The model of emerging market innovation that most people have in mind is a multinational corporation pioneers a novel product or service in their sophisticated home market, drops some features and cuts the price, and then exports the stripped-down innovation into emerging markets.
Increasingly, however, innovation flows the other way. Companies develop a product that appeals to emerging market consumers who combine discerning tastes with low disposable income, then managers quickly recognize that these products would appeal to some segments within mature markets as well.
At a recent London Business School panel on multinationals in emerging markets, I had the chance to discuss this reverse innovation with Paul Bulcke, CEO Nestlé; Anshu Jain, who runs Deutsche Bank’s investment banking business; Vittorio Colao, the CEO of Vodafone; and John Connolly, the global chairman of Deloitte.
- Distinguish between emerging consumers and emerging markets. Paul noted that Nestlé distinguishes
Last week, I moderated a panel on multinationals in emerging markets for the London Business School’s Global Leadership Summit. Four prominent business leaders–Paul Bulcke, CEO Nestlé; Anshu Jain, who runs Deutsche Bank’s investment banking business; Vittorio Colao, the CEO of Vodafone; and John Connolly, the global chairman of Deloitte shared their insights on several topics, including which multinationals (other than their own) they most admired for their success in emerging markets.
People often use the term “emerging markets” as a catch all phrase implying that all countries within this category are broadly similar to one another. In reality, of course, the differences between India and China or Brazil and Russia dwarf their similarities. The heterogeneity of emerging markets raises questions for companies seeking to invest in these countries: How should we prioritize investments across emerging markets? How do we differentiate a more attractive market from a less attractive one? What criteria should we use in evaluating and comparing different markets?
Below I summarize some of the insights on how four different executives from four very different industries evaluate emerging markets.
- Nestlé. GDP growth is important for a food company, of course. In Africa, for instance, GDP has grown at about 5% per year over the past decade. Second, a country or region needs to meet a threshold level of
Yesterday the London Business School held its annual Global Leadership Summit, I moderated a panel on how multinationals can seize opportunities in emerging markets. My panelists were Paul Bulcke, CEO Nestlé; Anshu Jain, who runs Deutsche Bank’s investment banking business; Vittorio Colao, the CEO of Vodafone; and John Connolly, the global chairman of Deloitte. (The podcast of the full panel is here).
Emerging markets are important for each of these companies. Vodafone books 22% of its revenues in emerging markets including India, Egypt, and Turkey. Deutsche Bank earns about €3 billion in these markets. Currently emerging markets account for approximately 32% Nestlé total sales (and more than half the firm’s factories), but Nestlé intends to increase revenues from emerging markets to 45%. Deloitte has about 15% of headcount in the BRIC countries.
One of the questions we discussed was other than their own company, which multinationals do the panelists most admire for their performance in emerging markets. Their answers are interesting.
- Tesco. John noted that by the end of this year, Tesco will have more retail space in Asia than the UK.