I’ve recently noticed a subtle but perceptible attitude shift among Americans working in foreign markets. My overseas colleagues are noticing, too. American business people, they say, are displaying more thoughtfulness than usual. U.S. companies operating overseas seem less inclined to approach global business as though its epicenter is in New York or Palo Alto.
It’s too soon to call this a new Zeitgeist, but change is in the air. The global economic crisis, which has its roots in the U.S., may be partially responsible. I think the new vibe is also influenced by Washington’s new tone in its approach to global affairs. As an American doing business abroad, this is promising.
Historically, many American firms have approached business from a decidedly ethnocentric perspective–more so than many of our European rivals. U.S. companies have missed opportunities as a result.
Things seem to be moving in a better direction now.
Today, there are more than 3.3 billion mobile-phone subscriptions worldwide, which means that there are at least three billion people who don’t own cell phones, the bulk… found in Africa and Asia. --Sara Corbett, author “Can the Cell Phone Help End Global Poverty?” (NYT)
I’ve been optimistic about the continued growth of mobile services in emerging regions, even through this downturn. If that happens, it’s good news for those who appreciate what connectivity is doing for new subscribers in the developing world. The nascent mobile sector is an enabling engine for other industries in the developing world notably health care, agriculture, banking, and goverment services.
We see continued growth in emerging markets where there are few fixed line communications, low mobile penetration rates, and the arrival of new, highly motivated operators. Look for continued double digit growth (CAGR). Revenue growth (ARPU) will likely lag subscriber growth as companies add more lower-income users. Despite a crowding market, prospects for for growth by incumbent and new operators remains strong so long as they manage their growth with an eye to the future.
Ex Africa semper aliquid novi — Out of Africa always something new. ~Pliny the Elder
This week marks my company’s 3rd anniversary of working in Africa within our emerging markets service practice. Helping companies in the region to understand and serve the needs of their customers has been enriching on a personal level. I’ve had the privilege of witnessing the growth of the sub-Sahara’s nascent service industry and I marvel at its favorable impact on a growing number of people in the region.
The ascendant mobile industry illustrates the point. On a continent where few people have landlines due to the high cost of installing cabling, cell phones are bridging the communications gap. In many sub-Saharan markets, like Ghana where we work, mobile growth rates have been approaching 50% annually. While less than 20% have mobile phones now, hundreds of millions of Africans are expected to get handsets in the next few years. Keep in mind that this is a continent of almost a billion people. That’s a lot of potential new subscribers.
For those interested in delivering their services to emerging markets, BusinessWeek provides an informative piece on Cisco’s EM strategy. The piece provides a glimpse of the company’s ambitious model for expanding its global footprint.
The story doesn’t delve into exactly how Cisco collaborates with emerging players aross geographic and cultural differences, etc. Often cultural disparities plague global alliances. I wondered how Cisco’s people engage their counterparts in emerging markets? Has Cisco developed a collaborative model for bridging the cultural gaps that often hamper global service initatives? These are my questions…
Despite the shaky underpinnings and dire economic climate, the U.S. still ranks ahead of the other nations in competitiveness, though economists see thorny challenges ahead. On the plus side, the U.S. still brings a lot in the area of production potential, well-functioning labor markets, sophisticated businesses, academic leadership and technological innovation.
While these are sustainable virtues, the U.S. has its work cut out to stay on top as other countries take steps to improve their competitiveness (see Fareed Zakaria’s seminal The Post American World). Globalization is leading to the “Rise of the Rest”. This pattern has been evident to anyone involved in business dealings across markets over the last decade.
The report had few surprises. A notable exception is that the UK slipped (from 9th last year to 12th) due to its heavy reliance on a flagging financial services sector.
Singapore, the Scandinavian nations and Switzerland have been perennial leaders for several years. And it isn’t surprising that the Gulf nations are on the rise due to worldwide demand for hydrocarbons coupled with concerted economic reforms.
Fiinally, some sub-Saharan nations are making headway though, as a region, it still lags behind. These economies have had 5-6% annual growth rates and relatively low inflation in recent years. But their infrastrusctures are fragile and they may be hit hard by a global slowdown.
The WEF report is a lagging indicator of the strengths and weaknesses of global economies. For example, it doesn’t take into account the prospects of a global slowdown which reduces the demand for resources.
The take away is that governments play a substantial role in shaping a nation’s long-term capacity to compete in an increasingly global and crowded world. Good governance rules.
The satellite company, O3b Networks, has attracted investors at Google, HSBC Principle Investments and Liberty Global for its project to deliver cheaper, high-speed wireless Internet access to underserved regions of the world. The term, ‘O3b’, refers to the “other 3 billion,” or the large segment of the world’s population that can’t access the Internet because there is no fiber cable in their regions.
03b, a Jersey Island (UK)-based company, announced that it is building 16 satellites that will enable lower-cost Internet accessibility over 3G and WiMax networks. These satellites will provide “trunking” or backhaul coverage zone between +/- 40 degrees of latitude which blankets much of the world’s underserved regions including Latin America, the Middle East, Africa and South Asia.
Fiber cable and the labor for digging fiber trenches in underdeveloped countries is costly by any measure. Mobile operators face prohibitive costs in building transmission capacity between their networks and towers. Using satellites had been long been considered problematic due to their latency or the time it takes for a signal to travel between earth and satellites.
Today’s geosatellites orbit the earth at an altitude of 22,500 and their latency can exceed 600 milliseconds. By contrast, O3b plans to use MEO satellites which orbit the earth at 5,000 miles and can reduce latency to only 120 milliseconds—not that much more than a fiber network.
O3b which expects to activate service by late 2010 intends to provide speeds of up to 10G bps (bits per second) to regions. The companies collectively invested about $65 million with the total cost estimated at $650 million.
This is good news for “3b” consumers, and probably a smart investment for Google which recognizes that the majority of the world isn’t currently using its services do to lack of access. With their $10M investment, Google is getting in on the ground floor, so to speak. Consider this another milestone in moving forward their Android initiative.
Having just returned from Ghana, I was keenly interested Roger Cohen’s NYT piece today. He says,
In my lifetime, conditions have grown immeasurably better, freer and more prosperous for a majority of humanity, yet hand-wringing about the miserable remains the reflex mode for most coverage of planet earth.
Nowhere more so than in Africa, from which I’d just returned when the e-mail landed. During a short stay in Ghana, which will hold free elections in December, Vodafone had bought a majority stake in Ghana Telecom for $900 million (entering a fiercely competitive mobile-phone market) and I’d heard much about 6 percent annual growth, spreading broadband and new high-end cacao ventures.
Accra, the capital, is buzzing. Russian hedge funds are investing. New construction abounds. Technology enables people in the capital to text money transfers via mobile phone to poor relatives in the bush.
I think most of Cohen’s points are well taken. He doesn’t mention the discovery of oil off Ghana’s coast and the country’s fiber projects or the investments being made by multinationals in the country’s business infrastructure. The business climate in the region is improving, albeit in successive approximations. The country’s services sector — chiefly teleco and financial services — are contributing to Ghana’s high annual growth rate. Inflation is a growing concern, but so far it’s been manageable. The process leading up to this December’s election should be interesting. So far so good.
It’s also true that Africa’s success stories aren’t newsworthy to many news consumers. We mostly hear about war, corruption, disease and rampant poverty. On this point, I recommend Charlayne Hunter Gault’s “New News Out of Africa: Uncovering Africa’s Renaissance,” — it’s chiefly about South Africa, but pertinent to the problem of media coverage across the continent.
If Ghana’s political environment remains stable and forward-looking, the country will be in a position to contribute even more of its stalwart intellectual capital to a “globalized” resource (R=G) community in the coming years. So, even if the global media is fixated on the region’s challenges, the numbers will support a different story. So look for Ghana and other gazelle nations of the sub-Sahara to lead the way.
My trip to W. Africa is winding down. What an interesting time to be in the region–multinationals are quickly entering the red hot telecom field–the last growth frontier in the industry. These new players are looking to hit the ground running. One thing is certain: consumers here will be exposed to a broad array of new services and enticements. Consumer demands will grow–radically–and power will shift to the consumer as it has in more other hypercompetitive markets.
How should businesses respond? We see exciting opportunities for companies to leapfrog the traditional approaches that firms in developed markets have struggled with in the past. Firms that make the most of their business intelligence and continually seek out new ways to gain new insights about their performance and their customers should have the upper hand.
There’s no magic bullet. Ultimately, it boils down to getting the fundamentals right. Simplicity and agility are critical. But companies that tighten up their business processes and align their people around a clear, customer-focused strategy can gain a serious competitive advantage.
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