Archive for the ‘Emerging Markets’ Category

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No Magic Bullet for Emerging Markets

Thursday, August 7th, 2008

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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Posted in Emerging Markets, Sub-Sahara Region, Telecommunications | Comments

Africa’s Innovation Hothouse

Friday, July 11th, 2008

Africa is leading the world in annual growth among mobile users. In markets where we’re working, penetration is still under 35% while annual growth has been over 50%.  In a continent of 800+ million potential mobile users there are only about 80 million users today, making it one of the hottest global markets in any industry.  This breakneck growth is leading to some interesting developments…

To add some perspective, there is only about one landline per 33 people in Africa and that’s unlikely to change much given the high cost of installing fixed lines in the continent’s vast, remote regions. However, mobile networks are relatively easy to install and maintain.  Thus, mobile phones have become the primary communication channel throughout the sub-Sahara.

The large transnational telecoms, hungry for growth and finding saturation elsewhere, are quickly swooping in to the region hoping to grow their user bases.  Mobile operators are investing millions of dollars in  extending their coverage across the continent.  And as competition grows, they’re pouring millions more in to expand and fortify their networks.

This injection of capital is creating jobs and raising living standards in the region, and this is only the beginning.  It certainly feels like we’re at an inflection point and the socio-economic impact will be enormous.

But the African market poses some vexing challenges to operators. First, they’ll need to help the continent’s large base of very low income consumers to overcome the cost barrier of using mobile services.  Bottom line: these consumers who make under $2 a day need lower cost handsets.

Operators have been working with handset makers to produce units for as little as $15 USD. Refurbished handsets, recycled from other markets, are bringing prices down further.

Low income users are mainly interested in a phone’s basic functions—voice calls and SMS text messages—and little else. For them, battery life – especially in regions with unreliable electricity – is more important than ring tone options.

But, low income users are “leapfrogging” to mobile banking which I’ve mentioned previously.  Mobile phones are now being used in developing cash economies to pay for things or transfer money across distances. The implications of the rise of m-banking and other mobile-based services among low income users is enormous.

Meanwhile, mobile operators must also compete for higher income users. They’re rolling out and bundling higher end products like managed data services, Blackberry, WiMax, 3G and more – all of this while reinforcing their infrastructures and business processes to deliver higher service quality and reliability.

It gets even more interesting.  Most of the people who are gaining access to communications and the Internet via cell phones have no other way to access the web, unlike developed country where cell phones are used mainky for voice with Internet access being an occasional activity.

Reliance on mobile devices for Internet access means that content developers in Africa, like other emerging regions, see mobile devices not as a substitute for their desktop, but as a primary data platform.   We’re already seeing some promising examples of voice-data convergence aimed at this growing market. We may witness the first wide-scale convergence applications coming from Africa and other developing markets.

I’ve worked with some talented, dedicated people in the region’s telecom sector.  The speed with which they’re adaptaing to the market’s growth has been impressive.  They’re making strides in building their management capabilities and business processes to meet rising consumer demands.

It’s an exciting time to be working in this market. I can’t think of a more interesting, fertile business environment today than Africa’s nascent telecom sector.  It’s a veritable hothouse for business innovation on so many levels.

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Posted in Emerging Markets, Innovation, Sub-Sahara Region, Telecommunications, What's Next? (WILD CARD) | Comments

Operating in the “Second World”

Tuesday, June 17th, 2008

Parag Khanna’s new book, The Second World: Empires and Influence in the New Global Order (Random House, 2008), makes a case for understanding the world from the standpoint of Second World countries—those between modern, highly developed economies, and those in the underdeveloped Third World. Second World countries, including Russia, Turkey, Indonesia and Brazil, among others, are increasingly using their resources to exert influence in a new world order.

“Right now,” Khanna notes, “from the Middle East to Southeast Asia, the hero of the second world — including its democracies — is Lee Kuan Yew of Singapore.” His point is that, contrary to poular belief, Second World countries are not ideologically-driven, as much as driven by their desires to advance their economic self-interests.  Seeing the world from their perspective is helpful to operating more effectively in a multi-polar 21st century.

The Europeans, whom he classifies as a Superpower (with no apologies to conservative Robert Kagan), assume a more expedient stance when it comes to dealing with the Second World.   As a result, they’re getting more traction in those markets.

Khanna’s take will stir controversy.  But, at the very least, it’s helpful to view the world from others’ perspectives in order to understand the forces that are redefining the world.

Khanna’s book is a companion to Fareed Zakaria’s The Post American World mentioned in an earlier post.  Both books describe the profound implications of operating in an increasingly muti-polar world consisting of new relationships and sources of power.   Individuals interested in doing business of any kind on a global stage can benefit from seeing the world through the prism of the other players.

Interested in finding more on these topics? Khanna’s prescriptive NYT Magazine essay and a recent Charlie Rose interview are both illuminating.

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Posted in Books, Emerging Markets | Comments

On “The Post American World”

Sunday, June 1st, 2008

In his compelling new book, “The Post-American World,” Newsweek Int’l’s Fareed Zakaria reframes the challenges and opportunities of a new world order. Zakaria argues that we’ve entered a “post-American” era in which the role of the U.S. will be diminished but not irrelevant.

While the U.S. still possesses unique, natural advantages, “the rise of the rest,” including China, India and Brazil, among others, are creating a world through their economic growth that is more multi-focal. Other nations are now catching up to America’s level of economic clout and self-assertion.  What’s next for the U.S. in this new world order remains to be seen.

Zakaria argues that America has assumed that its innate strengths – academic resources, free markets and diversity of talent – can compensate for its anemic savings rate or the absence of a health care system or a cogent, long-term economic strategy.

“That was fine in a world when a lot of other countries were not performing,” argues Zakaria, but now the best of the rest are working hard, saving well and are looking ahead. “They have adopted our lessons and are playing our game”.  He  worries that “the U.S. risks having its unique and advantageous position in the world erode as other countries rise.”

According to Zakaria, the U.S. still has significant natural advantages. But the new worry for America is neither the rise of other societies, nor its own diminsihing influence, but Washington’s politics of stagnation and partisanship in recent years.  Zakaria argues that anachronistic systems of government hijacked by vested interests are having a drag on the agility and innovativeness that led to America’s rise in the last century. As David Singh Grewal notes in his new book, Network Power, “Everything is being globalized except politics.”

Zakaria makes his case skillfully. His argument should inspire a broader conversation during this election cycle about how to shift attention to the new challenges and opportunities of a multi-focal world. Rather than engage in the same tired debate about restoring America’s lustre, it makes sense to weigh the options as seen through the prism of a post-American world.

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Posted in Books, Emerging Markets | Comments

Decoupling Emerging Markets

Sunday, March 16th, 2008

There is a lot of confusion about emerging market economies (EMEs) and the economic notion of ”decoupling”.

First off, the term ‘emerging markets’ was coined in the ’80s to describe rapidly growing economies with low-to-middle per capita income. They comprise over 80% of the world’s population, representing about 20% of the world’s economies.

Countries that fall under this umbrella are incredibly diverse ranging in size from (Singapore) to massive (China and India). They’re growing at varying speeds—merely “quick” (South Africa, Mexico and Chile) to “breakneck” (China, India, and the Gulf states).  And, their fortunes are linked to those of developed economies. In fact, many economists hold that when the United States sneezes, the EMEs catch pneumonia.

Or do they? Not so much, say advocates of the “decoupling,” the notion that emerging markets are broadening and deepening to the point where they no longer depend on the mature markets for their growth.  Decoupling accounts for emerging market stocks’ overperformance these last few years.  But is decoupling really happening?

Last May, Merrill Lynch economist David Rosenberg, told the NYT’s Daniel Gross, “I find it hard to believe that the rest of the world is going to be immune to a consumer sector that’s primarily responsible for pulling in nearly $2 trillion of the world’s output.”  His take was, “Before we can say there’s a decoupling, we have to wait for a sneeze—all we’ve had is a runny nose.”

The U.S. economy sneezed (sub-prime mortgage crisis) and coughed (credit crisis). The U.S. economy is sounding more bronchial by the day.

Mr. Rosenberg, and his cohorts may have been vindicated. In January EME stocks were rocked. And, they failed to get much relief from the medicine–$145 billion stimulus package. Hong Kong’s main index dropped 5.5% — its biggest loss since Sept. 11, 2001—while India’s fell by 7.4%. Even Brazilian stocks – darlings of the EME — dropped 6.6%.

There is some degree of decoupling. While certain markets—mature and developing—are susceptible to certain market forces other markets simply aren’t because today there are lots more variables at play.  The global economy is growing up rapidly and relationships among markets are becoming more complicated.

This increasing complexity is due to the fact that resources no longer flow exclusively from mature markets to emerging regions as they had in the past. For example, both the GCC’s and Africa’s mineral resources are being hungrily devoured by China to the benefit of all three economies. This is conferring a protective effect on them which wasn’t possible in prior cycles.  Flows of knowledge and capital are becoming omni-directional and multifaceted.

So?  It’s a classic “good news, bad news” story for mature economies, like the U.S. and EU. The good news: healthier, emerging markets can continue to buy products from mature economies like U.S. and Europe, hastening their recovery.  But the bad news: the price of oil will likely remain higher, longer — despite the reduced demand for oil among mature economies.

And, let’s consider the implications for Western product-service providers who see opportunities for delivering services to some of these EMEs.

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Posted in Economics, Emerging Markets, Telecommunications | Comments

EM learning model

Tuesday, March 11th, 2008

We’re developing, in successive approximations, a hybrid model of delivering premium training to emerging companies—those emerging regions that are clamoring for competitive capabilities to succeed in a world with more competitors along with more demanding customers.

It features, among other things, ”modular” content design which enables us to reduce development cycles and labor without compromising content quality.  A new quick-check knowledge management system is powering this effort.

Today, many organizations offer innovative solutions for improving knowledge transfer, as well as products that enhance the learner experience. But, we want to go further by translating our vision for delivering premium learning services to emerging markets where we can achieve superior learning outcomes at significantly reduced costs.

We aim to further our mission of creating substantial business impact through initiatives designed to provide research-based solutions, expertise and structured peer interaction.

And, of course, we must do all this without compromising quality.  Not easy, but worth the effort to be sure.

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Posted in Business Model, Business Practices, Emerging Markets | Comments

GCC Practice

Monday, March 3rd, 2008

Last year, we launched our Emerging Markets practice to address new opportunities brought about by converging market forces, chiefly globalization.  Several factors played into our selection of which markets to enter.  Our focus is on rapidly growing markets in Southern-Eastern Europe, Sub-Saharan Africa “hot spots,” and the six nations of the Gulf Cooperative Council (GCC) and the surrounding region known as “MENA,” (Middle East-North Africa).

The case for entering the energy-rich GCC was compelling. Demand for the region’s energy will likely infuse $3 trillion in capital into these economies over the next decade. An emerging class of affluent consumers is demanding high-grade services in telecommunications, financial services, real estate, transportation, hospitality as wel as the region’s burgeoning ”connected communities”.

Governments in the region appreciate the need for a diversified foundation and recognize that they must foster entrepreneurialism while creating an infrastructure enabling companies to compete on a global level.

What adds to the market’s promise is that business leaders in the region are convinced that their companies need to become more competitive. They know that in order to operate on a global stage characterized by complexity, speed and ever-greater synchronicity, competitive business capabilities cannot be passively acquired.

As the region diversifies away from energy to a knowledge-centric economy, businesses have to do more than merely bridge functional gaps. They have to build dynamic, efficient business processes and relational skills. They realize that competitive capabilities can only be transformed through continuous interaction with experts with experience in global markets.

As companies seek to capitalize on business opportunities popping up, a shortage of top-flite business professionals is exacerbating skilled labor shortages. Many companies have been hiring expierienced, non-native practioners who bring added diversity as well as know-how.  As that trend continues, a legion of talented, foreign workers will introduce new ideas and approaches.  But ultimately, success will come when a true fusion occurs between native and non-native knowledge workers.  Well-integrated, globally-oriented organizations serving the region are already on the horizon, but there’s a lot of work to be done in this challenging area.

We’re excited to see that regional businesses aren’t simply clamoring for best practices—they’re demanding next practices that enable them to deliver competitive, customer-centric services at lower prices. They are adopting more advanced tools and relying on data-driven metrics to track and manage their business activities.

Global business consultancies entering these markets are finding the environment to be challenging due to prevailing business traditions. For example, decision makers in the region remain protective, sharing their plans slowly, wary of abdicating control to outsiders.

Many global consultancies, new to the region, have struggled with this.  They’ve experimented with a range of business strategies, often partnering with local companies to gain a foothold in the region, spending considerable resources in the process.  Some are succeeding, but many have not.

We believe our approach sets us apart from other global firms.  We are bringing together people, cultures and ideas from around the world, transforming businesses in the region and driving unprecedented value.  Having worked throughout the Middle East, we recognize the paramount importance of demonstrating respect for and sensitivity to both the traditions and challenges of the region.  Our aim is to remain open to alternate, more effective ways of seeing, communicating, and tackling problems, and this region is an interesting market space.

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Posted in Emerging Markets, Gulf (GCC) Region | Comments

Spanning the digital divide

Wednesday, February 13th, 2008

The digital divide between rich and poor countries is narrowing as mobile phones and Internet use is becoming more available, but emerging economies still lag far behind.

This is according to the UN Conference on Trade and Development (UNCTAD) in its ‘07-08 Information Economy Report.  The report shows that mobile phone subscribers have almost tripled in developing countries over the last five years, and now make up some 58 percent of mobile subscribers worldwide.

“In Africa, where the increase in terms of the number of mobile phone subscribers and penetration has been greatest, this technology can improve the economic life of the population as a whole,” it said.

The report said mobile phones were the main communication tool for small businesses in developing countries, reducing costs and increasing the speed of transactions.

“Mobile telephony provides market information for, and improves the earnings of, various communities, such as the fishermen of Kerala, the farmers of Rajasthan, the rural communities in Uganda, and the small vendors in South Africa, Senegal and Kenya,” it said.

Internet use and penetration continue to increase worldwide but developed countries still account for the majority of Internet users and have the highest penetration.

“In 2002, Internet availability in developed countries was 10 times higher in developed than in developing countries; in 2006, it was 6 times higher,” the report said.

Developed countries continue to lead Internet subscriptions worldwide, and the gap in terms of Internet broadband penetration has widened since 2002, it said.

UNCTAD said the ICT revolution was spreading to the developing world but said more had to be done to make sure poorer countries reaped its opportunities in growth and development.

It recommends that developing countries invest more heavily in human capital and infrastructure and better regulation of cyber laws.

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Posted in Emerging Markets | Comments

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