The business case for exporting is compelling. From a company ownership and leadership perspective, the one strategy that can accelerate the valuation of a company fastest is exporting. The data here is compelling. Exporters enjoy higher margins and thus earnings before interest, taxes, depreciation and amortization (EBITDA) goes up. Market risk goes down significantly because exporting puts the company into multiple economies, which diversifies risk. When market risk goes down, the valuation multiple goes up. By exporting to just a couple of countries, companies see their valuation immediately rise by 50 percent or more.
The acceleration of the value of the company is compounded further, because exporters grow faster than their non-exporting peers, their employees tend to be 72 percent more productive and, surprisingly, competitive advantage in the domestic market improves as well. It turns out that a couple of years after starting to export, companies file seven times more patents than their non-exporting peers, and introduce four times the number of new product or service innovations. Exporting exposes them to lots of new ideas.
So, what does an interesting finding in the March 2015 Harvard Business Review about business strategy have to do with exporting in Wisconsin?
A lot, and it explains why it’s hard to act even when you have a compelling reason to do so. What gets in the way is not cost, or competition, or capability, or capacity. The real obstacle to strategic change is a bit surprising.
In the aforementioned article, the authors of the bestselling book Blue Ocean Strategy took a look back: “In the decade since the publication of the first edition of our book, we’ve had conversations with many managers involved in executing market-creating strategies. As they shared their successes and failures with us, we identified a common factor that seemed to consistently undermine their efforts: their mental models – ingrained assumptions and theories about the way the world works. Though mental models lie below people’s cognitive awareness, they’re so powerful a determinant of choices and behaviors that many neuroscientists think of them almost as automated algorithms that dictate how people respond to changes and events.”
One of the best ways to overcome a mental roadblock is to spend a little time with people who’ve already done it. For companies in Wisconsin, we have a tremendous vehicle to do just that when it comes to exporting. On May 7, the World Trade Association’s Wisconsin International Trade Conference will give you the opportunity to rub elbows with peers who export, and public and private sector entities that help smooth the pathway into new export markets.
-Bill Burnett is the director of the Global Cities Initiative at Milwaukee 7.