Innovation Management in Emerging Markets

By: Stefan Lindegaard

When it comes to innovation management, I see a growing number of companies in emerging countries like Turkey, Mexico and Brazil doing a better job than their counterparts in developed (primarily Western) countries. There are many reasons for this and here you get some of my observations.

The growth mindset

I have had many interactions with companies in emerging markets and they seem to be more driven and more willing to invest in the capabilities (such as corporate innovation) needed to keep growing.

In all fairness, it should be noted that Western companies in general have a higher starting point and thus they don’t have the same need to catch up as you have in many companies in the emerging markets. But the thing to have in mind is that if you slow down or stop moving at all today, you will be in trouble sooner or later. Keeping the momentum is critical.

A different understanding of and experience with innovation management

When you don’t have a 30-year legacy or history with innovation management, you most likely do things differently than what you see at the more mature “innovation-driven” companies.

The good thing is that when you know what you do not know, it becomes easier to accept that you need to learn and work with others to get better. You often also have an organization that is more curious and more willing to learn and try out new approaches.

The flip side for companies in emerging markets is that they have a lot of catching up to do. This is the same situation whether they more or less want a copy of what works in the Western world or if they go for a hybrid model that builds on the best from both worlds.

The top down leadership approach

When you have a patriarch-like figure in charge of your company, decisions can be taken quickly and swiftly. If this patriarch decides that the company needs to get stronger on innovation, everyone in the organization better buy into this fast.

The flip side is that sometimes the patriarch does not understand innovation. There is too much talk and too little understanding of innovation as a management discipline. In this case nothing happens – or even worse – the wrong things happen.

Furthermore, a heavy top down leadership approach is seldom the best environment for creating a more open, transparent and experimental corporate culture which is what is needed with regards to innovation today.

You don’t make it more complex than it has to be and you experiment your way forward to get the customers onboard.

Stronger home markets with faster action

Many emerging markets are significant growth markets. If you have strong home markets, you can better afford to expand your activities at home and maybe also internationally.

Many emerging markets are less settled. There is more of a “wild west” attitude in the positive sense where you try to capture the customers by offering the products, services and processes they need – and can pay for. You don’t make it more complex than it has to be and you experiment your way forward to get the customers onboard.

So you just do things. Action is faster. In a way, you can say that you innovate without really calling it innovation and without having too many processes that could actually kill the efforts. You just do what it takes to get the customers onboard and to keep them.

The flip side is that growth markets attract multinational companies that has more scale and often also a higher quality in their offerings. If the multinational companies can match their international acumen with a sense for what the local market needs, this could spell trouble for the local companies. The products, services and processes become more advanced and as you move up the value ladder, you need better processes for your innovation efforts.

This offers an advantage for the companies – local as well as multinationals – that get their innovation efforts structured in the right way for the right markets.

Complacency

One of the biggest innovation management problems in many Western companies is complacency as in “we already know how to do this” and “we are some of the best in the world on innovation and we don’t need to change. This is a key reason why the Nordic countries are so slow at adapting open innovation. Nordic companies in general have been thinking and acting as if they know best and thus don’t need to open up to others for the last decade and now they are paying the price as their innovation leadership positions are being challenged. Complacency in general is also a root cause for the death of many large companies.

But you also have complacency in emerging markets. If you have been the leading company for several decades, you might think that you are on top of the world. New competitors at home or the stiff competition that you meet at more established markets challenge the mindset. Maybe you are not as good as you thought you were and now you need to change your mindset fast. This is not easy to do.

Your take?

This is meant to be a discussion starter on how innovation management differs in developed and emerging countries. I will write more about this in the coming months. It would also be great to hear your perspectives, comments and questions on this.

What do you think?

By Stefan Lindegaard