Posted: 12:00 p.m. Friday, Oct. 25, 2013
By Anne HabibyJake Colvin and
It's happening right now. Why? Because a company's ability to trade globally now has less to do with location and more to do with visibility and trust.
When historians look back on the digital age, they will identify the last several years as the start of a truly global marketplace. While the Internet has been an international phenomenon since its inception, e-commerce platforms such as eBay have only recently begun to globalize their marketplaces so that sellers of various sizes and nationalities can engage over a single unified website. Today, the company and its international equivalents from Alibaba to MercadoLibre are critical digital hubs that power an increasingly global marketplace.
These digital marketplaces represent just one slice of a range of innovative technologies that together are galvanizing a potentially radical transformation in small business and entrepreneurship. Cloud-based technology platforms, marketing and website tools, social networks, and online payment, logistics, and shipping services are allowing even the smallest start-ups to participate in international markets, often without thinking much about it. Technology is permitting truly borderless entrepreneurship on a broad scale for the first time.
Many countries and communities have fostered vibrant cultures of entrepreneurship, but most traditionally focused on local markets. That is certainly true in the United States, where large domestic consumer and industrial bases occupy the attention of most start-ups. In developing countries, entrepreneurs often have lacked the resources or infrastructure to connect effectively to a global audience. The legwork and red tape alone are enough to cause all but the most intrepid entrepreneur to concentrate on building domestic relationships, awareness, and market share.
What is different today is that online technologies and services are minimizing or eliminating entirely the pain points and red tape that have limited the participation of smaller companies in the global marketplace. Emerging products from the likes of eBay, UPS, and the e-commerce enabler Borderfree are improving the traceability of international shipments, helping smaller businesses navigate customs, and enabling buyers to calculate the full cost, including duties, of purchasing products from overseas. The World Economic Forum estimates that the use of Internet platforms can reduce the burdens small businesses face when selling overseas and improve cross-border sales by 60 to 80 percent.
The Internet also helps to foster trust and shrink an often-significant psychological divide. Years of scam emails have instilled a strong wariness in most Americans about wiring money to far-flung locations. That means emerging start-ups from less-developed countries often have to overcome a high reputational hurdle. At a recent discussion our organizations hosted, Obinna Ekezie, the founder and CEO of Wakanow.com, Nigeria's equivalent to Travelocity, detailed how LinkedIn played a role in connecting his company to international financing. Ekezie outlined how a New York-based venture capitalist, who had watched him speak on CNBC, used LinkedIn to investigate his background and to connect directly, which eventually led the VC to invest in his company.
This is one example of a broader shift toward what the All World Network has coined Visibility Economics. For the first time in history, a company’s ability to trade globally has less to do with location and more to do with visibility and trust. Commercial and social platforms such as Facebook, Kickstarter, LinkedIn, and Yelp; business rankings from groups such as Inc. and AllWorld; and online communities that flow from message boards and blogs, facilitate millions of economic transactions by generating visibility and permitting companies and entrepreneurs to build global reputations.
As a result, even the smallest and earliest-stage businesses are able to participate in foreign markets on a broad scale for the first time. Etsy, the Brooklyn-based crafts and vintage marketplace, reports that more than a quarter of the transactions across its platform crossed international borders in 2012. PayPal, which has 128 million active registered accounts and is available in 193 markets, estimates that 25 percent of its transactions cross international borders. In the United States, an astounding 97 percent of eBay's commercial sellers engage in exporting. These statistics are all the more remarkable when you consider that less than one percent of all U.S. businesses export, according to the U.S. Commerce Department, and developing countries continue to face unique challenges accessing foreign markets.
Global success in the digital age requires a visibility strategy, particularly for entrepreneurs in developing countries. Emerging markets don’t lack entrepreneurs, but their entrepreneurs often lack visibility. Leveraging social and business platforms and digital networks can dramatically bolster global prospects for startups.
Some countries are engaging in their own visibility strategies, highlighting themselves as destinations for entrepreneurship and crafting public policies to encourage more start-ups to think globally. The Chilean government has launched Startup Chile, a multi-year effort to attract global talent to Chile and foster a culture of innovation. In South Korea, President Park Geun-hye is pursuing a “creative policy” program to encourage a more entrepreneurial culture to take root. The U.S. Congress is considering offering a start-up visa to permit foreign entrepreneurs streamlined access to launching a new company on America's shores. Internationally, countries have begun to discuss the importance of fostering global flows of information through international trade agreements, which would help promote transparency and the non-discriminatory treatment of data and internet-enabled services.
The transformative consequences of hanging a digital shingle on the web cannot be overstated. Technology is increasingly democratizing access to the global marketplace of goods, services, ideas and capital, which could have radical impacts on individual start-ups as well as on economic development around the world. Companies and countries would do well to implement the kinds of smart strategies and public policies that will help start-ups participate effectively in the global marketplace of the 21st Century.