Singapore’s 2018 Budget includes a new Enterprise Development Grant (EDG) designed to help firms internationalise. This is welcome news, but with today’s growing climate of global protectionism and fragmentation, it will take more than grants and tax breaks to help firms navigate overseas expansion in this post-globalisation era.
Even in the 'good old days' when globalising headwinds blew, expanding into new markets has always been difficult. Back in the 1960s, the term “Liability of Foreignness” (LOF) was coined to better understand the challenges – both social and economic- companies face when expanding outside their home country. The area of study is more relevant today than ever.
With the explosion of the digital, borderless, economy and its lightning fast communications technology, the planet has shrunk considerably. Distance became meaningless. Now expanding overseas is not only an option, but often a requirement for companies of all sizes to survive. Working in foreign markets, directly or virtually, has become the norm for millions of people.
In many ways, this shrinking planet has made everyone foreign.
Today, our Liability of Foreignness has never been higher. Protectionist sentiment continues, adding considerable competitive pressure within markets already tricky for new entrants. China’s push for “indigenous innovation”, India’s call for “make in India” and the US’ “Make American Great Again” are being echoed in smaller markets across all four corners of the earth as well.
Singapore, a tiny nation-state of immigrants, can only continue to thrive by growing businesses into new parts of the world. Incentivising such growth is smart.
In addition to the incentives laid out in this year’s budget, new skill sets are also needed. One commonly cited study claims that 70% of international ventures fail not because of protectionist measures, but because of cultural differences. These are the invisible differences our senses don’t immediately register: unspoken rules, roles, beliefs and values. These culture factors frequently blindside new entrants to markets. Missing these cues can quickly cause misunderstanding, mistrust, and ultimately, failed business deals.
Historically, cross-cultural studies have focused on understanding cultural distances to better work across diverse regions. But whilst technology has rendered distance irrelevant, differences remain. “Foreigners” are interacting more than ever before. Communication moments have multiplied, and so have the misunderstandings.
This isn’t a distance problem - it’s a friction problem.
Oded Shenkar, a sociologist and professor of business management, has argued for the need to move away from the idea of cultural distance to “cultural friction” in order to better understand, and address, these moments of cultural disconnects.
Business leaders will need to spend more time learning and adapting to communication challenges as they build networks and partnerships abroad. They need to upgrade skills to avoid and reduce these problems of friction.
Core communication skills are critical to succeed across markets. Tools including active listening and business story-telling are getting reinterpreted with a focus towards communicating across cultures and aimed at reducing cultural friction. Upgrading communication skills are also needed in order to collaborate and discover new products and solutions that fit local preferences.
For example, Dropsuite, a Singapore-based start-up has succeeded in expanding into a number of diverse markets including India and Australia. Part of their strategy was to re-brand and consolidate several solutions into one flexible offering that allows their local partners across the globe to deliver to their end users. Charif El-Ansari, the Managing Director attributes their expansion success to the relationships they’ve built with their partners in each market.
New technology companies like Dropsuite have the agility to navigate within this tricky global climate, arguably better than the larger multinationals. Ironically, in this era of polarised geopolitics and threatened trade wars, it is the small, nimble companies – multinationaletts - who may be the future leaders driving internationalisation.
Companies who develop a global mindset and continue to improve their communication skills will thrive in this post-globalised, global world. Singapore must continue encouraging business expansion and encouraging their entrepreneurs to see foreignness not as a liability, but as an asset.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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Kyle Hegarty is the Managing Director for TSL Marketing Singapore. A seasoned sales, leadership and communications trainer and coach, Kyle focuses on building sales pipelines for his clients and working with executive teams to develop localized leadership strategies across APAC and the globe. He researches and writes about the realities of business globalization in a post-globalization world.
A frequent speaker at worldwide business and management conferences, Kyle's work has been covered in The Straits Times, MSNBC, CNN, Dispatches Europe and Fortune.
Kyle is currently using his communications skills to persuade his family to allow him to train for his 5th IronMan distance triathlon. He graduated Magna Cum Laude from Bowdoin College where he majored in International Relations and Economics.