Emerging Market Firms Need a Diaspora Strategy
October 15, 2013 Editor 0
Emerging market diaspora populations have been on the rise, thanks to the continued march of globalization, and today’s diaspora communities are better connected with their homelands than ever before. That’s due both due to increasing information flows (e.g. democratized communication technologies like Skype) and more physical touch points (e.g. more global travel and larger immigrant communities). Emerging markets and their indigenous companies should see this as an opportunity to boost their competitiveness. But first they require a better understanding of the “jobs” diaspora members are trying to do when they re-engage with their home country or culture, and need to align their strategies to fulfill them.
Why does the diaspora matter? Clearly one reason is remittances: according to the World Bank, over $400 billion was sent back to developing countries in 2012. In Nigeria for example, recorded remittances rose from $2 billion in 2000 to $20 billion in 2010 (a whopping 26% annual growth rate). These transfers feed directly into the domestic economies of emerging markets and boost growth, but they do not necessarily push the country up the development ladder. However, there are two important stages of innovation that do help push emerging markets up that ladder: one involves borrowing developed market technologies and knowledge and adapting them to form new domestic industries (addressing domestic non-consumption); the other involves taking existing domestic technologies or products and exporting them to developed markets. The latter is a vital part of the final climb from developing to developed status — no economy has managed the climb without spawning globally competitive brands. In their October 2013 HBR article on diaspora marketing, Nirmalya Kumar and Jan-Benedict E.M. Steenkamp make the argument for diaspora as a cost-effective platform for emerging market companies seeking to build a global brand.
The knowledge and technology transfer stage, however, is where most developing markets are focused today. Diaspora can play a crucial role in this process for three reasons:
- They often achieve above-average success in immigrant communities, and wield influence across many levels of society. As such, they are well-positioned to use their expertise and capital to facilitate knowledge transfers and bridge the gap between emerging and developed countries.
- They are inherently motivated to develop their countries of origin.
- They are low-touch (or no-touch), compared to non-diaspora investors. They already understand the risks and know how to navigate them.
Today most emerging market countries and their companies have a haphazard approach towards engaging their diaspora. The result is that remittances have grown strongly, but coordinated transfers that build up capabilities have not kept up. To address this imbalance and reap the benefits of the diaspora opportunity, a more targeted approach is required.
Understand the motivations of diaspora communities
The first step is to understand what makes diaspora communities tick. Universities provide a helpful analogy. When engaging with a university after graduation, every alumnus is trying to do a “job”. Sometimes it is a functional job, like improving one’s knowledge on a certain topic or investing for financial gain. Most of the time, however, it is a social or emotional job, like reconnecting with friends, “paying the university back”, or being recognized by peers.
Similarly, diaspora communities can engage their native country with functional jobs (e.g. financial gain) and social/emotional jobs (e.g. self-discovery, need for belonging, family assistance etc.). These social and emotional needs often outweigh the functional needs, and also need to be balanced with obligations in the “host” country.
Emerging market institutions and companies should know their diaspora, not just demographically, but by the jobs they are trying to achieve. University alumni campaign programs often invest disproportionately to understand motivations through detailed surveys. Similar efforts should be directed at diaspora communities to create a “jobs-based segmentation” that facilitates how resources are deployed.
Create engagement opportunities at all levels
In order to foster broad diaspora engagement, emerging market institutions and companies should create opportunities for diaspora communities to be involved at all levels. Some diaspora members may be interested in moving “back home” to take up a position at a local firm, while others may have family obligations in their host country and prefer to provide part-time consulting advice. Still others may need to first be convinced that their efforts will bring just rewards.
Emerging market institutions and companies have limited resources — in terms of capital, people and technology — to court their diaspora, so it is important to seek highly leveraged ways of creating opportunities. Universities often achieve leverage by creating communication channels through alumni leaders, who are not paid employees but have dotted line reporting relationships with the central organization. Through local meetups, these leaders give alumni the opportunity to engage with the school with just their information and ideas. Emerging market companies and institutions can also have community engagement managers who organize local diaspora meetups and act as information liaisons between both sides.
Technology also provides an excellent means of creating engagement opportunities. Even busy overseas professionals with families may be able to spare a few hours a week to mentor young entrepreneurs or act as consultants to domestic companies via web or mobile platforms.
Measure impact and reward engagement
It is important to define the right metrics and measure them steadfastly. If the goal is technology transfer, an appropriate metric may be how many new ventures or products were launched with assistance from diaspora members. If long-term infrastructure buildout is key, the focus could be on diaspora participation in these projects. Universities with strong alumni outreach programs are particularly good at tracking and refining metrics for alumni participation in various campaigns.
Another consideration is how to reward exemplary members of the diaspora. The pre-eminence of social and emotional factors in the “jobs” the diaspora are trying to do hints that most of their incentives should be non-monetary, e.g. national recognition or status. Peer influence through diaspora community sub-groups, for example, is likely to be more effective at driving wide participation than the promise of financial rewards. It is important that these reward incentives are aligned with the right performance metrics.
Ideally, any emerging market’s diaspora strategy should be led by a coordinating body (like the government) and embedded in the operating priorities of the country’s institutions. But the private sector also has a role to play in pursuing more opportunistic lines of diaspora engagement, and companies can step in to lead the way in the absence of an effective government approach. Ultimately, if emerging market institutions and companies are to capture the diaspora opportunity and translate it into competitive advantage, a step change is required in their diaspora engagement models.
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