By Casey Rosengren
The Samwer brothers may be the most successful web entrepreneurs in Europe. These German siblings have made their careers by taking business models from the United States and implementing them elsewhere around the world. Based in Berlin, their company, Rocket Internet, has created over 20,000 jobs in its lifetime, and currently has offices in more than 20 countries. However, in an industry that holds innovation sacrosanct, their lack of originality has turned them into pariahs, with serial entrepreneurs like Jason Calacanis labeling them “despicable thieves” and questioning their ability to sleep at night.
Leaving aside the politics of the issue, it is unquestionable that the Samwers have stumbled upon an interesting phenomenon: execution entrepreneurship. While the Samwers are the most well known in this space, there are also a number of individual entrepreneurs that are riding the wave of execution entrepreneurship. China alone is home to over 100 daily deal sites, and countries like India and Brazil are not far behind. Some imitators shamelessly copy the original businesses; for example, the Brazilian company Vostu copied Zynga’s games so closely that they actually contained the same bugs. On the other hand, some companies view the originals more as inspiration, and take their businesses in entirely different directions.
Through research this past spring, I had the opportunity to speak with a number of execution entrepreneurs building e-commerce ventures around the world. One of the main themes that came up in these interviews was the importance of modifying products and business models to suit local conditions. The founders mentioned a variety of adaptations that could be categorized as responses to four different environmental factors: surface differences, market forces, cultural constructs, and Internet/technology issues.
Surface differences are the low-hanging fruit of localization. These are changes to the look and feel of the site that can be made with little effort and only superficial insight into the local culture. Translating a site into the local language or adding a payment processor that accepts the local currency would fit into this category; it is basically the bare minimum required to do business internationally.
Compared to surface differences, market forces are not as blatantly obvious and must be discovered through experience and knowledge of the market. For example, while RedBox and Coinstar machines have garnered some success in the U.S., similar products already exist in Japan. Thus, if someone tried to bring a Coinstar-esque machine to Japan, they’d need to come up with their own unique differentiation strategy. The same can be true for e-commerce businesses; while an exact parallel might not exist, consumers may be using other services to satisfy their needs.
Some of the founders also discussed how they had adapted their businesses to cultural differences. In Central and South America, consumers are more risk-averse and are still wary of e-commerce (see appendix for cultural measurements). Accordingly, in an attempt to alleviate perceived risk, some companies offer Cash-on-Delivery and Bank Transfer payment options in addition to traditional methods like credit cards and Paypal.
Aesthetics and design also may vary from country to country. For example, Japanese sites tend to be busier than their American counterparts, as can be seen through the comparison of the English and Japanese versions of Yahoo!’s homepage. One theory behind this difference is based upon the Japanese language itself; it uses a pictorial alphabet with over 2,000 common characters, and is read either from right-to-left or left-to-right depending on the medium. As a result, it is possible that Japanese consumers are used to taking in more information at once and have different eye movement patterns when looking at web pages. People from other countries also may process information differently, so international entrepreneurs must be cognizant of local design standards.
Many of these founders are creating markets in countries that have lower rates of technology adoption than in the United States. As a result, a number of companies have implemented some sort of customer or supplier education initiative. One C2C e-commerce site created in-depth instructional videos for their sellers, as they were targeting people that had no prior experience with computers or the Internet. Another founder in a developing country had to teach his customer support staff to handle the question, “Where is your store in (name a city)?” – consumers didn’t understand the very concept of shopping online.
While pursuing an execution entrepreneurship venture may reduce the idea-related risk of a business, there are still a plethora of issues that must be overcome to achieve product-market fit.
On a separate note, while counter-intuitive, it may make strategic sense for certain companies to encourage international imitation. For example, in many developing countries, Internet penetration is low, and imitators are implementing educational initiatives to help promote e-commerce. If an innovator decides to expand abroad, it may be able to jump into an existing market developed by imitators as opposed to having to create one from scratch. Assuming the innovator can effectively differentiate itself, this may result in cost savings that offset the market share lost to the international imitator (for more on this, check out the paper by Kathleen R. Conner referenced in the appendix).
Finally, it was interesting to note that nearly all of the founders I talked to were passionate about their market or had significant, relevant industry experience. As the companies I spoke with all had reached some level of success, this suggests that founder-product fit is important even for execution entrepreneurship ventures. As opposed to simply “cloning” a successful business, these founders seemed to have seen exciting trends occurring in markets they already knew or loved, and decided that they’d like to be a part of creating that trend abroad. I highly doubt whether this is true of all the Groupon, Pinterest, AirBnB, and Square clones around the world, but to lump all execution entrepreneurs together is to miss the founders who truly believe in what they are doing and are approaching their local markets in innovative ways.
Conner, Kathleen R.. “Obtaining Strategic Advantage from Being Imitated: When Can Encouraging “Clones” Pay?.” Management Science 41.2 (1995): 209-225. Print.
Cultural Dimensions (Hofstede):
PDI – Power Distance
IDV – Individuality
MAS – Masculinity
UAI – Uncertainty Avoidance
LTO – Long-term Orientation / Confucianism\
Casey is currently on leave from the University of Pennsylvania while working on a startup in Tokyo, Japan. His interests include lean methodologies, international entrepreneurship, the intersection of strategy and culture, and making the world a better place through e-commerce. He is also passionate about sesame seeds and avocados.