Not just for the big guys!

These days, everyone wants to go global. These days, everyone can.

When we think of globalization, we tend to think of giants - of the GMs and the P&Gs that have the depth of resources to project their presence anywhere in the world. But that's changing. Today, small and medium-sized companies are going global as well. They are capitalizing on today's shortened product lifecycles and extending their reach via new computer and telecommunications technologies and a growing number of strategic alliances and ventures that let them pool resources to tackle large and distant markets. And these companies are finding a lot of reasons to look beyond their own borders, with overseas markets- and especially, emerging markets-offering the potential of high growth rates and early-entry opportunities that can't be matched at home.

But these smaller companies also face significant challenges as they head overseas. Going global means greater investments in technology. It places heavier demands on the time of CEOs and other senior managers as they oversee far-flung operations and alliances. It requires specialized skills to deal with complex tax and currency issues. And it requires greater care to avoid the pitfalls of doing business in different legal and cultural environments.

For a smaller company, then, going global has the potential to stretch financial and human resources to the breaking point. The trick, of course, is to plan and focus those resources where they can do the most good. In international business, knowledge is power, and smaller companies can thrive by taking the time up front to clearly understand the challenges, assess their own resources, and find the right partners and markets. Once their international efforts are launched, they should be prepared to learn and adapt, and apply a "heavy dollop of listening," says Timberland CEO Jeffrey Swartz.

In this Chief Executive roundtable, co-sponsored with Deloitte & Touche, much of the discussion centers around the difficulties of working overseas, from collecting receivables in South America to finding the right managers in Japan. But just as many, if not more, of the CEOs' comments center on solutions and successful approaches to coping with such international challenges - and above all, on the importance and inevitability of moving into international markets. By making a serious, long-term commitment to going global, and "recognizing it for the really strategic step that it is," says Deloitte & Touche's Jim Copeland, small and medium-size companies can play successfully in a global arena - and find a world of new customers.

SMALL COMPANIES, BIG CHALLENGES

Margaret Mulley (Deloitte & Touche): On the surface, all the ingredients for success for small and midsize companies going global are there. But it's not that easy; there are real challenges, and it takes real discipline. Many smaller companies are not necessarily interested in introducing that much discipline into their organizations and their decision making. And when you make a mistake in going global, it can be costly, and smaller companies don't always have the financial wherewithal to withstand those mistakes.

In our observations, these companies often underplan their entry into a market. We worked recently with an investment firm that had decided to go into the brewing business in Eastern Europe and to take their practices and ideas there. What's happened with great frequency is that the locals there will lock out the foreigners who are coming to look after their investment and implement the changes necessary' to move the business forward. It's been a disaster. They underestimated the difficulties of the local business environment and failed to understand who and what they were up against.

William R. Berkley (W.R. Berkley): The biggest mistake I've seen is people thinking that the customer's culture is the same as theirs. In reality, the things that we take for granted can be unbelievably different. In some places, everyone pays their bills in cash. In Indonesia, a company might have no general ledger until the end of the year, when they need to balance the books. There's no electronic payment system any place in Asia that really works, except Hong Kong. The fact is that the differences in the culture and in how businesses work are astonishing.

We sell insurance, and in one place we have messengers that go around house-to-house collecting premiums. That's why we were a success there, because we collected the money. Two of our big American competitors there thought that people would really come in and pay their bills. Just 22 percent paid their premiums to one of our competitors.

Harry E. Gould, Jr. (Gould Paper): You have to consider the culture's relationship to the financial aspects. When I was a chief financial officer, I was looking at this major manufacturer we owned in France. After the obligatory wining and dining and visiting the plants, I said, "Well, we need to look at the books." And the French gentleman said, "Which books do you want to see?" I said, "How many do you have?" He said, "Three - one for my family, one for the revenue collector, and the real one." I said, "Let's start with the real one." [Laughter] Now, he didn't think anything about that. There's a cultural mindset that has no bearing on the reality we are used to here in the United States.

Henrich Heitmann (BMW Holding): Let me start with an observation from my own industry: In the Daimler-Chrysler merger, I think that the Americans haven't really understood what they are getting into. The whole discussion about German codetermination has not been addressed. My understanding is that there will be a new company called Daimler-Chrysler AG, and it will have a German supervisory board. Fifty percent of such boards are union members. In Germany, that is not unusual. But I think for Americans, it's the strangest thing that can happen. I always try to provoke people by asking, "Does Mr. Eaton know that the union members will determine his bonus and his share options in the future? [Laughter]

Arnie Pollard (CE): Henner, when you decided that you were going to come to the U.S., what did you do to make sure you understood the differences in culture, and what issues did you uncover?

Heitmann: I think that making the connection between Germany and the U.S. is not difficult. Most Germans have a certain capability in your language; they can find their way around, and I think they have a basic understanding of your culture in the States. But, it took me more than a year to understand that an American boss can make an observation, and people will understand that as an order. So if you visit a new plant, and say, "I think this wall, which is painted white, doesn't look right," the next time you go there, the wall will be painted yellow. That is strange to me. There is a German word that means, "you obey in advance," which is something that I have only experienced in the States, and in no other country where I have worked. The people here were really trying to observe what I wanted, and that was for me a very new experience.

Phillip D. Ashkettle (Reichhold): The globalization of systems is also a real issue. We happen to be one of the leading-edge folks on SAP/R3. We went into the U.S. with it early, and had a relatively economical introduction. But now, as we really become determined to be truly a global company, we see that we're going to have to have the same information system everywhere, and the capabilities to communicate. I think it's critically important to do that, but it's also very, very expensive.

Pollard: Are you prepared to make that kind of investment?

Ashkettle: Yes. We are doing it, and we believe it will have value because we have opportunities with our global accounts, but only if we manage them as global accounts. The number [for installing SAP] in Europe, which is roughly one-third of our business, will be twice as much in cost as it was in the U.S., because of multi-languages, multicurrencies, multi-cultures, and the time curve. We still have Latin America to go after, which is even a smaller business area for us, but we're going to do the same thing there.

FOREIGN ENTANGLEMENTS

Mulley: Smaller companies very often go to market overseas by doing some sort of alliance or joint venture or acquisition. What often happens is that smaller companies, because they prefer not to write 50-page contracts and dot every "i" and cross every "t," fail to give themselves an escape clause that would help them in case the business doesn't work out well with that joint partner. It's also very difficult to make sure you have your goals aligned with that alliance partner, and to make sure they have the customer focus you want them to have.

M. Farooq Kathwari (Ethan Allen): Because we don't like a lot of overhead, we have gone into joint ventures, partnerships, franchises. There's a common thread in all of these: We are a service business that provides home decoration. So these folks better understand home decoration and want to do it. If they don't, they're not going to be successful. So we look for partners that have, as we do in the States, an understanding of home design and decoration, as well as integrity.

William R. Hill (OAO Technology Solutions): We decided that in every new market we go to, we're going to take on a partner in order to spread the risk, and to get the advantage of their knowledge of their culture and the business practices. But more importantly, now, instead of going to two or three countries, we can go to six or seven, and even if we fail in two or three, we can start up again.

Berkley: Our business is banking services, and we recognized that as a small company, we needed to have an image or a name. So we spent two years searching for a company that was domestic and that didn't want to go overseas. We found Northwestern Mutual. So, the first thing we did was find a partner whose name and reputation would put us on equal footing with other global companies.

[In terms of partners in other countries], you often hear people say: "We will keep our business here, and we will set up a new company to be a joint venture with you." You don't get anything. They really want your technology, they want your expertise, and maybe you'll sell something and maybe not, and they are going to keep their business right alongside of you. There's something wrong with that. It doesn't pass the common sense test. If something doesn't make common sense, there may really be something wrong. You may not be dumb. [Laughter]

Stephen B. Siegel (Insignia/ESG): Things are different in different places, but for me, it boils down to your people, and qualifying the - whether it's the American that can go over there, whether it's the right Frenchman in France - it's the right person that is the key. You have to be comfortable, if you're going the acquisition route, with the people who are running the companies you're acquiring. Take whatever time it takes. We're finding in our international acquisitions that we spend a little bit more time getting to know one another.

Peter T. Francis (J.M. Huber): You do have to find the right person to run the business in the various locations. That has always been the case, and it makes no difference where you are. And when you come up with an answer on how you pick that person, will you drop me a line, please? [Laughter]

Hill: I believe the common denominator is the entrepreneur or manager or leader, in Mexico or the U.K. or wherever. It's that one person who's going to stand up every day and lead that business venture, and lead those people, and understand how to work in the market. To me, that's the linchpin in all this.

Erick J. Laine (Alcas): I think probably the clearest thing we've learned is that there is no single approach to manning a country that works everywhere. Our experience is that you really have to let the countries dictate what works.

For example, in Australia, which is our best-performing country, we took an American manager and sent him over there, and the thing took off like gangbusters. When we entered Korea, we recognized that it was a totally different culture than we had here in the U.S., and we felt we were being pretty smart in training Korean-born Americans to take the business over there. We felt we had the cultural issue covered, and boy, did we learn differently. That culture gets lost in a hurry when they come here and live through their teenage years. They're not Korean anymore, they're American - and we were very late in finding that out. We had to completely reverse ourselves, and we ultimately learned that we had to take a Korean national and train her, and she's making Korea grow like we now know an American never could. So it's clear to us that we have to just watch it country by country.

Jeffrey B. Swartz (Timberland): One of the mistakes we've made was to sort of read the book that says if you want to operate a business in Europe, you have to operate with a French-French person, an Italian-Italian person. It says that you can't put a German in charge of European business, because it'll work in Germany, but it won't work in France, because the French won't respond to a German leader. So we went through some of the most impressive-looking guys, the type that had been in European/international business for 20 years, and it was a disaster for us. In fact, we found that Americans do a spectacular job at running American brands in Europe.

In Japan, we bought into the logic that there's this tremendously difficult distribution network, and you have to be careful. We showed up, and we played the game, and nothing happened. For two years, we did all the fight things, and we did absolutely no business. So we said, let's start again, with the assumption that this isn't Japan, that this was just a place to do business - how would we do it? We changed one thing, which was this attitude about having to be culturally sensitive. Yeah, we were culturally sensitive - and irrelevant. Now, we're culturally respectful, and we've got a business.

I think we were afraid of who we were. But we now send somebody from deep in the heart of our journey and say, "Make this thing work." There are a lot of different languages now spoken in Timberland; you can visit us in 80 different countries around the world. But we all speak Timberland, and have a notion that our brand is relevant to something. Because we have products and services, but in the end, we're a brand. And every time we've tried to act like a global company [at the expense of the brand], it's been a disaster.

Heitmann: We all are used to qualifying people and putting them into a certain category - German, Dutch, British, or whatever. I think that doesn't help us any longer. Our world is so global - we share information and communicate so easily around the globe. I think we cannot use nationalities as denominators and descriptions of people, and we have to accept that we have to deal with individual people, rather than with nationalities.

BUILDING GLOBAL SKILLS

J.P. Donlon (CE): Is there any sort of general best practice in terms of acquiring the knowledge or skills to work and manage globally?

Ashkettle: One of the things we do is bring somebody from offshore in to run our international business, our export business. We bring them into headquarters; they learn the culture there, and then we send them back into their country. That has worked very well for us.

Heitmann: We all tend to send our people from our home countries into the overseas countries, and pay a hell of a lot of money for that. I would suggest that everybody spend the same amount of money to educate people from those other countries in your home organization.

Mulley: Smaller companies are often so resource constrained that to even think about doing that can be awfully hard, because you really feel that you're going to be taking someone who's critical in that organization off-line to bring them back. So having that kind of meaningful exchange is critical, but it can be awfully tough for smaller companies.

Swartz: We don't have the resources of a larger enterprise that would allow us to do a lot of formal training things, but I spend time with our people overseas - I've spent about a week a month for the last 10 months in Europe - because they have to "get it." We're selling stuff that we believe in - it's about believing in the brand and its mission. We ask all our sales people to come to our factories, as a first step in the process, and we have them make a pair of shoes for themselves - because I want to make it personal and something you can't shake off. When that happens, we've found that they can come into our culture.

Francis: When you go into different countries, you're usually required to have some sort of a governance board. We found that that's an ideal situation to expose people to that country or to bring in people from outside the company from the local culture, so you get some of the cross-fertilization that you need. For example, in Finland, we have a technology-based company, and we had people on that board who are in either science or law there, and it's been extremely helpful. So one of the things I'd urge is to make these active boards instead of passive boards that are just rubber-stamping things in order to fit the legal requirements of the country. Make them active, and do something with them - it's a great opportunity to educate your company.

Joseph E. Griesedieck (Spencer Stuart): If you're going into a country where you have no experience, the advisory board can be a very helpful tool to advise you on how to get around some of the cultural issues, certainly, but also issues having to do with employment rules, regulations, that type of thing, I wouldn't suggest it as a permanent solution, but I think it's a bridge to get you to the point where you want to get.

Frank V. Cahouet (Mellon Bank): If you're really serious about going international, you should try to integrate into your senior management somebody who truly has international experience. The CEO cannot shoulder that; he just doesn't have the time, and international trips take so much time. When you have somebody going to a country and arriving Sunday night and leaving Friday night, they don't really have the time to truly begin to work through problems. You've got to have somebody who can stay there, stay with it, and have an impact.

Also, I'm on a major European company's U.S. board. They have very deliberately populated that board with a preponderance of Americans, because they do a huge amount of business in the United States, and they feel that it works to their advantage to really understand the mores in the States.

Donlon: Joe, can you give us a reality check on all this? Off the top of your head, what's the instance of U.S. companies putting non-U.S. people on the board?

Griesedieck: As companies become global, the demand for international directors has become much more pronounced. I would say that [placements] lag the demand, for a very practical reason: If you're having eight to 10 board meetings a year, trying to get somebody from Germany to come over and attend a meeting in Silicon Valley or Chicago is very, very difficult. There's a huge time commitment.

Heitmann: There is always the key question: Do you understand, really, the conditions under which your people work? Do you have people from top management who are prepared, who have experienced these differences, and who have this full knowledge of what is going to happen? I think that kind of responsibility lies with us.

You have to have international people who are really prepared to [work across cultures]. I was sent to Singapore as financial controller. I had been trained as a lawyer and suddenly had to go into British accounting and all the rest of it. So that was a valuable experience. I think you need people who you can expose to different environments, who are prepared to adapt their own attitudes to a foreign culture, and who don't have this conviction that they should change the environment. They accept that these cultures are different, and they want to be part of it. They don't reject it. They have a positive attitude.

BRIDGING THE GAPS

Griesedieck: Our businesses run at different speeds in different places. What ties the whole thing together and makes it global is that everybody in the firm has a common set of values and, in our case, a common set of professional-practice principles. If you're a manufacturer, maybe it's manufacturing principles, but there needs to be something that ties the whole thing together and yet allows the local operation to keep its perspective on its own culture and its own local activities. So, it's trite, but it's the old saying of "think global, act local" that I think works best.

Ran Burns (J. Walter Thompson): Something that's run through much of the conversation today is the need for a common vision or philosophy for your organization and how to best adapt that in all the markets of the world. A secret that we discovered 10 years ago was creating agencies within agencies that understood the vision for our client's brand as well as its organization, so we could help them carry that into the marketplace. And that has paid huge dividends for our agency.

Swartz: We give every employee 40 hours of paid time to do community service. It's a deeply held value in our company that being invested in communities is a matter of good business. We had a hell of a time trying to convince folks in China to do that - it's something that is just not done in a business enterprise there. But we've stuck to it and said we're going to find a way to make community service relevant to China. I was there last year with one of the people we buy from, and he shut his factory down and sent the workers out for a day of service in the local community. It was a bizarre event. People were looking at each other like they were not exactly sure what they were doing. But I'll tell you, the next time we came back, it turned out that the concept was inside people.

Ashkettle: One of the things that I've done is visit sites and have town meetings. I was told by the person running the French operation that culturally they don't do that in France; it won't work. And he was absolutely right. At the first luncheon we had, I said, "Does anyone have any questions?" Dead silence. We spent 15 minutes looking at each other, with me asking myself questions in order to have some sort of dialogue. I went back in less than a year, and during that time, the French had seen videotapes of question-and-answer sessions that we conducted throughout North America. And when I went back, there were more questions asked by those Frenchmen - who culturally didn't do that - than we had in the U.S. So, it's not as much a matter of what the folks would like to do as what they've been allowed to do. I think human nature gets much more close to center if you allow it to happen.

Kathwari: The needs of people all over the world are the same. The methods of how you do things are different - the insurance, how you get a telephone system in - those kinds of things are different. But the overall needs are the same: Those people also get up in the morning; they want food; they want to raise their children; they want to send them to school. And I think people's need for communication, and for honesty when you are telling them what to expect, are the same. People sometimes forget that, and somehow feel that they've got to treat them differently in the basic issues of communications. I think all over the world people like honesty, even if it's a tough message. Sometimes when you go to a different culture, you feel that you should forget those basic human principles.

TAKING THE PLUNGE 

Donlon: We're learning from our discussion that there is obviously no single right or wrong way to globalize. But I'm curious to hear what you think is most workable - what is your own sort of unifying principle that works best for you?

Hill: I think we just have to be willing to go to those markets and get the experience. As a smaller company, you don't have the luxury of taking 15 years to build a multi-national business. I'm not an NCR, starting out 100 years ago. If we don't catch this window, we won't be around. We don't have time to do a country every three years. So starting in '95, we've gone into the U.K., Mexico, Brazil, France, and Argentina, and we've had teams already in Singapore, Hong Kong, and Australia. And some of my board ask me, "Why do you want to go anywhere else? You're already here in the largest market in the world." If you want to be on the growth curve, you really don't have a choice. We're in the outsourcing business - it's about a $200 billion market, with about half of it outside the U.S., and the international part is growing faster than the U.S. marketplace. So I say to my board, "If we don't become a legitimate global company, and we can't service our multinational customers, you might as well sell us as soon as you get a premium, because I have no alternative."

Parker O. Chapman (Monumental Investment): Our situation's a little different than most everyone else's. We've probably looked at 30 different countries, and in each case, we haven't gone there with an idea of opening an office and being there for a long time. We're in the construction business, so we've gone there for a particular project. But we've found that the questions are the same no matter where we go. The answers may be different, but the things we have to know up front - customs regulations, labor, etc. - are the same. We try to understand those, and then it's a people business - being able to bring in more supervision from the U.S., or hire more locally, or build alliances with local people.

Kathwari: Anyplace we have gone without strength, we have lost. I think you've got to understand the mechanics of doing business in different worlds, that different places are different. But going overseas has got to be the same thing as going to Staten Island or going anywhere else. You've got to go with strength; you've got to go with a lot of good people; and you've got to be willing to lose money. And then it works.

Burns: One of the real change agents to consider is what will be happening on the Internet, and what is happening today. For some of the players around the table, what you're doing in terms of experimentation will be important. We all know the opportunity the Internet brings to move forward through dealer bodies into consumer bodies, and a Timberland or an Ethan Allen will be facing an opportunity of a new channel of distribution. I think that has to be considered, especially for the smaller global players, as a really significant asset in their armory. It warrants tremendous study, because it is a hugely Significant wave of the future.

Berkley: I think you have to start with understanding yourself and how you get in there and how your business runs. And then look at the culture of the country, and then make the decision whether you're going to really be prepared to commit what it takes, in time and resources. Because going only once a year for a week, and spending just enough money to get it done, won't get it done. Also, you're going to make mistakes. It'll cost you more than you think, and it takes time. But you have to see it as your new core, and be committed. You have to be willing to invest the time and the people to figure it out. Because once you write the check, you're there. And there is no getting it back. You sometimes get dissuaded by looking at the world, looking at one country at a time, and the effort needed to figure it out and find a partner. But I think there are enormous opportunities out there.

James E. Copeland, Jr. (Deloitte & Touche): I think Bill has recognized that he was sort of betting the farm on international operations. He was not getting into it in a marginal way. A mistake I see smaller companies making more often than not is just piddling in international investment, rather than recognizing it for the really strategic step that it is, focusing resources and recognizing the risks that are going to be taken, and concentrating senior management time and effort on it. Instead, a lot of small companies end up with the time of their CEO and the senior management group devoted to investments in companies that really don't amount to much relative to the entire business operation - even if they were successful there, it wouldn't increase their earnings by 5 percent. So, I think you have to focus on this, and say to yourself that this could be important to my business - in fact critical to my business - and therefore we are committing resources to it.

Cahouet: Humility is a very valuable thing in this particular area. I think a lot of companies that are moving into globalization for the first time don't know what they don't know. So if I were counseling a company doing that, I would say you probably can't overdo the front end time that you spend understanding what you're about to do, being certain there is a good strategic reason for entering into global activities, and then being sure you're committed to it for the long haul, willing to invest enough to allow you to make the inevitable mistakes that you're going to make when you first get into a new marketplace and then recover from it.

Swartz: Originally, we had visions for our brand doing more business outside the United States because the value that our product represents is relevant to consumers across a variety of cultures. I think the same thing is true of the values of our enterprise. Whatever success we've had has come by sticking very hard to our principles and coming back to them time and time again. So it's important to understand that balance point between knowing what you stand for and what's important to you, and at the same time being sensitive enough to understand that the rules are sometimes different. And I'd say that that there needs to be a heavy dollop of listening if this is going to be something that succeeds over the long term.

A Who's Who Of Roundtable Participants

Phillip D. Ashkettle is president and CEO of Research Triangle Park, NC-based Reichhold, a $1.2 billion manufacturer of specialty polymers, adhesives, and polymer systems.

William R. Berkley is chairman of CEO of Greenwich, CT-based W.R. Berkley Corp, a property and casualty insurance holding company with $1.4 billion in revenues and $4.4 billion in assets.

Ronald Burns is president of global business sat J. Walter Thompson, a New York City-based advertising agency.

Frank V. Cahouet is chairman, president, and CEO of Pittsburgh-based Mellon Bank Corp., a banking corporation with more than $300 billion in assets under management.

Parker O. Chapman is CEO of Baltimore-based Monumental Investment Corp., the parent company of The Poole and Kent Organization, a privately held mechanical contractor with annual revenues in excess of $400 million.

James E. Copeland Jr. is managing partner of Deloitte & Touche, a $7.4 billion global professional services firm which delivers audit, tax, and management consulting services.

Peter T. Francis is chairman, president, and CEO of Edison, NJ-based J.M. Huber Corp., a $1.5 billion diversified industrial and natural resource solution provider.

Harry E. Gould Jr. is chairman, president, and CEO of New York City-based Gould paper Corp., a distributor of printing and business papers with revenues of almost $1 billion.

Joseph E. Griesedieck, Jr. is CEO of Chicago-based Spencer Stuart, a $234.4 million international consulting firm focusing on senior-level executive searches and board director appointments.

Henrich Heitmann is chairman and CEO of Woodcliff Lake, NJ-based BMW (U.S.) Holding Corp., the $6.9 billion marketing and sales arm of the automotive manufacturer BMW AG.

William R. Hill is the founder of Greenbelt, MD-based OAO Technology Solutions, a provider of information technology solutions and services.

M. Farooq Kathwari is chairman, president, and CEO of Danbury, CT-based Ethan Allen, a $571.8 million international home furnishings manufacturer and retailer.

Erick J. Laine is chairman, president, and CEO of Olean, NY-based Alcas Corp., the manufacturer and marketer of Cutco Cutlery, a high-end household cutlery product.

Margaret V. Mulley is a vice chairman of Deloitte & Touche, a $7.4 billion global professional services firm which delivers audit, tax, and management consulting services.

Stephen B. Siegel is president and CEO of New York City-based Insignia/ESG, a $300 million commercial real estate services company.

Jeffrey B. Swartz is president and CEO of Stratham, NH-based Timberland Co., a $796.5 million footwear, apparel, and accessories company.

Craig Winn is the CEO of Charlottesville, VA-based Value America, an Internet-based retailer.

RELATED ARTICLE: View From The Ground

There are three qualities that companies need to operate effectively on a global basis, says Margaret Mulley, head of Deloitte & Touche's Growth Company Services practice. "An organization structure that's customer-focused, and that maintains enough flexibility to meet the global needs of its customers. Organizational consistency, which in many cases can be fueled by information and communications technology to help you employ the same procedures around the globe. And finally, the human resource capacity to have the right people at the right place."

Those three qualities are often found in smaller and medium-sized companies, Mulley says - but that doesn't mean that such companies find globalization to be a snap. "It sound great at 40,000 feet. The problem is that when you get on the ground, it's not quite the same terrain."

In practice, smaller companies tend to run into trouble in a number of areas, including:

Customer focus. "Because these smaller companies are more customer-focused and more flexible, they typically first go global to meet the needs of their global customers, not because they've done a lot of market research or because they're looking for efficiency or lower operating costs," says Mulley. "So often, they dramatically underplan their entry into a market, and this wonderful advantage of being flexible and customer-focused can get them into a lot of trouble."

Information technology. "Operational consistency requires two elements," Mulley notes. "First, it requires an organizational discipline, so that you have some common approaches. Second, it takes actually having the systems that will support those methodologies. Our experience is that smaller or medium-sized companies significantly under-invest in their technology when they expand globally. The systems they put in place often look much more like systems you would find in a very small business. And so the sophisticated information you could and should have to be able to run the business isn't necessarily available to them."

Human resources. "To succeed globally, you need to invest in the right people. That can be particularly hard for smaller companies, especially when they're going overseas for the first time," Mulley says. "To compound that problem, the needs you have in the business are very different over time. When you first enter a country, you often need someone who's far more entrepreneurial, who really does understand the local market, so you can get the right balance between the local market and the culture you're trying to bring to hat country. But as that business grows, you probably need someone who is more disciplined to run the business. Finding ways to have that balance is very tricky for most smaller companies."

RELATED ARTICLE: Oh, Canada: So Near, And Yet So Far

"You may not think of Canada as international and we didn't either - but certainly do now. We went to Canada in '95, thinking we could do four or five million in the first year. We did a million. The second year, we were bumping along to do maybe a million and a half. And then we made one change. We pulled the guy out of Canada who was running the Canadian organization - and the guy was me. I pulled myself out, and we hired a Canadian, and we turned the business over to a Canadian entrepreneur. Two years later, they're doing $20 million.

You don't see the business and cultural differences unless you actually live somewhere and experience it. I never saw it. And I was the CEO and founder of the company, so you would think there wasn't anyone who had a better chance of articulating what we wanted to accomplish, and to motivate the employees than me. The truth is, I couldn't get it off the ground."

William R. Hill