A few months ago, news broke of a rather interesting development: a little-known Brazilian investment firm, 3G Capital, was teaming up with legendary American investor, Warren Buffet’s Berkshire Hathaway, to buy H.J. Heinz, the iconic ketchup maker for $28 billion. The deal was dubbed the largest acquisition in the global food industry. Some analysts have noted that the deal, which follows in the footsteps of other mega deals such as the acquisition by China’s Lenovo of the personal computer business of IBM years ago, is symptomatic of a resurgence of mergers and acquisitions. While there might be some validity to this claim, American thought leader and management consultant Ram Charan sees these developments as part of a bigger, more formidable trend that has vast implications for the future of practically every business. He calls the phenomenon the “global tilt”.
The global tilt, according to Charan, refers to an irreversible shift in economic power from North to South – from the US, Europe and Japan in the Northern Hemisphere to China, India, Brazil, Indonesia, Malaysia, South Africa and other countries mostly in the Southern hemisphere. It is to these countries that major industries are migrating. These are the countries with the population that can generate not only sizeable consumption, but in addition possess a work-force that that can produce the same output for a fraction of what it would have cost in countries of the North. Little wonder therefore that the centre of gravity for jobs, wealth and market opportunities is fast migrating southwards.
Indeed, relative to the South, GDP growth in the Northern Hemisphere is low. America’s growth rate is at 2-3 percent while Europe and Japan are growing at less than 1 percent. Conversely, in the South, India’s growth rate is between 5-6 percent, Indonesia’s is about 6 percent, China’s is about 7 percent, and Nigeria’s is about 8 percent.
Assumptions pertaining to the business managerial superiority in Northern hemisphere are, to all intents and purposes, now obsolete. In an intricately networked world where information resides on everyone’s fingertips, Charan submits that businesses in the South have ready access to the capital and expertise they need to grow and scale up. Their leaders also have just as much knowledge, talent and drive as their Northern counterparts. They may not be grabbing the headlines as fervently as the top American business leaders but they are unleashing their entrepreneurial prowess no less fervently. The Southern hemisphere, for instance, now boasts of world leading entrepreneurs of the likes of Aliko Dangote, Koos Bekker, Sunil Mittal, and many more.
While increasing fluidity of capital, the communications revolution and the sheer explosion of the middle class globally are contributing to this tilt, says Charan, the human factor is also a key and powerful driver. The structures which the aggressive emerging business leaders in the South are building are such as could possibly rival those created in the 19th century by the likes of Andrew Carnegie, Henry Ford and John D. Rockefeller. Their owners are regularly on the move sourcing readily available funding and the critical expertise which they need to grow and scale up.
Whereas there might be a possibility for business leaders in the North to try to portray their peers down South as people who owe their success to government patronage or low-cost labour, Charam posits that such views may be mistaken. Many successful leaders down South are not only hugely ambitious with grand plans to extend their businesses on a global scale but also combine this with immense energy. In addition, they enjoy a good number of advantages over their Northern counterparts.
Many emergent business leaders from the Southern hemisphere grew up under extremely difficult conditions. GTBank’s co-founder, Fola Adeola, for instance, regularly narrates how Aliko Dangote once sold his car in the 1980s when he fell on tough times. Dangote by then resided in a neighbouring flat in Surulere district of Lagos. Sunil Mittal, says Charan, began his career as a salesman selling crankshafts to bicycle manufacturers. Because his customers tended to bully him with regard to pricing, forcing him to sell at prices they practically dictated, he learned to ride on the back of trucks and crowded trains in order to maintain his margins. This discipline of maintaining tight margins has never left Mittal, he says. It can be argued, too, that Dangote’s triumph over tough circumstances may have helped to hone his business shrewdness.
Southern leaders are also energised by the huge changes they see taking place right before their own eyes in their own countries. In a little over ten years, for instance, telephones have grown from practically nothing to well over 100 million lines in Nigeria. Such a pace of growth is unprecedented in this age in any Northern economy, but unleashes tremendous opportunity for Southern business leaders. While an American company may think that 4 percent revenue growth is acceptable, his Southern peer would probably set his sights more in the range of 20 percent revenue growth. The Chinese appliance firm, Haier, had by 2011 been ranked for three years in a row by Euromonitor International as the top appliance brand in the world. By operating with painstaking innovativeness, Haier has engaged well-known and -entrenched Northern manufacturers on their own ground, succeeded and leveraged that success to resounding effect across the world. Haier’s boss has never been equivocal about the main objective of the typical Chinese company, namely export products and earn foreign exchange. In the case of Haier, in exporting, it was critical that it also established a solid brand reputation.
For Nigeria, Ram Charan’s secrets of the Southern countries are particularly compelling. Ours is a country of immense possibility. Our biggest asset is our people: more than 180 million energetic and entrepreneurial people with massive youth and middle class demographic segments. It is not only a potentially huge home market, but a potentially vibrant labour force for just about any industry. We need to put in place robust action plans with which to turn this huge population into the asset that it truly is and position Nigeria for the growth and development that beckons, growth which Brazil, Malaysia, India, South Africa, Indonesia and all of our peers already recognise and are assiduously tapping into. We must get rid of the mentality of oil and all of its trappings, including our rent-seeking disposition, and prepare for the new economic world order that is unfolding before our very eyes.
BEMIGHO AWALA
Awala works at XLR8, a communications management consultancy
