, but very smart)

They're all great tactics, they all find ways to validate assumptions before investing too heavily in a finished product.

I've always been a fan of testing something to see if it works, then tweaking based on early feedback.  It's an evolutionary mindset that requires me to apply myself to a problem and learn from experience. This works not only in software development, it works in almost all areas of work.

I never truly understand a problem until I try to solve it.

Between the Variables and Constants, People are the Operations - The Mathematics of Team Performance.

In mathematics, "operations" are things like add, subtract, multiply, divide, squaring, etc. If it isn't a number it is probably an operation.

In business operations however, people are like the mathematical operators.  It's people that add, subtract, divide and multiply.

As any business owner will tell you, dealing with people is difficult to get right.

So - here's a tip for any managers out there.  If each of your team member were an operation (+, _, X, /), which would they be?

+ ADD +
Someone who adds, adds value.  They do their job well, consistently.  You need to reward, motivate and nurture these important team members.

- SUBTRACT -
Someone who subtracts is not providing value.  They do not do their job well (for whatever reason).  You need to address this performance and attempt to turn it around. This may not be possible.  If you fail to turn a subtract into an add, you need to remove this person from the team.

/ DIVIDE /
Someone who divides not only does their job badly but causes others to do their job badly as well.  They suck up your time.  They are a bad influence.  They are poison.  If you have a divider, you need to realise this quickly and remove them fast.  Your team will thank you for this.

x MULTIPLY x
Someone who multiplies not only does their job well but causes others to do a better job as well.  They are a catalyst for success.  Success breeds success and so if you can have more multipliers on your team, subtractors can become adders and adders become better adders.  You need to listen to and empower your multipliers.  You also need to make sure they don't get bored or disillusioned.  They need to believe in your vision and they will amplify that vision for you.  Look after them like the gold that they are.

So, think about your team.

Are you team A?

xxx++++

Or team B?

X++---//

This simple perspective can really help when tough decisions are needed and can help you remember to look after your stars.

Why Growth Companies Struggle With Hierarchy

The way a team works together effectively will change as the number of people in the team increases.

An organisation of 10 people acts very differently to an organisation of 200.

Getting from 10 to 200 can be a difficult journey to manage at the best of times, although in a venture-backed start-up the growth rate is often accelerated artificially such that the number of people joining the company builds the team size quicker than otherwise would be the case.  A company who relies on organic growth will not add people as quickly and the adaptation time is slower.

I've experienced this growth challenge several times.  It's not easy.  Here's why.

I like to use an anthropological analogy to illustrate the point.

A group of 4-10 people will act like a "hunting party".  Together they go out on a hunt with a prey in mind but they are very tactical, communicating in real time as the circumstances dictate.  There may be a leader and the leader emerges as being the person that all the others defer to and they are happy to be the leader.

A group of 10-40 people will act like "family huts".  Imagine that each family has a hut around a central fireplace.  Each family has a leader and these leaders and the elders will sit around the fire to share stories and make plans.  Life is relatively spontaneous.  Everybody knows everybody else, they communicate directly with each other as needed yet they spend more time with their own family than anyone else.

A group of 40-150 people will act as a "small village".  In the village everyone has specific roles and there are people in charge of various things.  Someone might be in charge of security, another in charge of energy, another in charge of the harvest.  Everyone knows everyone else to a degree but things start to get done effectively by using a light hierarchy.  Each function has a leader.  To get that function to operate effectively, you need to get the leader to instruct their team of specialists to do the job required.

A group of 150 people+ is like a "town" and the default organisation is a strict hierarchy.  Large groups like this work through the power of the hierarchy.

(See also "Dunbar's Number, Cross 150 With Caution")

There is a reason why a hierarchy works better when there are more people.

Imagine you have 10 people.  10 people communicate directly with 10 people, verbally, via email, on the phone.  That's 10 x 10 potential lines of communication open at all times.  100 threads.  If there are 50 people and they do the same thing, it's 50 x 50 = 2500 threads. 5 times as many people creates 25 times as much noise.  We can't cope with so much noise.  To organise ourselves we naturally create groups and communicate with the group leader who then coordinates the activity of his or her group.  Less noise.

The type of person that operates effectively in a hunting party may not like town life.  In fact the reason they are a good hunter is because they are not townies.  People have preferred methods of organisation and communication, learnt behaviours and default reactions to situations.

A startup might hire some great people when they are small.  These great people might not like the environment they find themselves in a couple of years later when a new mode of organisation would be more effective.  They still act like it's a hunting party.  Those new hires who are used to living in a village or a town join the company expecting things to work like a village or a town because that's the size of the organisation - but they are confronted by hunters who act in a way that they need to adapt to.

The challenge for growth companies therefore is to adapt and change whilst maintaining effectiveness as well as acquiring and retaining talent.  Simply being aware of what is happening with the group dynamics helps, as does anticipating changes that might be needed as a result of a changing group size.  Communication structures work well if adopted by the majority, that's challenging if there are different expectations within the group.

There's no magic formula, this is human nature we're dealing with.  Awareness is a great first step.

Why a Facebook Like Has Very Little Effect

Facebook recently made an earnings announcement showing that they are making significant progress in generating revenue.  As reported here by Forbes, Facebook said fourth-quarter net earnings jumped more than eightfold from a year ago, to $523 million, and importantly mobile ad revenues constituted 53% of overall ad sales.  An impressive set of numbers.

I find it unusual now to find a brand without a Facebook page.

The discipline of social media marketing is still underdeveloped however, partly due to the fact that the success metrics are not clear and as obvious.  What makes a success?  Someone seeing a post, reading it, liking it, sharing it?  What ROI are advertisers looking for when they run a Facebook campaign?

In an interesting article just published entitled, "Brand Comparison Study: What's Really Happening on Facebook?", Thomas Baekdal looked into the engagement patterns of 8 brands over the past two years to try and unpick what trends if any could be found.

It really is a fascinating article, albeit someone inconclusive.  I'd recommend any digital marketing specialist to read it as it will probably challenge many assumptions.

One key takeaway is that the more brands and publishers use Facebook, the more people like each brand, the less chance there is of any given brand getting a share of visibility.  It becomes more difficult to get the attention of users the more users there are and the more brands there are.

The graphs below show views per unique dropping over two years.



And - remarkably (well done Facebook) - page likes per unique reach are up during the same period.

Baekdal goes on to go into some detail and helps us to realise that a "like" is not enough.  What really matters in social media marketing is if people talk about your brand in a positive way, for example, recommending your products or talking about their experience with their friends.

He says, "You need to get people to talk about you, because just liking your posts on Facebook has very little effect."

Those "likes" are just the tip of the iceberg and actually don't mean that much. They might make you feel good and make your corporate ego shine.  Just like in the real world, what matters is not how many people know you or say they like you but how many say good things about you behind your back.

That's tricky to measure and it's why social media marketing measurement has some way to go.