New Rules For Success In Emerging Markets

by Adrian Burstein

The World Bank recently released a study which noted that the Bottom of the Pyramid (BOP) represents a $5 trillion market and that by 2010, 90% of the world’s population will be in emerging markets. While sizing the opportunity is important, more is required for successfully developing out these future markets. Deep understanding of cultural values and parity in political agendas must be internalized to avoid falling in the unsuccessful strategies of the past. This calls for new rules:

Develop mutual leadership
Look beyond the first world lens
Recognize and nurture local innovation

Develop mutual leadership

The latest news about the all American corporation Halliburton moving its headquarters included its CEO to Dubai sparked criticism from politicians and citizens alike. Many feel it is anti-patriotic. The fact is, however, that having top leadership sitting in Dubai allows the firm to be more flexible and adaptable, resulting in greater earnings. While Dubai itself is far from being a poor emerging market, there is a lesson to be learned for other companies pushing into emerging markets.

Being there pays off, and having top leadership being able to see through the eyes of the people can offer even greater rewards. The traditional colonial approach to emerging markets-where rules and ways are dictated and fed into a receiving culture-needs to change. The interests of the receiving culture must be represented at the highest levels within American corporations in order to align leadership and innovation intents, set expectations and brand participation, and secure appropriate resources. This we call mutual leadership. And while many would feel this gives up control, it creates stronger connections and a truly borderless organization.

Look beyond the first-world lens

Many American companies have created satellite offices, acquiring local businesses, and deployed US managers and engineers to transfer their business know-how to these regions. While this approach is important, there is a danger in seeing emerging markets as a lab where scientists observe a phenomenon through their own biases. In order to truly be ingrained into the core values of a market, and deliver the most meaningful and profitable solutions, it is necessary to drop our own depictions of emerging markets from an outsider-wealthy-country perspective, and start seeing the world through their eyes, their institutions, and their systems of values. This is easy to say but very hard to achieve as a strong cultural sensitivity is required to navigate through the nuances that comprise each culture. However, if achieved, this will unleash the possibility of truly innovative business models, and not just product adaptations.

Recognize and nurture local innovation

Not surprisingly, business people from emerging markets keep joining the ranks of billionaires worldwide. In fact, Forbes recently declared Mexican business man Carlos Slim as the third richest man in the world, following closely Warren Buffett. The source of his wealth resides in his intimate knowledge of his market, his people, their roots, a history of businesses conducted, connections made, and resources built at different levels of society.

A more specific example from Tata Motors in India was published in McKinsey Quarterly. In this case the company made a come back through product innovation by enabling its own home-grown human capital to learn from the outside world and then apply the learning to their very own reality. Tata Motors’ managing director commented: "The trick was how to expose people to the outside world to allow them to see what is happening there rather than drilling change into them through speeches and letters." Innovation happened from within, by enabling locals to learn from the outside world and create their own solutions that make sense to their own cultural preferences, rather than having foreign models imposed on them.

Not being local does not mean that success is unattainable. While we believe that being local or foreign is not relevant, leveraging professionals who deeply understand the nuances in behavior and attitudes at the individual levels and who also understand the American ways, and developing human capital within these communities is imperative to develop authentic products and services that will deeply touch different levels of society.

In planning your strategies for emerging markets, it is critical to move beyond our U.S.-based notions of what success means. In order to do so, I recommend three strategies: developing mutual leadership, and recognizing and nurturing local innovation. Emerging market consumers represent the biggest opportunity areas in terms of new products and services, while emerging market businesspeople are at the forefront of bringing their populations meaningful solutions that connect at emotional as well as economic levels.