strategy+business Winter 2013 : Page 70

B E S T B U S I N E S S B O O K S 2 0 13 / G L O B A L I Z AT I O N 70 by underdeveloped market institutions. In examining more than 105,000 BRIC companies over consecutive five-year periods, the authors reported that more than 70 percent of the firms that adopted a profit-oriented strategy in Phase I retained their higher profitability in Phase II, whereas fewer than 10 percent successfully made the switch from a sales-first strategy to profits lat-er. Thus, it is not surprising that virtually all rough dia-monds adopt a more balanced approach to growth that doesn’t overtax their internal resources or incur unnec-essary risks. These companies recognize that growth is important, but pursue it in a phased approach of gradu-al and incremental expansion, while remaining intently focused on sustaining high levels of profitability. Ac-cordingly, the authors also find that rough diamonds do not engage in M&A nearly as much as do many state-owned enterprises, especially those in China. Undoubtedly this is par-tially due to their incrementalist management philosophy, but per-haps it also reflects their relatively small size and few resources. The book’s focus on a hith-erto little known set of private companies, instead of Huawei, Lenovo, Tata, and the other usual suspects, makes it a valuable addi-tion to the growing body of litera-ture on emerging market multina-tionals. In addition, the authors’ data on the long-term benefits of adopting a profit-first versus a top-line growth orientation is truly in-sightful, and their extensive experience and insight into the peculiarities of doing business in emerging markets shine through on every page. For these reasons, Rough Diamonds is my choice for the best business book on globalization in 2013. A Tidal Wave of Entrepreneurialism The emergence of rough diamonds, and indeed of any national economy, depends on an environment that en-courages and supports entrepreneurial activity. China’s economic growth spurt didn’t start until the early 1980s, when Deng Xiaoping unleashed a wave of entrepreneur-ship via township and village enterprises, which were effectively private firms at the local level. Similarly, In-dia’s economy took off only after it finally abandoned the stifling bureaucracy of the License Raj in the early 1990s (although India continues to have a large number of rules and regulations that, for example, make it dif-ficult to start a new business). We are seeing hotbeds of entrepreneurial activity in emerging economies throughout the world. It is highly likely that this is where many of the great global com-petitors of the future are being incubated right now. One of these hotbeds is the Middle East. It’s easy to forget that, like China and India, the Middle East was once one of the most technologically advanced and eco-nomically powerful regions in the world, with a lead-ership position in science, math, and philosophy, and a long tradition of entrepreneurship. Today, even as the region is experiencing wrenching political upheav-als, Christopher M. Schroeder, a venture capitalist and former e-commerce CEO, points to another revo-lution—a less-heralded entrepre-neurial one—that is unfolding with far fewer headlines. In Startup Rising: The Entre-preneurial Revolution Remaking the Middle East, Schroeder re-minds us that the collective GDP of the Arab world is larger than Russia’s and India’s and nearly twice that of China on a per capita basis. The Middle East also has more than 350 million people whose disposable income has grown by 50 percent over the last three years and whose Internet appetite has been expanding at a speed that rivals that of any other region in the world. And more than 40 percent of those online denizens say that they would like to start their own businesses. Schroeder categorizes the startups that are being launched in the Middle East into three buckets: impro-visers, problem solvers, and global players. Improvisers are businesses that adopt proven mod-els from other markets and “Arabize” them in both lan-guage and cultural sensibility. For example, Altibbi.com is reminiscent of WebMD, but adds the anonymity of message boards to protect female users. Egypt’s Nezal Entertainment created a Facebook game based on its founders’ experiences in Tahrir Square, using those 18 days of protest as a backdrop. Problem solvers are businesses that take on lo-cal and regional challenges that were once relegated to strategy+business strategy+business issue issue 73 73 best books 2013 globalization

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