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What Every Global Executive Should Know About Working In Emerging Markets

2013 June 19

History is, to a great extent, a tale of great powers: Athens vs. Sparta, Rome vs. Carthage, the Axis vs. the Allies and NATO vs. the Warsaw Pact.  Great nations drive great events.

That is, until fairly recently.  While North America and Europe struggle to return to prosperity, BBVA research predicts that 68% of global economic growth over the next decade will come from emerging markets.

So the greatest opportunities are likely to come from some of the most unlikely places. However, few executives are ready to deal with the challenges of the developing world. Cultural, governance and management challenges meet you at every turn and general business experience is often a poor guide.  Here’s what you need to know.

1. Every Place Is A Village

Meet a friend from another city, or even another industry, for lunch close to their place of business and you’ll very likely have some important people pointed out to you that you’ve never heard of before.  You’ll soon forget them, because they have no relevance to you.

Every place is like that, even Manhattan.  Charles Kuralt, a longtime resident famous for his keen powers of observation, once noted that New York isn’t really a big city at all, just a lot of very small cities right next to each other.  If you’ve ever lived there, you know what he meant, every neighborhood has its own culture.

When you go to an emerging market, your purpose might be global business, but you will be entering yet another village, where invisible bonds of family, class and upbringing tie people together.  Chances are, you won’t take note of them or even care very much when they’re pointed out to you.

But make no mistake, your business partners live in that village and that’s often what they most care about.

2. Nobody Thinks Of Themselves As A Bad Person

Emerging markets are often corrupt places, with vastly different ideas about business practices and the rule of law.  If you run a business of any scale, you will inevitably have to deal with some unsavory characters.  It’s just a fact of life.  Operate in developing societies long enough and you’re bound to have the locks changed on you once or twice.

It’s very difficult to deal with, but after spending most of my adult life in some of the rougher places in the world, I’ve learned one thing:  Nobody thinks of himself as a bad person.

Most people involved in unsavory activity actually think of themselves as quite moral and upright.  They do, however, believe that the world is corrupt and that they find themselves in a classic prisoner’s dilemma.  In their mind, they are merely accepting the practicalities of modern life.  They would love to be honest and true, but refuse to be fools.

So what I’ve found is that the best way to deal with corrupt people is to be absolutely honest and incorruptible yourself.  Never insinuate that you are “in on the game” or even, if you can help it, acknowledge it exists.  Just be respectful and always keep up your end of the bargain, even when it costs you.

It won’t make you bulletproof, but it will give you the best odds of success and might even gain you some sympathetic protection.

3.  Expect To Meet People Smarter Than You

People in foreign countries talk funny.  They often have heavy accents, are unfamiliar with colloquial language and, because they often translate phrasing from their original language, have a seemingly strange way of expressing themselves.

However, make no mistake, while they may speak with an accent, they don’t think with an accent.  In fact, many developing markets (especially the former Eastern Bloc) have better education systems than our own.  In former Soviet countries, many executives have even attended top US graduate schools on Muskie Scholarships.

Further, because there’s less business activity in emerging markets, there is less competition for top talent.  Provide a decent work environment and opportunities for advancement and you can have your pick of the cream of the crop.  In Ukraine, I would routinely hire 20-year olds who could speak five languages and do econometric modeling for $200/month.

Unfortunately, after ten years working in a local company, many have fallen behind their first world analogues, so it’s often best to focus on young graduates that you can train, rather than looking for long, impressive resumes.

4. Most People Need To Hack To Survive

While denizens of the tech world like to think of themselves as natural born hackers, people in emerging markets hack to survive.  When you live in a dysfunctional system, you learn to trade favors, navigate black and gray markets and rely on personal networks of friends, family and neighbors.

This can be a challenge for a foreign executive who wishes to practice “hands off” management.  While basic rules and regulations will be followed to a tee, underneath an informal system will arise that has a mind of its own, making it difficult, if not impossible, to implement initiatives.

However, for those managers who actively create a distinct corporate culture, the rewards can be enormous.  Many firms, including GE, Unilever and Cisco have used the natural ingenuity of emerging markets to create low cost, high efficiency products that can succeed worldwide.

While most companies go to emerging markets in search of new consumers, reverse innovation may be even a bigger opportunity.

5. No, People Aren’t The Same Everywhere

One of the first things you’ll notice in an emerging market is how familiar many things are. International brands, western style shopping centers, popular music and film.  You’ll be tempted to assume that you are in a place where people want the same things we do, but are merely ten or twenty years behind.

Nothing could be further from the truth.  If you learn the local language and spend some time in people’s homes, you’ll find that not only do they come up with different answers, they don’t even ask the same questions.

Every market is different, bringing its own religious, historical and cultural baggage. Moreover, as you indulge in your desire to explain how things “should work” you’ll find that you have a fair bit of your own irrational biases and will struggle to explain why your most heartfelt beliefs can be justified beyond the fact that you grew up with them.

And that may be the biggest benefit of spending some serious time in a truly foreign culture, not so much what you learn about others, but what you learn about yourself.

– Greg

4 Responses leave one →
  1. Ayelet permalink
    June 26, 2013

    You hit this on the head – after living abroad for 4 years (with two of those years in a developing country), this article showed me that I still have some unconscious biases going on. Great article!

  2. June 26, 2013

    Thanks Ayelet. I’m glad you liked it.

    – Greg

  3. July 7, 2013

    Really insightful article Greg. NYC really is a lot of “small cities” right next to each other. I’ve been immersing myself into various neighborhoods here lately and I am continuously delighted by my experiences.

    The second point reminds me of Serpico: remaining “honest and incorruptible” and the idea of still not being “bulletproof.” Hard lessons, integrity.

    So very glad you pointed out that while people may “speak with an accent, they don’t think with an accent”! Necessary reminder; respect, and the humility that comes with its practice, goes a long way in building alliances.

    Hacking “to survive” — yes. Ultimately, cultural literacy and cultural education in general are missing in far too many international business endeavors and this compromises success.

  4. July 7, 2013

    Thanks Jackie. Glad you liked it!

    – Greg

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