Connected by separation: How global businesses address emerging markets
Businesses headquartered in the developed markets have looked to emerging markets as sources of cheaper resources but, as those markets develop, they are increasingly becoming customer markets and locations in which key business processes, including IT, are established. Orange Business Live 2011 brought together two customers to explain their views on the development of emerging markets.
Aloys Kregting is CIO and executive vice president ICT at DSM IT BV, a Dutch company that combines materials sciences with life sciences and has a heritage in mining. Kregting describes the company as one of the largest companies that nobody has heard of. The company provides plastics for the iPhone, HTC smartphones and other devices and produces (possibly) the strongest fibre in the world. Forty times stronger than steel, the product can also float on water and is used to make replacement spinal discs and replacement knees. DSM also provides nutritional products.
DSM has operations across the globe and Kregting commented: “We’ve stopped calling emerging markets that now and call them high growth markets instead; it’s ridiculous to say they’re emerging.”
That change in attitude is a global shift as the productivity profile of the planet shifts from the traditional developed markets to high growth markets that do business in different ways and at an accelerated pace. “Innovation is the only way to survive the battle with the high growth countries,” added Kregting. “If not Europe will become a museum of how things were done in the past.”
Kregting shared a platform at the event with Tobias Frank, CTO of Vale, Brazil, a traditional mining company that operates on five continents and is the world’s largest producer of iron ore. The company also holds the largest iron ore reserves in the world and extraction activities include construction and ownership of railways and shipping fleets. “I live in the US but spend a lot of time in Brazil and other developing markets and the contrast between the emerging and the developed markets is huge,” he said. “The energy and optimism in developing markets is incredible.”
Kregting agreed: “The thing that has struck me most is the difference in the way of thinking in management in developed markets. For example, if we want to find talent in a market we select a shortlist and try to fly out to interview applicants in a month or so. That tempo doesn’t fit a market like Singapore. If you wait a month the candidate is gone. So we need much more localised decision making, we need a more loosely coupled management style. We have to let go.”
However, to do that communications links that enable collaboration and rich experiences must reach even the furthest flung parts of a corporate empire. “Partners and suppliers must be able to keep up with the speed of our growth and have the reach to serve us,” added Vale. “In emerging markets things happen very fast. This year we plan to spend US$ 24 billion on new projects, that’s US$ 45,000 per minute.”
Vale also points out that, from an innovation point of view, emerging markets have been less well served. “Typically emerging markets have been treated as the B end of projects and most suppliers struggle to bring resources to bear in them,” he said. “The shortage of talent in some markets is a large issue.”
Kregting agrees: “The war for talent is especially intense in Asia Pacific and Latin America,” he said. “We’re all searching for the best but then you get indecent proposals like requests for 50% rises in salary. We’ve moved a lot of IT resources to India and China because of shortages of skills in developed markets.”
Global companies need global partners and innovative applications, underpinned by reliable connections and services, are the critical requirements to enable collaboration and new projects. Kregting gives the example of a project involving Orange Business Services that linked 400 executives across the globe. Not only did the technology work, much to his relief, but it also was viewed as a positive means to communicate by DSM’s personnel. “The executives said it was the most intimate top management conference they had attended,” he said. “We called it connected by separation.”