By Vaclav Muchna, CEO, Y Soft
The CEO of an international software company operating globally in 14 countries, with customers in more than 120 countries, outlines his expansion strategy.
Software companies looking to grow beyond their home boundaries have a lot to consider. The first thing you need to realize is what it actually means to go international. For some, this may mean selling to Canada. Should you add Puerto Rico or Mexico, you are almost global. In my opinion, going international means something different. First, it starts with your state of mind.
US companies are somewhat disadvantaged here, because the domestic market provides so many opportunities for growth. You may be successful in the US and just believe that you can go to another country and you will replicate that success. Also your incentive to go abroad is not as strong compared to a company from, let’s say, Europe. A good start is to forget almost everything you believe you know about business. The outer world does not speak English and has very different habits, some of which you may not even believe. They value different things (so you may need to adjust your value proposition). They have different rules and regulations you have to comply with. Are you ready to go to school again to learn and discover all these things from scratch?
A good example of where we had to adapt is when we came to the US. Prior to this we were able to successfully support customers and partners. But in the US, back when we entered this market, customers did not have good technical experience with our product. The same type of support was not working. We had to pay close attention to hiring senior level customer support people as the level of support expected by US customers was higher. Another example is that the Nordic countries are more concerned about sustainability/green issues than other regions. So highlighting how we can help in this area has played an important role in our set of value propositions.
What I’ve learned is that there are core values and there are the local cultural differences. Everywhere I travel the core values may be the same – it is communication that presents challenges. Language has nuances and can result in different meanings that aren’t understandable to an outsider. For example, if someone from Germany says “You need to do this,” it can mean “You should consider this.” If someone from Sweden says it, it may mean, “It is imperative that you do this or we will fail.”
Second, you should figure out what exactly is your goal. Is it just to add 20 to 30 percent of growth? Or do you want to go more global? Let’s talk about terminology first. Global companies have subsidiaries everywhere, while globally operating companies operate everywhere, but they deploy subsidiaries strategically to cover regions. And where do you start? It depends where you have opportunities. If you don’t have any so far, just start “everywhere,” but continue only in places where you have the most traction. Y Soft’s expansion started when we founded an office in Japan, and later in the US through an acquisition. For Japan, we wanted to be close to a major partner whose customer base was very large in Europe. We began to have great success with them throughout Europe.
Third, going global is expensive and you will lose money. You have to establish or acquire subsidiaries to establish your presence. Take into consideration the local culture, language, regulations, customs, etc. and ensure that you have the financial runway to support a period of losses. In Y Soft’s case we entered Australia by acquiring a competitor’s reseller business. In the US we also acquired a company, but in China we spent over a year studying how business was conducted and building relationships before establishing a local office. Y Soft has always reinvested in the business with no outside capital, and that reinvestment is what funded our global expansion plans.
Once you start expanding, your next challenge will be internal communication. You must realize that subsidiaries are far from you, and their access to information is limited. It is a good idea to deploy an experienced HQ employee there permanently to simply provide knowledge transfer. Still, ongoing communication with HQ can be a challenge. Whereas before everyone was practically in the same room or could gather in a common area, and communication was easy. Now you may need to consider time zones and different ways of communicating. Inevitably, misunderstandings and miscommunication can occur. To avoid this, more frequent communication is often required. Factor in that more time needs to be taken to ensure understanding happens. Even the most mundane things can end up taking a lot of time to solve if not communicated well and often.
The vision for Y Soft was always to go global – I wanted to prove that a Czech company could do it successfully. As I explained above, going global is state of mind – you simply must have the conviction that you want to build a globally operating company. If you don’t have that, it may not be worth even starting.
Vaclav Muchna is CEO and co-founder of Y Soft, a global enterprise software company operating in 14 in countries. Through Y Soft Ventures, Mr. Muchna mentors portfolio companies on a range of business topics including business growth through global expansion.