Peter Drucker’s ‘culture eats strategy for breakfast’ is more at play, says Babs Omotowa, in one reflection of what it takes to succeed in emerging and frontier countries, gleaned from decades of experience in the oil and gas industry
The attraction of emerging and frontier markets is clear – many have high GDP growth (6+%) that is twice that of developed countries, for example, and they attract more than $3trillion USD per annum in Foreign Direct Investments (FDI). They are also home to young populations with growing middle classes and offer the possibility for digital technologies to leapfrog development.
However, it is important for any leader intending to work in any emerging or frontier market country, to take the time to fully understand the exact context, complexities, nuances and dynamics prevailing in that particular country.
While emerging and frontier market countries are not all the same, here are some of their common characteristics and areas where one might expect a difference of context between emerging or frontier markets and western mature markets:
- Cultural – colonial histories, diverse ethnic groups, deeply religious and with communal value systems.
- Political – immature and unstable democracies, autocrats, changing policies, bureaucracies and red tapes.
- Institutions – weak regulatory frameworks (for example, judiciary) but a more aggressive disposition by regulators.
- Security – typically volatile with higher crime levels, poor policing, general insecurity and human right issues.
- Society – low average per capital income, higher level of poverty in communities, disruptive social dynamics.
- Transparency – more opaque systems in public and private sectors and higher prevalence of corruption.
- Infrastructure – inadequate and in poor state including electricity, transportation and health facilities.
- Supply – limited manufacturing, significant imports, port delays and few internationally competitive vendors.
- Practices – typically antiquated and limited ‘best practices’ including on safety, operations, technology.
- Education – uneven local education standards and poorly funded educational and research facilities.
Leadership skills for success in emerging and frontier markets
Irrespective of whether in an emerging, frontier or western developed country, for a leader to be effective, they would need to adjust their leadership style, to suit the relevant environment and the requirement of their team. They will need to deploy different skills from an ever-expanding leadership toolbox, based on the context of the organisation and the external environment.
A leader must be able to assess and interpret the environment in which they operate and anticipate opportunities and threats ahead; develop a vision and strategy; build organisational and people capacities; execute consistently, measure outcomes and adjust strategies, based on feedback and analysis.
From the context prevailing in many emerging and frontier countries, the following are important insights for leaders to overcome business challenges and succeed, and which may differ from those required for western mature countries.
1More focus on stakeholder returns beyond shareholder return
The prevailing societal challenges (poor infrastructures, limited manufacturing, high poverty, security) in emerging and frontier countries, do have a significant impact on the ability of an organisation to deliver business results and maximise shareholder value. As such, for a leader to succeed and harvest opportunities, they must be engaged on enabling sustainable long-term stakeholder value, beyond what would be required of them in western countries.
This would require leaders with relationship and networking skills, able to inspire and mobilise potentially sceptical stakeholders.
2More attention to organisational culture
Peter Drucker’s ‘culture eats strategy for breakfast’is more at play in emerging and frontier countries. This is based on the historical and cultural context that prevails in most of such countries. For example, it is not unusual for the organisations to have covert ‘authorities’, sometimes linked to ethnicity or political connections, which are different from the formal overt reporting hierarchies. Understanding the culture and dynamics is important to determine how to evolve and manage any cultural change necessary to drive business results.
This would require culturally astute leaders and place a premium on skills of active listening, empathy and change management.
3Driving commitment on ethics, well beyond compliance
Due to weak regulations, including a higher exposure to regulatory capture, managing compliance in emerging and frontier markets, demands intense focus. However, the limited transparency and relatively higher level of corruption in such societies means local ethical standards are usually low and relate more to ‘lip-service’. A reliance only on corporate governance system, policies and controls, which are usually adequate in western countries, would not be effective in emerging and frontier markets. As such, a leader driving only compliance to ethical standards will miss out on ethical infractions that are usually below the surface, that is those below the compliance ‘iceberg’. Therefore, driving commitment to ethical values is key to ensure significant value is not eroded.
This would require leaders with integrity, an eye for details, the ability to build commitments and the courage to pushback against organisational imperatives that may structurally incentivise a more relaxed approach.
4Overcoming higher-bar obstacles to deliver significant results
There are significant values to be harvested in emerging and frontier countries as organisations there are usually not operating to ‘best practices’. However prevailing challenges (such as policy volatility, regulatory barriers, infrastructure and supply gaps) tend to create much higher hurdles to deliver results than those in western countries. This is compounded by entrenched interests and much stronger resistance barriers to change and innovation.
This requires leaders with the courage to take risks and remain resilient while building consensus for the long term.
5Being able to fly high, and also ride low
Based on the significant opportunities in emerging and frontier countries, but lacking in deployment of ‘best practices’, the evolution of a vision and strategy by a leader in such an environment is important. However, realising value and eliminating non-value-adding activities requires not just planning, but importantly more hands-on operational execution and change management by the leader. This means a balanced ‘trust but verify’ approach.
The leader must be strong in strategic thinking, knowledgeable about global standards, but practical and focused on local circumstances, to ensure effective implementation.
6 Much stronger focus on people development – attract and retain technical staff
With a high young population, multinationals are able to attract and retain the best young talent in emerging and frontier countries, especially as multinationals usually pay relatively good wages. However, as educational institutions are of uneven quality in many countries (especially with regards to technical skills), leaders must focus on developing talent, exposing them to best practices, driving coaching and mentoring, and creating the enabling environment for them to deliver exceptional results. Any strategy of a heavy reliance on expatriate staff will be ineffective in the medium to long term.
This requires motivational leaders with strong talent and people management skills.
Not new, but rather a different emphasis
Emerging and frontier countries demand a different emphasis of leadership skills, in aspects necessary to overcome the varying fundamental challenges in such countries.
These leadership skills are not ‘new’ but need to be applied differently to enable a leader to succeed in emerging and frontier market environments. This is consistent with situational leadership and the leader will need to know when to tell (e.g., best practices), sell (e.g., stakeholders’ persuasion) participate (e.g., culture change) and delegate (to identified top talents).
The rewards are there, as are the opportunities to deliver significant value and growth as well as to make societal impact, and work with diverse publics and motivated staff. There may be frustrating moments, but leaders must keep a balance, knowing that the potential rewards are bigger than the immediate hurdle being faced.
To lead effectively, leaders must not just rely on what made them successful in the past in western countries but be willing to learn and adapt. It requires unconventional leaders with the right temperament, humility, patience, energy, discipline, resilience and ability to work with others without compromising core values.
Babs Omotowa worked for 26 years with Royal Dutch Shell across several continents and was a member of its Upstream Leadership Team with responsibility across 40 countries. Previously, he was MD/CEO of Nigeria LNG, during which time the company generated $40 billion USD in revenue. Babs is also the author of From Storeroom to Boardroom (Practical Inspiration Publishing, 2021).