The following post originally appeared on the Harvard Business Review Blog Network.
I've recently returned from Ethiopia, where I led a breakfast meeting at the World Economic Forum on Africa. One of the topics we discussed was whether our concept of repeatable models applies only to advanced economies or equally to the emerging markets of Africa.
To recap: As Chris Zook and I show in our book Repeatability, the most successful global companies typically rely on what we call repeatable models to grow sustainably and profitably over time. Three design principles underlie these models:
Nearly everyone at our meeting felt that repeatable models were directly relevant to Africa—to local companies operating wholly within the continent, to businesses that started in Africa and have become global leaders, and to multinational companies (MNCs) entering or expanding in Africa. For example:
Discovery, originally a South African health insurer, developed a series of data-based methods for modifying people's behaviors and attitudes towards risk, then rewarding those customers who successfully changed their behavior. It then applied that model of consumer engagement to new areas of coverage, including life insurance, saving and investing, and car and home insurance. Today, the company's operations extend well beyond South Africa, to China, the UK, and the US.
Olam began with a single product, cashews, in a single African location, Nigeria. Today the Singapore-based company supplies 20 agricultural products and operates in 65 countries. The key to its growth: a repeatable model by which the company manages and track commodities from farm gates to their customers' factory gates. The model includes helping farmers achieve maximum productivity, managing currency and other supply-chain risks, and providing value-added services for their customers, such as organic certification and customized grades.
Like any MNC, Diageo, the global beer and spirits producer, faces multiple challenges as it expands in Africa: limited consumer incomes, unreliable power and water supplies, poor transportation networks, a fragmented retail landscape and inconsistent regulatory regimes.
In its priority markets, Diageo follows a repeatable strategy of investing to create integrated supply chains: it builds production sites with their own power and water supplies. It invests in local suppliers, in developing a salesforce and in working jointly with distributors to enhance their capabilities. As a result of these and other repeatable models, Africa accounts for nearly 13% of Diageo's total net sales. Last year, the continent contributed 30 percent of Diageo's global sales growth and 40 percent of its global operating profit increase.
As we discussed repeatable models in emerging markets, we identified five reasons for their importance:
- Talent shortages. Nearly all the business leaders at the meeting noted the severe talent shortages they faced in Africa. Repeatable models allow for better training and experience sharing, which enables people to get up to speed faster.
- Infrastructure challenges. Infrastructure issues in many African nations add huge operational complexity. "When you're faced on a daily basis with so many unforeseen crises, it is imperative that you do the stuff you do know about simply and repeatably," said one leader.
- The delivery gap. In unpredictable markets, predictable customer service can be a key competitive advantage. "If we can consistently keep the promises we make with simple delivery models, we can win," another observed.
- Succession issues. Many founders of successful African businesses are handing off their businesses to the next generation of leaders. They are eager to translate what they do every day on instinct into a simple repeatable model that can outlast them.
- Balancing local adaptation and global complexity. Companies face huge pressures to adapt their offerings and ways of working to local African markets. The more they find commonality between markets through repeatable models, the more they can reduce complexity.
That said, it isn't always business concepts from advanced economies that are adapted to Africa. Increasingly, the repeatable models that companies develop to compete in Africa are helping them in the rest of the world. Diageo, for instance, successfully created social networks over mobile phones to tell African consumers about promotions and other news of interest. "We've now taken that marketing approach and rolled [it] out around the world," says Nick Blasquez, president of Diageo Africa. "So Africa, in our business certainly, is leading other parts of Diageo."
James Allen is a partner in Bain & Company’s London office and co-leader the firm’s Global Strategy Practice. He is co-author, with Chris Zook, of the book Repeatability: Build Enduring Businesses for a World of Constant Change (HBR Press, March 2012).