In 2013, a BCG survey of more than 150 senior executives of MNCs revealed an eye-opening disconnect. More than three-quarters, or 78%, of respondents said their companies expected to gain share in emerging markets, but only 13% were confident that they could take on local competitors. Not a single company stated that it had all the capabilities required for success. The biggest concern was not the ambition but the ability to execute locally. Our experience since then indicates that not much has changed—except the urgency with which many MNCs must address their emerging-market operations.
Emerging-market transformation has to start in one local market (or at most two or three) to ensure that it addresses gaps in local competitiveness and that a robust methodology is developed for subsequent rollout throughout the company. Once one market demonstrates results and positive momentum, the approach can be transferred to other countries. To take advantage of lessons learned in the first country or countries, companies should use the same templates and tools. They can develop handbooks and lessons for fast learning and ensure some continuity by transferring people who have experience with the approach to the transformation management team.
Chevron, for example, launched a program in 2013 to promote efficiency and productivity in its different upstream businesses all over the globe. It started in Nigeria and Angola, where—in addition to achieving significant productivity gains—the company built a toolbox that could be used by others; it included activity time-analyses, steps to streamline the organization, and process optimization programs. Chevron then rolled out the toolbox to other emerging markets in the Americas and Asia.
For many large global companies, this is not only the right time to rethink the operational models they deploy in emerging markets; it’s the essential time. The kind of global transformation we propose makes the company better adapted to local circumstances and strengthens its competitive capabilities worldwide. MNCs must become “multilocal” players if they want to succeed.
MNCs should ask themselves the following questions:
- Do we need some minor fine-tuning of activities in emerging markets or a more fundamental reset?
- Are the current trade-offs we make around investments, product portfolios, process excellence, and people development still valid?
- How do we want to approach the transformation of operations to ensure immediate results and a fast global rollout of the program?
Growth in emerging markets will continue, but only for companies that are set up to be competitive and that make growth profitable. In the changing world of emerging markets, this will become the new definition of winning.