Institutional Infrastructure - Business Enablers

Ed Marsh | Jul 8, 2011

Institutional vs. Physical

Everyone has heard the China v India argument regarding physical infrastructure:  better roads, communications, refrigeration, freight and distribution are cited as one of China's strengths in the battle for manufacturing dominance.

But what about the business services - and the "easy to work with" attitudes that we take for granted in the US?  I know, your banker may not always seem easy to work with, but at the end of the day for her to make money she needs to facilitate your doing so - at least over the long haul.  But it's not that way for some services or in many markets.

Market Discriminators

In his book Winning in Emerging Markets: A Road Map for Strategy and Execution, (here on Amazon) Harvard Business School Professor Tarun Khanna argues that assessing the "Institutional Voids", or those areas where the traditional business enablers upon which your market model has relied are absent or different, holds the key to understanding emerging market potential.

It may well be, he argues, that just becuase credit card processing is minimal, that you should defer entry.  Alternatively you should revise your model for that market, or even adapt your approach to structure the missing infrastructure yourself - as part of your offering or as a separate effort.  The latter obviously entails enormous challenges (stepping outside of your traditional core strengths) but could be a profitable opportunity to develop first mover advantage in a valuable area of "Institutional Infrastructure."

Sensible Market Selections

How does this impact you?  It may not - depending on your product, target markets, key demographics, etc.  On the other hand the most difficult assumptions to overcome are those that you don't even realize you are making.  If easy access to freight facilities, refrigerated distribution and rapid clearance through customs are important for your business you would probably list those as you evaluate markets.  But if you plan to expand your ticket agency which is founded on internet access and credit card payment prevalence (both physical and institutional infrastructures) you had better find markets which don't have a predominantly cash economy - or develop a creative approach.

And that's an example of where the other business values (innovation) and joy of exporting come in.  Of course the primary goal of a global business development program will be increased revenue - and presumably security through diversification nearly as highly prized.  But don't omit other desirable objectives from your planning cycle.  There are other substantial benefits.