Posted on Apr 05, 2019
Growth is the goal of almost every business. However, expansion for entrepreneurial firms operating in emerging or frontier markets presents a specific set of challenges. Identifying internally when you need to stop thinking and start acting like a large multinational company is the first of those challenges, writes Alex Donov, Chief Financial Officer at Kusto Group.
According to established wisdom, the growth stage of the business cycle comes before the expansion stage. However as anyone who has run a business knows, these sorts of hypothetical models rarely work out, particularly for companies which operate across several sectors and markets. Multiple challenges present themselves: How to set strategy across diverse sectors and disparate locations, each set within a specific market and cultural context? Where to base the centre of your growing operations? These are all questions we’ve had to contend with during Kusto Group’s steady expansion in recent decades.
Goal setting and strategy
For diversified holding companies like Kusto, growing from a single jurisdiction to multiple jurisdictions has been challenging. We have been forced to transition from an opportunistic model, to one where alignment with strategic objectives is the leading parameter. This sense of transition is particularly evident in the supply of goods, where small-scale approaches quickly become unworkable with expansion. Platform solutions can be a way to prioritise growth without sacrificing quality, looking more holistically at each business and offering end to end solutions. Kusto is particularly interested in this model: whilst preserving the local character of the firms we invest in. In 2014, we acquired Tambour, an Israeli paint and constructions materials company.
To prepare for platform-based growth, we chose first to expand the firm’s offering of innovative paint solutions over a large range of applications, and all the attendant technology. Now that this platform-capability vision is in place, decisions on growth are more easily reviewed, managed and implemented. In other words, dare to dream but build bridges at the same time.
Kusto’s growth is partly down to our management’s talent for spotting opportunities at the earliest stages. However during this transition to large-scale thinking, these may not always align with our new, more formal, priorities. Allocating time and resources to the quality of internal processes may lack the excitement of closing deals but ensures that expansion is well-managed especially for future ventures.
Location, location, location
Singapore’s favourable conditions are well suited to multinational growth businesses such as Kusto, which require access to a large pool of talented and culturally diverse individuals. The fast-moving sectors in which we operate mean that up-to-date knowledge drives success. That is why we are committed to educating over 8,000 staff members through leadership and development courses and professional qualifications all across the group. Delivering these customized education solutions is made easier in an environment like Singapore.
Clear and defined management structures are a prerequisite for businesses operating across regions and cultures. At Kusto we have chosen to adopt a flat management style, emulating best practices that promote entrepreneurial thinking. And yet, this structure is not without hazard, leaving some employees without enough structure as the business expands.
Therefore, a successful business will find the right balance: keeping a flat structure, allowing for fast decision-making and proximity to top management, but with the proper procedures in place to evaluate progress and minimise risk.
Additionally, procedures must be put in place to ensure that new businesses are integrated into the wider group – and local expertise is not lost.
One solution which we have adopted is to combine a firm’s own management (inevitably a limited resource), who have knowledge of the corporate culture, with experienced local managers. Education is vital to managing this process, meaning that local managers and established employees can share knowledge and create horizontal connections. Knowledge transfer is fundamental to Kusto’s approach to growth: whether between the different projects of Kusto Home, our real estate branch, where skill gained in Vietnamese projects have been put to use in Kazakhstan, or between our different agricultural branches, where technology updates can create efficiencies across multiple sectors. Ultimately, every part of the business in every corner of the globe stands to benefit from this collaborative and open approach.
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