By way of a little background, Herbison has been an instrumental player in corporate communications, public affairs and investor relations for some time. Previously, he was a vital part of the team that built Mmd Group into the leading Eastern European communications pioneer after the fall of the wall. Operating across 20 countries in Central & Eastern Europe, Mmd became the “go to”agency for FDI, consumer outreach, and corporate relations.
After the sale of Mmd Group to London-listed Huntsworth PLC in 2006, Herbison joined forces with his long-time colleague and mentor, Mmd Founder Alistair McLeish, to found Speyside. With a shifted focus to Latin America, Speyside represents one of the most interesting, what I call “sniper consultancies” in the world. I actually invented the term to categorize businesses with the sharpest and most expert focus on their targets. In the case of Herbison and Speyside – multinationals getting down to business in emerging South American markets.
The Emergence of Specialists – Advanced Understanding & Methods
We caught up with Ian at his company’s branch office in Bogata. Here is how the exchange went.
EPR – Ian, your current focus is in Latin America, perhaps the emerging market with the most potential worldwide. What do you see as the biggest hurdles for corporations wanted to expand into those markets?
Ian Herbison – At the risk of stating the obvious, I would start by saying that Latin America is not a homogenous region. In the early days of Speyside I sat down with a Brazilian CEO and talked about our Latin American & global emerging markets model and he responded with a puzzled look: “what has that got to do with us? Brazil is neither Latin American nor an emerging market”. I disagree on both counts, but the anecdote illustrates some of the cultural differences and sensitivities across the region.
That said, having lived in over ten emerging markets and helped to build or run businesses in over twenty, there are clearly similarities: not just across Latin America but across emerging markets globally. These are characterized by huge social, economic, political and regulatory change and the first challenge for corporates is to anticipate and manage changes: sorting out what is merely ‘noise’ and what represents a significant business risk or opportunity.
Another key challenge is to understand that business in emerging markets is rarely ‘private to private’ – politics is far more pervasive than it is in more mature environments and it is crucial to engage with legislators, regulators or state-sponsored actors in a way that just frankly isn’t required when making direct investments in Western Europe or North America.
The successful companies are those that take time to understand these unwritten ‘rules of the game’ and operate intelligently within them. To be absolutely clear though: never believe anyone who says one of the rules is that you must pay bribes, or compromise on ethical standards. While I have seen some companies gain short term advantage by going down this route, in the long run, they are dead.
EPR – If we can say Latin America is about where Eastern Europe was when your focus was on establishing a network there, is the Latin America demand for brands as strong demand was in the 90’s in the emerging Europe? Is Latin America ready for the same range of foreign direct investment (FDI)?
Ian Herbison – On the level of consumer behavior and demand – in Central and Eastern Europe, Latin America and across other global emerging markets you can see two trends: firstly, consumers are hungry for strong global brands. Secondly, they are among the earliest adopters of new technology.
In Central and Eastern Europe, particularly, we saw a lot of ‘leapfrogging’ of consumer behavior in more developed markets: going from being backward to being ahead of the curve in a very short space of time.
For example, working with the likes of Vodafone, Google and Visa we saw a move from outdated telecommunications infrastructure and a reliance of fixed line services to 3G networks and widespread e-commerce within the space of 2-3 years. Today, Estonia and Peru are two of the most advanced digital economies in the World…
Brazil, Mexico and Colombia – our top three markets – all now have very fast growing middle classes, with consumers hungry for global brands and new technologies. This represents a huge opportunity for multinationals, which at the moment is not fully recognized or fully exploited, despite all the hype around emerging markets as a hedge against the decline & fall of the ‘old world.’
EPR – This is actually fascinating stuff Ian. So, what you are saying is the consumer side is ahead of the curve growth wise, and on the corporate side many multinationals have not caught up with the intricacies of doing business there? Is that about right?
Ian Herbison – Well, I could give you a long list of multinationals that have got it right, but unfortunately there are too many that still run the region as an add on, or afterthought to the North American business. Many others fall into the trap of purely focusing on Brazil at the expense of other regional markets.
Those running Latin America directly out of the US find it very hard to understand and respond to the fluid and fast-moving environment I described. They also typically don’t dedicate enough time to the region and, to be fair, why would they? For most multinationals the revenue and profit contribution from Latin America is marginal compared to the US business. This is a structural problem, which results in them focusing on current problems (in the USA) at the expense of future growth (in Lat Am).
Then we have those who see Latin America purely as Brazil, the same players that equate a global emerging market strategy with the ‘BRICs’. Brazil is a market of 190+ million consumers, blessed with a huge natural resource base and huge growth opportunities. But the commodities super-cycle ( fuelled by Chinese demand ) has masked Brazil’s huge structural problems, chiefly, a lack of investment in infrastructure, education and a lack of labor market and tax reform.
In the medium term, we are actually more bullish about broader-based markets such as Mexico, Colombia and Peru than Brazil, although it will always, of course, be a major global market.
EPR – Speyside, so far this year, has supported some $5.5 billion in FDI in Latin America, primarily in the energy, mining and pharmaceuticals. Where have the preponderance of these projects been? Where do you see the most relative growth potential in the short term now? Mid-term? Long-term?
Ian Herbison – About 40% of our work is focused on support for large scale foreign investment into the region, with the rest focused on ongoing corporate communications and public affairs support for multinationals already established in the region, but looking to manage reputation and relationships to support growth.
In terms of the inward investment flow, you are right : energy and mining are still very important sectors, as are pharmaceuticals and financial services. Energy and mining investment is clearly boosted by current commodity prices, while other sectors are clearly attracted by the very fast growing regional consumer markets.
In today’s world it is hard to predict even the medium-term outlook, but I think even if the commodities bubble bursts, there will still be a very strong outlook for the pharmaceutical sector (relative to Western Europe & the USA), and the North of Latin America will still be an attractive manufacturing base, due to the relatively low cost base and location.
EPR – It actually a surprise to realize, that though Brazil has this huge potential, that other superb opportunities in Venezuela, Columbia, Mexico, Peru, and elsewhere have not been the focus. Can you explain this a bit Ian?
Ian Herbison – I have already touched on Mexico, Colombia and Peru, but I am delighted you have given me the opportunity to talk about my current hobby horse, Venezuela.
There is a lot of buzz across the region about what 2012 will bring in Venezuela. There is a growing consensus that Chavez is very seriously ill, and change is on its way. Some say his demise will result in a postponement of elections and the imposition of martial law, while an orderly transition can be ‘managed’ by the current ruling elite. Others feel that discontent is too widespread & the roots of civil society too deep to let this happen. I am inclined to agree. I think there is a strong chance that we start seeing Venezuela electing a more mainstream government, and opening itself up to foreign investors. Whenever that happens, we plan to be there with a very strong team on the ground ….
EPR – Are US companies doing all they should in Venezuela in light of the potential there?
Ian Herbison – Venezuela today is not the ‘no go area’ that some might think. There are already a range of US based global companies that are very successful. In fact, that there is an argument to be made that from a political risk perspective, Venezuela is an easier place to do business than Argentina.
What is undoubtedly the case, however, is that there will be a completely different level of opportunities post-Chavez and, no, I don’t think companies are giving enough time and attention to developing plans to exploit this.
EPR – From what you are saying Ian, there seems to be a great need for communications and management strategies tightly focused on “in country” intel, as well as a multinational level – both with a refined skill set, of this makes sense. Where does this leave the multinational PR firm?
Ian Herbison – To be clear, I am not saying that PR must be handled at a purely local level. In fact I think a complete decentralization would be just as ineffective as a completely centralized approach.
What you need is a consistent strategic approach that is intelligently localized and implemented by people on the ground with strong local knowledge, understanding and contacts. The key question is how to make that happen?
At the risk of being too direct, the so called global PR networks are not really global. Most are US networks with pockets of excellence elsewhere, often in Western Europe and the major Asian markets. Few of the global PR agencies have a significant network of fully owned offices in emerging markets, operating instead through affiliate partners. Those that do have fully owned offices rarely put their best global people there. It is the same structural issue as with any multinational: why would you if the USA is the overwhelming profit driver?
This is where people like us come in. Emerging markets is what we do & what we have done now for over 25 years. A key part of our blueprint is taking global-class consultants out of the PR centers of excellence in London or New York and embedding them with very experienced local consulting teams on the ground in Latin America, blending that international experience and approach with deep local knowledge and contacts.
This is not a grandiose thesis that the age of the global PR network is coming to an end, but an explanation of one of the reasons why, I think, our model is resonating with many multinationals focusing on market entry and expansion in emerging markets, and also why we are increasingly partnering with some of the globals to help deliver for their clients.
EPR – Governmental regulations, cross border barriers, massive infrastructure issues, especially in Brazil, the job of doing business effectively across borders in South America seems circuitous – fraught with possibilities and problems. Ian, have you identified any common denominators for success, so far I mean?
Ian Herbison – Yes, if I may provide a list:
• Don’t compromise on corporate governance standards
• But recognize that the environment is different ; take time to understand it & adapt
• Review plans much more frequently than in more developed markets
• Appoint resilient managers & keep them there long term
• Choose local business partners with extraordinary care
• Be careful which taxis you take!
EPR – We chatted earlier about PR and marketing companies, business in general, operating differently in the future – a more supporting and integrated network of companies, as it were. Can you see this happening even now?
Ian Herbison – As an extension of what I said about there being no truly global PR networks, I believe that there is no ‘one size fits all’ solution to multinationals with global needs.
Instead I think clients increasingly look for one ‘hub’ agency that can manage best-of-breed local or regional partners on the ground in each key market.
This is something we do for a number of clients, especially those with a heavy global emerging markets presence: working through our own network in Latin America and with other specialists, selected on a case-by-case basis.
Finally, the New World with Ian Herbison
I have known Ian Herbison for some time now. We don’t often have contact, but each and every time I speak with him several things impress me. First and foremost, Ian is a gentleman. Secondly, he always has clear and straight to the heart of the matter advice – and encyclopedic knowledge of communications and the necessary elements for cutting edge international relations. His answers above reflect a tiny portion of this.
In the case of Latin America, what many observers may not realize, is the gravity and magnitude of possibility there. What’s more, while Ian does not specifically point to it, the potential for collaboration and even the business of general PR is massive. With correct communications as the backbone of developing and engendered companies – the integration of social media and other technological advancements, and another almost limitless consumer base… You get the idea.
Hurdles always exist. Before the fall of the Berlin Wall, even immediately after, not many imagined an EU inclusive of Romania, Poland, and so on. There were and are problems there too. Ian and his contemporaries hurdled many of those for principle players back then – knowing him, I have zero doubt companies across South America will have help with their hurdles. Thank you Ian for your time, and for always exhibiting a touch of class.