Competition

Looking for ways to screw up your Emerging Market business?

/ Jai Thampi / 2 Comments

In 2014 McKinsey published an insightful article that provided a great perspective on ASEAN – the seventh largest economy in the world, its multi-dimensional diversity, its high growth potential, etc. Most western multinational Companies recognize the importance of entering this market, but they tend to look at the exciting stats, build strategic growth plans without truly understanding the complexity of the market, and eventually go down making losses. ASEAN is just an example here, this is also the case with other emerging markets like China, India, Latin America etc.

Emerging markets are complex in nature, but they don’t have to be complicated. We often complicate things ourselves by not understanding what makes these markets unique, and by not building a clear strategy and execution plan.

Have an emerging markets business in your portfolio that you want to destroy? Here are 5.5 things for you could consider:

1. Do not create localised products

Differentiate, or Die – that’s what you need to remember if you want to win in emerging markets in the long run. If you don’t develop and deliver localised and customised products relevant to the market, your business will die a slow painful death. It might be a smart approach for large multinationals to enter emerging markets focusing on the premium price segment. But do remember that this space is not a safe haven forever. If you don’t do continuous, agile, product innovation and branded differentiation, competitors will eliminate you from these markets in the long run.

2. Ignore your local competition

Asia is arguably the most competitive market to do business in. FSG has a brilliant blog post on this topic. Many Asian competitors operate in a factory model. Vertical integration, low cost production, extremely lean OPEX model, aggressive management that drives volume share gain as their key KPI – add up all these and you have a tough battle to win if you are a multinational corporation. If you don’t plan a differentiated product roadmap and a consistent brand superiority strategy across all touch points, you will lose the battle over time. Needless to say, this needs a very disciplined cross-functional execution model.

3. Do not build a dynamic distribution strategy

Most emerging markets have a fragmented multi-tier distribution model. See this China example. It is not a walk in the park to tightly manage all tiers of distribution and ensure inventory sell through and revenue growth. Yet another decision MNCs face is to operate via distributors vs. going direct. You need to consider multiple factors before making a decision to go direct – including your targeted geographic and channel breadth, your distributors’ appetite to grow, their support infrastructure to help you scale your business, your own organisation’s constraints on OPEX spend etc. If you do not build a strategic distribution plan that addresses all these factors, you will eventually fail.

4. Live and breathe the mantra “one size fits all”

One size doesn’t fit all when it comes to emerging markets’ channel landscape. For instance, if you are an FMCG company you will quickly learn that the levers to pull to gain mindshare and win at small format resellers are totally different from that for a large format retailer. One way to avoid the pitfall of doing the same thing for everyone is to properly segment your customers. Rigorously implement this across the value chain, and repeat this segmentation exercise on a regular cadence to see how things change as you scale and grow.

5. Operate with myopic investment mindset

The myopic mindset is to look at past years’ results and make budget and investment decisions. Really dumb executives tend to react to market volatility by thinking short-term and re-directing their investments into mature markets. Some even eliminate headcount in their emerging regions, citing excuses that they can return to the market when the market is ripe again. I have seen some companies setting myopic KPIs which prematurely kill any future growth-oriented investments for these frontier markets. Want to fail? Continue doing these things.

5.5 Build the same operational model for emerging markets and mature economies

Asia is a unique region – you have some of the most transparent economies next to some of world’s most corrupt nations. Political changes could happen any time and they will influence your decision-making. Currency fluctuations could catch you off-guard. Regulatory systems may be immature, and in some cases non-existent. If you are operating in a highly regulated industry (eg. healthcare) expect to experience tons of roadblocks that you will have to patiently remove as you make your way into growth. Be prepared to get surprises from regulatory bodies and authorities like Customs. A sure-fire way to failure is to ignore all of the above, build no rapport with the authorities, develop no government engagement strategies, and do business like how you operate in developed economies.

As multinational companies start to look for growth it is normal to have an eye on emerging markets. My advice – don’t set yourself up for failure. Understand and acknowledge the challenges of operating in this environment. Attract and retain senior-level talent who have “been there & done that”. Prepare for roller coaster rides. Things will be complex here, but don’t become the moron who makes it complicated.

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Unlearning the human nature – a Sales & Marketing conundrum

/ Jai Thampi / 1 Comment

If you are a salesperson, skip this paragraph and go to the next. If you are a marketer, continue reading. Raise your hand if at least once in your work you came across a sales team complaining to you “Our competition has this new product X, why aren’t we making it?” or “So-and-so brand just launched this new marketing campaign, why aren’t we doing something similar?”. Looks like everyone’s hand is up in the air. Rest of this post is all about this real-life sales vs. marketing conundrum. And by the way, dear salesperson, I know you continued to read this paragraph despite my asking you to skip to the next. It was a test to make you understand the fundamental human nature – the insatiable desire to get what you don’t have, especially when you are told someone else will have it.

We humans evolved with desire. “This is the monstrosity in love, lady,” Troilus tells Cressida in arguably Shakespeare’s most vexing and ambiguous play, “that the will is infinite and the execution confined, that the desire is boundless and the act a slave to limit.” Human desire, in other words, is infinite – we are perpetually unsatisfied even when we get what we want, and we are capable of wanting anything at all. And when we get what we want, we usually start to wish for what the neighbor has.

Good sales people are generally relentless and aggressive in nature. They want to sell the best products and services (who doesn’t?) and that’s when marketers and product managers get thrown the question “why aren’t we making the so-and-so product, when our competitors have it?”. Reasoning about tight budgets and resource constraints and technology challenges and vendor issues won’t work in this context.

In my 15 years of international experience, I’ve come across salespersons who are blatantly ignorant of their company’s products and services – people who cannot even articulate the real differentiators of their own products – but are well versed and thoroughly knowledgeable about their competitor’s products. Why? Because of the fundamental human nature to desire and want what they don’t have. Remember how kids crave for a certain toy, and once dad brings it for them, they play with it for a while, toss it aside and start wishing for their next toy. Very often I see the same tendencies in sales people. Needless to say, this is not good for the organization as a lot of energy and creativity is being wasted on wishing and wanting what they don’t have yet.

When Airbus launched the A380 super jumbo, the Boeing sales force must have rained over their product team asking for a matching response. Instead of wavering from their course, Boeing stuck to their core message of fuel efficiency and eco initiatives, and developed the 787 Dreamliner which has eventually taken to skies earlier this month. At the same time they also worked on a new version of their own jumbo jet, the 747-8, which is slated to fly by year’s end. Industry analysts have obviously shared varying opinions about Boeing’s approach, their production delays etc. But I do see them as a great example in the context of this post, as they stuck to their strategy rather than jump all over the place. Agree, this may not be applicable to your industry as the capital investment profiles, production costs and timelines are very different (prohibitive) for an aircraft manufacturer to change course every now and then. So treat this as an example to drive home my point.

Enough of understanding the problem, you will now be asking “is there a way out of this?” Absolutely yes. But it demands both marketers and sales leaders stepping up and acting as a team. Here are some practical tips that can help your organization get out of this perpetual cycle.

  • Come together as a team and think about selectively unlearning the human nature of desire. Observe the usage of the word “selective”. Be aware that it is desire that drives the sales force to perform and outperform. So don’t spill water over the fire and make them lose their passion to sell and achieve. Instead, brainstorm together on ‘how can we sell what we have, instead of crying out loud for what we don’t have’.
  • Sales leaders could coach their field sales force to channel their resources and energy and emotions to selling “the bird in hand”, instead of fighting in vain for “two in the bush”. They must handle it sensibly and sensitively as some sales people may get de-motivated when they see their manager “take sides with marketing” (this is particularly true in Asian context).
  • Product managers could take the opportunity to clearly articulate the company’s product strategy. Explain in simple one-two-three steps, why they chose to make product A and not product B, unlike competitors.
  • Marketers could build sales force training materials that can be used for educating the team as well as for external client presentations. Re-deploy existing marketing collaterals to reinforce the main messages and themes, so the sales force is well trained on their product benefits and differentiators.
  • Leaders could encourage sales force to go for a solution-sell approach instead. If backed by deep customer understanding, a total solution offer would appeal more to the customer than a stand-alone product, thus eliminating product-to-product comparisons, sanity check of features and technical specs etc.
  • At the same time collectively investigate any possible quick product wins, so long as it doesn’t jeopardize the company’s product strategy or trigger a financial debacle.

Yes, it is human nature to desire… but channel your desire in the right direction and you could be the next sales superstar.