A Blog by Jonathan Low


Mar 6, 2015

The New Era of Tech-Enabled Micro-Multinationals

The physics of business are changing. Mass is no longer required to achieve scale.

Just as intangibles like the value of software coding and the rule of law may now be worth more than the gross tonnage of steel shipped or wheat harvested, so the size of an enterprise may no longer have any causal relationship with its ability to influence consumers or command premium prices from investors.

The amounts being paid for investments in enterprises which have not released a product or generated a sale can often be far above those which more established institutions command.

The world has been made smaller by the growing power of technology, a force converging with enhanced ability of small groups of individuals to harness that power and apply it effectively with a broader scope, often thanks to tech-enabled partnerships with similarly constituted allies. It is a small world, after all. JL

Neil Seeman comments in Venture Beat:

Gone are the days when headcount at headquarters matters. Nowadays ‘micro-multinationals’ from Toronto to Taipei are commonplace. A micro-multi may be small in headcount, yet enormous in growth, servicing global facing organizations.
How big are you? How many people?”
Wrong answer: “Just eight employees. Many more if you count our consultants.”
Right answer: “Eight employees. Why do you care?”
Gone are the days when headcount at headquarters matters. Nowadays ‘micro-multinationals’ from Toronto (our physical HQ) to Taipei are commonplace. A micro-multi may be small in headcount, yet enormous in growth, servicing global facing organizations. They can be category killers.
Never heard of them? I hadn’t either until an executive at a big company in Brussels told me our company was one. My response was, ‘huh?’ He said, “Have you ever heard the phrase, ‘you are a citizen of the world? You, Sir, are a CEO of a company of the world.”
But lots of founder CEOs  – no matter how ‘hot’ the sector – make myriad gaffes when running a micro-multi. You’re dealing with different cultures, virtual teams, online demos, and time zone differences. I have made many such gaffes. I hope readers and prospective founders starting micro-multis can learn from my mistakes, since that’s where the jobs and opportunities of the 21st century are. (Which brings me to a quick side-note: Around the world, governments of different political stripes focus unduly on supporting debt-financed taxpayer-funded accelerators to promote innovation and jobs. It’s a well-intentioned error that is empirically flawed as a tool to create jobs, evidenced through the non-partisan, exhaustive global research by scholars such as Josh Lerner (Harvard Business School) and Vivek Wadhwa (Stanford). Quick test: What’s the fastest-growing startup city in the U.S? Answer: St. Louis; there’s not a government-funded accelerator in site.)
Back to my top advice to micro-multis on avoiding gaffes:
1. Align your teams in other countries with incentives other than money
The Silicon Valley model focuses on options equity or other cash models to incent staff. That can work – but it’s very risky when you’re dealing with partners overseas who you’ll need time to get to know. For example, after time and money spent finalizing that legal agreement, the overseas partners may not turn out to be the “value-added” resellers you hoped for at all, since their enthusiasm can melt away after first-date swooning over Skype. Partners and introducers, for all sorts of reasons, may not work out if you don’t have enough face time with them. Our team in the Mideast is amazing; they run a fantastic small consulting business whose global reach aligns perfectly with ours. That team’s data analytics services look more beautiful to their clients by leveraging our global data platform; we are in a kind of virtual business symbiosis. Other non-cash incentives have included inviting their clients to a hockey game during a rare visit to Toronto. They are therefore highly motivated to sell our product.
2. Pay for better e-connectivity
Pay for the best international phone lines, virtual translators, and video conference feeds. Today, in the early days of micro-multis, clients are forgiving, but that won’t always be the case. A client in Melbourne was especially kind to me, but I’ve learned my lesson.
3. Beware the lawyers
Every entrepreneur gets heart palpitations when he or she sees a legal bill for “email correspondence”. But in a micro-multi model, dealing with lawyers’ bills is especially crucial. Your U.S.-based lawyers – even the best – may deliver you little relative value. Pay for lawyers on the ground wherever you do business. Added benefit: They tend to have more flexible pricing models than North American-based law firms.
4. Don’t listen to local-based advisors too much
An “expert” in online “influencer marketing” in Toronto doesn’t know an iota about the same subject in Santiago. Be polite, but ignore them.
5. Don’t play cute with physical virtual offices
Everyone knows a mere address in London isn’t a real physical office. Don’t be afraid to broadcast that the reason you have that London address is because you pay for services such as virtual multi-messaging (e.g. for less costly e-faxing) in foreign cities in order to conserve costs.
6. Price to value
In North America, many companies, especially business-to-consumer Web companies, are more focused on “freemium” models or other different modalities of pricing than is the case in foreign jurisdictions. Stick to one pricing model. If you keep tinkering with your pricing model for different jurisdictions (since you assume a non-profit in Indonesia is different than an NGO in Switzerland), you’ll end up wanting to bang your head with a brick.
7. Beware the channel partners
U.S.-trained management consultants seem to adore the channel partner model. Sometimes it works beautifully. But as strategy and innovation gurus A.G. Lafley and Roger Martin intone in Playing to Win, say no if you suspect you’re being taken advantage of.
8. Laugh a lot. Be prepared to take funny verbal punches from foreign-based players in bigger cities who think the “brand” of their city is more important than yours. One gentleman in London from a global organization emailed me this: “We don’t touch deluded hissy-fitting non-trepreneurs like you, dead right you’re not important at all.” Yes, Toronto’s a smaller city than London. We’re polite and respectful. Yet we’re in common cause with every micro-multi in the world. We form an army to which traditional multinationals should pay attention, not mock. Failing to pay attention to micro-multis would be a major gaffe.


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