Geographic expansion - how to make it work and not lose your shirt (5/5)

If you've read the previous four posts in this series, you will be aware that two-thirds of geographic expansions are either closed or still losing money after two years, and that there are some common steps that the successful expansions take to stack the deck in their favour. In the last three posts, we covered the first three of these steps: preparing the company internally by creating a replicable business model; following the money to choose the right location; and, warming up the market with leads, contacts and relationships before creating a local presence. In this post, we cover the fourth and final step: committing to the chosen location.

Such a commitment is about three things. First, focus on one country or region at a time, and make it successful before moving on to the next; each new location will take up serious management time, and multiple additional locations are major distractions that pull management further back from the required tipping point. Second, don't dabble in markets. Just like learning a new language, you either need to immerse yourself or accept that you will never be credible. Third, take active steps over a major period to bed the business into your global business, for example by using six-month exchange programmes for new recruits at head office.

Lane4 is one of the leading and most successful executive development consultancies in the UK. It has strong demand for services world-wide from global clients. Conscious of the need to retain control over quality and have a commonly-understood way of operating, Lane4 is very deliberate in its new office opening. It has effectively created a queuing system so that one office is opened at a time, every 2-3 years. It has done this successfully in Australia, the US and Switzerland. New offices always contain long-term senior company employees in their management teams. Lane4 even relocated one of its founders to the US office to invest in the offices development and support local academic relationships with his contacts.

This deliberate, committed approach can be contrasted with a famous operational consultancy (unnamed in this post out of respect for interviewees) that experienced a rapid growth in international demand for its services based on a best-selling business book. It opened a series of international offices simultaneously to support overwhelming demand. It made no proactive effort to integrate new staff, though the rapid expansion would have made this unviable anyway. Furthermore, the company's laissez-faire appraisal system reduced the chances of a uniform approach to close to zero. The result was a patchwork of offices with inconsistent approaches, and numerous false starts within many countries. With a series of loss-making international offices and investment write-offs, the company itself closed down after five years of losses, despite the fact that its home office was highly profitable over the period.

Our messages from this five post series are, firstly, that the perils of international expansion should not be under-estimated and, secondly, that there are a series of steps companies can take, that are common to successful expansions we have observed and that can be used to stack the deck emphatically in your favour.

Of course, there are legion other issues to consider in expansion, such as what business model to use, whether to have a physical location, etc. These are determined by the specific circumstances of the particular company, and will be the subject of a future post.

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