Magazine Spring 2012 Research Highlight

Learning How to Grow Globally

Faced with the need to educate themselves quickly about a foreign market, companies employ a variety of approaches to learning. New research offers insights into choosing the best approach for your circumstances.

Christopher Bingham and Jason Davis Reading Time: 7 min 

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Learning may be the single greatest challenge when entering offshore markets. Few, if any, employees have in-depth knowledge of markets other than the one where they live. Faced with the need to learn quickly about a foreign market, many companies employ a variety of approaches, in a variety of sequences.

How does the sequence in which a company applies learning approaches affect performance? To assess this question, we observed nine companies in the high technology industry. To minimize geographic and cultural bias, we selected companies with headquarters in three culturally distinct markets: Finland, the U.S. and Singapore.

Our studies show that most organizational learning results from four direct and two indirect approaches to learning:

Direct Approaches to Learning

Trial and Error: In this approach, companies engage in particular actions and then assess the outcomes to determine whether those actions produced the desired result.

Experimentation: Experimental learning occurs through deliberate small-scale tests in controlled settings to help managers gain understanding. Management takes specific actions while manipulating variables to learn how each affects the outcome.

Improvisation: Many companies learn on the fly by improvising. They devise solutions as problems arise and revise their products, concepts and beliefs to capture unanticipated opportunities.

Deviance error: Unlike trial and error, the deviance-error approach starts with a successful action or product that the company subsequently varies. Executives then discover that as a result, performance declines, so they revert to the prior state. This process helps them understand why their original action or product was better.

Indirect Approaches to Learning

Vicarious: Executives often seek to learn vicariously when they lack appropriate experience of their own yet need to move quickly. They study what other companies have done to enter an offshore market and then apply that learning. If the subject company’s entry is perceived as successful, management tries to replicate their model. But if the subject encountered difficulties, management adjusts its own model in an effort to avoid them.

Advice: In many cases, companies learn from low- or no-cost advisers such as investors, business partners, trade associations and governmental foreign-trade agencies. In addition, retaining international business consultants is one of the fastest ways to learn about foreign markets.

Soloing vs. Seeding

Soloing.

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About the Authors

Christopher Bingham is an associate professor and Phillip Hettleman Fellow of strategy and entrepreneurship at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill. Jason Davis is Theodore T. Miller Career Development Professor in the Technological Innovation, Entrepreneurship, and Strategic Management (TIES) group at the MIT Sloan School of Management.

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Comment (1)
globalroundhouse
Excellent, insightful article. Yes, executives need to diversify in a number of areas as you note. One additional way would be to engage seemingly unrelated fields of knowledge. 

Soloing and seeding are good metaphors here.  Musical person that I am, I wish the terms were more closely aligned. That said, it seems to me that soling and seeding should be related thematically; seen as parts of the same effort with different articulations. Companies want/need both immediate success and long-term gains. 

Also, diversifying the conversation beyond discourse with other companies (like-minded professionally) is instructive. Learning from disparate fields, cross pollination of ideas (to go back to seeding) can create hybrid seeds that are resilient -- better able to handle shifts in the (financial) environment such as wind gusts (wild market swings), tsunamis (depressions and recessions), etc. Some are doing this now -- Jazz (and Hip Hop) as a model for business development and strategy is rooted (seeding again) in culture and so is a model/template for both immediate and long term success. 

http://www.theglobalroundhouse.com
@GlobalJackie