Written by James C. O’Brien
I left government after nearly 12 years as the president’s representative, responsible for policies that affected several countries, covered thousands of US civilian and military personnel, and involved budgets in the hundreds of millions of dollars. Despite experience gained in scores of negotiations, internal and external, I wondered what from these experiences would be relevant to a career in the private sector.
After another nearly a dozen years as part of Albright Stonebridge Group, a global advisory firm that has worked in more than 70 countries and advised about as many companies, I’ve learned there are strong similarities. In simplest terms, diplomacy is Tom Sawyer getting his neighbors to paint his fence. In the public and the private sector, the art is the same.
One of the greatest similarities is the need to be able to operate effectively in unfamiliar environments. Governments are often asked to handle crises in regions unknown to the most senior policymakers, and so it is a great training ground for learning just enough – and, just as often, for seeing the consequences of not knowing enough.
Corporate executives are increasingly facing the same challenge. With emerging markets expected to double their share of global GDP in the next several decades, more firms will find themselves increasing their investments – and their exposure – in unfamiliar places that even a few years ago their headquarters might have regarded as marginal.
My work with Albright Stonebridge Group has demonstrated that there are a few lessons I learned as a diplomat that can also guide a successful market entry.
The first lesson is that in markets with underdeveloped governance structures, there are multiple stakeholders, and each must be engaged. During my career as a government representative, engaging not just with the sitting government, but also with other civil and public sector leaders gave me the clearest sense of local dynamics and allowed me to be most effective at the negotiating table. Similarly for business leaders, the implementation of a broad engagement strategy can make the difference between success and failure in new markets. Consider a couple examples:
ASG worked with a global consumer products company that found its ability to function threatened by protests led by local environmental groups. A long-term process of engagement with those groups, and global environmental standard setters, has helped to create a stable and reassuring environment for the company.
We watched an energy products manufacturing company establish major expansion plans with local partners in a Chinese province but neglect to find allies in parallel political and national channels. The business has not met expectations.
It can be difficult for local corporate teams, often new to a country and without the government channels and resources available to diplomats, to manage the multiple relationships needed for all stakeholders to be satisfied. A simple approach to this problem of scarce resources is to find and engage a few officials who might become advocates internally, having recognized the value of the company’s involvement for the country as a whole. For example, in Central Europe one global pharmaceutical company persuaded officials that it could engage local researchers in a global network, improving their reputation and expertise; this facilitated market entry. In many markets, these efforts take time and careful building of relationships; that should not be reduced to a transaction by transaction relationship.
The issues can be more complicated around initial market entry, which is partly a commercial matter, but also a political one, especially in emerging markets. More often, regulators in many countries – especially China – have become more assertive when reviewing acquisitions. It is increasingly a mistake for companies to rely on approvals in one or two leading markets in the hope that other markets will simply follow. For example, a global consumer products company failed to win approval for a strategic acquisition in a major emerging market, in large part because it believed that approvals from other markets would be relevant and persuasive to the local regulator. In so doing, they failed to fully understand the strategic and political importance of the firm to be acquired, which led regulators to impose limits on the transaction. It took several years of careful engagement with regulators and political leaders for the business to recover.
These examples point to other similarities between the government and business experiences. The U.S. Government always speaks for U.S. interests, embodies U.S. values, and speaks for U.S. law. Global companies should keep their global character even as they engage locally and respect local norms. By bringing best practices and globally acknowledged standards into markets, global companies have an edge in creating a sustainable business. For example, the environmental activists mentioned above wanted improved standards and testing in their jurisdiction; the company endorsed EU standards (globally the toughest) and arranged for testing to those standards by qualified laboratories. The retail firm entering a different market insisted on global compliance standards, changing the market for itself and for its suppliers, many of whom welcomed the chance to avoid problematic local practices.
Other companies promote senior executives from the country in question and then use those executives for advocacy back home, even when they are based elsewhere around the world. This simple demonstration of how the company rewards talent can win enormous good will, both inside and outside the company, and show how changes in practice can take place.
A final similarity is to know when to engage at the top and when a more multi-layered approach is appropriate. One global pharmaceutical company made a series of market entry arrangements with senior government officials, but the officials responsible for implementation delayed market entry for several years. A multi-level campaign with government officials was needed to make the market entry effective. Conversely, another company failed to engage at the C-Suite level early enough to enter Russia. Without personal contact at the top, many leaders in major emerging markets doubt a company’s commitment to the country.
At its heart, market entry and success is a matter of corporate diplomacy – the ability to work with multiple stakeholders simultaneously, at the top and at working levels, while maintaining the company’s global identity. It can be done, with the right investment of time and resources. Most of all, it takes a company’s ability to bring its entire value proposition – employment, training, global standards, promotion, and money – to bear. Diplomats learn that the result sought can come from persuading another country to accept the result sought as an answer to its problems. For corporations, success can come most easily when a company positions itself as the answer to a local problem. To do this, companies, like governments, need to be able to work with many stakeholders, locally and globally, and show that their best practices can help both its bottom line and the country.
About the Author:James C. O’Brien, a principal at Albright Stonebridge Group, finished twelve years in Government as presidential envoy for the Balkans.
