Dancing Backward in High Heels: Communication Challenges for Rapidly-Developing Economies

 

 

Thank you very much for inviting me to speak today. I really value taking part in events like these – not because I get to share my ideas, but because I have a chance to listen to yours in the course of the conference. I’m particularly interested in hearing about the issues, challenges and opportunities that different companies face – whether it’s an American company trying to expand in China, or a Chinese company expanding abroad into Europe and North America. So, it is an honor to be here today as a speaker and as a proud sponsor of this important conference.

 

I’m lucky that in my position I get to travel a fair bit. It’s allowed me to see how trends develop from different angles, and one of those trends is what I’d like to discuss today. Globalization has been a long-discussed factor for international businesses and something that, as communicators, we’ve had to address in many forms over the last few years.

 

Globalization has created opportunities and challenges for businesses, governments, citizens and consumers alike. As a process of integration, globalization has made economic growth possible in parts of the world that have been desperate for positive change. And the increased sophistication of communication technologies allows people to understand the world beyond their own sphere. Yet, at the same time, many countries and societies are feeling growing pains because of the sheer extent, impact and velocity of change.

 

As much as we talk about globalization, I think we miss the forest for the trees. It helps to step back and re-examine just how globalization as a process is affecting us, particularly in how we communicate.

 

Of the challenges that globalization has wrought – and with which most are still grappling – is an increased amount of integration and competition among markets. The recent turmoil in the financial markets around the world is just one indication of how connected and interdependent the world has become. What started out as a problem for the U.S. economy has steadily spread to affect nearly every corner of the world.

 

But this is just one issue among many. Understanding how globalization continues to reshape our world is another important issue, much of which has to do with how we communicate and with whom we’re communicating.

 

From a business standpoint, integration has thrown open national boundaries. As the process gained speed in the late 1980s and the 1990s, Western companies looked east and south to the developing world for new opportunities – often in the form of lower-cost manufacturing and cheaper materials – and to develop new consumer markets.

 

Because of this, capital and management skills flowed from the West, and the speed of growth in a number of markets was greatly accelerated by their increased integration with the global economy.

 

Growth in places like China, Russia, Mexico and Brazil has been such that these once-developing states are now emerging competitors for the U.S. and other Western economies, and with one another.

 

According to a recent article in Time magazine by Harold Sirkin, a senior partner of The Boston Consulting Group, a global management consulting company, China, India, Brazil, Mexico, Russia and Turkey are home to the next wave of global challengers – the new brand names and innovators leading multiple markets in sales of goods and services. 

 

The speed of their rise shouldn’t be underestimated. Remember that a decade ago the idea of an industry-leading technology company from South Korea wouldn’t have been taken seriously anywhere. But today, Samsung is recognized as one of the world’s most innovative companies.

 

Companies such as China’s Haier and Lenovo are quickly moving up the same path. They are already serious competition to their Western counterparts in the mainland and are taking on markets outside of Asia. It won’t be long before they are mounting serious challenges to their rivals in the markets of Europe and North America.

 

And the same thing is underway in a number of other emerging markets right now.

 

As the footprints of these new competitors grow, the rules of competition and communication are changing rapidly – in a way that every company needs to pay attention to if they are going to stay around for long.

 

The primary challenge for the emerging competitors will be adjusting to the expectations of how companies communicate outside their home markets. The learning curve these companies face will become increasingly steep as they expand past their national borders. Western markets have a different set of standards and biases that must be acknowledged and addressed to ensure success.

 

Some of you will remember Fred Astaire and Ginger Rogers, a dancing team and the darlings of Hollywood in the 1930s. Fred Astaire today is remembered as an actor, singer and choreographer – but most of all as one of the greatest dancers of his century.

 

Ginger Rogers is remembered mainly as Fred Astaire’s partner, not as a great dancer herself. But it should be pointed out that as great a dancer as Fred was, Ginger matched him step-for-step – and her steps were backward and in high heel shoes. 

 

I think of this when I look at companies from emerging markets that are trying to break into North America or Europe. They face the same barriers to entry as any other company. But like Ginger, they will have to dance just as well as better-known companies. And they must do it backward in high heels. Or in the case of businesses, they must match the performance of their competitors in the context of an environment with long-held stereotypes and misperceptions.

 

Biases – whether they are a result of political or historical issues or just a product of a lack of familiarity with other countries and cultures – affect how consumers, policy makers and business leaders see companies from countries such as Mexico, China, Turkey and Russia, and how they make decisions regarding them.

 

For example, Russia – which we advise – is an easy target in the U.S. marketplace. American politicians face almost no risk in challenging and criticizing Russia and can play up their stance against the country to win political support. Ultimately, this affects not only the bilateral relations between governments, but also how consumers and businesses perceive Russian business opportunities.

 

A number of countries, including China, have been in this position before. Because of this, any company looking to the U.S., Canada or Western Europe must include this factor in its communication planning.

 

As we learned from CNOOC’s failed bid for Unocal and the controversy over Dubai Ports in the U.S., mindsets stuck in the past can affect businesses. But there are more subtle and recent examples.

 

Take TNK-BP, for instance. It is jointly owned by Russian and Western investors. For years the company operated without a hitch, but ultimately its two main investor groups found themselves at odds. This certainly isn’t the first time that financiers, investors and business owners have competed for control of an organization, and it happens as much in New York and London as it does anywhere else.

 

Yet many media reports of the disagreements played on stereotypes of the Russian investment environment. These news stories would have you believe that the Russian investors were attempting to pull a fast one on their foreign peers, and that they were using the system and possible government help to do so.

 

This story lasted for months, no doubt convincing audiences around the world that Russia had not established a fair market dynamic, or at the very least sowing seeds of doubt.

 

When ultimately the two sides came to an agreement without resorting to the courts, the story sank from the pages of international news to the back of the business section.

 

The story that challenged stereotypes got considerably less attention than the more exciting one that reinforced pre-existing notions and misperceptions.

 

This doesn’t mean that emerging competitors are facing an insurmountable challenge as they look to the West for growth, but it does mean that they have to be aware of the challenges they will have to overcome in a new market.

 

It’s also important to understand how some of these stereotypes are created. Often the lack of knowledge toward a country or region leads audiences to make broad generalizations.

 

For example, China’s manufacturing sector was painted with a broad brush as lacking quality controls and standards after problems over pet food, toothpaste and toy products were widely covered in the international press in 2007. This created a belief among consumers in North America and Europe that ALL Chinese products were potentially unsafe.

 

And unfortunately, no matter the number and range of high-quality and safe products that come out of China, any additional problems with the quality of the mainland’s goods will propel this perception.

 

This takes me to my next point – nothing is local anymore.

 

In addition to the way that media coverage sometimes reinforces stereotypes and misperceptions, the expanded speed and breadth of coverage also increases the amount of information that people look at.

 

This has created a compelling duality. On the one hand, the speed of communication and amount of information available can result in rapid change in how we see the world.

 

On the other hand, people have a tendency to bucket ideas in ways that we already understand. So, much of the new information that we have to deal with is collapsed into already existing molds.

 

When these two factors work together, new stereotypes can be created overnight, and once established, they are incredibly difficult to change.

 

Take the recent issue around tainted baby formula in China’s dairy product market. On its own, this was an issue that primarily affected Chinese consumers. Had something similar happened a few years ago, it would have been fairly insignificant to international audiences.

 

However, on the back of last year’s stories, this now has resonance well beyond China. It was interesting to see that in the midst of a very busy news cycle nearly every major paper in the U.S. covered the ongoing events with the melamine crisis in a significant way.

 

It didn’t impact America in a serious way, but news readers in the States were still interested. The issue of quality control in China had been linked to our personal interests because of problems widely reported last year, and the milk contamination story further reinforced attitudes and opinions.

 

What happened is that new attitudes and beliefs have been established. In the future, any stories tied to product quality and safety in China will find a ready international audience, and Chinese products will be put under a microscope.

 

This is an issue that ultimately ties to China’s GDP, because the country is an intrinsic part of the global manufacturing chain. Beliefs and attitudes drive our actions, and if consumers feel that they cannot trust Chinese-made goods, that will affect businesses in China.   

 

A lot of what I’ve discussed already relates to how disparate audiences are now tied together more closely. As much as audiences are connected, they also are becoming more active. Digital technology has made it possible for nearly anyone to take part in stories as they develop.

 

This, coupled with the factors above, makes managing communication much more important. As journalists seek new sources of information – and as more people create their own widely available news and editorial content – the new communication model drives how the story is told as much as the underlying facts and figures.

 

One example that I am well-acquainted with is how Gazprom -- Russia’s natural gas company and one of the largest companies in the world, as well as a client of ours – discovered that who tells a story and how it is told can affect perceptions on a major scale. The event was the gas supply and pricing dispute between Russia and Ukraine in the winter of 2006.

 

Here’s how the Russians viewed the situation: The West had for years insisted that Gazprom stop subsidizing energy sales to the former Soviet states. Ukraine had been paying less than a quarter of market prices for Russian gas, and Gazprom had been engaged in negotiations for the better part of a year with Ukraine, as well as with other former Soviet states. Gazprom was sensitive to raising the issue during Ukraine’s election crisis of 2005 and negotiated for 2006, when the existing supply contract expired.

 

Ukraine refused to pay anything close to market rates for its gas and left the negotiating table without a contract. With no contract, Gazprom stopped supplying Ukraine with gas for its own use. Western Europe gets a third of its gas from Russia, much of it through Ukrainian pipelines, so Ukraine siphoned gas intended for Europe and expected sympathy from the West after tapping into gas for which it refused to pay reasonable prices.

 

Gazprom, at the time, thought that the facts spoke for themselves. However, here’s the story as it played out in the media and as you may recall it:

 

Ukraine, less than a year after the election crisis now referred to as the Orange Revolution, was bullied by a petulant and energy-rich Russia. Russia was portrayed as using its gas as a political weapon to punish Ukraine and charged exorbitant fees for it.

 

We were told that poor Ukraine couldn’t pay, so Russia turned off the gas – in the middle of winter no less – and Ukrainians began to freeze, and Western Europe was threatened with the same until a solution was finally found, but, as the story goes, not until the Russian bear showed its claws and its true face.

 

The Russians were flabbergasted at how the world viewed the situation. What happened was that the Ukrainians spoke to the key global media, reached out early and often to European regulators, and played on existing fears and stereotypes of the Russian state to shape the story. Russia, on the other hand, did not assert its position, believing that the facts would speak for themselves.

 

This situation isn’t uncommon, and speaks to the need for communicators to make sure their voice is heard.

 

And that’s exactly what Gazprom did when Belarus defaulted on payments for gas supplies in 2007.

 

Under the terms of the contract signed with its Belarusian partner, Gazprom had delivered more than 10 billion cubic tons of natural gas by the summer of last year. When the Belarusian side began to miss its regular payments, Gazprom continued regular deliveries in good faith. Eventually, Belarus’s debts were over $450 million, and the situation needed to be fixed.

 

This time, in addition to working with Belarus, Gazprom’s spokespeople briefed journalists from the international media and members of the European Council, who were concerned about the security of natural gas supply that transited through Belarus to Western Europe. Gazprom explained its position, and the steps the company had taken to try to find a solution.

 

By communicating the issues to key influencers before the situation became critical, Gazprom was recognized for acting in a transparent manner. European officials understood what was taking place and did not see the disagreement as a threat to their energy security. Subsequently, media coverage of the tense negotiations between Gazprom and Belarus was balanced, and a number of outlets positively remarked on the company’s transparency. The Financial Times went so far as to issue an editorial commending Gazprom for its handling of the issue.

 

Ultimately, these efforts yielded positive results that lasted beyond the event itself by building credibility with Gazprom’s influencers abroad.

 

As communicators are actively engaging their stakeholders, they also must be vigilant in identifying potential risks. As technology has made communicating easier, individuals and groups have begun to use high-profile events to their own advantage.

 

Another case from China is instructive in this instance. The 2008 Olympic Games in Beijing was a major event for the country, but also for companies looking to leverage the games to promote themselves.

 

The torch relay was supposed to be symbolic of the values that the Olympic Games stand for – sportsmanship, international cooperation, and excellence in performance. However, well before the relay began, professional communications anticipated advocacy groups across the globe would use the event to raise awareness for their respective issues.

 

Ketchum worked with Lenovo to prepare communications for the relay as a marketing opportunity, but we also prepared for potential issues management. Unfortunately, in a few cities the political dimension ultimately overshadowed the spirit of the torch relay. Instead of a positive news cycle, we were faced with downplaying the reputational risk associated with the relay.

 

In the end, planning and vigilance made all the difference and we were able to effectively manage the issue, while more than a few sponsors were caught unprepared.

 

I’d like to finish up today with some initial ideas about how we, as professional communicators, can begin to cope with these issues. The first thing that we need to do is realize that all the platitudes – like the world is flat, that we’re all connected, and that the Internet has sparked a communication revolution – are true.

 

The implications for communicators are. . .

Let’s go back to the first implication: That every organization is going to have to deal with new rules and expectations for communication as the world becomes more competitive and as organizations interact with new markets.

 

Emerging markets are going to continue to develop, and their homegrown companies will raise competition on a global scale as they expand past national borders. These companies need to realize that in addition to the normal competitive barriers they will face, they also must contend with long-established beliefs that may hamper their growth. These can be overcome with a lot of work, but they cannot be ignored.

 

But just as emerging market companies should expect a tougher playing field when entering Western markets, Western companies need to take stock of how they approach emerging markets. Even a few years ago, a Western CEO could come to China with very little to say and hold a press conference with 50 rapt journalists, all of whom would write stories that looked very similar to the company’s press release.

 

Nowadays, executives have to make real news and be especially savvy about what they are bringing to China, or Russia, or wherever else. Reaching across all stakeholder groups, as well, is a vital element to any communication program – it’s no longer a matter of holding a press conference and meeting a minister or mayor.

 

Any organization seeking to expand its presence needs to approach each and every market expecting that it will be held to high standards, that these standards change from culture to culture, and that these standards entail certain biases that need to be considered.

 

The second implication: That as the world becomes more integrated, so, too, do the audiences that you must reach, and this broadens – and makes more complex – the range of attitudes and beliefs with which communicators must contend.

 

There used to be a clear delineation between audience segments based on gender, age, income level and geography. These distinct segments still matter – and in many ways targeting can be more effective than ever – but these groups also are increasingly connected. Companies everywhere need to understand that they are always speaking to a global audience, and that messages conveyed to one group will be heard by others.

 

Communication strategies must be approached from a holistic sense to ensure that all tactics and activities support the same goal. Planning and coordination are ever more important because of this.

 

And the final implication: Changes in the tools of communication make proactive and vigilant communication critical to success.

 

It’s no longer enough to assume that the facts will see the light of day. Every communicator must ensure that the point of view of the organization that they represent is articulated and heard. This means that organizations must be proactive with media outreach and often must go beyond the standard toolkit.

 

The strategy that we’ve found to be most effective can be summarized as “First Person, Third Party.” If you are the sole voice advocating your position, it is likely that you will be lost in the din of competing interests. However, if you can work to develop advocates that can act as third-party support, you greatly increase the likelihood that your perspective will be heard.

 

Moreover, it’s important to take your messages directly to the audiences that matter most. If your concern is what regulators in the U.S. think of your company or industry, don’t assume that a few well-placed advertisements or media pieces will make your case for you. Organizations need to be out there talking one-on-one with people to make their case.

 

For all the changes that globalization has brought about, and the new challenges that have appeared in communicating value and position, there are opportunities.

 

Certainly, the companies that learn to dance in step with new global markets will be the world’s leaders in sales of goods and services. And a key part of that will be having communicators who quickly learn to move to the beat of the new global communication landscape.

 

Thank you.