“We are more interconnected than ever, but we’re also more divided,” Prof Catherine Welch, Trinity Business School’s first ever chair of strategic management, said in her opening remarks at Future Human today (13 May).

Speaking about the future of business, Welch explained the paradoxical nature of the risks that businesses face from internationalisation. While it has become easier for a company to set up a website and go global, she said it is also riskier than ever to do so.

Welch said that tech companies in particular have an added set of risks when it comes to expanding, not only because of volatility that the world is currently facing, but also because “innovation is inherently risky”.

“You don’t know if your technology is actually going to end up doing what you want it to do,” Welch said. “And even if you solve that problem, you’ve got the next problem which is, it may work but do customers actually want it? Often that’s something you only work out a little too late.”

In order to adapt to these issues, Welch said tech companies have to “de-risk”. She said tech companies still have to work toward going global as “we have global markets, technology is global”, but risks have to be taken into account.

In order to achieve this, Welch said “it depends”. She drew chuckles from the crowd when she said “that’s the classic academic answer isn’t it”? She explained that it depends on what type of technology a company is trying to bring to market and provided two contrasting examples.

Saas style companies

Welch said the first company example was represented in a Future Human fireside chat yesterday with Intercom co-founder Des Traynor. She said companies that work in SaaS and software development don’t usually work with groundbreaking technology. Instead they offer “novel applications and recombinations of technology that’s already out there”.

Welch said this allows these companies to start out globally very quicky, with a very optimistic outlook initially. She added that its usually easy for these companies to find customers who are enthusiastic about the new product around the world.

She said the problems begin when these companies try to move away from these early adopters, which makes companies try to develop an offline presence as well as an online presence.

“That’s when it starts to become very expensive,” Welch said. “Not only that, but you have to invest in this presence often ahead of getting a return. For some companies, this is not going to be a period that they survive, so it’s a real pressure point for companies and getting it right is very difficult.”

In order to de-risk, Welch said these companies need to plan “lean internationalisation”, which is finding cost-effective ways to deliver value when expanding.

Welch gave the example of Australian software company Atlassian, which she said was able to develop a good global reputation without a large sales and marketing team, through the power of “word-of-mouth” which helped them “afford to go global”.

“I’m not suggesting you go out and fire your sales and marketing team,” Welch said. “But what I am suggesting is you need to think very carefully about where you’re going to invest.”

Deep tech companies

The second example Welch gave has a different set of risks and “pressure points” associated with them, called deep tech companies.

“These are companies that are trying to bring to market a product that is based on a scientific breakthrough,” Welch said. “So these are companies that are new to the world and their product is new to the world.”

Welch said the biggest issue for these companies is that it can take decades to get something that is a breakthrough innovation to market. The example she gave were vaccine manufacturers.

“These companies, which are now household names, were pretty much on their knees at the time that Covid-19 first hit,” Welch said. They had worn out the patience of their investors a long time ago and really, they had one last chance.

“The rest is history but it just is a reminder to us that this sort of technology, these sort of innovations, take a long time to get to market, if they ever do,” She added.

She said this often means that the first innovators “are not the ones to reap the rewards” of the new tech products they’re trying to launch. She added that these companies need investment, people to have faith in the vision and “patience, a lot of it”.

For these companies, she said the best method to handle these risks is “ learn from those who have been there and done that before”.

10 things you need to know direct to your inbox every weekday. Sign up for the Daily Brief, Silicon Republic’s digest of essential sci-tech news.

The post The challenges tech companies face from a more connected world appeared first on Silicon Republic.