The Hindu Business Line : World winners emerging from `new economies'

By under-rating corporations from developing economies you will be repeating the mistake of discounting the so-called Third World countries which are now turning winners globally, says The Emerging Markets Century, even as Sweet Spot suggests ways to achieve alignment, and Made to Stick comes up with tips to succeed.

They could `eat your lunch, take your job, or possibly be your next business partner or employer'. Who? `A new breed of world-leading companies' you've never heard of! Thus cautions Antoine van Agtmael in The Emerging Markets Century, from Free Press. "Just as conventional wisdom wrongly depreciated emerging markets twenty-five years ago as `Third World', today's all too common error is to underrate the leading companies from these markets," he writes.

In the intro, the author reminisces how in September 1981, he had come up with the `positive and invigorating' phrase `emerging markets' as a substitute for `Third World', a stigmatised label that reminded one of `basket case' economies not too different from `volatile casinos'. EM or `emerging markets', thus, had its origins as an elevator pitch to shake off `an image rife with negative associations of flimsy polyester, cheap toys, rampant corruption, Soviet-style tractors, and flooded rice paddies'.

The tag caught on. "With the rising power of China, India, and other emerging markets, and the resultant shift of consumer demand from the West to these markets' exploding middle class, we have now formally entered the Emerging Markets Century," declares van Agtmael.

Emerging MNCs

"Nearly one in ten of Fortune magazine's top 500 global corporations comes from emerging markets," he notes. "Many of the world-class firms of the future will come from the `new economies' rather than the `new economy," he prophesises. The book talks about 25 emerging multinationals that are already world-class, and the list includes Infosys, Ranbaxy and Reliance.

The Tata Institute of Fundamental Research (TIFR) in Mumbai finds mention in an early chapter for its research on string theory — `the universal theory that proponents suggest can be used to explain black holes and the origin of the universe'. TIFR's research is among the most advanced in the world, comments the author.

"While ancient India was known for knowledge, innovation, and discoveries (including the mapping of planets and the solar system, as well as the invention of the zero), it took nearly ten more centuries for India to enjoy a second Golden Age, marked by internationally recognised software and pharmaceutical industries, which today no longer rely on the crude economics of sheer cost advantage but on intellectual capital to advance globally." The largest buyers of US assets have been Indian as opposed to Chinese companies, finds van Agtmael.

He discerns `three distinct waves' that define `the commercial relationships between the former First and Third Worlds in the past century'. The first wave saw FDI (foreign direct investment) in overseas plants, be they to `operate copper mines or oil fields, assemble cars, run agri-businesses, or make televisions or disk drives'. What was the real impact of these plants? Over time, they `familiarised a local labour force with global technology, trained local managers, set rigid standards for efficiency and service, and introduced management methods that spread quickly to their local suppliers and competitors.'

This set the stage for the second wave, of outsourcing and offshoring. "First a single component or cheap, low-tech part, then whole modules or products, then finally the design of entire, sophisticated, high-tech products, were increasingly `offshored'." Meanwhile, "outsourcing companies were able to earn excellent margins, often higher than those of their clients," though the clients in the US, Europe and Japan `remained in the driver's seat'.

We are now in the early years of the Wave 3, says the author: `Peer-to-peer emerging world-class competitors.' Examples that he cites are of Samsung and High Tech in consumer electronics, Modelo in beer, Embraer in aviation, Tenaris in oil pipes, Companhia Vale do Rio Doce in mining, and Cemex in building materials, all of which `have learned how to cleverly become global players without losing the particular advantages of their location in low-cost markets'.

The book wraps with `ten rules' for investing in the current century. To follow these rules, however, you might need `three intangible attributes that are not in abundant supply' — viz. "the discipline to dig deeper, never-ending curiosity, and a `cool' mind-set."

A must-read, unless you want to forego your lunch!

Get everything aligned

Arun Sinha advocates a new way of thinking in Sweet Spot, from Wiley (www.wiley.com), to help business growth by maximising marketing. "In business, a sweet spot is a place, time, or experience in which a company's brands, products and services, finances, leaders and marketers are in tune and in time with consumer needs, aspirations, and budgets," defines Sinha. "Everything and everyone is aligned; the company's differentiator is cogent, persuasive, and alluring. Repeatedly finding these sweet spots is the key to growth in increasingly competitive times."

To successful global companies that want to set shop in India the author offers three suggestions. First, adapt the business to local conditions. "What works in New York may not work exactly the same in New Delhi." For example, "The McAloo Tikki burger, made of potatoes, has the highest sales in McDonald's restaurants in India. Most Indians don't eat beef, so McDonald's decided to respect the sensitivities of the customers and not serve their most popular ingredient in India." Another gastronomic example is of Pizza Hut finding its traffic grow fourfold after introducing Tandoori Pizza.

Sinha's second suggestion is about shaping the market by introducing approaches that are indigenous to India, but which can then be leveraged in other countries. "For example, Hindustan lever introduced single-use sachets of shampoos and soap products so that lower-income customers have access to premium brands." And his third suggestion is about the need for a long-term commitment. One of the biggest mistakes companies can make is for the senior executives to make an investment commitment without thinking through the horizon for return on investment, rues Sinha.

A book you may not like to spot in your rival's bookshelf.

`SUCCES' road to stickiness

Why do some ideas survive while others die? Chip and Dan Heath explore the answers in Made to Stick, from Random House (www.atrandom.com). There are six principles that make ideas succeed, say the authors. And these are contained in the acronym SUCCES: Simplicity, unexpectedness, concreteness, credibility, emotions, and stories.

"People are tempted to tell you everything, with perfect accuracy, right up front, when they should be giving you just enough info to be useful, then a little more, then a little more," explain the authors in the `simple' chapter. By prioritising the core, the listener can be saved from `the quicksand of decision angst' in `an environment of uncertainty'.

Unexpectedness is about surprising people, by breaking their guessing machines. "Common sense is the enemy of sticky messages. When messages sound like common sense, they float gently in one ear and out the other." On the contrary, curiosity is stirred with gaps in knowledge. "Unexpected ideas, by opening a knowledge gap, tease and flirt. They mark a big red X on something that needs to be discovered but don't necessarily tell you how to get there."

Concreteness is the easiest and the most effective of the six traits of stickiness, one learns. "Concreteness makes targets transparent," say the Heaths. "Concreteness creates a shared turf on which people can collaborate. Everybody in the room feels comfortable that they're tackling the same challenge."

There are three more principles to go, but it helps to know that there are villains in the way of ideas becoming sticky and thus successful. Such as the arch villain, `the curse of knowledge'! What's that? "You know things that others don't know, and you can't remember what it was like not to know those things."

Recommended addition to the reading list you may wish to stick to this week!

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