The Global Trifecta

Image courtesy of Flickr/Cloudzilla

It’s the wild, Wild West in the global marketplace. Opportunities abound; companies headquartered in emerging capitals are in a land rush to stake their claims as market leaders with best products andservices.

And diversity is proving to be a pivotal strategy many companies are counting on.

Whether I’m doing globaldiversity and inclusion work with an Italian pasta-maker, a Swiss pharmaceutical company, a Brazilian software company or a U.S. airline, three interlinked themes always emerge: how to fuel growth in these places, how to generate innovation and how to attract skilled — and diverse — talent.

Let’s look at the imperatives of growth and innovation in the global economy through the lens of diversity and inclusion.

Market Growth: Between now and 2050, the world’s population is expected to grow by 2.3 billion, eventually reaching 9.1 billion. The combined purchasing power of the global middle class is estimated to more than double by 2030 to $56 trillion, with India and China alone accounting for $10 trillion.

While companies in the developed markets see modest 1 to 2 percent growth, projections for the emerging markets are 6 to 10 percent. Multinational corporations know where they must rush to prosper.

And here’s where diversity comes in. For example, the South Korean conglomerate CJ, beloved at home, is not a well-known brand in markets like India, Malaysia and Vietnam. Therefore, attracting a new type of talent is difficult. CJ isn’t alone in this challenge. In fact, most multinational companies, regardless of where they are headquartered, are in the same quandary.

There really is no possibility for companies headquartered in one place to effectively navigate the array of differences on everything — from a different type oftalent,diversity issues with local idiosyncrasies, regulatory demands that sprout out ofnowhere, and consumers who make decisions about whatattracts them to use products and services in different ways.

Without the ability to attract smart, skilled, local leaders, managers and employees from those countries reflecting the vast localdiversity in the mix, any multinational placing their bets on global expansion faces what really should be labelled as intolerable risks. Both the local talent and those from other countries working for the same company all need the cultural competence to work with one another and across thediverse cross-border issues.

TM1114_DV_GlobalView_Chart Tomorrow's Headquarter Forecast: Global
Source: "Urban World: The Shifting Global Business Landscape," McKinsey Global Institute, 2013

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Innovation: As this diverse talent is sourced and acquired, the work of inclusion is not only for feel-good purposes but also for the innovation required to develop alternative ways of looking at products, services andoperations. Organizations need this talent with different cultural and diversity-of-thought perspectives, as well as agile leaders who can cultivate and use these disparate points of view to develop new solutions.

One emerging strategy to attract and develop local talent andensure leadership decisions are not from legacy headquarters is to move corporate headquarters to these new markets or at least co-locate them. For example, the Chinese market is so enormous that Milwaukee-based Johnson Controls, a technology company, is going to co-locatewith Shanghai.

As strategically savvy as this is, there is a large risk given bignational cultural differences that affect every businessdimension from interpersonal relationships to regulatory compliance to efficient processes to performance management.

Procter & Gamble, for example, paid an initial price to recover successfully from early missteps when it opened up a research-and-development center in Shanghai — where after it did, it saw market share drop and turnover climb. Dell had similar challenges when it opened up call centers in Asia to service the U.S. market.

P&G solved its challenges through cross-cultural interventions, while Dell simply brought its call centers back to the U.S.

In the global markets, diversity is indeed not just a nice to have — it’s do or die.