I interviewed Christoph Szakowski who discussed Changing the way you work in Logistics Emerging Markets.
Today's topic is changing the way you work in logistics, emerging markets. Before we start, can you provide an introduction and your experience in logistics, emerging markets?
Thank you, Dustin. I'm Christoph Szakowski, and it's my pleasure. I'm managing partner of LogCon East / LogEasy. During my international career in logistics and transportation, for the first 10 professional years or so, I gained leadership experience in large logistics organizations like DB Schenker, Logwin, [0:00:54] in Western Europe in the German-speaking world. So I know how to provide logistic solutions, expand client relations, market share, and manage people in locations which are very well developed in terms of standards, infrastructure, and maturity of business.
After that, for a period of approximately eight years, I've been dealing directly in the world of emerging markets in logistics. So again, in some cases as manager for the logistics providers, in other cases as consultant and interning manager. I gained experience in countries like Russia, China, Turkey, and Kazakhstan. All of them ranked in top 15 in the Agility Logistics Emerging Market Index 2017. So something I will be talking about later in this interview.
What are logistics emerging markets, and what is so special about them?
Let's start with considering what is said in the agility logistics market index I mentioned previously. 50 countries are measured there on the combination of their market size and how attractive the markets are, also, on the business climate, the transport infrastructure, and the efficiency of customs and borders. Also included there is a trade lane analysis of major trade lanes linking emerging with developed markets. In this index, you can find also the opinion of logistics professionals. So all in all, you count them there to a ranking with China, India, and United Arab Emirates on the top of the list and mostly African countries besides of Nigeria, which is in the middle, occupying the lowest ranks.
What is so special about these markets? Of course, there really are huge differences within the whole group. As the leaders [inaudible 0:03:31] of the lowest-ranked country. But there are some common observations, at least for the overall Asian markets, which I know well.
The first point is the uncertainty and changing nature of business regulations, which you are confronted with as decision maker, as a manager, as an entrepreneur. But this disadvantage needs to be considered together with a huge growth perspective in these markets.
Once you are good at entrenchment [inaudible 0:04:16]... I just want to continue. And once you do that, you change management and you know your company and your people are adaptive to deal with less orders and regulations and [inaudible 0:04:33] productivity, you might be the winner.
The reason is actually the second point about logistics emerging markets, which is special. And this is the lack of [inaudible 0:04:47] or relative low number of third-party logistics providers. So the result is a good potential for outsource transportation services and integrated logistics. According to some research and our experience — for example, Russia — there is high outsourcing potential for third-party logistics providers in over-land transportation, domestic-land transportation, warehousing, custom services, and freight forwarding. So that is the second point, which is special.
And also, I would like to mention the third point which is special for the logistics emerging markets. That is the relatively low amount of highly-qualified specialists and managers who are able to work successfully in logistics provider organizations. I made this experience in a managing career for a 3PL provider in Russia and other functions for China, Kazakhstan, Turkey as well. So worldwide, we talk about supply chain talent shortage or even about the supply chain talent crisis. But what is special in the emerging markets is that there, in many cases, has not been as special logistics education, logistics-focused education. And also, they graduate from management schools. They rather preferred other business sectors from the beginning. So there is a fight for real talent and if it is possible to find the right candidates, train and keep them motivated once you know the approaches and possess a good network. So those are the special points about logistics emerging markets.
What are the three key issues that you should consider to change to be successful in emerging markets?
You could be actually surprised how important your attitude is in this aspect. So the first thing is to change the way of how you think about emerging markets, especially coming from more developed economies, maybe having worked a very successful career path and believing you just need to transfer one to one your way of managing into the emerging markets. But simply this is not working.
For successful operations, in such a competitive business like logistics, you need people who understand and respect the culture, the language, and the mentality of the emerging markets. So you need to keep your management values on the one side, but you need also to dive deep into the different characteristics of the markets on the other side. This helps you to be a successful leader and to receive authority right from the start. I heard once that you need first to understand before you are understood. So this is a good recommendation.
Secondly, you need to change your perspective on business planning whereas any [inaudible 0:08:35] management systems, you are expecting your managers and senior specialists to play a very active role in the planning, preparing, proactive communication, the needs, steering the team or department independently. This might be different in emerging markets. So people need to be taught and incentivized to start in such a way. The reason is that naturally, they might be a little bit reluctant to take on the full responsibility and make clear decisions. So those points, they might expect from you as the big boss.
To give you an example, a logistics provider is establishing an office in emerging markets and [inaudible 0:09:30] from the branch manager. [Inaudible 0:09:39] expect the local specialist to come with a business plan. And this business plan should consist of a market, trade lane analysis, clients, sales plan, surveyors, service products overview, all of the tool and organizational and financial plan. But you [inaudible 0:10:02] experienced person and he [inaudible 0:10:08] give some calls to suppliers and clients he knows. So he or she would continue in such a way before you stop this manager suggesting that to organize a little bit his ideas and suggesting how to develop his department with clients and achieve targets in a more systematic way.
And the third point, you need to change working in logistics emerging markets is something I would call applying a management style, a special management style, with quite good portion of tolerance for the approach but high commitment to the goals. As mentioned to you earlier, you have the infrastructure issues, [inaudible 0:11:00] price sensitivity, market instabilities, and sometimes, what is also hard is the first specific ship and logistics provider constellation, which is hard to predict as you don't know exactly the pattern of decision making.
So this all doesn't allow you to define exactly your business development steps. But once your team, your people, are committed to the goals, they will try out different solutions to achieve them. Using, for example, Unix set of couriers, suppliers, customs agents, and so on, and different modalities in the transportation chain. And this is them, the exact [inaudible 0:11:53] for the client but maybe never heard of in your corporate strategy.
Should the people management also be changed by companies that are dealing in logistics in emerging markets?
If we consider that managing people has something to do, in general, with the way our objectives are set, with the way decisions are made, with the coordination achieved, and finally, how people are motivated. So I would also make a distinction between a traditional and alternative model, and then ask what is more to be applied. You need to make a choice for your people management style in emerging markets. Definitely, you need to do so.
So are you going for a system when the boss knows best and makes the decisions or are you, for example, expecting in countries like Russia or China that that decision is an aggregation of inputs from your team members? Are you going to motivate people there by paying for performance, for example, instead of underlining the social drivers of motivation, which is giving people a purpose, a sense of work? This is the tendency, of course, but from my experience, in several projects [inaudible 0:13:33], I recommend to rather to use the traditional people management option with rather top-down decisionmaking and material motivation in emerging markets.
But, again, the key in this is something we do in several seminars, projects, trainings, is to choose the balance between the different drivers of motivation. So definitely in the current situation of supply chain talent shortages, you need to take the right decision for people management, as this gives you a strategic advantage, whether you are going to have operations in Southeast Asia or Central Asia, CIS countries, or West Africa.
Do you have any final recommendations?
I would recommend logistics companies to rely on expert opinion and involvement, helping them to guide through the emerging markets. Sometimes we see that the corporate strategies — the guidelines, processes — which have been constructed decades ago for the core business markets cannot be successfully implemented in emerging markets. So for strategy and operational consulting or just for finding the right stuff, it is very often the key to involve specialized advisors with extensive experience in those markets.
Thanks for sharing today, Christoph.
It's my pleasure. Thank you.
About Christoph Szakowski
COO / Logistics /SCM/General and Interim Manager in 20+companies/DACH, CEE,CIS, Asia, Emerging Markets