Klaus Wehage is the CEO of 10X Innovation Lab, author of Global Class, and Silicon Valley ambassador who serves as a conduit, connecting the world to the startup community elite.
Are you ready to take your business global? In this episode, we have Klaus Wehage sitting with us in a lengthy exchange about his expert insights on international business. From assessing your company’s readiness to go global to key factors to consider when transitioning from local to international markets. Klaus offers concrete examples and valuable advice on the challenges and costs of international expansion that you have to anticipate and address. Lastly, Klaus highlights the advantages of international expansion beyond the monetary gains.
Don’t miss Klaus’ wisdom on these critical topics, plus his frameworks, tools, and strategies you can utilize in your business toward global acceleration and growth.
Why you have to check out today’s episode
- Discover battle-tested strategies to establishing your business for global success and cultivate its competencies from the very start
- Find out both the advantages and challenges of expanding globally and the ways to anticipate and address them.
- Learn how to assess your business’s global readiness based on factors such as business operations, mindset, and the characteristics you need to have that qualify for international expansion
“You need to have eyes and ears into the world. Being able to see patterns and trends that can feed into how you build your products well.” — Klaus Wehage
Topics Covered:
00:30 Why thinking globally on Day 1 determines success in the international arena
02:40 Klaus explains concrete examples to assess your company’s readiness to go global
04:00 The process of hiring the perfect candidate for an international market
08:42 Certain traits that you should look for when building an international-literate team
10:49 Key business aspects to evaluate in transitioning from local to international
13:19 Globalization versus Localization
18:12 What key factors do companies often fail with in their international business model?
20:37 What are the costs associated with going international: localization and market entry cost
23:45 The challenges of international expansion that you have to anticipate and address
26:32 Klaus’ expert advice for successful American businesses seeking international
experience
30:52 Huge advantage of going international besides making more money
34:34 Klaus’ insights on the present decline in globalization
37:23 How does the virtuality of business today affect the international business arena?
Key Takeaways
“If you seek to learn and understand nothing will be foreign.” —Klaus Wehage
“Be open and be willing to relearn and listen to local teams to discover how to best find product market fit in new markets.” —Klaus Wehage
“Think about partnerships instead of disruption when you go into new markets. Take a more collaborative approach in enabling support and growth in the industry” —Klaus Wehage
“Localization is about creating a strong business model and then identifying key questions that will challenge it.” —Klaus Wehage
“One of the most important things, when you go international, is also the ability to say no. Cause you have a tendency when you engage with customers in new markets to say yes, we want to do it, we want to secure a customer” —Klaus Wehage
“The biggest mistake that we see with companies is that the leadership team are not exposed to the local reality” —Klaus Wehage
“If you don’t understand how they react to certain tastes in a specific market, you’re not going to be successful because you can’t just change a person’s palate, the taste buttons. It sounds very simple but there is a tendency to standardize, that’s the bias.” —Klaus Wehage
“Make your product/company more resilient to competition.” —Klaus Wehage
People/Resources Mentioned
Global Class: How the World’s Fastest-Growing Companies Scale Globally by Focusing Locally: https://www.amazon.com/Global-Class-Fastest-Growing-Companies-Globally-ebook/dp/B09RMFNNZ4?ref_=ast_author_mpb
10x Innovation Lab: https://www.10xinnovationlab.com/
Silicon Valley: https://www.siliconvalley.com/
Connect with Klaus Wehage
Website: www.globalclassbook.com
LinkedIn: https://www.linkedin.com/in/mr10x/
Email: klaus@10xinnovationlab.com
Full Interview Transcript
(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
Katrina Burrus
Welcome to the International Leadership Podcast. I’m your host, Dr. Katrina Burrus, and today, we have Klaus Wehage. Welcome, Klaus.
Klaus Wehage
Thank you so much. I’m excited to be here, so I appreciate the invitation, and I know you’ve been chasing me down a little bit over the last period
Katrina Burrus
Yeah, that’s true.
Klaus Wehage
But it’s been busy with the book launch and everything. But I’m excited to be here today. Thank you so much.
Katrina Burrus
Good. And you’re an expert in international expansion, and you developed a methodology in your book, Global Class.
Klaus Wehage
Right.
How to Build Your Business for International Success? Think Global Starting Day 1!
Katrina Burrus
Tell us a little bit. What’s the key message of your book?
Klaus Wehage
There’s quite a few, but a lot of the stuff that we talked about is also about building the capabilities within your organization to be successful when you go international. In the book, we talk about global class companies where we say that you need to think global early on as you’re building the business, because that will also be a little bit predicted in terms of how you’re going to be successful international in the future.
With a lot of the companies that we typically work with, with our consulting firm, we work with a lot of early-stage companies, we see a tendency for entrepreneurs and startups that are running scale ups that they hard-code the business around their local market. For example, I spoke to a fast-growing company from Korea about one and a half month ago. I can’t mention their name because I don’t want to kind of throw them under the bus here, but they have raised a couple of hundreds of millions of dollars, and they have 600 employees. And in the conversation with the leadership team and the founder and CEO, I asked them, “How many languages could you speak at the office if you ask all your employees?” And they kind of giggled a little bit and said, “Maybe three languages.” And that, to me, is an indicator that you hard-coded your business around your Korean market, and imagine if you didn’t want to take it international, that’s going to be extremely hard. Because if you hire someone in the US or in Indonesia and other markets that needs to deal and interact with the headquarters to be able to get resources and support for the expansion, that’s going to be very hard; there’s going to be a lot of latency, a lot of misunderstanding, etc.
So, what we talked about is that you need to think global much earlier because that will impact the way you build your product, your teams, your culture and even processes within the organization; that’s going to enable you to scale in the future as a company.
Know Whether or Not a Company Is Ready to Go Global
Katrina Burrus
Give us some concrete examples of how you would determine the readiness of a company to go international.
Klaus Wehage
There’s obviously a lot of elements, but I think the most important piece is around people; diversity in the organization.
To give you an example is Pleo which is a Danish company. When there were 21 hires within their sort of organization, they already could speak 17 different languages. Fast forward to today, I think they’re around 800 people and they’re a global organization. They’ve scaled very fast beyond Denmark, which was their first initial small market.
Another example is Canva, which is probably known today by most people who are disrupting Microsoft, Google, all those big incumbents. Before the pandemic, I believe there were around 200 people and they spoke around 70 different languages within the organization, had teams located around the world so they had much more of a distributed approach when it comes to talent development.
And I think when it comes to thinking that way and hiring people in that way, you also get eyes and ears into the world. You are able to see other patterns and trends that also can feed into how you build your product as well.
The Interpreneur Mindset: Why a Multicultural Mind Is a Plus When Aiming for the International Market
Katrina Burrus
So, you said about, okay, the languages are very important and the hiring. So, what about the hiring? How do you hire somebody that’s the perfect person for an international market?
Klaus Wehage
That is obviously very hard to identify. In fact, when we spoke to executives, that was by far the hardest thing to do; it’s hiring and team building. And I’m happy to kind of flash a little bit if you’re going to be showing this video later in some of your resources and where you distributing the podcast. We actually developed something called an interpreneurial sort of a mindset of an individual that you should look for when you want to go international. It’s sort of playing on that entrepreneurial concept, but is an evolution of that concept, if you will.
For those that will be viewing this podcast, you can then see that there is a pyramid of three layers where in the bottom, we say that there is the agile mindset—people who are iterative, resilient, growth-focused, sort of the classical entrepreneurial concept; the mindset that we talked about today. That has given away for companies wanting to have these agile thinkers within their organizations. People who can navigate bureaucracy, build coalition and buy-in, we label that as the company mindset. Those two together forms the intrapreneurial mindset within large organizations. Basically, people who drive certain initiatives, that moves the needle around digital transformation and innovation within companies. But what we then say is the sort of tip of the pyramid is the cultural mindset, with global mindedness and cultural curiosity that allows people and leaders to have empathy with local markets and ecosystems and cultures to then identify how to localize the business for successful expansion when they want to go global. And we find this to be extremely important. It’s the skill set of the next decade; also verified by a lot of the companies that we interviewed where they say, “You can absolutely not become a leader in the companies if you do not have international experience, because we are a global company.”
To give you an example of how to maybe identify these leaders, we often talk about formative experiences that sort of let them on the path to build an international career. I’ll highlight three people in particular.
Abe Smith, who you can see in the bottom right, he’s the Head of International at Zoom. He was an English teacher in a rural fishing village in Kyushu, Japan. That gave him the aspiration and the motivation to build a global career. He has that curiosity because he was pulled out of his backyard in America and planted in a completely foreign environment, and that really enabled him to build his global career. After that immersive experience in Japan, he then went back to the US. He joined a small bagel company, bagel as in eating bagels. He helped grow and develop that company, but he also helped that company expand to Japan as well. Again, going back to his experiences, his view into other parts of the world and seeing opportunity for that bigger company to expand to Japan, he gained that agile mindset and that agile muscle there.
Katrina Burrus
Klaus, I just want to make a point.
Klaus Wehage
Sure.
Katrina Burrus
You made a point that they’re multicultural, meaning in the language, they can speak several languages. There, he grew up at a significant time in his life in two different cultures. He’s neither Japanese or whatever first country he was from. He’s sort of in between; what we call sometimes global nomad, to say so.
Klaus Wehage
Yeah. I guess Abe Smith, he grew up in the US, but he went over to teach English. But there’s another example that we share about, which is Masami Takahashi. He led expansion and growth for Uber and WeWork. A very successful person but he was actually living in other parts of the world in his early life because his dad was a journalist. He lived in the UK and he lived in other parts of Europe. He was pulled away, obviously, from the Japanese culture, but he really was immersed in different types of culture that gave him that mental flexibility, if you will, to operate in different types of environments; in hot and cold water, if you will, if you consider, like fish and all that stuff.
So, I think it gives a lot of that flexibility in a human being that is able to tackle something very difficult as it is with expansion, where you take a company from one market to another and you have to realize that it’s going to be very different, that journey.
The Team Building Framework: Traits and Skills to Look for When Building an International-Literate Team
Katrina Burrus
What can you explicate that is the particular skill that they get from having multicultural references, national cultural references? What is the skill set?
Klaus Wehage
I guess I can kind of show you another framework that we built where we talk about traits and skill sets. We built a Team Building Framework in the book, but I just want to portray and this is also something that I want to clarify, something that we talk about in the book—we’re not culture expert per se, but we have built tools that allow companies to identify certain things that are important when you go international. And with this team building framework, we have built certain traits around that you should look for when you actually want to build the team when you go international.
For example, in the top left corner, you see the Interpreneur Mindset, as I talked about a little bit earlier.
Katrina Burrus
Right.
Klaus Wehage
Agile mindset—people have grit, comfort with ambiguity, open to failure, problem solving, customer development mindset. Then the company mindset is strong collaboration skills, navigating bureaucracy, etc. But the cultural mindset is really values diversity, holds bias; I think it’s extremely important when you want to take a company international because you can’t be biased towards what’s already been done, because then you’ll fail.
But I think one of the most important things that I’ve found is curiosity. You need to be curious. Because if you’re not curious to learn, then you’re not going to be able to understand. We say it a little bit in the book—if you seek to learn and understand, nothing will be foreign. That’s one of the quotes in the book, and we’re true believers in that. You really need to just engage and learn and understand before making decisions when it comes to international, in our opinion.
Katrina Burrus
Yes, it’s an open mindset so that you can observe and then understand then adapt.
Klaus Wehage
Yes, exactly. Hopefully that answered your question.
Katrina Burrus
Yes, it did.
Localization Resource Team: Key Business Aspect to Evaluate When Transitioning From Local to International
Katrina Burrus
So, tell us what companies need to assess for their readiness to go international. You’ve mentioned the hiring process, the mindset, the team mindset. What other things that they knew on a business level, like cost or scalability?
Klaus Wehage
We often get the question from companies, “How many markets can we tackle at the same time?” And it often depends on the capabilities you built within the organization. We often say that “How many customer development programs can you run at the same time?” That’s the big question, because at the end of the day, international expansion also becomes a stress on the organization, because all of a sudden you need to spend resources on other markets; you need to change your product, you need to hire new people in new countries. So, it impacts all functions of the organization.
So, one of the things that we talk about in the book is building structures and processes that really allows for this to happen. We developed something we call a Localization Resource Team within a company that in the early stages can be shared or fully developed as sort of a mechanism. That localization resource team is sort of the front door for local teams to interact and they can help navigate the organization bureaucracy that will happen inevitably to help get these resources internally.
For example, if a local team says, “Oh, we need to change a part of our product in order to really fully resonate with the local consumer”, then that localization resource team can go and actually get that done internally within the company; go to that particular function within the company to make sure it becomes a priority within the organization. Because what often happens when companies go international is that the organization, the headquarter, or the established part of the company is biased towards what’s already been done. And so, you need to find a way to avoid this to happen. Because obviously, when you go in a national, again, you can’t just hold to that bias that we talked about a little bit earlier. You need to relearn all of a sudden. You need to be open, and you need to have that curiosity to be willing to change as an organization and listen to obviously the local teams that are understanding and doing this discovery at a local level to figure out how to best find product market fit in new markets.
Globalization & Localization: The Localization Premium Analysis Tool That Helps Businesses Localize to Get Collaborative (Not Disruptive) Traction
Katrina Burrus
I want you to define localization and how it differs from globalization for our listeners.
Klaus Wehage
Localization—and I’ll flash something again for those that want to view this podcast. We have developed something called a Localization Premium Analysis tool in the book. What we say is that localization is not just language translation, which it’s often associated with that; it’s actually considering all aspects of your business. Everything, from your marketing to your sales organization and sales model to changes in product to even hiring and so forth, right? You need to localize the business to be successful.
And we share a little bit of an outlier example when it comes to localization with the company like Zendesk. Zendesk is a Danish company that chose to scale in the US. They’re located in an area called Tenderloin, which is an area in San Francisco that has a lot of homelessness, and they’re a big proponent on community impact; very big in that. And so, they’re focused on the homelessness community in San Francisco. But then when they expanded to Singapore, the employees were like, “Homelessness does not really resonate with us because there’s not a big issue around that in Singapore.” They instead actually discovered that there was a lot of senior isolation happening, and so they started to focus on that because as soon as people turn 62, they get pushed out of the workforce. So, the community impact area, they localized, to focus on that in Singapore.
But other localization stories that we share is around, like for example, product. DocuSign, which is a signature platform from the Bay Area, when they were expanding to Japan, they could easily say, “Hey, signatures—which is obviously the common norm in the US and around the world to sign documents—that’s going to be how we enter into Japan.” But they realize that that’s not the norm in terms of signing documents. Actually, what you do there is stamps, hanko stamps, which is a physical wooden piece that you just press on a piece of paper, and that’s the way you sign documents. And so, they recognized that cultural importance of stamping documents in Japan and took a little bit of a unique approach, in my opinion, where they then partnered with a local hanko stamp maker called Shachihata that only does physical hanko stamp. They said, “We want to partner with you and we want to come to Japan. We want to respect this cultural norm, partner with you, and then create an e-hanko on the platform.” So obviously, we could adhere to that practice, and they will share a part of the economics with you as an organization.
Katrina Burrus
But how could they do that virtually if they’d like it stamped and physical?
Klaus Wehage
They obviously talk to each other in terms of how to localize that part of the platform. I don’t know the detailed story around that, but the unique part of the story is that they recognized that cultural significance and they also shared the part of the economics. And instead, for example, if you’re comparing it to Uber as a company that went in to disrupting the markets and leave a lot of scorched earth and asking for forgiveness later, pushing the model through different municipalities, saying “we’re just going to go all in and disrupt everything,” they were very successful because they didn’t disrupt the hanko stamp making sort of industry, but they want to partner with them instead. So, what we see here in the book is that you should think about partnerships rather than disruption when you go into new markets, because often times, you’ll fail.
Katrina Burrus
So, in Uber’s case, what would you have suggested to them? Because they were disrupted to work with the taxis or to work with the government to do a transition process.
Klaus Wehage
Obviously, I can’t give you the exact strategy for them.
Katrina Burrus
Of course.
Klaus Wehage
But what I would say is that they should have taken much more of a collaborative approach instead of being disruptive; figuring out how can we enable and support and grow the industry, and figuring out a way to actually collaborate with the regulatory environment to introduce this to the industry. That will be my recommendation overall, and not just go in and say, “Hey, we’re going to enter, we’re just going to wait until you guys react in the market and we’re going to disrupt as much as possible and then ask for forgiveness later.” That didn’t work, obviously. That worked in the US, but that model didn’t work abroad. So, I think it’s about being culturally sensitive and also be more collaborative when you enter in with a disruptive technology, as Uber was inevitably, obviously, to a more traditional industry in the market.
Katrina Burrus
Well said.
The Business Model Localization Canvas: The Importance of Revisiting the Company’s Operating Model and Asking Key Questions
Katrina Burrus
What happens if it’s an American that has experience selling US Products in the US and they want to go into international business? What would you suggest?
Klaus Wehage
As an overall process, you need to revisit customer discovery and customer development. We built a tool called the Business Model Localization Canvas, which I can also share, and we talk about when you want to start to go international, it’s about trying to learn and understand the beginning. And so, we talk about you need to do what we call localization discovery. You need to go in market, you need to go in to talk to stakeholders, you need to then learn and understand how you possibly need to adapt your business model to be successful in that market.
What we often see companies fail with is asking key questions. If you look at this model that we have here, we say you have to take your validated model in your initial market and run it through two filters—government regulation and culture—and then create your hypotheses in terms of how you need to change. And so, if you take the key partner category as an example, when you expand the business into Middle East, in a lot of Middle Eastern countries, you have to stand up a joint venture and not just have your own entity operating. So that impacts the way you operate in the market. So, that’s a government mandated thing that you have to do. That’s government and regulation and how they impact your ability to operate in that market. But in that culture example was DocuSign, cultural norms, where you have to partner with a local entity and local organizations then introduce the product to the market.
And I think often, when we work with companies, it’s about going through, okay, what is your business model? What made you successful at home? And let’s then identify what are the key questions you need to ask yourself to challenge that business model when you then go international. By figuring out what are those key questions for you as an organization will then help you identify who to talk to when you then want to go and do your localization discovery, going to these new markets. It’s really about thinking about these things so you fully understand sort of what are the most important questions you have in mind.
Localization and Market Entry Costs: The Costs Associated With Going International
Katrina Burrus
Well said. Brian Dumaine, who was on the show earlier, he wrote a book called Bezonomics, and he said the biggest challenge that Amazon had going international was first, the transport cost, the privacy rules, the hiring regulations, which made the cost and the resistance to buying also much higher.
Klaus Wehage
Right.
Katrina Burrus
But for example, the iCloud, the cloud storage, was easy because it has no boundaries.
Klaus Wehage
Right.
Katrina Burrus
So, those are some of the costs, I would imagine, that are higher going international.
Klaus Wehage
Right. I think the whole cost element of it is a little bit abstract to many organizations when they want to go international, and that’s why we developed the Localization Premium Analysis Tool—the spider chart that I showed you, and we have a back-end tool actually there that helps you fully understand all the things you need to change in your business model, and it’s not just that visual tool. But in that tool, back-end tool, we’re then also are able to outline what are the costs associated to these localizations and what at the end are the market entry costs, how much will it actually cost you to enter into that market. Then it’ll also allow you to map out what are the priorities now versus later, what’s the stage one in terms of localization implementation, what’s the stage two, stage three, stage four, etc. So, the point being is that we’re trying to bring it down to a very practical level and granular level to map these things out. So, it helps you to predict those costs and then plan a little bit better around your expansion strategy, because also, when you expand to new markets, you can’t just say yes to everything as an organization; you also have to pick say no as well. Part of that process is also saying “No, we’re not going to do this now. We may be doing that later.” So, you need to figure out what are the most important things to change when you enter into a market and then you can kind of bucket the other things in terms of thinking about doing that much later and maybe when they see other patterns in other countries that are requiring those localizations as well. I think that was one of the big things that we learned from an executive from Slack. He says one of the most important things when you go international is also to the ability to say no. It’s a very simple concept. You have a tendency when you engage with customers in new markets, say, yes, we want to do it, we want to do it, we want to secure a customer, we want to do business, etc. But as soon as you say no to everything, you’ll put a lot of stress on the organization overall.
The Stress of International Expansion That You Have to Anticipate and Address
Katrina Burrus
Can you describe a little bit in detail the stress it puts on the organization? Give us an example.
Klaus Wehage
That’s a good question. The stress it puts on an organization; let me think a little bit about that.
To give you an example on the stress it puts on an organization when it comes to expansion, let’s pick a function as an example. When you go international to the point of that Korean company I talked to a little bit earlier, they want to be able to scale up fast, hire fast, etc., and they have built a very much a Korean HR function, and then all of a sudden, they’re thinking about, “Can we actually get that HR function to hire in new markets or do we have to create a whole new HR function in the company?” That becomes a stressful sort of mechanism you need to build within the organization. And how do you align both parties if they built a separate function as well? Because you also want to share sort of universality around culture and values, etc. So you have two different HR functions, maybe misaligned as well. There’s a lot of complexity all of a sudden that gets added to it when you haven’t really built that muscle up from the early stages of building your company.
And so, you need to think about it. As soon as you expand globally, it puts the pressure on product, it puts a pressure on marketing team to serve that local market, to give them use cases to communicate to customers, it puts a pressure on the sales model or even customer service.
For example, in the US, customer service is fully digitized, but when you go into Japan, Japanese customers expect a human being to service them; it’s a call center. In Korea, we even heard stories about big Korean conglomerates. They will ask you to have a full account team to be hired to service that customer, to be dedicated to that customer over a long time. And this becomes hard to manage.
And so, there’s a lot of elements to the added stress and also culture. All of a sudden, how do you manage your local team in Japan? How do you build a flatter, hierarchy type of culture and transparent type of type of culture that you often want to develop in the US? How do you create the same mix in Japan? It’s often not that way. Feedback is not as openly shared as it is in the US. How do you then change the way you have your feedback in Japan and engage with local teams? How do you culturally conscious manage that team, as we also talked about in the book? So, there’s a myriad of examples that we can go through. I’m happy to talk about it more, obviously.
Expert Advice for Successful American Businesses Seeking International Experience
Katrina Burrus
So, somebody, an American, worked in America, was very successful. What would you advise him or her to have international experience? What would be the first steps, according to you?
Klaus Wehage
I think it’s about being immersed, to be honest. Because if you’re not immersed, you don’t understand the reality.
To give you another example, and again, I can’t mention a name, but we spoke to a managing director of the UK, and it’s an American company, very successful in the US. He has been leading that market, I think, for the past three years, and I think there’s three co-founders. We asked him, “How many times have the co-founders been to that market?” And he said, “One time, one of the co-founders.” And I think that’s often the biggest mistake that we see with companies—that the leadership team are not exposed to the local reality.
We often hear also the story of Airbnb when they were expanding to Asia, and in particular, Korea. Brian Chesky, the CEO and Founder, he actually went over to Korea before they actually launched, and actually, he was trying to observe users of Airbnb in Korea through a one-way mirror to understand how they actually use the application. He understood the reality as well in that market. So, being immersed.
And I think one of the most important things that you could do as a local leader to try to engage with leadership team and have them understand is to make the leadership team fall in love with the country. That is Masami Takahashi that said that word to us. You need to inspire them to be emotionally involved in that market, because if they’re not emotionally involved, you’ll not get the resources you need to lead expansion. And that only comes by exposing them to the environment, immersing them, having them feel the culture, and really understanding that local context.
Katrina Burrus
I think that’s a great point. I interviewed also on this podcast, Excellent Leadership, Peter Brabeck who was the CEO of Nestle and past German, and he said international experience and speaking several languages is important. I said, of course, then the usual question I ask is why? And he said, look, we have like Maji, it’s global.
Klaus Wehage
Right.
Katrina Burrus
The product is global. But she or he as a leader has to understand the local culture and the local taste because it’s adapted to that market.
Klaus Wehage
Right.
Katrina Burrus
And without that kind of experience, they would standardize everything, and of course, wouldn’t have the same effect.
Klaus Wehage
I agree. My experience in in Vietnam, that was in 2012, I believe, I was a part of a relaunch team in Vietnam for Carlsberg—one of the biggest beer room companies in the world, and we were also doing user testing with local consumers. One of the things that we found out with the beers that they had in the market is that the consumers didn’t like it; it was too bitter. Because Vietnamese people like sweeter things, sweeter beers and all that stuff. And so, if you don’t understand how they react to certain taste in that market, you’re going to be not successful, because you can’t just change a person’s palates, right?
Katrina Burrus
Yeah.
Klaus Wehage
You need to localize it. It sounds very simple but there is a tendency and that is the bias that we talked about a little bit earlier to standardize; that is the bias. We were successful at home, that can be translated abroad, but it just can’t. You have to really figure out what are the most important things that you need to adapt. And when it comes to consumer products and beverage products and food, taste buttons, you can’t change that at all; that’s not going to happen. You need to figure out; that’s the recipe for all.
Katrina Burrus
Yes. It’s very culturally specific. I’m coming from Switzerland, I love chocolate. I come here, I find it too sweet, too this, too that.
Klaus Wehage
Yup, exactly.
Huge Advantage of Going International (Besides Making More Money)
Katrina Burrus
So, if someone wants to go international, what would be their biggest advantage of going international besides making more money? What would you say would be a huge advantage?
Klaus Wehage
I would say you’d be able to make your product or company more resilient to competition. That would be my main message.
To give you an example, one of my good friends, he is one of the leading investors in Southeast Asia, but he was one of the guys that founded a company called Mixi in Japan, which were the Facebook of Japan back in the day; very successful. I think they were valued around $3 billion back then. And then all of a sudden, Facebook came in and they outcompeted them, and so their valuation dropped very, very quickly. What later they were actually good at they were able to pivot that company into being a gaming company because they have a large usage still. But if they had maybe gone international earlier, they would maybe have been able to better compete against Facebook. But the reality is that they weren’t able to compete because they’re so focused on local markets.
Now, it can also be a competitive advantage because you’re such a local company, you’ve been able to localize in the hardcore around the Korean market that then you also are able to keep competition away. Kakao is a great example in Korea that is an app now building a super app. They’re the most used product in Korea in terms of application, and they have Kakao Taxi and all that stuff; they have a lot of different services, so that’s very hard-coded around the Korean market, but they’re not successful abroad. So, in Korea, there’s a tendency to have very much a local product.
There’s pros and cons, and you have to pick and choose. Do you want to be a global company or do you not want to be a global company? If you don’t want to be a global company, you are going to face competition down the road for sure. It all boils down to your ability to be super hard-coded, super local that you could keep competition off. If you’re not, then you’re likely going to be outcompeted. It’s a matter of a mindset and what you pick in terms of priority as a business. But we believe that you should think local in particular around when you’re a technology company; I think that’s important.
Katrina Burrus
Speaking about technology and social media, the Chinese invented TikTok, and now, it’s rampant here in the US.
Klaus Wehage
Right. One of the few success stories. I don’t really know many other Chinese success stories abroad and in particular in the US. You typically don’t see that too often. And now, also, there’s a conversation around whether or not it’s been used for bad things, but that’s a whole separate topic. But that’s one of the few success stories. We don’t see a lot of other companies being successful in China either. I know LinkedIn just pulled out of China, as an example. Before, I’m talking about them being one of the only social media company or one of the few successful companies in China, but they also had to pull out because of certain issues that were arising that I can’t really speak about here on this podcast; that’s a little bit more sensitive. But yeah, you’ll see, typically, those two markets don’t really gel well with each other and a lot of technology companies has to simply just not pick going theirs.
Insights on the Present Decline of Globalization
Katrina Burrus
I want to ask you one last question. Globalization was accelerating in the past and expanding.
Klaus Wehage
Right.
Katrina Burrus
Now, we could ask maybe it’s not going to be accelerating and might even decrease. What’s your opinion about that?
Klaus Wehage
I think there’s two sides to the story, obviously. But yes, you see companies that had supply chains and manufacturing in China pulling out, reevaluating things because it’s high risk for them to be reliant on having things produced in China. I think it’s like Vietnam that gets part of it and other Southeast Asian countries now. And then in Europe, around energy. I know Germany was energy dependent on Russia, as an example.
Katrina Burrus
I think 60% or something like that.
Klaus Wehage
Yes.
Katrina Burrus
Tremendous!
Klaus Wehage
Yes, exactly. And they all obviously have to reevaluate things, right? So, it’s very dynamic around those things. But I’m also a big believer that there is also an opportunity here. While other companies are pulling back in terms of international, there’s an opportunity to also push forward and capture market share.
To give you an example, a company called Kavak that’s based out of Mexico, it’s an out of tech platform, trading platform, and they raised a lot of money, very successful company in the region. They announced that they’re going to be investing around $200 million in expansion. They have learned that muscle. They have expanded into other countries. They have a little bit of a playbook already developed around understanding how do we actually enter into a market, how do we find product market fit, and also how do we scale? And so, they’re fairly confident with their methodology, and then they’re saying, “Hey, even though there’s an economic crisis coming, our model is a little bit recession resilient. And then also, we understand the playbook, so we’re going to push forward.” So, you can have that as an opportunity, as well. There’s also a lot of companies that are very successful around the last crisis, right? I think Airbnb got born out of the crisis back in 2008, 2009. And so, those that are able to accelerate right now and see as an opportunity can actually be the incumbents of the future.
And there’s also actually an opportunity around talent, because right now, there’s a lot of people who are getting laid off, so you can get people at a lower cost, and there’s not that same talent-conscious as we’ve seen over the past many years so you can actually get more resources as well for cheap compared to before.
There are certain opportunities that you can also tap into even during an economic crisis.
Katrina Burrus
Yes, and now, you don’t hesitate to really work with people in the Philippines or different countries or different platforms and all virtual.
Klaus Wehage
Right.
How the Virtuality of Business Today Has Affected Businesses Internationally
Katrina Burrus
How do you think the virtuality of the business has affected business internationally?
Klaus Wehage
By virtually, do you mean distributed teams and everything?
Katrina Burrus
No, being able to be on Zoom like we are today or do business virtually instead of face-to-face.
Klaus Wehage
I think there’s always a spectrum around these things. I think we moved so far to one side in terms of virtual teams and all that stuff that it’s been obviously the model during the pandemic, but I think we’re going to swing a little bit back now again.
I think when it comes to doing business, doing sales and all that stuff, I think still, you have to be immersed in countries, in my opinion, you have to be close to customers, because things are changing so fast and rapidly in a local market. So, when you are in the customer’s side, I think it’s still important to be close to the customer. If you’re not close to the customer, it’s hard to really truly understand what’s happening at a ground level.
But obviously, there’s things that can be done virtually, as well. You’re seeing a lot of companies going a full virtual model. I think in order to do that, you have to have a really strong company culture to be able to operate fully virtual as a business. I think it’s natural human behavior to also have a home as well. And so, if you don’t have a home, people to go to, feel that bond and yell, it’s going to be harder to retain people as well; and strong culture will be that, but also the relationship you form at the job.
And so, I’m not so sure that I’m a big believer in full virtual models to the extent that you see some companies do, because I’m also very much a person that likes human interactions, physical interactions with people, and kind of being able to see people beyond their shoulder and up, actually see how they move their hands and all that stuff. I think it’s really important also when you engage with the customer how can you analyze how they sort of respond to the conversation. You can assume, but it’s still a limited view that you have. If you don’t go to dinner with them, you don’t see how they’re interacting with other people, then you cannot develop the same level of trust, in my opinion, as you are when you are in front of a human being. That’s at least my opinion.
Katrina Burrus
Yes, I’m a fan of the author Nonaka who said there’s two types of knowledge—the explicit knowledge and the tacit knowledge.
Klaus Wehage
Yeah.
Katrina Burrus
And there’s as much communication in the tacit knowledge, meaning how they observe them in public, what they’re not saying, how they say it, the body language. It’s all a form of communication that can’t be readily tapped into.
Klaus Wehage
Imagine if you’re Nike, and I think the former she was like a VP of marketing in Nike, we had her to present to a Japanese cohort a couple of weeks ago, she shared with us a story around Nike when they went into Japan. They couldn’t really understand why consumers didn’t really respond to the beautiful shoes because they’re beautiful on the side and everything and very well-designed. But then they found out that when Japanese people buy shoes and they look at the shoes, when they wear them and everything, they look at the shoe from above, because that, to them, is the way that it’s beautifully designed and everything, so they didn’t respond well to the design of Nike shoes because from above it didn’t look as nice. For us, it’s on the sides. When people can see our shoes, when we walk about the streets, and you cannot do that when you’re virtual. You have to actually be there, physical, in the stores, to actually see how people use the product. The same with Brian Chesky and Airbnb. You have to go and actually see how people respond to their app.
So, I think a lot of the business does surround understanding localization and changes in the product and business model. That has to be done at a local level, in my opinion.
Katrina Burrus
Klaus, I could talk to you forever or interview you forever, but we’re coming at the end of our podcast. Where can people get a hold of you and purchase your book?
Klaus Wehage
Global Class can be purchased on Amazon, as an example; that’s one. And then they can always reach out to me on klaus@globalclasscompany.com. And again, we work with a lot of scale-ups and corporates that want to refine their international strategy, and happy to support companies as they are going through this journey. And in around Q2, we’re going to be launching an online curriculum on this topic as well. So, there’s going to be an online learning platform where people can just go into and tune in on this topic and learn as fast as possible through bite-sized videos.
Katrina Burrus
Much needed scale, too.
Klaus Wehage
I think so.
Katrina Burrus
Thank you, Klaus.
Klaus Wehage
I appreciate you. Thank you so much.
Katrina Burrus
Thank you.
