Building Emerging Markets

The questions came via email from a senior executive interested in my thoughts about Latin America. “What do you think about the viability of software markets in Brazil and other parts of the region?” More specifically, he wanted to know my thoughts on the market for “on-demand applications” and specifically “talent management applications”.

Before commenting on those particulars, it might be helpful to provide context, since the world appears, at this writing, on the edge of an economic abyss, and many of the financial and commercial norms that we have known in the past several decades are changing so fast as to warrant some reflection. What is happening to emerging markets, especially Latin America? How are people coping and in what direction are these markets going? Do they rely on technology or other solutions that come from “the north”, or are they increasingly independent and uncoupled from the freezing-up of credit and other mechanisms in the northern hemisphere?

In brief I would say that it’s a mixed environment. Certainly a market as huge and self-sufficient as Brazil is a lot less concerned about the challenges faced in the U.S. and Europe. For them, in the words of a good friend in that country, they are accustomed to crises all the time, in fact it’s almost a way of life. Except for a jump in interest rates, recently, nothing much has changed since the “meltdown” began earlier this year in the U.S. and other world economies. In other words, to the extent possible, business people and others will take these situations in stride, find a way around the barriers they come up against, and move forward. Brazil has natural advantages, of course, including a widely diversified economy, a huge population of consumers that have learned to love a stable currency and credit facilities to enhance their life styles, and a government that has in the main been largely free-trade and hands-off with regards to managing that country’s economy.

Nonetheless, there is a definite impact in the stock markets and capital markets of these emerging economies, including Brazil. Stock markets are getting hit, currencies are weakening against the U.S. dollar and projects are being delayed to let the dust settle. Those countries that have enjoyed a run-up in commodity prices without building up a sufficient “rainy day” fund are going to find severe challenges when demand falls for their bread and butter products (soy, wheat, copper, beef, etc.). A notable example of this is Argentina, which continues to flail away at its economic challenges and has recently announced it will appropriate private pension monies to tide it over as major, sovereign debt comes due in the coming 12-24 months. Chile, on the other hand, has been very conservative about holding on to the tax revenues raised (in the billions of dollars) over the past several years for its many commodity exports (copper, fisheries, agricultural, etc.), and has an enormous reserve upon which to draw in this faltering market environment.

What do these macroeconomic issues have to do with “on-demand applications” and “talent management applications”? From the perspective of building an emerging market, creating a brand and gaining market share there is a correlation. Until such time as the value proposition and cost/benefit equations are fully embraced by consuming organizations of these offerings, it will be a long, hard road to create and sustain markets with these kinds of products. In particular it should be noted that the effect of an exporting company’s marketing, advertising and even customer success stories in the U.S. or Europe have very little impact on the folks in Latin America. Even as their economies have grown, and their imports and exports with other countries have expanded, Latin America remains focused on its own markets, its own communities and its own reference points. Until an “on-demand, talent management application” can really be proven as a must-have, versus a nice-to-have for day-to-day operations, there will be serious impediments to building that particular market. Likewise, until the “best practices” of performance reviews (see a contrarian view on this topic: here), succession planning and other talent management techniques become acceptable to Latin American firms and worth funding via technology, consulting or other investments, it will be tough for this kind of application to make progress in the short term. So, just as the consumer, generally, and many companies in the U.S. are cutting back on expenditures, and eliminating many nice-to-have items, so, too, consumers and corporate organizations in Latin America will do the same, having an impact on how U.S. and other non-Latin American vendors approach and serve these markets.

That being said, there are vendors that have on-demand offerings, fairly well-known, well-capitalized and willing to do the “blocking and tackling” it takes to create and build an emerging market like Brazil, Mexico or other nations in Latin America. Does this mean they can achieve short-term results? Yes, but not on the scale that Wall Street-driven firms in the U.S. or Europe might be hoping for. Does it mean it might take years to begin to get real traction in the region? Yes, it does. One particular “Software-as-a-Service” vendor I know admitted to six years of effort in Latin America, and they are just now (as of mid-2008) beginning to find their bearings and produce what they hoped for all these years. Who knows where they are today, in this “soft freeze” economy that seems to be delaying new hires, postponing projects and hoping that the first of the year will dawn warmly with positive GDP’s and operational budgets to gear up sales and profits once again in the region?

Regardless of the challenges, there will be those vendors who make a commitment to being “global” and put into action the teams and strategies necessary to serve and build emerging markets. With appropriate expertise, a clear-cut strategy and the executive talent to see the big picture in terms of time, resources, talent and commitment (yes, it’s often called hard work), Latin America and other emerging markets will adopt on-demand applications, just as they will adopt wireless broad band technology, or any number of other products and solutions. Want them to adopt talent management applications? Then, put the talent you have on the case, fund it appropriately, scale it on a time line that makes sense in Latin American terms (not Wall Street terms), and get to work. Need help figuring out what to do? Contact me: info@TopExec.org and I’ll be happy to help.

Thanks for reading this chapter of the Career Path Expressway™. Please share it with a friend, and subscribe to the blog to receive future postings. My regards to you, and safe travels as you approach emerging or other markets in today’s global economy.

© Daniel A. Cabrera, TopExec.org, All rights reserved, 2008