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February 11, 2011 5:07 pm
A few years ago, executives at Procter & Gamble, the consumer industries giant, became frustrated at how few nappies (diapers) they were selling in Brazil. So, they decided to investigate nappy consumption on the ground – and discovered an interesting cultural twist.
In America, when parents buy nappies they often demand fussy add-ons (think nappy flaps, subtle scents, biodegradable material and so on). But in Brazil, babies often sleep with their parents, and many families are poor. Thus what consumers really care about is keeping the baby (and parents) dry all night. So Procter & Gamble eventually launched a cheap, ultra water-tight nappy in Brazil, without fussy details – and sales soared. Many parents are happier now, they are getting more sleep,” one industry leader observed with a chuckle, at a recent debate at the World Economic Forum.
It is a salutary tale for all those western multinationals now flocking to countries such as Brazil. However it is also pretty thought-provoking – and cheering – for anybody, like myself, who once studied social anthropology or other social sciences. A couple of decades ago, when I was at university, it was not always clear how a degree in social anthropology might produce a job. After all, in the 1980s the “hot” – or high-paying – parts of the job market typically required degrees in economics, hard science, law or languages. Anthropologists, by contrast, tended to end up in social work, aid work, teaching or the media; they rarely dived into the business world.
But these days, an awareness of cross-cultural challenges is suddenly looking more relevant; even to earnest men in suits. Last month in Davos, for example, there was a frenzy among companies about how all the next growth opportunities are (theoretically) going to be found in the coming years in our so-called “emerging markets” world. And, as the excitement mounts, western companies are trying to find ways to sell everything from nappies to nuclear parts in places such as Brazil or India.
Yet, in practice, the track record of those western companies is littered with cultural mistakes. Last week in Davos, for example, I heard tales about how western multinational companies have repeatedly tried and failed to sell breakfast cereal in India; apparently this is because local families want hot breakfasts, and most western cereal cannot survive contact with hot milk. Similarly, I also heard a story about how a US car company tried to sell a cut-price version of its bestselling car to India – and removed the rear-seat electric window controls to save costs. That also flopped since the Americans had failed to notice that while the rear seat is low-status in the west (since that is where kids sit) it is high status in India (since wealthy families have chauffeurs).
So as those amusing tales pile up, the need for cultural analysis – and local cultural sensitivity – has moved up the agenda. Some western companies are now considering moving more research and development centres out to the emerging markets. Others are trying to move employees between different emerging market locations, to provide fresh perspectives on cultural trends. And, yes, some companies are even hiring social anthropologists, to help them spot all the important rituals that might be attached to, say, a Brazilian nappy.
Whether any of this will work is a matter of hot dispute. Until now, it has been widely assumed that product innovation travelled from the west to the developing world, as technology was “driven down” from rich to poor. Given that, says Professor Vijay Govindarajan of Tuck School of Business, western multinationals are not always willing to cede control to R&D centres in emerging markets. And while western companies prevaricate, countries such as India and Brazil are producing some highly impressive companies that often beat those western multinationals at their own game – and with innovations aplenty.
But, as the discussion about the cultural challenge heats up, perhaps the most interesting twist is a trend that Govindarajan has christened “reverse innovation”. As the emerging markets and businesses grow in economic importance, some global business executives are now less focused on transplanting ideas from the “west” to the “developing” world (or from rich to poor) – and are asking instead how emerging market innovations can be brought into the west too (from poor to rich.) “In the west we assume that innovation is there to make products more powerful, flashier, faster – but in emerging markets, innovation is about commoditization, about cutting costs,” observed the chief technology officer of a giant American multinational. “But maybe cheaper, simpler products are what western consumers would prefer too.”
Or, to put it another way, if you were to offer a cut-price, basic waterproof nappy to American parents, might they actually prefer it to one with fussy flaps? How about a pared-down version of a car? And how might these choices change in an era of austerity? Right now, it is unclear. But, as an entirely partisan observer, I hope that this might yet create more jobs for the next generation of anthropologists; and not just studying the emerging markets – but also the equally strange habits of the western consuming world.
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