Platt Perspective on Business and Technology

Moving past early stage and the challenge of scalability 30: business scalability from the global business perspective 1

Posted in startups by Timothy Platt on April 18, 2013

This is my thirtieth installment in a series on building a business for scalability and long-term success (see Startups and Early Stage Businesses, postings 96 and scattered following for Parts 1-29.)

My goal for this posting is to at least begin a discussion on navigating the complexities of building a business to succeed in a larger more globally diverse operational and strategic context, and in a wider cultural context. I have touched upon a number of the issues that would enter into this, and that would help to shape an expanding business’ success in the course of writing this series up to now, and in other series in this blog. As such, some of what I would write here is new to the blog and to this series in it, and some would be added here more to offer a single more organized narrative on a complex subject and even if that means bringing together details and perspectives already at least briefly touched upon.

When I noted at the end of Part 29: scaling up and expanding the virtual company, that I would discuss going global in this series installment, I somewhat arbitrarily picked out one area of difference and complexity that essentially always has to be faced when building offices, factories or assembly facilities, in-house storage or distribution facilities or other wholly-owned facilities in another country – with their own local staffing and other features: cultural differences. I picked with that, what seems at least from my experience to be the one area where the most unexpected challenges can arise. So I will address that topic but I want to do so in a larger context and I will begin that by noting an area of difference that at least should be overtly more obvious up-front: differences in law as you begin operating across national boundaries and in completely different legal jurisdictions and frameworks.

Any lawyer reading the above paragraph and its last sentence would probably wince. “Legal differences” can and do include everything from tax law and interpretation and understanding as to what is taxable where, to labor law and employee rights, to owner and manager liability as legally defined and parameterized, to laws pertaining to zoning, construction and maintenance of physical plant to …. The list is seemingly endless, and court cases arise and judges and juries rule in legal gray areas where binding legal interpretations coming out of a decision are not always certain going into those legal proceedings. But law, at least in most cases and circumstances, is on the books and publically visible even if sometimes ambiguously and even contradictorily written. And where there are reasons to expect differences in interpretation and understanding of meaning, that fact should be knowable. And skilled attorneys should at least, be able to draft arguments that would logically support the positions of the businesses they represent and in agreement with existing case law in place. And the visible experience of others from case law history should indicate where rulings tend to be arbitrary and capricious or systematically biased – meaning it should be visible and knowable where these additional sources of risk and due diligence concern would have to be taken into account and both when formulating international agreements for setting up and running foreign-sited and staffed facilities, and for when actually running them.

• The above paragraph presents a very partial listing of some of what should be considered areas for possible legal worst case scenarios. When expanding and scaling up a business, a part of the decision making process as to where to expand would take risk levels coming from them and similar into account when choosing appropriate sites to expand into, and policy and practice for that would be laid out in the scalability model in place.
• To consider a specific example here, China is generally considered a positive source of business expansion opportunity for its potential marketplace scale, with over one billion consumers, but when a foreign business seeks entry into those markets through business expansion into that space they have to meet some very specific legally mandated and supported requirements. One is business to business partnership with a Chinese business that might be state owned or controlled and that at the very least has to be state approved. Another involves technology transfer to that partner business and certainly when new or novel technology serves as the basis for entry. So the effect is that unless an entering foreign business negotiates with care they can in effect primarily be setting up their own most significant competition, as partner businesses gather and then use transferred technologies and other proprietary business intelligence.
• Operating in another country always carries a blend of opportunity and risk so this is not strictly speaking just about doing business in China. Legal requirements and restrictions and their longer term consequences as actually played out in practice have to be taken into account when working in any other country – always.

Think of this as an elaboration of the types of legal compliance issues that arise when simply selling to foreign markets where all of those restrictions and requirements have to be allowed for and understood, plus a lot more. But as I noted above, the legal frameworks for this all tend to be formally spelled out in writing in a country’s or local jurisdiction’s legal codes. And this, as a source of comparison points brings me to the issues and challenges of cultural awareness, accommodation and compliance.

• I have written several times in this blog about how corporate cultures can be viewed as sets of assumptions and perspectives and behavioral norms that are followed but rarely thought about. They are just what is done and only become apparent when in some way violated.
• This also holds for national and other community-based cultures and certainly for the little details of automatically assumed behavior – automatic that is, for those who live those cultures. As a simple case in point, consider cultures where people routinely eat with their hands when eating alone or when sharing meals with others. Now think about the implications of someone dipping their left hand into a container of food that is being eaten from by a larger group at a socially organized meal – in a culture where it is only socially acceptable to do so with the right hand as it is culturally the standard to use your left hand for other purposes considered to be unclean. No one really thinks about this until it is done embarrassingly wrongly and in public and where everyone else at that meal feels at least a bit uncomfortable at best, as a result.

Culture and cultural differences extend way beyond just defining dining practices and good table manners.

• For businesses and business settings this also means differences in communications practices and expectations, and on how good or bad news is or is not stated or even acknowledged.
• This affects how mangers lead, and how people on their teams respond to suggestions, directions or advice and from whom and on what time schedules.
• Business expansion and scalability has to be carried out with an awareness of these and other issues and certainly when this means expanding in directions where differences and conflicts of understanding and acceptability can arise – which as stated above might only be apparent after a problem has developed.
• And I add, if there is one area of experience where people can be expected to push back against the homogenizing forces of online global connectivity and community, it is in preservation of their cultural differences as a defining and local community-individualizing voice. So individual managers and business leaders, and business organizations as a whole expand outward and internationally without active awareness of these issues with at least as much peril as they would face if they did so without explicit awareness of legal systems differences.

I am going to continue this discussion in a next series installment where I will delve into approaches that can be taken to lessen problems that can arise from legal and particularly from cultural differences. Meanwhile, you can find this and related postings at Startups and Early Stage Businesses. You can also find related material at Business Strategy and Operations and at its continuation page: Business Strategy and Operations – 2.

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