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  • Blaž Mertelj

Risks in the Internationalisation of Innovative B2B SMEs

Going international or global is a no-brainer for some companies and a frightening concept for others. While the latter may worry too much, the first may not prepare enough. Below are some of the risks that need to be taken seriously.

Innovative SMEs in B2B usually provide important improvements to the processes of their clients. These are mostly technological improvements and sometimes they allow even for innovation of the business model itself, with huge strategic value to the companies.

The Warriors and the Worriers

Due to a limited number of suitable target businesses for a particular provider in their local market, as big as it may be, it seems almost inevitable for them to embark on the internationalisation journey in order to grow further. For companies with such reactive strategies this can be quite a frightening mission and they immediately look for assistance.

On the other side of the SME spectrum, we have innovative SMEs that started up with the vision of becoming a global leader, famous in the high-tech realms, competing with the likes of Tesla, LinkedIn or at least Medallia. These companies don't fear international markets, they're a kind of born into them. And this is good, but not entirely, as it does have its downside.

Why Be Careful

The careful people, the worriers, may have difficulties with the decision and the start itself but they are more aware of the associated risks and the preparation or assistance required. Well, sometimes this may be a show stopper and that is often not a good thing, especially if the company has a really good offering. However, most of the times it prevents some expensive running into walls that can be avoided.

The danger for the "can-do", "just do it", "learn by doing" methods is not in mistakes, temporary setbacks or failures, but in the lost time and energy, and sometimes precious funds. This can tire the team down and kill the enthusiasm they need to continue the growth. Enthusiasm is very needed but lack of preparation and professional assistance are its enemy.

The (Ever Incomplete) List of Risks

Wrong Value Proposition - This one is taken too lightly and we can find it with most tech companies. If you do not have convincing answers to the questions below you may have even more difficulties in foreign markets. ...... Do we know which problems our offering solves? To which role in the organisation, who is responsible for these issues and solutions? Do we have a clear competitive advantage over existing and alternative solutions? ..... However, with some professional assistance these can be answered, or by talking to your existing clients again, focusing really on their benefits and point of view.

The Target Markets - Did you decide for the right market(s)? That is the obvious one, but it may have two risks: ----- (1) you may decide on a market because of a project, a friend or a partner that can allow for a quick start. That is risky for later if the market is not ok. At least, the market should be good in itself, if not the best, to consider a good start as a decisive factor. So, do your critical assessment nevertheless. ----- (2) you can always be wrong with the market - you may find later in the development you were wrong with some assumptions about a market even if you couldn't have avoided that. So, try to test the market with a partner or outsourcing model first and after it proves valid, deploy your resources.

The Entry Model - How will you enter? There is no one-fits-all model, you will risk here. The one risk I want to emphasise is the confirmation bias. You may have some preconceptions about a certain market or some other personal preferences about the business model, like negative previous experiences. This will influence your interpretation of the information gathered and also the decision. If you are a strong leader, your team will not be critical about it. This is why you need some external, possibly professional assistance.

The Partners - Even though the partner models rely on personal relations and trust, you risk not approaching it with structure and objective criteria upfront. Picking the first foreign partners by an SME is often the job of the CEO/Owner and as such the rules are "invented on the go", which is positive in terms of flexibility and efficiency but leads to a non-performing chaos. Again, use an external expert to help with partner models and proven performance management techniques, which otherwise tend to be seriously missed after a couple of years and 10-20 very different partners. Difficult to recover.

The Organisation and Execution - When doing the internationalisation ourselves, with our existing team, we do it also because we don't want to include new people nor cost. The risk aversion pushes us to add new people and systems as the need arises. But, then it is too late. The problems are already piling, your people are already overloaded, mistakes start causing more stress and panic, most tasks are on the couple of top people, who are not really professional managers. There is no time for proper hiring, training and know-how transfer. Try to find a way to equip the team with additional people and systems upfront, maybe temporary or hire professionals to help you with this initial phase.

Internationalisation is a road most entrepreneurs have not yet traveled. The enjoyment of the challenges on the way may, unfortunately, fade in the light of seriously delayed results. But, as you can see most of these risks can be avoided by engaging some external professionals with the practical experience which you can verify by their previous projects. They will save you a lot of money and more importantly, time and energy which you need for other things. When we think we can do it ourselves, we always think as enthusiasts, but there will be unexpected negative surprises.

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