Services Going Global - KIBS and trade. Project report

Transcription

1 - KIBS and trade Project report Irma Patala December 2008

2 Table of contents 1 Executive summary Introduction Study goals, scope and methods Findings Conclusions Summary of case companies Attachments: Case summaries List of interviews Table of Figures Figure 1: Study framework....6 Figure 2: Internationalization drivers and paths Retail...10 Figure 3: Internationalization drivers and paths KIBS...11 Table of Tables Table 1: Summary of case companies...22 Project team Finpro: Irma Patala, Senior Consultant, Finpro, Region North & Middle Europe, Global Services, [email protected] Germany: Reape Neal, Senior Consultant, Finpro, Region North & Middle Europe, Global Services, [email protected] UK: Perry Le Dain, Senior Consultant, Finpro, Region West & South Europe, [email protected] Denmark: Terhi Rasmussen, Market Analyst, Finpro, Region North & Middle Europe, [email protected] Tekes: Minna Suutari, Senior technology Adviser, minna.suutari(at)tekes.fi Ella Kylmäaho, Senior technology Adviser, ella.kylmaaho(at)tekes.fi - 2 -

3 1 Executive summary The main goal of Services Going Global -study was to provide practical examples and learnings to encourage and support Finnish service companies internationalization. The study analyzed service companies internationalization drivers and paths, success factors and key challenges through 18 case studies from Nordic countries, UK, and Germany. Companies represented retail and knowledge intensive business services (KIBS). Case analysis was based on personal interviews with directors responsible for internationalization or business development of the company. The key drivers for internationalization in the studied cases were growth and knowledge acquisition. In retail cases most important driver was growth but from different perspectives: mature brands were looking for new markets due to limited growth opportunities in the home market, whereas online concepts were going international early on due to niche market focus and business model built on global presence. For KIBS companies key drivers were global customers and partners as well as knowledge acquisition and credibility needed to meet global competition. Internationalization paths and models for the cases were varied. Retail companies were growing international through own shop concepts except online concepts scaling through new channels. In most cases, mixture of channels was used but strategic focus was in growth through consistent brand experience (shop concept). Business model covering the whole value chain from product design to retail customer experience was regarded as competitive advantage that supported the integrity of the brand. Online concepts were innovatively exploiting personalized offering strategies. KIBS companies growth strategies were mixture of networking, acquisitions and organic growth. International networks were either first step in internationalization, followed by own operations, or key part of the business model also in home country. Key success factors included managing international service brand and experience, recruiting and committing key personnel, and integrating to local ecosystem. Key success factors for retail were ability to manage brand value across multiple markets, understanding local markets and value networks. Key personnel in entry markets played vital role in managing the balance between global brand and local demands. Brand value in KIBS context was critical in two dimensions: ability to attract and commit people that share company core values, and credibility as well as attractiveness of know how and services to customers. Networking was seen vital in building presence and credibility in local markets. Retail and KIBS companies shared fairly similar challenges and risks that were related to growth and local market know how. Shared challenges include loose, opportunistic and reactive internationalization strategies; underestimating cultural and market differences even in closer markets; too little time and resources for managing, supporting and integrating local operations; unrealistic expectations on time needed to establish presence and profitability; balancing between brand values and local demands (loosing focus); and growth exceeding the process development. Service innovations emerged in offering, delivery and finance. For retail concepts innovative thinking was most evident in how multi channel brand strategy was built by combining elements with only loose business synergies but with strong brand synergy. Online retail concepts included several innovative aspects from technology solutions to personalized service offering and redefining the role - 3 -

4 of consumer. In KIBS cases, innovations related to redefining the key competence or know how offering and thus differentiating from dominant competitors. External support and expertise was used especially in the market entry phase. Private sector professional services were widely used whereas public support offering was less familiar to service companies. External know how was needed in issues related to local markets and typically legal, financial, recruiting, and market research services were used to support market entry. Public support structures, on the other hand, were not well known and little used. Overall conclusions of the study highlight the need for increased measures to encourage Finnish service sector internationalization: Finnish service companies should increase their internationalization efforts to keep abreast global competition and to create new growth sectors for Finnish economy. Building effective internationalization support programs and instruments for service industries requires new thinking and support offering. More specifically, study recognized need to develop internationalization support offering that complements market entry phase services like market, competitor and value chain analysis, market entry strategy formulation and partnering support. Key areas for supporting long term internationalization strategies include Creating and managing service brand Competence sourcing and management Integration to local networks and culture - 4 -

5 2 Introduction Services Going Global was a joint research project for Tekes, Finnish Funding Agency for Technology and Innovation, and Finpro, international growth expert and partner for Finnish companies. Project participants were Tekes Serve -programme and Finpro Global Service Industry. Serve is a Tekes programme aiming at the creation of new knowledge in service innovation and encouraging the development of innovative and internationally competitive service concepts in companies. Serve programme runs from and the total budget is about 100 million Euros, where half is public funding and other half comes from the participating companies. Serve provides Finnish companies and research organizations with project funding, national and international networks through seminars and industry specific forums as well as tools to support product management and IPR questions. More information: Finpro is a consulting organisation focused on speeding up the internationalization of Finnish companies while managing the risks involved. Finpro operates through a unique global network of over 50 offices in40 countries as well as regional offices throughout Finland. In matrix with strong market presence and local market know how, Finpro has global industry practices building competences in specific focus industries. Finpro Global Service Industry supports Finnish service companies in exploring and exploiting global market opportunities, developing internationally competitive business models and service concepts, as well as planning and managing internationalization process. Finpro Global Service Industry has four focus areas: retail and living services, knowledge intensive business services (KIBS), travel and leisure services, and service integrators

6 3 Study goals, scope and methods 3.1 Goals The goals for the Services Going Global -project include: Building know-how on critical success factors and problem areas in designing global service concepts as well as internationalization process and paths. Activating discussion on the role and development potential of public and private support structures and instruments in services internationalization. Project deliverables will support the dissemination of key learnings to relevant target groups as well as provide inspiration and best practice cases to companies on the verge of internationalization. Figure 1. represents the study framework. Figure 1: Study framework 3.2 Scope Project focuses on service sectors that are in the core of Serve-programme including knowledge intensive business services (KIBS) and trade. In this study, KIBS is defined as professional service companies providing consulting or other knowledge based services to other companies. KIBS companies include e.g following: strategy consulting; operational or process consulting (ICT, legal, financial, marketing and communications, architecture and design, R&D); HR-consulting. Trade service cases were defined as retail concepts in shop or digital channel. When going through the long list of potential case companies a need for a more focused approach was recognized. In order to provide more value to the participating companies and allow for better comparison, the - 6 -

7 general KIBS and retail focus was narrowed to KIBS with emphasis on marketing communications, technical and strategy consulting and retail with focus on fashion and lifestyle concepts. Company cases were selected from several countries to provide comparative data from markets with higher service internationalization rate than Finland. However, the geographical focus was set to Europe as the internationalization motives and paths were assumed to differ significantly for companies outside European Union (EU). The home market size and the trade relations in general were assumed to make companies outside EU less comparable and interesting for Finnish service companies. The focus markets were chosen to be Finland, Sweden and Denmark, United Kingdom, and Germany. For Finnish companies other Nordic countries provide natural comparison due to the market similarities as well as geographical and cultural closeness. United Kingdom is one of the leading countries in Europe in terms of service sector contribution to the GDP and service sector internationalization. Therefore it was chosen to provide cases of companies benefiting from long traditions and know how on service internationalization. Germany is a highly competitive and big home market but provided also interesting cases where growth was based on international expansion rather than home market success alone. 3.3 Methods The study conclusions are based on analyzing 18 company cases. Case studies summarize company background information available in company website, news and other public sources and personal interviews with directors responsible for international operations or business development. Interviews took place between May and June Interviews were conducted based on interview questionnaire to provide comparable information from each case. Interview questions covered basic company info, overview of international operations and growth history, internationalization motives and success factors, challenges and barriers for internationalization, innovation and global vs. local aspects of international service concepts, and the role of public and private support (know how, resources) in the internationalization process. With the range of companies in terms of size, country of origin, and service sector, similar themes emerged from case studies. Even when industry differences of retail and KIBS gave slightly different perspective to key issues, the fundamental themes were mostly shared. The case studies analyzed the critical success factors and problem areas in designing global service concepts as well as internationalization process. Cases also discussed the role of innovation and public and private support structures to build understanding on the structures that support innovative and internationally competitive service development. The following issues were studied in more detail: 1. What were the motives and drivers for internationalization? 2. What kind of internationalization paths companies went through and what kind of structures and business models were used? 3. What were the key success factors and enablers for internationalization? 4. What were the key challenges and risks these companies had recognized? 5. What new or innovative elements drove or supported the internationalization? 6. What was the need and role of public and private support (resources, know how, finance)? - 7 -

8 These themes are discussed in more detail for retail and KIBS to highlight the differences between these sectors (Questions 1.-3.). In some themes, the differences between the service sectors were not evident and findings were generalized rather than discussed separately for retail and KIBS (Questions 4.-6.). Summary of case companies is presented in chapter 7. 4 Findings 4.1 Motives and drivers Retail In retail cases most important driver for internationalization was growth but from different perspectives. The differences were caused by financial resources, ownership model (growth targets and risk taking ability), and business model (niche market focus and earnings model). In some cases internationalization started in a mature phase where brand concept was well developed and tested in home markets and high penetration limited growth opportunities. When home market matures, options for growth include extending brand concept to include new product lines or new market entry. New market entry is preferred option if brand concept is well defined, minor brand extensions do not offer enough growth potential and major extensions incur risk of loosing focus. Ownership model played an important role in goal setting. Venture capital financing drives aggressive growth and need to search for new market opportunities earlier. Limited financial opportunities tie internationalization to long term strategy where lower risk taking ability necessitate long term planning and early testing of internationalization. Online concepts had typically adopted focused niche market strategies resulting in earnings model based on global demand and born global or early internationalization growth paths. Online retail concepts were entering international markets early on as well as extending their global sales and offices rapidly. Scalability of online concepts and risk of copy cats raised the need to establish market presence and build global brand. In most cases contingency played a big role in how, where and when internationalization took place. Opportunities were related to shop location, acquisition potential, and right people with specific market expertise and networks either contacting company directly or being found. This resulted in a mixture of growth strategies (acquisition, franchising, own concept stores) KIBS For KIBS companies key drivers for internationalization were internationally operating customers and partners as well as knowledge acquisition and credibility needed to meet global competition. Internationalization processes were typically triggered by global customers expecting service offering and expertise to cover major markets. Service provides had to build international resource - 8 -

9 base and know how to meet the customer expectations and competition. Home market size had less influence in growth strategies when customer focus and service offering were global. Several cases involved niche strategies where specific expertise area narrowed customer focus and market potential thus necessitating early internationalization. Also for KIBS companies opportunistic approach was typical where personal drive and ambitions or finding suitable acquisition target, partner or entrepreneur to start up local office had big role in the market entry decisions. Internationalization drivers mentioned by case companies include: Personal experience and motivation of founders and international corporate culture and contacts made international networking and thinking part of the everyday business. Home market was already dominated by global companies, to be able to match the competition there was need to build global know how and presence. International customer base, offering targeted to global market and open to global competition (customers, competitors) raised need to gain critical mass rapidly for credibility. Primary driver for internationalization was knowledge acquisition and need to build competences through demanding projects in key market locations. Global partner network(s) supported and drove internationalization. New growth opportunities were sought due to home market penetration. Tight customer focus exhausted rapidly home market growth opportunities. Market and competition opening up to international players due to EU, customers, partners and projects became international. Scalable business model was easy to replicate to different markets. 4.2 Paths and business models Retail Retail case companies were all growing in international markets through shop concepts except online cases scaling through new channels. In most cases, mixture of operational models was used but strategic focus was in growth through consistent brand experience (shop concept). Business model covering the whole value chain from product design to retail customer experience was regarded as competitive advantage that supported the integrity of the brand. Own production was often complemented with either exclusive products or products with co-branding value. Retail growth was typically a mixture of own shops, franchising and acquisitions. There was shift in strategies to both directions, some were moving from franchise stores to own shops, some were starting new markets through franchising when own shops had been dominant earlier. Here the role played by chance and opportunity were evident. Flexibility might allow more agile strategies but can also increase overhead costs of managing different structures and partnership models with slightly differing needs. For retail shop concepts online was clearly a secondary sales channel or only marketing channel and focus was in building shop experience. Opportunities in creating online customer relationship and balanced multi channel strategy were not fully exploited. Figure 2. represents internationalization drivers and paths in retail

10 Figure 2: Internationalization drivers and paths Retail Online concepts were innovatively exploiting personalized offering strategies. However, as in shop concepts, also in online the customer interface was only small part of the brand experience and the whole value chain was critical in managing the overall brand promise (product design and assortment, production and logistics, payment, customer support etc). For all retail cases international structure was centrally managed from head office. The need to manage brand value is verified also in the operational model where key issues (product design, assortment, purchasing and partner networks, brand marketing, shop concept) were tightly centrally managed. Local market know how and networks were important and highly valued in bringing understanding on the product assortment, seasonality, as well local partners, networks and marketing channels. For traditional shop concepts internationalization typically started from culturally closer markets. Especially for Nordic companies other Nordic countries were preferred test markets. In Central Europe, big home markets and cultural and market differences can make entry to even neighboring countries more challenging than e.g. entering countries with historical, cultural or language ties. For online concepts global or international market presence is often prerequisite due to niche market strategies and global competition KIBS KIBS companies growth strategies were mixture of networking, acquisitions and organic growth. International networking was often first phase, followed by own operations. Local networks were also important for knowledge acquisition and gaining critical mass rapidly in new markets. Networking played important part in cases where ability to bid for big projects and customers was gained through strategic alliance or partner network. Later these partnerships were replaced by own international offices to have more consistent offering and optimize knowledge and resource sharing

11 Acquisitions were playing important part in some cases where motivation was to acquire complementing know how, broaden service offering, and need to gain critical mass and global presence rapidly due to competitive reasons. Acquisitions was main growth model for two cases where focus was in finding complementing know how and services and gain rapid access to local customers and networks. Setting up green field offices, however, was the most typical internationalization model. This was partly due to the opportunistic process where offices were set up based on personal motivations or right person found in potential markets. Opportunism and organic expansion was enabled by the low investment cost and risk in opening up office. Often the investment was based on existing customer projects or demand that supported rapid start up phase. Most cases emphasized the importance of finding people with right mix of competences as well as commitment and fit to the company values and culture. Figure 3. represents internationalization drivers and paths in KIBS. Figure 3: Internationalization drivers and paths KIBS KIBS companies internationalization paths were driven by customer and partner needs thus the key locations globally were more scattered to Asia, North America and Middle East. For Nordic companies other Nordic countries were still often first international markets, whereas UK companies preferred countries with Anglo-Saxon culture (e.g Middle East). Most case companies operate today globally. The KIBS cases operational structures reflect the importance of knowledge sharing and shared company culture. Organizations and ties between head office and international offices were described by case companies as: Matrix with regions and competence teams working together. Meshed network of international offices

12 Network where offices typically work in multi country and multidisciplinary teams. Hub structure where centralized service development scale over international locations. Global business areas based on specialist knowledge and competences, one stop shopping for customers. Customer focused global competence centers with expertise on customer industry. Local hubs, work is organized to global virtual teams. Network of entrepreneurs with global research and knowledge infrastructure. Headquarters responsible for brand, service offering and sales, service delivery globally through freelance networks. 4.3 Success factors and enablers Retail Key enablers and success factors for retail brands were focused on managing brand value across multiple markets and understanding local markets and value networks. Strong brand was related to consistency of shop concept that enabled growth through mixture of own shops and franchising. In most cases brand had already raised some interest in foreign markets followed by franchisee interest and contacting. Launching brand to any new market is always a challenge where risks lie both in the attractiveness of the brand concept (market entry barriers) but also in managing the brand consistency and local expectations. The solidity or integrity of the brand concept in terms of total brand experience (shop concept and channel, product assortment, delivery and logistics, marketing and communications) support scalability (marketing, logistics, planning, corporate values and culture) and decrease the risk of brand dilution. For shop concepts, the value chain management was key in maintaining the brand promise of product quality, sustainability as well as ensuring healthy margin structure. For online, the value chain was critical performance factor (time and cost of delivery, billing and customer service). Local service offering for online was created through localized web pages as well as customer support. Finding and attracting the right persons to run local operations played key role in transferring company culture and brand values to new locations. Combining legacy knowledge to local market know how was seen vital. Local management was the key in integrating to the local partner and marketing networks as well as gaining deep understanding of local consumer preferences. In most cases shop location was mentioned as key success factor and most exit decision were based on shop location decision being wrong. This emphasizes the need to understand and analyze thoroughly the local distribution channels and shop location determinants. In several cases, external help and research had been used to find the right locations and market entry had to be planned to allow waiting for the right location to be found. In summary the key success factors include: Strong brand and brand management: consistency and clarity across markets and managed throughout the whole organization. People and company culture make or dilute brand value; recruiting challenge is to find people with entrepreneurial skills, local market know how and networks combined with commitment to brand value. Own shop concept support the integrity of the brand. Brand promise is delivered through the whole value chain (product design and quality, customer shopping experience and service, billing and delivery for online). Deep understanding of market structure and shop location determinants is needed and exit option must be planned

13 Management commitment, personal drive and brand value of key person(s) KIBS For KIBS companies key success factors were clustered around three key themes: brand value, competence creation (recruiting and knowledge sharing), and networking. Other success factors mentioned include scalability and flexibility of the business model, understanding customer needs and customer focus, entrepreneurship, and global service offering. Also the low investment need and related low risk were mentioned as enablers of flexible growth strategies that allowed opportunistic and personally driven market entry decisions. Brand value in KIBS context was critical in two dimensions: ability to attract and commit people that share core values, and credibility and attractiveness of know how and services to customers. Most KIBS companies work in very competitive markets where only way to differentiate towards potential employees and customers alike is the clear brand message. Even more important than attracting talented individuals was the ability to find people that share the company core values and culture. Focus was in finding people who were able to contribute to the knowledge accumulation as well as to the creation of innovative and motivating working environment. Branding was mentioned from different perspectives including: Strong brand and clever recruitment is a virtuous circle. The foundation of the company s brand provides inspiration and vision for employees in all international offices to drive freedom and innovation within the company. Key competitive advantage in KIBS is in people; people who are genuinely engaged in the value of the brand and demonstrate passion and enthusiasm for their work We are a lifestyle company, people join for the lifestyle. Most KIBS cases mentioned knowledge sharing as one of the key success factors. Knowledge acquisition was also key driver for internationalization when global customers and competition challenged companies to seek for both functional or professional competences as well as local market know how to support the global offering. International growth challenged both recruiting and keeping critical talent as well as integrating fragmented organization where cultural as well as time and physical distances limit personal and informal communications. In some cases, inability to tie local hub to corporate values and processes necessitated exit decision. Comments related to competence sourcing and management include: We recruit people with right skills but also DNA that contribute to the competence base and company culture. The informal communication and trust among the employees creates strong ties that are critical for success. Communication is encouraged to be informal and ad hoc in order to create an environment that picks up the weak signals. Company culture and structures need to support co-creation and co-learning, sharing and accumulating knowledge and ideas. Company has set up global training program and resources to ease cultural integration and to maintain the integrity of the overall company culture. Networking was important internationalization enabler but also critical success factor in integrating to the local ecosystem, gaining credibility and making bigger impact locally. Local partners and networks have key role, integration to local value networks increase our local impact through collaboration. Partnering opened up access to international locations and customers that likely would otherwise have taken many years to build up

14 International network reduced the risk and allowed building know how and networks in international markets with limited investment and resources. We work with a cross border consortium of competitors and complementary consultants. This collaboration is an effective way to extend our international footprint. 4.4 Challenges and risks Retail and KIBS companies shared fairly similar challenges and risks which were related to growth and understanding local markets. Shared challenges include loose, opportunistic and reactive internationalization strategies; underestimating cultural and market differences even in closer markets; too little time and resources for managing, supporting and integrating local operations; unrealistic expectations on time needed to establish presence and profitability; balancing between brand values and local demands (loosing focus); and growth exceeding the process development. Especially KIBS companies found challenging managing the balance between creativity and shared practices and processes. In both retail and KIBS cases, companies recognized the need to have more focused approach to where and how internationalization took place. In most cases the early internationalization had been opportunistic and there was need to build more analytical and long term internationalization strategy. Same time most felt that the learning by doing approach had worked fairly well in the early phase of the internationalization due to flexibility allowed by relatively low investment need for market entry. Strong local competitors or highly developed local market in general can become a major barrier to entry even to close markets. For example, Germany or UK have mature and highly competitive service markets where credibility is not easily created. Also cultural differences are easily underestimated when service offering and competition is regarded as global. Especially for KIBS companies, who were entering geographically and culturally more foreign markets early on, the cultural differences presented a big challenge. This acted as market barrier in two ways: services required too much localizing to fit local needs and/or local people did not fit to the company culture and integration of local operations was unsuccessful. In several cases the time and commitment needed for supporting and integrating the global operations was higher than expected. Thus even when eventual capital investment in the market entry is low, the time and attention required from the top management are significant and tie up the valuable human capital of the company. Finding right location (retail) and / or recruiting (KIBS and retail) were mentioned as time consuming processes. Expectations for time needed to establish operations were minimal especially in KIBS where new market investments were triggered by existing customers. However, integrating to the local networks and building up support structures takes time. Several companies mentioned the challenge of expanding further without compromising brand integrity. Also the long term roles of head office and global network where an issue: should global brand mean also value discussion moving from head office to global network? To build successful brand, company must have a clear vision of what the brand stands for. Internationally operating company needs to crystallize the core brand elements that should carry across all markets and be able to manage conflicting market demands with other concept dimensions that can be used flexibly

15 Especially in KIBS cases, the high autonomy requirements of professionals make it difficult to manage the right balance between committing to shared goals and structures and creativity and customer responsiveness. Clever people don t like process. The lack of discipline means its like trying to herd cats. Similarly growth puts strain on adopting more professional internal processes where requirements for maintaining open and innovative culture and need for more structured and professional organization were conflicting. It is difficult to keep up with the tool and process development when creativity is the value add sold to customers. As in most growth companies, also international growth took in most cases place faster than company processes and structures could adjust to the new demands. Internationalization challenged process development even further due to increasing fragmentation of the company and more varied needs (legal, cultural, language, market, operating model etc differences). Networking was seen as key success factor and enabler for internationalization. However, in loose international networks the synergies were sometimes difficult to realize and they were considered only first phase or complementary resources. 4.5 Role of innovation Case analyses considered what kind of new elements or innovations were involved in the original internationalization drivers, processes or service offering. Innovative elements were recognized in framework of process, offering, delivery and finance. For retail concepts innovative thinking was most evident in how multi channel brand strategy was built by combining elements with only loose business synergies but with strong brand synergy. Online retail concepts included several innovative aspects from technology solutions to personalized service offering and redefining the role of consumer. In KIBS cases, innovations related to redefining the key competence or know how offering and thus differentiating from dominant competitors. Redefinition took place e.g. when customer relationship was deepened to strategic partnership by refocusing the competence offering from general professional expertise to building excellence in supporting customer s business solutions. Know how based differentiated offerings include cases where new combinations of expertise supported customer s emerging business challenges (e.g. innovations and sustainability, online technology and marketing know how). KIBS companies were also building new type of business models where collaboration and partner networks were seen not as support functions but as key source of competitive advantage. All KIBS companies were looking for new ways to encourage creativity and knowledge transfer which were vital to their competitive advantage but increasingly difficult to manage in the fragmented organization. The interviews were not able to cover the theme of knowledge management in international context in detail but being one of the key success factors, as discussed earlier, this might be an area were organizational innovations are emerging. 4.6 Role of private and public support Interviews discussed also the need and role of external resources (know how, resources, and financial support), including private and public sector services. Market specific analysis on local

16 structures or programs for supporting service sector internationalization or growth was not included in this study. As background data on the availability of these services or resources were not analyzed, the interview outcomes were not reflected against supply and demand or quality and quantity of support. In general, case companies were not very familiar with the public support networks or availability of support instruments. Only few had used any public funding or advisory services. For Swedish and Finnish companies the public support network and their services were most well know, and their services were also used. Only one case outside Finland and Sweden mentioned public support. Private sector consultants were not mentioned as strategic partners supporting internationalization process even if several type of support services were typically used e.g. financial, legal, market research, market location analysis, recruiting. These were often local partners offering know how in specialized area. Internationalization was mostly financed from ongoing operations. In some cases, companies were already in stock exchange or had acquired venture capital financing. External financing typically pushed for more aggressive and systematic growth strategies

17 5 Conclusions Structural change taking place in Western economies is shifting focus from manufacturing to services. Developed economies are already moving from information economy to knowledge economy and also in Finland economic development is increasingly dependent on service sector growth and internationalization. Finland is still lacking behind EU in private service sector employment, productivity, and share of total economic activity. Services are increasingly becoming also global business. Multilateral trade agreements, technology development, and globalizing customer base support and also create market opportunities for new services. Internet is enabling scalable, global business models also for services and at the same time creating new demand for expert services. Globalization is polarizing consumer preferences and supporting emergence of international retail brands. Strong brands are becoming internationally attractive also in services and the lack of scalability is partly compensated with franchising and new channels. Global customers and competition drive in special professional service companies to challenge their know how in international markets and to build credibility and competences in key markets. In Finland, high share of public sector services and protected home market have not challenged private sector services productivity or international competitiveness. Opening service markets and lack of competitive home market has made it fairly easy for international service providers to enter Finnish markets. At the same time Finnish companies internationalization is lacking behind most European countries. Finnish service companies should increase their internationalization efforts to keep abreast competition and to create new growth sectors for Finnish economy. Internationalization must be based on strong drivers and supported by long term goal setting and top management commitment. Finnish service sector lacks in ambition as well as history and best practices in internationalization. The few international success stories are regarded more as exceptions of the rule than something to strive for. Finnish public support structures and instruments have in past focused on historically strong export sectors and technology driven industries. Services are now gaining new attention from public support organizations but the service offering does not yet effectively reach companies with internationalization opportunities. Major characteristics of services, namely intangibility, inseparability, variability, and perishability, increase the complexity of service development and internationalization and consequently challenge the related public support structures and offering. Lack of scalability and focus on process, life cycle management across different channels and customer experience in services differ fundamentally from product based industries. Consequently, building effective support programs and instruments for service industries requires new thinking and support offering: how innovation is defined and evaluated, what are the potential sources of competitive advantage and what are the specific support needs of service companies. Based on the key learnings from the cases, the study recognizes potential areas for support which complement market entry phase internationalization services like market and competitor analysis, market entry options and partnering support. Key areas for supporting long term internationalization strategies include service branding, competence management, and integration to local ecosystems

18 Creating and managing service brand: International markets challenge companies to crystallize the core value proposition both to attract new customers and to support effective transfer of core values across market boundaries. Service experience is created through the whole service process where service touch points, different channels and total lifetime of customer relationship must be managed. Cultural and market differences increase further the complexity of managing international service brands. Brand is also reflected in company culture which plays a key role in attracting the right people with competences covering entrepreneurship, fit with the company values (DNA) and expertise and networks in local markets. Potential areas for support: Building and managing consistent service experience with sensitivity to different cultures and market conditions. Managing balance between global and local needs. Exploiting multichannel strategy how to exploit different channels, co-branding opportunities or local networks in maximizing brand presence. In special, how to exploit online channel in creating new services and relationship with customers that support overall service experience. Understanding local markets and consumers, integrating to local value networks (e.g. market research, consumer preferences, shop location analysis) Branding with emphasis on how employee brand and corporate culture can effectively support attracting, committing and motivating key people. Competence sourcing and management: Consistent service concept and talented local management provide good base to local operations. Managing local operations is, however, continuous challenge. International operations require constant support and attention from shared resources and top management to integrate them effectively to the global organization as well as to ensure knowledge transfer. Personal interaction play important role in service quality and customer experience. Consequently people management and motivation to commit to shared goals plays vital role in creating consistent brand experience. For KIBS companies competence base can provide source for differentiation and more customer centric offering where redefining competence offering increases value add to customers. Potential areas for support: Supporting brand experience through motivating and integrating local people or partners to shared goals and values. How fragmented organization with cultural, language and geographical differences challenges leadership and corporate culture? Recruiting key personnel with a mix of skills (e.g. entrepreneurial and networking skills, commitment to brand values): defining recruiting needs, reaching and attracting right people. Managing service excellence across locations e.g. through training, knowledge transfer and/or tools and concepts. Maximizing collaboration, knowledge transfer and synergies across markets and projects (KIBS). Managing balance between creativity and shared processes. How to foster creativity and corporate learning across different markets and offices (KIBS). Differentiating through competences creating customer centered solutions that go beyond traditional expertise offering (KIBS). Integration to local ecosystem and culture. Customers, partners and networks are key enablers for service internationalization. Effective networking decrease market and cultural barriers and increase credibility and impact of local operations. Networking strategies can also offer opportunities for building new business models allowing more effective use of resources and adding complementing competences and service modules to meet customer needs

19 Potential areas for support: Analyzing strategic options for market entry and how they fit company s business model, resources and growth targets (exports, shop in shop, franchising, own shops, licensing). Specific know now on different entry models e.g. franchising, M&A. Integrating effectively to local market infrastructure: networking, value chain analysis and partnering support. Creating effective partnering strategies to expand local and global credibility and resources: international, local or Finnish partners or networks with complementing know how and services (KIBS) Managing service delivery and customer relationship in networked business model. Role of technology platforms or tools in supporting service process and quality The findings of the study have been discussed with Tekes and Finpro partner organizations as well as service companies to test the relevance of the conclusions. Additional conclusions that came from discussing study findings with the reference groups include: Public support focus and relevance must be increased. Leading service companies in Finland are still small in global markets. Complexity of services internationalization makes it important to support even mature service companies looking for new growth opportunities in global markets. High potential lies also in small but globally scalable service concepts where early globalization is essential for competitive and business model reasons. New instruments or programs as such are not needed but in order to reach and attract the most promising companies and concepts communications on support availability and offering must be more focused and relevant. Mixture of methods should be used in supporting internationalization of service companies. Consultative support services should be completed with opportunities for networking and sharing of learnings e.g. training, sparring and mentoring, networking and exchange of learnings with Finnish or international service companies and networks, case analysis/presentations and benchmarking studies, market studies, thematic workshops or consultations, and networking with target market industry organizations or research

20 6 Summary of case companies The cases study covers 18 companies in retail and KIBS sectors. Six cases are from retail with focus on fashion and lifestyle concepts. 12 cases are KIBS companies with focus on management consulting, technical consulting and marketing communications. Retail cases include four home design and lifestyle brands and two online concepts based on innovative mass customization strategies. The lifestyle cases include Zone Company - Danish home design chain, Hemtex - Swedish home textile chain, Pentik - Finnish home lifestyle brand, and Conran shop - UK home lifestyle brand. Conran brand is one the most well know lifestyle brands in UK. The Conran group consists of several business units related to lifestyle and design (D&D restaurants, Conran Shop, Conran design studio, and licensing). Conran Shops are located in key cities worldwide (New York, Paris, Tokyo and other major cities in Japan) and even with only few international shops the brand visibility is maintained by the Conran group promotion. Hemtex is the leading home textile chain in the Nordic region. Hemtex started in Sweden in 1973 and today they operate 208 stores in Sweden, Norway, Denmark, Finland, Estonia and Poland. Pentik is a major interior design retailer in Finland growing international through own shops and franchising. The retail operations include over 70 stores in Finland, Sweden, Norway and Switzerland. Zone Company was founded in 1997 and after home based growth it has grown international through wholesale operations and franchise shops. Zone has total 28 shops in Sweden, Iceland, Poland, Middle- and Far-East. Online channel enables building totally new retail concepts with innovation opportunities in personalized offering and mass customization. Success cases combined innovative customer proposition with total service offering covering cost effective production and logistics processes for mass customized products. Leftfoot is a Finnish retail concept offering mass customized shoes through specialized service points (shop in shops) and online. The concept combines specialist software and technology for customized shoe design and production as well as online repeat order and delivery system supporting global sales. Left foot has currently nine retail shops serving global customers (Finland, Germany, Malaysia and Japan). Spreadshirt is a German online service that allows individuals, companies or institutions set up their own online shop and design their own products for sale. Current product range includes T- shirts and some closely related articles. Spreadshirt has today 10 international branch offices in Europe and US and they serve 13 countries, with 2/3 of turnover coming outside German market. KIBS cases include consulting companies in strategy consulting, marketing/digital marketing, engineering, architecture and design. Quest Worldwide, Roland Berger, ICUnet and Whatif offer management consulting services, ranging from more traditional strategy consulting to innovation management, intercultural services and policy consulting. Force Technology, Whitbybird, and Evata are engineering based KIBS offering engineering, technology, architectural and real estate consultancy services. Marketing related cases include TradeDoubler (digital marketing), YouGov (online research), Komdat (online marketing), and Contra (marketing agency). Contra is a Finnish marketing agency focusing on B2B customers. Taking very untraditional growth approach the company started with a focused internationalization strategy and opened their first international office during the company s start up phase

21 Evata is a Finnish architecture and real estate consultancy that has grown international firstly through networking and alliances and in the second phase with own international offices (Russia, Estonia, China, and Sweden). In 2007, Evata was acquired by Pöyry, a global consulting and engineering firm business units covering energy, forest industry and infrastructure & environment. Force Technology history dates back over 60 years to the foundation of Danish Welding institute. Over the years Force has acquired companies in Sweden and Norway with complementary skills that support the core service offering in technology consulting. Force employs over 1000 people with headquarters in Denmark and subsidiaries in Sweden, Norway, USA, and Russia. German ICUnet offers intercultural consulting and training services through a global network of freelance partners. Komdat is a German online marketing agency combining technical solutions to marketing consultancy. Komdat offers consulting and solutions for online marketing from e-consulting and agency services to technology solutions. Komdat is still in the early phase of internationalization having opened their first international hub in Austria to support projects in East European markets. Quest Worldwide is a change management company with focus on strategy implementation, operational excellence and people engagement challenges. Founded in 1988, company s home market is UK with regional offices in US, Australia, and Singapore. Roland Berger is one of the leading strategy consultants in Germany. Founded in 1967, Roland Berger operates globally with a network of 35 offices in 24 countries. Tradedouble is a digital marketing company offering solutions and services for online publishers, advertisers, and marketing agencies. Headquarters in Sweden, the company has a local office in 18 countries across Europe and Asia and they employ over 650 people. Founded in 1999, they company went international very early, entering 10 foreign markets in their second year of full operation. Founded in 1992, Whatif innovation consultancy company employs today over 300 people with head office in UK and regional offices in US and China. Whatif s core services include consulting and training supporting innovation capability building, innovation projects and ventures. Whitbybird is a UK based engineering company founded in It has 10 offices in UK and eight international offices in Italy, Poland, UAE, India, Australia, Kazakhstan, Ireland. In 2007, it merged with a major global engineering group Ramboll. YouGov is a market research agency specialized in the use of online surveys and specialist target group panels. Founded in 2000, YouGov has grown rapidly by acquisitions and partnerships in UK and abroad

22 Table 1: Summary of case companies HQ Establ Company Business area Size Int'l operations Technological DK KIBS 1940 Force Technology Big consulting services Digital marketing Swe KIBS 1999 TradeDoubler consulting and Big solutions UK KIBS 1992 Whatif Innovation consulting SME UK KIBS 1998 Quest Management consulting SME UK KIBS 1945 Whitbybird (merged with Ramboll in 2007) Engineering consultancy Part of Ramboll End user online UK KIBS 2000 YouGov SME research UK KIBS 1989 Technopolis Group Policy evaluation and consulting SME D KIBS 2001 Komdat.com Online marketing solutions and consulting SME D KIBS 2001 ICUnet Intercultural services SME D KIBS 1967 Roland Berger Strategy consulting Big HQ in Denmark, subsidiaries in Sweden, Norway, US and Russia briging 47% turnover. HQ in Sweden, 19 international offices in Nordic countries, Austria, Belgium, France, Germany, Italy, Ireland. Lithuania, Netherlands, Poland, Portugal, Russia, Spain, Switzerland, UK and Japan. HQ in UK, regional offices in China and US. HQ in UK, regional offices in US, Australia, Singapore, UAE HQ in UK, intern'l offices in Nordics, Italy, Poland, UAE, India, Australia, Kazakhstan, Ireland. Total ramboll group operates 182 offices in 24 countries worldwide. HQ UK, int'l operations in Middle East (UAE), Germany, Austria, Denmark, Finland, Sweden, Norway and US HQ in UK, int'l operations in Austria, Belgium, France, Netherlands, Sweden, Estonia, Turkey. HQ in Germany, subsidiary in Austria covering Eastern Europe. 200 freelance consultants worldwide. Offices in Shanghai, US, Tsech Repub. 35 offices in 24 countries: Europe, China, Gulf region, Japan, US Marketing comm. FIN KIBS 1996 Contra SME Lnd, US, Singapore, China agency FIN KIBS 1961 Evata Architectural and real estate consultancy Part of Pöyry HQ in Finland, offices in China, Baltics, Russia, Sweden. In 2007 merged with Pöyry leading engineering consultancy in Finland operating in 45 countries. HQ Establ Company Business area Size Int'l operations Household and DK Retail 1997 Zone Company lifestyle design SME chain Swe Retail 1973 Hemtex Home textile chain Big UK Retail 1973 The Conran Shop Home furnishing and decoration chain. Part of Conrangroup HQ in Denmark, wholesale (Sweden, Norway, Germany, UK) and franchising 28 stores (Sweden/15, Iceland, Poland, Middle- and Far-East) HQ in Sweden, own (183) and franchise (25) shops in Sweden, Finland, Denmark, Norway, Estonia, and Poland. HQ in UK, concept stores in Paris, Japan (4x), and New York. D Retail 2001 Spreadshirt Online service for designing and selling your own T- shirts. SME HQ in Germany, offices in US, UK, Ireland, France, Netherlands with sales activities in 13 countries in total. 2/3 of turnover outside home market. FIN Retail 1971 Pentik Home lifestyle chain SME Mass customized FIN Retail 2001 Left Foot SME shoes concept HQ in Finland, 13 own and franchise shops in Sweden, Norway, and Switzerland. HQ in Finland, int'l shops (partner, franchise, own) in France, Germany, Japan and Malaysia

23 7 Attachments: Case summaries 7.1 Case The Conran Shop Founded in 1990 by Sir Terence Conran, the Conran Group started its life in an apartment in Butlers Wharf, London, consisting of one restaurant, one shop (opened in 1973) and a small design studio. Terence Conran has been influencing public taste since the 1960s and he is recognized as an innovator in design field, having also founded Habitat home furnishing brand. Today Conran Group has grown into an international architecture and design business with restaurants and shops in major cities around the world, and Terence Conran has become one of the world s best known designers, restaurateurs and retailers. Conran Holdings is made up of Conran Limited (licensing Conran branded products), Conran&Partners (architecture and design services), Studio Conran (product and graphic design), The Conran Shop, D&D London (restaurants). The creative teams at Conran produce innovative designs while The Conran Shop sells a carefully chosen selection of contemporary, well-designed furniture and home furnishings in London, Paris, New York and 4 stores in Japan. Conran shops grew with customer demand with emphasis on finding the right location E.g. the historic Michelin Building was acquired in 1987 to provide perfect location in London and the right size to serve as show case for Conran life style products. Conran invested in a full restoration of the Michelin Building to create the Conran look and feel in order to enhance the customer experience for retail and hospitality. Creating a whole life style experience for customers was a unique concept in the 1980s where Conran tapped into the new trend for quality design and food. Local and international growth for Conran has typically been organic and opportunistic following the UK success of finding the right property development opportunity. Brand awareness and customer demand have driven investments to new markets. Following the success of the Michelin Building, Conran achieved considerable success with the district by the Tower of London. The Conran brand is vital to Conran shops as it ensures visibility and presence even with only limited market coverage. Conran brand strength lies in the group activities supporting each other (licensing, design practice, Terence Conran books etc). Protecting the integrity of Conran brand during expansion into international regions is one of the key challenges they face. For Conran Shops key success factors have been understanding the local market demand, protecting the integrity of the brand, solid business practices and profit targets, people that understand and adapt to international cultures in order to ensure continuity of the brand while accommodating the needs and tastes of the local people. 7.2 Case Hemtex Hemtex is a Swedish home interior chain with focus on textile and other smaller interior design products. In addition to the Swedish market, where they have been active for over 30 years, the company also operates in the other Nordic countries as well as in the Baltic and Poland. The shops are centrally managed under one brand and Hemtex manages the whole value chain. At the moment there are about 210 Hemtex shops. Finland is the biggest market outside Sweden with

24 shops, followed by Denmark 8 shops, Norway 8 shops, Baltic 1 and Poland 3. Majority of shops are own but also franchising is used in Sweden and in Poland. Hemtex employs 602 people internationally. Hemtex market share on the Swedish market is 31,3% (April 06 March 07) and their goal is to reach 15% market share in the Nordic market. Hemtex is a stock listed company (OMX Nordic Stock Exchange) with clear growth targets. Due to mature home market Hemtex has been looking for new markets abroad. The internationalization was started in close markets to ensure similarity of tastes and maximize brand awareness. Currently Hemtex is looking for additional growth opportunities by investing in new bigger store concept (Hemtex&More) with broader product offering (furniture, kids collections, kitchenware). Hemtex internationalization has been realized through own shop concepts with strong central management (purchasing, design, marketing, store concept). Franchising has been used in Sweden and Poland. In Sweden, company has been increasing the number of own shops by buying the existing franchising stores. Hemtex has studied extensively new markets before entering in order to understand both consumer preferences as well as market structure and value chain differences. Strong brand and store concept has allowed Hemtex to grow internationally rather rapidly (four countries and over 40 stores in 7 years). Even with fairly similar tastes and cultural closeness it has proved challenging to enter new markets. The key learning has been the necessity of strong commitment to brand and shop concept to manage consistency over different markets. Balancing between local demands and shared concept is demanding and requires deep understanding of core elements of the concept. Market differences are reflected in shop location (e.g. shopping malls mostly used in Finland), product assortment, and customer focus. In the future, Hemtex is aiming at some 15% market share in Nordic markets with focus on expanding through own stores as well as testing new market areas in Baltic area. 7.3 Case Left foot Pomarfin Oy Pomarfin is a family owned Finnish shoe manufacturer established in Company headquarters are in Pomarkku. In 1992, already part of the manufacturing was moved to Estonia and since 2005 Estonia has been the sole production location. Pomarfin manufactures comfortable, high quality casual shoes, walking shoes, and boots for men, women and children. The increasing manufacturing cost pressures forced Pomarfin to search for new opportunities that would allow them to keep healthy profits and grow. A market study revealed individualization being a dominant trend that could offer totally new business opportunities. The new business concept was found in customized footwear with repeat orders in internet. Pomarfin invested in R&D as well as business plan formation to exploit the recognized market opportunity. The Left Foot Company was registered in Due to the niche market focus business plan was made for international concept. Left Foot success was due to being able to build working technology and business model that met maybe already recognized but not fulfilled customer need. Solving problems related to measuring the feet, adapting manufacturing, and building the customer interface (retail and web) was a risky investment and needed collaboration with partners having expertise in different areas. The complexity of the service model has given Pomarfin a first mover advantage and since today no

25 major competitor has been able to copy it. The novelty value of the concept has also gained international media attention supporting the international launch. The retail operations cover currently Europe and Asia. After fast start Leftfoot international retail network has gone through restructuring and some locations have also been closed down. With focus on solving technical problems, too little planning and effort was put on fine tuning the retail channel strategy, market focus and partner search. Also partner evaluation, introduction and management processes are being further developed to support the growing network of international locations. Current internationalization goals include expanding global retail network but with more systematic approach. More emphasis will be put on building long term partnerships with shared understanding on goal setting. 7.4 Case Pentik Oy Pentik is an international interior design retailer. Interior design is highly competitive market with strong global and local competition. Global brands and leading retail chains compete with small local brands and gift boutiques. Demand is fragmented due to individual and cultural/market needs and preferences. Pentik has managed to build a lifestyle brand with Scandinavian flavour but with unique features that make Pentik recognizable and different. Brand is built carefully and in detail around lifestyle product range and customer shopping experience. Pentik has chosen a selective channel strategy, growing internationally only through own concept stores. This means small market coverage with large initial investment as opposed to cooperation with major retail chains already with strong foothold in the market. Managing the whole value chain has been the key competitive advantage for Pentik allowing them to maintain control over the brand consistency and margins; brand value and earnings. Pentik internationalization drivers include investing in long term growth opportunities as well as existing international demand. Pentik is family owned company with limited financial resources and risk taking ability. Continuity brought by the family ownership and management allows building new markets with years perspective. As home markets still offer growth opportunities, international expansion is investment to future, rather than necessity to reach current growth targets. Pentik internationalization process is still in a very early phase, having started from Scandinavia due to cultural closeness, market size and competitive situation. Latest step was opening up own store in Switzerland, which will be a test bed for brand attractiveness in Central European markets. Future international growth will challenge both Pentik brand in different cultures, ability to create and manage unique brand experience across different markets and increasingly also different channels (online, shop). Further challenge will lie in finding right resources to drive internationalisation in target markets as well as manage new requirements international operations put into internal processes and centralized functions. 7.5 Case Zone Company Denmark A/S Zone Company Denmark is specialized in accessories for home décor and interior design. Zone brand stands for functionality and design at reasonable prices. It was established in 1997 and employs today 70 people in Denmark and 70 internationally. Zone has grown rapidly and has

26 entered number of international markets during the past five years. Their international markets include both neighbouring markets like Sweden and Norway, as well as Middle and Far East. They have entered these markets either by wholesaling (Sweden, Norway, Germany and United Kingdom) or through franchise concepts. Currently there are 37 Zone Concept stores spread around the world: 15 Sweden, 5 Cyprus, 3 Dubai, 3 Poland, 2 Iceland, 2 Kuwait and one shop in the following countries: Oman, Qatar, Hong Kong, Greece, Bahrain and Singapore. After achieving certain market size and presence in number of markets, their main concern for the moment is to strengthen the brand and to extend their presence rapidly on the existing markets. The early internationalization was done mostly by franchising and driven by brand awareness and demand in individual markets. Change in ownership introduced more aggressive growth targets with focus on international growth. International operations focus on building brand presence through concept stores (own and franchising). By 2011 the ambitious goal is to have minimum of 100 concept stores in place. Key success factors supporting the international growth have been local market know how and networks. Brand power and related offering and service delivery have been driving international demand and in the future there will be even more focus on international branding in growing number of markets. Biggest challenges in internationalization have been the fast growth and related lack of structures and processes supporting international operations. Acquiring local market know how, networks and business environment understanding are crucial in entering new markets. Thus finding the right local people is both challenge and success factor for Zone. In the future, Zone focuses in building presence through own sales force in near markets and aggressively increasing the network of concept stores in chosen international markets. 7.6 Case Contra Oy Contra is an advertising agency, operating in Europe, US, and Asia through own offices and network of local partners. Contra s focus is in b2b customers and strategic marketing planning, in special creating new approaches to traditional b2b marketing, but they are also working with consumer products. Contra employs 60 people and they are among 15 biggest marketing&communications groups in Finland. Contra was started up with a vision that market opportunity exists for creative B2B marketing services. From the very start, company was built on the idea that serving multinational customers requires hands on understanding on global markets, credibly built only through own international presence. Soon after establishing first Finnish customer relationships Contra opened up their first foreign office in London (1996). Within next ten years new offices were opened in San Francisco, Singapore, Peking, and Shanghai. The key driver and enabler for expanding office network has been customer needs. Contra s multinational customers have sought support in their growth markets and Contra has built presence and competences to meet the expanding customer needs. Internationalization in consulting services incurs lower risk financially due to low fixed investments. Biggest challenges and risks Contra has recognized relate to human capital: recruiting the right people, ability to manage and motivate fragmented organization to shared goals and to contribute to competence creation on company level

27 One of the key success factors has been the strategic positioning of Contra to less competitive markets of b2b where Finnish customers provide base for international growth. Consumer marketing is already dominated by international chains and Finnish customer base is both limited and more focused on closer markets (Nordic, Baltic countries, Russia). Contra has also been skilful in networking with local partners which has increased their local impact as well as supported recruiting, integration to local markets and organizational learning. Contra is currently looking for new growth opportunities opening up with existing customers both in Europe and new developing markets. At the same time they are building structures for managing growing organization in a more systematic way, but not at the cost of creativity. 7.7 Case Evata Pöyry Architects Evata is Finland's leading architectural design firm founded in After strong growth and internationalization period, 70% of the company was acquired by Pöyry Group in Pöyry is a global consulting and engineering company focusing on the energy, forest industry and infrastructure&environment sectors. In 2008, Evata was renamed Pöyry Architects. Evata offers architectural and interior design, workplace design, office property consulting and services related to real estate development. The company's core architectural design services cover business space and office buildings, sports and leisure venues, and industrial facilities. Evata operates globally with offices in Finland, China (Beijing), Baltics (Tallinn), Russia (St. Petersburg), and Sweden (Stockholm). Evata employs 150 people globally and ranks as the biggest architecture company in Finland and among the 10 biggest in the Nordic countries. Evata has grown internationally in two steps. In the 90 s, Evata joined a strategic alliance, Equator, offering access to big international projects and ability to compete in the opening EU markets. Equator is a co-branding network with shared website, integrated services, and tools supporting effective co-operation. After building a strategy based on differentiation through customer focused service portfolio, Evata re-evaluated also its internationalization strategy. New strategy differed from the traditional architectural service offering and to reflect the new thinking throughout organization Evata decided to build up own market presence. Evata s internationalization has since been built on the niche strategy where they focus on building competence centers in specific customer segments. This differs from typical generalist architectural service offering and enabled Evata to build international credibility in their chosen focus market segments, allowing them to compete for big international projects. The more business focused approach had also given Evata opportunity to move from basic design and planning services to higher value added consulting services. Evata s current internationalization strategy is tied to the new cooperation with Pöyry group which will offer new opportunities for building customer relationships, market presence and industry competences. 7.8 Case FORCE Technology FORCE Technology (FT) is a technological consulting and service company. They sell highly specialized engineering knowledge for practical and cost-effective solutions to a wide range of

28 industries. FT has 60 years of experience from their field. They have chosen to promote their strategy through new technologies, organic growth and growth through acquisitions. FT was established in 1939 as a Danish inspection body to inspect welds in load-bearing structures and pressure vessels. The company has grown through mergers and acquisitions from a national one-man company into an international service company employing more than 1000 people and customers in more than 70 countries today. FT turnover in 2007 was MDKK 829. Currently FT has wholly owned subsidiaries in three countries: Sweden (170 employees), Norway (100 employees) and Russia (20 employees). Nearly half of FT s turnover comes from outside Denmark. FT has performed impressive growth strategy through successful acquisitions. Their motives for acquisitions have varied from expanding existing business to market and new business entry. The focus has been in finding companies that complement FT s core activities and offer further synergy and development potential. They have been successful in integrating these acquired businesses into their business model and this has allowed them to move away from point-of-services firm to a onestop-shop with a variety of highly specialized knowledge services to offer. Knowledge acquisition is one of the key drivers of FT s internationalization. FT has sought to have critical mass that allows them to develop, acquire and maintain knowledgebase. Thus growth is a necessary prerequisite for long term existence. FT acquisitions have been based on thorough market research and due diligence. Shared benefit and goals are vital for the successful integration of new business units. The motivation for the acquisition has not been the volume in itself; instead it has been the potential for knowledge transfer and business/customer synergies. FT has strong business infrastructure which has supported effective takeover process and rapid realization of overhead savings. Starting operations in near markets has been easier due to legal, business and leadership similarities. FT has learned that acquiring smaller company in a far away markets can be very challenging, because of time and effort needed in managing the operation. Thus the effort needed for managing international operations must equal the market potential they can offer. Also cultural differences have proved to be more challenging than anticipated. Their prime focus for international growth in the future will be in the near markets. Similarity of Nordic markets offers still growth potential in terms of market volume and knowledge acquisition. FT approach is to set up operations through acquisitions locally with local people and with a certain volume to survive. FT sees risk in building net work of small companies spread abroad due to the management burden, attention needed to support them. 7.9 Case ICUnet.AG ICUnet.AG is the market leader in Germany for intercultural services. Their services range from consulting to self management e-learning tools. In the age of globalization the founder of ICUnet.AG, Dr. Fritz Audebert, recognized opportunity in the market for more tailored-made intercultural services back in At that time these services typically included only open seminars, where perhaps even competing companies sat together to listen. Hence ICUnet.AG was started with the goal of offering more in-depth and personalized intercultural services. These services aim to assess the suitability of candidates for foreign engagements and

29 prepare them accordingly, thereby reducing the risk of problems or even an early discontinuation of the assignment. This requires that ICUnet.AG has worldwide intercultural knowledge not just of every day life in the countries their customers are doing business in but also of the business culture. However having the necessary number of intercultural staff available in numerous different locations on a full time basis would be very difficult to scale. For this reason ICUnet.AG maintains a base of 200 freelance consultants worldwide which they use when necessary. This allows ICUnet.AG to scale their services up without having to maintain a large fixed overhead. Since its founding, ICUnet.AG has grown quickly (750% over 5 years) and they are still in a growth phase. With offices in Shanghai, the US and Prag and plans for Singapore they are also open to a more physical presence in other markets. This however must be based on a solid business case. Indeed any employee can present the case to ICUnet.AG for a particular market and, if it makes sense, start capital will be provided to open an office there. This is somewhat similar to a franchise method of internationalization and is aimed at promoting sound business thinking within the company when it comes to expanding Case Komdat.com Komdat.com is an online marketing agency which provides and combines both consulting and technological know-how. This means that they compete both with technology providers and agencies in the marketing field. Both segments are individually very competitive with large dominant players especially prominent in the agency market. The market for online marketing technology is more fragmented but still very competitive and containing strong players (e.g. T-Systems Multimedia Solutions, Elephant Seven (Pixelpark)). Komdat.com is a relatively young company (founded in 2001) which is growing fast both nationally and internationally. The strategy for international growth is based on a combination of premeditated actions towards specific markets area s (German speaking area, CEE, SWEA) and ad-hoc opportunity realisation based on their personal network or people related to specific markets Komdat.com s size and culture allow them to react in a flexible manner to market opportunities. In combination with the offering of both agency and technology services under one roof Komdat.com has an offering and flexibility that gives them a competitive advantage within the German market and the targeted international markets. Maximizing that particular competitive advantage has been one of the main drivers for internationalization currently. Komdat.com understands that either an agency or technology driven company would be able to buy in the additional core competency through acquisition and start providing a similar offering. Hence the current internationalization efforts are focused to a large degree on Eastern Europe where the markets are less mature and they are less likely to meet such a combined offer. The internationalization strategy is driven by an investment in the right people for the right markets. The internationalization is still at an early phase and coordinated from 2 office hubs in the German speaking area. By building international operations from these hubs Komdat.com can manage the investment risk and also ensure strong team work within the responsible functions. Key for

30 Komdat.com is that not only do the employees have the necessary competencies for their roles but that they are also local i.e. able to speak the local language and know the local market/culture Case Roland Berger The name Roland Berger has been synonymous with Strategy Consulting in Germany for many years. The company was founded in 1967 by Roland Berger, at that time a young entrepreneur, who had gained his first foreign experience in Italy working as a consultant. Since moving out of direct management of the company Mr. Berger has moved into the supervisory board and has active role in media/politics. For much of the company s history Roland Berger has been in private hands either owned by Roland Berger himself or as is the case today, by partners. The strategy consultancy operates now worldwide and has been internationalizing since its very beginning with the first office in Milan and the latest one in Casablanca. The services have developed from marketing consultancy into strategy consultancy (50% of project were strategy projects by the mid 80s). The internationalization has not only been underscored by new locations but also by the number of projects abroad and by the increasing number of international partners being nominated. The strategy for Roland Berger from the beginning was internationalization or more specifically growth through internationalization. Hence as offices were being opened throughout Germany, the international consultant consortium TIG (The International Group Consultancy and Research) was set up by Roland Berger in a number of countries. By 1980, Roland Berger Strategy Consultant was part of ACME (Association of Consulting Management Engineers) as the first European consultancy. To further facilitate and accelerate growth the company was sold to Deutsche Bank who provided an existing network of international locations and international clients. Finding a partner with the correct synergies gave Roland Berger an excellent channel to grow internationally. However another key stepping stone was exiting the partnership at the right time to allow Roland Berger to realize the increasing opportunities in consulting for financial sector. In 1998, a management buyout took place and the company is now owned by Roland Berger himself and a number of partners (160 today). The company has introduced processes and tools to ensure a high standard of consulting is available regardless of the country. Key personnel are sent to initiate the set up of each new office. This is the main format of internationalization at Roland Berger. Despite the systematic approach company emphasizes that entrepreneurship and creativity of the consultants is valued at Roland Berger and used as a differentiator. Hence less static consulting tools and models are in use compared to other strategy consultants. Roland Berger Strategy Consultants is very much dependant on its people for the quality of its service. Roland Berger himself has a very prominent position in the German business and political landscape and still plays an important role in the success of the company Case Spreadshirt Creative Apparel is what German based Spreadshirt uses to describe the ability they provide their customers and partners to design individualized clothing via an online front end store. From order to dispatch Spreadhsirt has a turnaround time of 48 hours which remains unmatched in Germany

31 Clothes are only printed when ordered which means that large stocks do not need to be held in advance and Spreadhshirst customers have no minimum sales quota to consider when setting up a store. Fashion is subject to varying tastes and culture but the desire to own design is a global phenomenon nonetheless: being able to individualize your clothes to your personal tastes and culture. Started in 2002, the company turnover has reached the double digit millions with customers. From production to billing the company takes care of the entire process when it comes to running your own store. What began as a student business now has 250 employee which take care of customers in several different countries. The internationalizations strategy of Spreadshirt has been one of trial and error ; seeing what works and what does not and adapting accordingly. Physical locations have been set up where the appropriate person can be found to accelerate the sales and where production is scalable to meet the global ambitions. Otherwise the website has been translated to the local language and native speaking resources have been sourced from the Leipzig area (often the University) to support the local country needs.the founders business idea and contacts to the textile industry gave them a head start in the individualized clothing market which they have actively built in Germany and beyond since day one. Currently Spreadhshirt are active in the USA, UK and the Nordic countries among others. Their rapid growth was self financed until 2006 when venture capitalists invested in the company. Their growth has been at a very high rate which has challenged company focus and structures. Now company is going through transition phase from start-up to an established organization. To facilitate this process it has been key to recruiting more experience resources as the company grows. At higher management level Spreadshirt have managed to attract such resources in recent years. Spreadshirt is one of the most successful internet companies of the past few years. Established in 2002 without any major capital, Spreadshirt now employs more than 250 people and has expanded in Europe and the USA. Spreadshirt was awarded the Futuresax in 2002 and 2006 as well as the Hewlett Packard Business Innovation Award in The company was nominated for the category Aufsteiger des Deutschen Gründerpreises (up and coming German start ups) in 2005 and won the German internet prize. Spreadshirt has recently made it into the Top 5 European Growth list "Europe's 500" Case Technopolis Group Technopolis Group was founded in 1989 as a spin off from Sussex University s Science Policy Research Unit. SPRU has an international reputation in the field of research and innovation policy. Technopolis Group provides knowledge-based research, advice and management support services to policy makers and those responsible for putting policy into practice. The core focus is on science, technology and innovation and policies for economic and social development. Key customer segments include international companies, national and regional governments, international organizations such as the European Commission and the Word Bank, science advisory and research councils, funding innovation agencies, associations of research organizations and individual institutions

32 The Technopolis Group is an European organization with a staff of 75. Headquartered in the UK, offices are located in Austria, Belgium, Estonia, France, The Netherlands, Sweden, Turkey and the UK. The offices typically work in multi-country and multidisciplinary teams. Overall, Technopolis Group has experience of policy and innovation in 35 countries. This brings an international perspective to all projects at the regional, national and international level. In the late 1980s, the EU commission was important driver for building an effective European network consisting of researchers and companies working with research and innovation policy and evaluation. Under pressure from increased quality control of university research and the need to publish in the academic research literature, university research on innovation and research policy in the UK became increasingly theoretical. This created a space between the traditional research and consulting communities into which Technopolis could initially spin off from the Science Policy Research Unit (SPRU) at Sussex University and work in evaluation and applied science policy. A key driver for growth from the outset was the born global concept. Technopolis very easily entered the international market. The first customers were in Finland, Ireland and Sweden. To begin with, all work was international before any business developed in the UK. The growth and development of Technopolis Group was initially opportunistic. The company was formed in response to slow-moving university administration that could not decide in a timely way whether one of the founders could be involved in a large evaluation project in Sweden.They therefore set up Technopolis in order to respond to the opportunity. Technopolis has successively added offices through people knocking on the door and suggesting they set up a branch in their own country. Since the key resources needed to address Technopolis markets are specialized skills, local knowledge and networks, the company has not been tempted to enter markets where it does not have local connections, although it does sell a substantial proportion of its work across borders. Technopolis Group developed a mesh network of international offices while its competitors tended to work nationally and in hub-and-spoke consortia. As a result, Technopolis was early on able to address the growing openness of national markets within EU. Technopolis is operating in highly competitive, mature markets where local market knowledge is vital. This may drive the need in future for acquisition of local companies as opposed to Technopolis Group s traditional approach of welcoming trusted people who would like to set up local offices. Competition tends to be lower in emerging markets, where it is more viable and less challenging to open a local office. In emerging markets local knowledge is not so vital as these regions are evolving commercially, politically and culturally due to the organic and disruptive nature of the change that is occurring. However, it is harder to package an offering in an emerging market due to the unpredictability. Technopolis Group works with a cross-border consortium of competitors and complementary consultants. This collaboration is an effective way to extend Technopolis Group s international footprint. It is vital to build a trustworthy network and develop relationships in regions where Technopolis Group does not have a presence as well as in places where Technopolis is present but could benefit from complementary skills

33 7.14 Case?What If! What If is an innovation consultancy company with special niche in social innovation. What If services focus on supporting companies to innovate new products, services and experiences and helping companies increase their innovation capability through organizational change, training, study tours and events. What If is a people business. The brains and energy of the people is core to the business. It is the people that attract the clients to the What If innovation culture and creates the brand. What If has a mission to develop a wealth of insight at a time when the commercial world is beginning to seriously address issues of sustainability. Social innovation is also a key to the value proposition. What If was founded in 1992 by Matt Kingdon and Dave Allan as a response to the bureaucracy of big corporate structures. They felt that big corporations had inefficient and damaging approaches to creative innovation, especially when it came to new product development. Today What If employs 300 people and is located in London, Manchester, Shanghai and New York with others planned internationally. Company works in over 40 countries worldwide for 194 clients. 40% of the business is in the UK; 30% in US; 30% in Asia Pacific. Singapore and Bombay are key targets for growth in the Asia Pacific region. What If is privately and wholly owned by the employees. Whatif trades out of four companies: What If Holdings, What If Ltd, What If USA Ltd, What If China. What If has from early on worked with companies operating globally which has driven them to look for global presence in key markets in order to thrive. What If started very small in London. The first international office was in Australia. This was purely opportunistic and entrepreneurial. After several years Australian office was closed due to poor profitability. The US market followed due to significant demand from big brands in New York. The New York office was established in 2004 and now employs 50 people. Opening the New York office was more pragmatic and less opportunistic/accidental. The third office was opened in Manchester, UK. The fourth office was opened in Shanghai, China. This was planned and strategic due to the need to be positioned in Asia/Pacific to take advantage of the massive growth potential. Singapore and Bombay are on the radar screen for development in the near future. The pragmatic approach to growth will become the company culture as it matures. Nowadays?What If! will invest in a business case for new markets to qualify the viability. The markets have to be tried and tested.?what If! has yet to encounter any major risks or barriers to internationalisation. Potentially, a local competitor with strong brand equity in an international market would provide significant barrier to successful market entry. A culture of recruiting the right people (culture/behavior) is key to the company s competitive advantage. Consequently, recruiting the right people is vital to?what If!. A problem at the outset was locating and hiring local talent that embraced the What If concept of innovation. Employing people with the appropriate mind set is critical for the success of the What If business model. As part of the internationalization strategy, employees must embrace the?what If! culture and have the What If brand in their DNA. There is a critical mass of this DNA in the management, combined with the street smart new recruits. Street smart is an important aspect of the recruitment employees must understand the local culture.?what If! employs people who understand the legalities of different countries e.g. tax law and employment law. This ensures that offices open efficiently and in a timely manner and are managed properly and at low risk.?what If! now employs senior local people at each office from the outset

34 From the beginning,?what If! deployed an opportunistic approach to internationalisation. As the company matured it changed strategy. Nowadays,?What If! has a pragmatic approach to growth and will deploy a systematic and demand led approach rather than opportunistic and accidental. For example, the internationalisation strategy will be dictated by demand in emerging markets.?what If! s growth will be supported by global learning. To support global learning the company recently embarked on an initiative to consolidate the global teams through People Team Leaders in each country. This will be core to the strategy as the company continues to grow. Future growth will challenge the What if brand value; how can the company continue to expand and roll out services without compromising its integrity Case YouGov YouGov plc, is UK's leading online political and corporate market research group. The YouGov strategy is to combine innovative product development of online market research and polling with geographical expansion and selective acquisition. The YouGov strategy remains focused on innovation, investment and internationalization. Recently acquired businesses have accelerated the international strategy and provided YouGov with international scale in key market research territories. Headquartered in London, YouGov s internationalization began in the Middle East. YouGov now has operations in the Europe and US. YouGov quickly realized that it had a scaleable business model that was easy to replicate and integrate. This was a key driver for internationalization. YouGov s international growth has been organic due to expansion of legacy business and acquisitions. YouGov made three international acquisitions in 2007 in Denmark, Germany and US. To maintain this positive growth, the business has been refocused, with research brains hired to head each of YouGov's five market verticals. This will lead to involvement in more strategic global campaigns as well as ad-hoc tactical ones. The internationalization challenges lie in integrating the acquired businesses and rolling out core products across the group. This has created opportunity for strategic cross border projects - which is key to the long-term success and competitive advantage of the business. The acquisitions will accelerate growth and are consistent with the strategy to establish key geographic hubs to facilitate a global presence and develop the necessary communities of business and consumer panels for the market research and polling services. But acquisitions are also challenging due to cultural conflicts and process integration of the new business. You Gov have successfully used internet technologies in supporting a hub structure with centralised IT and operations at key points replicated globally at low cost and low risk. The internet-based business model is transportable easily to many international regions where there is demand for YouGov research services. Even when it is easy to replicate the services in different regions, the local cultural issues must be built into the offer. Developing the hub structure in order to manage the international regions has been very successful. It has provided a significant competitive advantage as it provides a strong platform for global delivery and allows YouGov to develop the products to meet the needs of different international regions e.g. tracking politics and local brands. International hubs allow YouGov to adapt to both local and global needs (micro and macro). Hubs also allow YouGov to develop and utilise their panels effectively by region

35 The YouGov offer is consistent globally, but has to be localised and branded to accommodate cultural differences (including the acquisition process). YouGov floated on the UK Stock Exchange for 18 million in April Case Quest Quest Worldwide is a global change management consultancy, founded in Quest Worldwide works with multinationals across all industries to assist with strategy implementation, change management and performance improvement. A key area of expertise is people and culture transformation. Quest Worldwide works with clients to develop a balanced strategy combining leadership with a connected set of values and behaviours throughout an organisation to mobilise teams at every level and improve efficiencies and optimise existing resources through organisational change and performance improvement. Quest Worldwide was born global. Quest s service offering requires an international presence as their core services such as process improvement and change management are customised to meet the needs of MNCs in global markets. Emerging markets are key to Quest s internationalisation strategy. A strong and credible brand and value proposition are vital for penetration into different and challenging markets. The cost and effort should not be underestimated. It is important to adapt to new international markets but keep the core integrity of the offering intact. The core offering is underpinned by consistent quality of service and the experience and quality of the consultants the people have to be experienced and credible and opportunistic. Quest has an opportunistic approach to developing international business, in the sense that it identifies and responds to specific opportunities in specific markets where Quest services can be effectively deployed. This includes Dubai and China due to the enormous potential from these emerging markets. The European market was inevitable for Quest because in Europe there tends to be a less sophisticated use of consulting in a holistic approach to change management. This has created opportunities for Quest due to the lack of competition vs the need for quality change management consulting services. A key challenge for consulting-based services is language and culture, so there is a strong need to adapt accordingly in different regions. It is vital to understand the key drivers in the market place; understanding the real needs of the international client and delivering the right solution for their market. Quest Worldwide has to play the game in all markets. It has to be lean, flexible and adaptable in order to facilitate growth and protect the equity of the brand (quality and reliability). In the consulting business, working capital and operating costs are low. There is limited need for capital expense (e.g. machinery or IT investment), which helps create a reliable platform for international growth. Opening new offices in new regions is accessible and low cost. This also enables a responsive and flexible approach to doing business in international markets. KIBS businesses can easily go where the business exists as long as it deploys a hub model for supporting key regions

36 Successful internationalisation requires agility, nimbleness and the capability to deliver what the customer wants better and faster than the competition. Credibility, experience, agility and flexibility are the key skills for a strong competitive advantage. Once these issues are understood it is fairly easy to deploy the appropriate skills in the new markets. This is underpinned by the right tools and knowlege to enable Quest Worldwide to to respond to international marketplace dynamics and new challenges from emerging markets as well as the relentless drive for higher quality of service in existing markets to maintain the competitive advantage: Put processes first, make high performance possible. A key consideration for international growth is ensuring geographical balance: cross pollination of resources between different regions and encouragement of sharing knowledge and expertise Case Whitbybird Ramboll Whitbybird is recognised as a world leading knowledge based engineering company operating from 116 offices in the Nordic region and the UK and from 24 permanent offices in the rest of the world. It employs 6500 people. Ramboll has a history of growth through global mergers and acquisitions. In 2003 Ramboll doubled its size through acquisitions in the Nordic countries. This Nordic presence forms the basis for Ramboll's strong market position. The extensive global presence is also the result of a merger with Whitybird in This was part of Ramboll's growth strategy to increase global presence and engineering competence within the rapidly growing global market for high-rise buildings. With the purchase of Whitbybird, Ramboll secured a strong presence in the UK, Middle East and India. Ramboll wanted to be international but without a UK base they weren t able to develop into a real international player. Another factor in the decision to increase global presence through the merger was a reaction to the down turn in the engineering market due to 9/11. This was a catalyst for diversification. The slow down in the global market meant that Whitbybird and Ramboll could not rely on their traditional markets. The UK tends not to be too challenging for specialist and demanding engineering projects hence there is need to look abroad. The Middle East is the main focus for internationalisation currently and for future growth for Ramboll Whitybird. Strong information and management systems are a key part of Ramboll Whitybird s internationalisation culture. Ramboll Whitybird must continually innovate to remain competitive in global markets. Historically, the growth of Whitbybird has been organic and opportunistic. Nowadays, Ramboll Whitbybird has a policy of employing entrepreneurial people to facilitate this growth. For example, they have a policy of following the architects and developers around the world following the quality work. But, the opportunistic approach does not always work well in different regions. Some cultures are naturally not risk taking e.g. Asia. Internationalisation is low risk and low investment due to the nature of engineering consulting. Sharing workload between international offices has been a key enabler for internationalisation (managing costs efficiently while optimising resources). The policy is to encourage shared work load

37 between international regions. Sharing projects worldwide has a positive effect on growth and development of employees. But, sometimes sharing work load between international offices causes problems due to multicultural issues. Sharing resources across borders can be compromised by cross-cultural issues. It is important to manage this in order to ensure harmony in the project management due to different cultural reactions to different problems. Good knowledge management influences the practicality and effectiveness of a multidisciplinary international team environment. Strong information and management systems are a key part of the cross-border culture. In a knowledge economy, Ramboll Whitybird s ability to manage its knowledge can mean the difference between commercial success in an international market or failure. A key aspect of being able to manage knowledge is the ability to identify and capture it. 8 List of interviews Conran Group: Brand Development Director Jill Webb Contra Oy: Global Account Director & Partner Kiti Häkkinen FORCE Technology: Technical Director Willy Damgaard Kristensen Hemtex: Director Establishment Olof Fredman ICUnet.AG: Managing Director Dr. Fritz Audebert Komdat.com: Managing Director Martin Stoehr Left foot Pomarfin Oy: Managing Director Jarno Fonsén Pentik Oy: Managing Director Pasi Pentikäinen Pöyry Architects: Director International Operations Francois Duchastel Quest Worldwide: Regional Director Peter Holman Ramboll Whitbybird: Director Strategy and Business Development Thomas Bjørnkilde Kveiborg Roland Berger: Partner Felicitas Schneider Spreadshirt: Michael Petersen Technopolis Group: CEO Dr. Erik Arnold TradeDoubler: Vice President Products & Vice President Business Development Kayhan Utkutug?What If!: Marketing Director Minnie Moll YouGov: CEO Nadhim Zahawi Zone Company Denmark A/S: International Sales Director Christian Daugbjerg