"Entrepreneurs and managers agree that creating value and motivating people is at the core of what they do," states Harvard Business School professor, Tarun Khanna, "but differences quickly emerge over what constitutes value and how to motivate people, and that's because conditions differ enormously from place to place, in ways that aren't easy to codify." In his recent article titled Contextual Intelligence, published by the Harvard Business Review (HBR), professor Khanna goes on to explain why companies need to stop trying to apply management practices uniformly across geographies.

We had the pleasure of sitting down with Professor Khanna during his recent visit to Toronto. After an enlightening conversation, we have distilled his advice into five steps that can help businesses realize success in emerging markets.

  1. Don't underestimate the challenge of replicating success in emerging markets

    In his HBR post, Professor Khanna explains contextual intelligence as the ability to appreciate the limits of our knowledge when adapting it to an environment different from the one in which it was developed. Businesses that can recognize and address the limitations of their knowledge are more likely to experience international success.
  2. Increase your business' supply of contextual intelligence

    If you want to develop a successful global expansion plan, you need to equip your business with people that are "fluent" in more than one culture. While the options for acquiring contextual intelligence are neither easy nor cheap, your success depends on it. Khanna recommends the following:

    • partner with local companies in your target country
    • develop local talent in your target country
    • hire people that are "fluent" in more than one culture before expanding

    Professor Khanna agrees that companies located in diverse, multicultural cities like Toronto have an advantage. Companies that leverage diversity are less susceptible to group think and confirmation bias which leads to poor decisions. "Here in Toronto, there are so many people from different walks of life, offering a variety of perspectives that challenge pressure to conform to the group," Khanna states.
  3. Identify the ingredients that are crucial to the success of your business model

    How can businesses be unaware of what makes them successful? This notion is not meant to be condescending toward successful business leaders and entrepreneurs, insists professor Khanna. In his article he explains why more successful companies could experience even greater difficulty adapting to new markets:
    Businesses that have achieved success in one market invariably have tightly woven operating models and highly disciplined cultures that fit that market's context –so they sometimes find it more difficult to pull those things apart and rebuild than other companies do.

    "There are many facets to an operating model," Khanna tells us. "When you have executives put all of these things down on paper and explain which are pivotal to success, and which could change, it becomes clear that there is some uncertainty –and that's normal."
  4. Identify and separate local variations into two groups: "buy-side" and "sell-side"

    Khanna suggests that companies identify and separate important cultural differences into two groups: "buy-side", and "sell-side." This is important because on the “buy-side” there are different expectations about how information and products should be presented. Meanwhile, on the sell-side, motivation of employees, staff incentives and retention plans need to reflect local norms and expectations.
  5. Consider contextual intelligence when locating your headquarters

    An alternative to spending time and money on consultants is to locate your headquarters in a place that gives you access to talent from a diverse range of cultures and ethnicities. Recognized for its multiculturalism, the Greater Toronto Area (GTA) of Ontario is home to foreign-born populations that exceed 50%.

    Reflecting upon his frequent visits to Ontario over the past 30 years, Professor Khanna states, "Diversity is a major selling point for cities like Toronto."

Learn about Professor Khanna's book, Winning in Emerging Markets: A Roadmap for Strategy and Execution

Find out more about Ontario's highly skilled and diverse workforce




May 11, 2015

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