The Big OE for Business: When is the right time to open a London office?
Many Kiwi businesses consider overseas expansion. Touchtech founder Adrian Falvey shares his exploration of the idea.
By Adrian Falvey.
Many business owners, at a certain point in their growth, become concerned about the limitation of their company's potential imposed by the small domestic market. While some will try remote-working for overseas ventures, any effort to expand these efforts will always be limited by New Zealand's geographical distance from everywhere else. They then look to the obvious solution: expanding their business by opening an overseas office. And where better than our cosmopolitan gateway to Europe, London city.
There are compelling reasons for expanding to London. Access to the UK and European markets diversifies a company's income sources and reduces the risk of becoming dependant on a single economy and currency.
Larger projects for larger companies increase a company's ability to scale both in New Zealand and the UK.
It provides New Zealand based staff with the opportunity to work and live in the UK whilst staying part of the company, reducing the risk of losing young staff to their OEs. This is particularly important in the tech industry, where a large proportion of development roles are filled by under-30s.
It provides a business with the chance to employ European staff interested in relocating to New Zealand.
Culturally the UK is a close fit to New Zealand so the transition isn't too difficult. London is a fun place to live and having a London office adds to the prestige of a New Zealand business.
I found myself propelled by these reasons late last August. I'd been thinking a lot about how we were going to expand our business, and the UK just made sense. We had a number of 'push' factors – notably wanting to hire top developers from Europe, provide opportunities for our excellent Kiwi staff, and wanting to secure big British contracts. London seemed like the perfect option for us.
However, flying halfway around the world on a whim seemed like somewhat of a risk. Before jumping in, I opted to find out what people who'd been in these shoes before had to say about their experiences. So I went door-knocking.
The first person I talked to warned me off the idea entirely. This took me completely by surprise. He told me a story of how a British move for his company had not only failed, but had dealt a near fatal blow to his staffing and company culture at home as well. I found this particularly alarming, as our great home office culture is something we want to preserve at all costs.
I found that the 12-hour timezone difference will make life brutal for both the UK office and the New Zealand office. No matter what time the meeting is, one person will always be struggling.
Millie Jocelyn's experience was just that. "It's similar to the feeling of coming back to work after a long holiday – the difficulty focusing at different times of the day, the jetlagged energy drain of working when you're accustomed to sleeping,” said the CEO of Showcase. “Most companies can't operate successfully with that level of energy on one end of the phone call."
To communicate both parties have to make sacrifices, and while it might be possible to find times when both people are nominally awake, the differences in mood and energy between the two timezones will mean that meetings are very limited in their productivity, and may be frequently postponed or cut short due to other priorities.
Other issues include the impact of different personalities on small or medium businesses. If the UK office were to hire staff then the problem of such limited personal contact between the UK and New Zealand offices could create the risk of building two separate company cultures. This could lead to tensions around transnational decision making and strategic goals. It would be very easy for the two offices to start having differences in opinion over processes and aims. Mitigating this would involve a lot of costly flights and face to face visits which may not ultimately prove successful at solving the problem.
At the same time, there appears to be a lot of opportunity for Kiwi companies in the UK. New Zealand has a good reputation and there's an excellent pool of New Zealand talent there that can be called upon to help.
To succeed, New Zealand businesses need to hit the ground running with solid introductions ready. UK companies are bigger, busier and less forgiving than New Zealand companies. A sales pitch needs to be sharp and focused to get any attention. A business needs to present itself with the highest level of professionalism, as you're never going to be the only candidate, and you only have brief moments to beat out your competition. New Zealand businesses need to do their research, define their edge, and target companies who might be seeking that point of difference.
UK companies appear to have an enlightened approach to outsourcing. The sheer size of the big multinationals and the close proximity to Europe means that UK firms are highly accustomed to dealing with dispersed teams. Being New Zealand-based should not be a serious impediment to selling into the UK. On the other hand, UK companies are more accustomed to outsourcing to Eastern Europe and South-East Asia, where resources may be cheaper. The advantage of cost-effective staff from a similar cultural base to Britain may need to be stressed.
I’ve also learned about the difference in scale offered by the UK. Apparently, big corporations are very slow when it comes to making decisions or changing vendors, so New Zealand firms are better off chasing SMEs or forming partnerships with similar companies in order to get the bigger jobs.
Because of these possibilities, a services business like ours would need to have their scaling model figured out before leaving New Zealand. There'd be no point in signing up a bunch of big UK contracts if you didn't have the capacity to actually do the work.
In the end, whilst there are a whole lot of good reasons to open a UK office, a New Zealand business needs to be prepared. The biggest warning that I heard time and time again was the impact that the 12-hour time gap has on company culture and relationships within the management team. In several cases I heard from other firms where this almost ended their business. The tyranny of distance still seems virtually insurmountable, even with modern communications systems.
I'm still very keen on the idea of an overseas office, but will be working on our internal processes first, and looking for a location a little closer to home.
For advice on expanding overseas, check out the KEA (Kiwi Expats Abroad) network. If you are interested in tapping into the wealth of knowledge that they can provide, consider joining their LinkedIn group or giving them a call in their Auckland office.