Tag Archives: emerging markets
I recently wrapped up two overseas trips; one to Central America and another to South Africa. As such, I had the opportunity to meet with a national bank and a regional retailer. It prompted me to ask the question: Does location matter in emerging markets?
I wish I could tell you that there was a common theme on how firms in the same sector or country (even city) treat data on a philosophical or operational level but I cannot. It is such a unique experience every time as factors like ownership history, regulatory scrutiny, available/affordable skill set and past as well as current financial success create a unique grey pattern rather than a comfortable black and white separation. This is even more obvious when I mix in recent meetings I had with North American organizations in the same sectors.
Banking in Latin vs North America
While a national bank in Latin America may seem lethargic, unimaginative and unpolished at first, you can feel the excitement when they can conceive, touch and play with the potential of new paradigms, like becoming data-driven. Decades of public ownership did not seem to have stifled their willingness to learn and improve. On the other side, there is a stock market-listed, regional US bank and half the organization appears to believe in meddling along without expert IT knowledge, which reduced adoption and financial success in past projects. Back office leadership also firmly believes in “relationship management” over data-driven “value management”.
To quote a leader in their finance department, “we don’t believe that knowing a few more characteristics about a client creates more profit….the account rep already knows everything about them and what they have and need”. Then he said, “Not sure why the other departments told you there are issues. We have all this information but it may not be rolled out to them yet or they have no license to view it to date.” This reminded me of the “All Quiet on the Western Front” mentality. If it is all good over here, why are most people saying it is not? Granted; one more attribute may not tip the scale to higher profits but a few more and their historical interrelationship typically does.
As an example; think about the correlation of average account balance fluctuations, property sale, bill pay account payee set ups, credit card late charges and call center interactions over the course of a year.
The Latin American bankers just said, “We have no idea what we know and don’t know…but we know that even long standing relationships with corporate clients are lacking upsell execution”. In this case, upsell potential centered on wire transfer SWIFT message transformation to their local standard they report of and back. Understanding the SWIFT message parameters in full creates an opportunity to approach originating entities and cutting out the middleman bank.
Retailing in Africa vs Europe
The African retailer’s IT architects indicated that customer information is centralized and complete and that integration is not an issue as they have done it forever. Also, consumer householding information is not a viable concept due to different regional interpretations, vendor information is brand specific and therefore not centrally managed and event based actions are easily handled in BizTalk. Home delivery and pickup is in its infancy.
The only apparent improvement area is product information enrichment for an omnichannel strategy. This would involve enhancing attribution for merchandise demand planning, inventory and logistics management and marketing. Attributes could include not only full and standardized capture of style, packaging, shipping instructions, logical groupings, WIP vs finished goods identifiers, units of measure, images and lead times but also regional cultural and climate implications.
However, data-driven retailers are increasingly becoming service and logistics companies to improve wallet share, even in emerging markets. Look at the successful Russian eTailer Ozon, which is handling 3rd party merchandise for shipping and cash management via a combination of agency-style mom & pop shops and online capabilities. Having good products at the lowest price alone is not cutting it anymore and it has not for a while. Only luxury chains may be able to avoid this realization for now. Store size and location come at a premium these days. Hypermarkets are ill-equipped to deal with high-profit specialty items. Commercial real estate vacancies on British high streets are at a high (Economist, July 13, 2014) and footfall is at a seven-year low. The Centre for Retail Research predicts that 20% of store locations will close over the next five years.
If specialized, high-end products are the most profitable, I can (test) sell most of them online or at least through fewer, smaller stores saving on carrying cost. If my customers can then pick them up and return them however they want (store, home) and I can reduce returns from normally 30% (per the Economist) to fewer than 10% by educating and servicing them as unbureaucratically as possible, I just won the semifinals. If I can then personalize recommendations based on my customers’ preferences, life style events, relationships, real-time location and reward them in a meaningful way, I just won the cup.
Emerging markets may seem a few years behind but companies like Amazon or Ozon have shown that first movers enjoy tremendous long-term advantages.
So what does this mean for IT? Putting your apps into the cloud (maybe even outside your country) may seem like an easy fix. However, it may not only create performance and legal issues but also unexpected cost to support decent SLA terms. Does your data support transactions for higher profits today to absorb this additional cost of going into the cloud? Focus on transactional applications and their management obfuscates the need for a strong backbone for data management, just like the one you built for your messaging and workflows ten years ago. Then you can tether all the fancy apps to it you want.
Have any emerging markets’ war stories or trends to share? I would love to hear them. Stay tuned for future editions of this series.
Recently, my US-based job led me to a South African hotel room, where I watched Germany play Brazil in the World Cup. The global nature of the event was familiar to me. My work covers countries like Malaysia, Thailand, Singapore, South Africa and Costa Rica. And as I pondered the stunning score (Germany won, 7 to 1), my mind was drawn to emerging markets. What defines an emerging market? In particular, what are the data-related themes common to emerging markets? Because I work with global clients in the banking, oil and gas, telecommunications, and retail industries, I have learned a great deal about this. As a result, I wanted to share my top 5 observations about data in Emerging Markets.
1) Communication Infrastructure Matters
Many of the emerging markets, particularly in Africa, jumped from one or two generations of telco infrastructure directly into 3G and fiber within a decade. However, this truth only applies to large, cosmopolitan areas. International diversification of fiber connectivity is only starting to take shape. (For example, in Southern Africa, BRICS terrestrial fiber is coming online soon.) What does this mean for data management? First, global connectivity influences domestic last mile fiber deployment to households and businesses. This, in turn, will create additional adoption of new devices. This adoption will create critical mass for higher productivity services, such as eCommerce. As web based transactions take off, better data management practices will follow. Secondly, European and South American data centers become viable legal and performance options for African organizations. This could be a game changer for software vendors dealing in cloud services for BI, CRM, HCM, BPM and ETL.
2) Competition in Telecommunication Matters
If you compare basic wireless and broadband bundle prices between the US, the UK and South Africa, for example, the lack of true competition makes further coverage upgrades, like 4G and higher broadband bandwidths, easy to digest for operators. These upgrades make telecommuting, constant social media engagement possible. Keeping prices low, like in the UK, is the flipside achieving the same result. The worst case is high prices and low bandwidth from the last mile to global nodes. This also creates low infrastructure investment and thus, fewer consumers online for fewer hours. This is often the case in geographically vast countries (Africa, Latin America) with vast rural areas. Here, data management is an afterthought for the most part. Data is intentionally kept in application silos as these are the value creators. Hand coding is pervasive to string data together to make small moves to enhance the view of a product, location, consumer or supplier.
3) A Nation’s Judicial System Matters
If you do business in nations with a long, often British judicial tradition, chances are investment will happen. If you have such a history but it is undermined by a parallel history of graft from the highest to the lowest levels because of the importance of tribal traditions, only natural resources will save your economy. Why does it matter if one of my regional markets is “linked up” but shipping logistics are burdened by this excess cost and delay? The impact on data management is a lack of use cases supporting an enterprise-wide strategy across all territories. Why invest if profits are unpredictable or too meager? This is why small Zambia or Botswana are ahead of the largest African economy, Nigeria.
4) Expertise Location Matters
Anybody can have the most advanced vision on a data-driven, event-based architecture supporting the fanciest data movement and persistence standards. Without the skill to make the case to the business it is a lost cause unless your local culture still has IT in charge of specifying requirements, running the evaluation, selecting and implementing a new technology. It is also done for if there are no leaders who have experienced how other leading firms in the same or different sector went about it (un)successfully. Lastly, if you don’t pay for skill, your project failure risk just tripled. Duh!
5) Denial is Universal
No matter if you are an Asian oil company, a regional North American bank, a Central American National Bank or an African retail conglomerate. If finance or IT invested in any technologies prior and they saw a lack of adoption, for whatever reason, they will deny data management challenges despite other departments complaining. Moreover, if system integrators or internal client staff (mis)understand data management as fixing processes (which it is not) instead of supporting transactional integrity (which it is), clients are on the wrong track. Here, data management undeservedly becomes a philosophical battleground.
This is definitely not a complete list or super-thorough analysis but I think it covers the most crucial observations from my engagements. I would love to hear about your findings in emerging markets.
Stay tuned for part 2 of this series where I will talk about the denial and embrace of corporate data challenges as it pertains to an organization’s location.