Fast-growth market success
(As originally appeared in Financial Post, 27 April 2011)
By Trent Henry, Canadian chairman and chief executive, Ernst & Young LLP
The global economic recovery has been marked by the rise of emerging markets. Business opportunities are distributed more widely around the world than ever before. It's a polycentric world, where growth, innovation and talent can come from anywhere, and it represents a great opportunity for Canadian business leaders. It also poses significant challenges. The good news is Canada's multinationals have an advantage — a not-so "secret weapon" that may make them better equipped to thrive than just about anyone.
Market convergence has never been greater, propelled as it is by the growing integration of trade, capital, culture and labour across borders. A globalization index developed by EY and the Economist Intelligence Unit shows that the average integration score of the world's 60 largest economies is increasing steadily. Global economies of scale are more achievable than ever.
However, convergence doesn't mean homogeneity. Local business environments and customer needs differ considerably from one market to another, while government policy and regulatory and political condiions can also vary. Emerging fastrowth markets often require differnt business strategies than slowerrowth, more developed markets.
In a polycentric world, one size doesn't fit all. To succeed, companies need to balance global scale, capabilities and strategy with a thorough understanding of customers, markets and political environments.
This takes savvy leadership and a broad perspective. Management teams whose members share similar ages and backgrounds and career paths may quickly run up against limitations. Astute leaders will build a more diverse management team that brings together people who have experience in different markets and business environments, cultural knowledge and a range of viewpoints.
Canadian companies have a remarkably deep talent pool to draw on to assemble teams that bring broad global experience, a deep knowledge of world cultures and an understanding of how to win in a range of market conditions -from mature markets, where efficiencies and incremental growth are the focus, to fast-growth markets where rapid decision-making and a more entrepreneurial attitude are needed. Businesses that harness Canada's inherent diversity to build multidimensional leadership teams will be those that can activate an unparalleled wealth of knowledge, perspectives and experience.
Building diverse leadership teams with strong global experience is not the only factor for success. Our research, conducted as part of the globalization index and in interviews with global businesses executives and experts, identified three other priorities:
Redefine "global" and "local" Balance globally consistent strategic direction, shared corporate culture and values with greater autonomy that enables regional managers to respond to local market characteristics.
Develop a polycentric approach to innovation Instead of adapting products to suit different markets, reverse the process: Develop products or processes primarily with local markets in mind and apply the ideas in other markets where appropriate.
Rethink relationships with government and tax administrations Identify how to engage with the policy makers while monitoring potential impact of the political environment.
However, I maintain that building a diverse leadership team with strong global experience is what will enable businesses to gain the essential, hard-to-access expertise needed to flourish in a polycentric global market. Leveraging Canada's diversity can help Canadian companies to punch above their weight in the global arena. Now is the time for Canada's business leaders to make the changes needed to seize the opportunity.