IAN MACLEOD: Harnessing the power of (pr)academia

My retired professor uncle will tell you academia is the real world. But you probably know entrepreneurs and CEOs who snub their noses at textbooks, putting their faith instead in street smarts.

None of them is wrong. I relish having one foot in the academy and another firmly in the market. I get a nerdy thrill from extracting practical value from professorial pursuit. It can be arduous. You may need to read part or all of dozens of articles to land on something you can apply at the office tomorrow. The trick is triage: speed-read the abstract, cut your losses at dead ends, hover intensely over the juicy stuff (that’s where the nuggets lie).  

I must have read a dozen books and 30 papers to get to my most useful “pracademic” discovery. Prof David Tuckett of University College London founded and built out what I argue is the most potent lens on investing since portfolio theory. Through interviews with dozens of the world’s biggest, smartest asset managers, he distilled “conviction narrative theory”.

In Tuckett’s words: “To make decisions in the context they inhabited, my respondents had to organise the ambiguous and incomplete information they had into imagined stories with which, if they believed them and were excited enough by them, they then entered into an actual relationship which had to last through time.”

His conclusion? Regardless of how quantitatively minded an investor may be, “narrative is the currency of financial decision-making”.

Or, in the words or Tyrion Lannister   from Game of Thrones, “there is nothing in this world more powerful than a good story”. And what is a business but a story? So, practically, if you’re raising capital or selling your business, do not neglect the importance of telling a compelling story. Numbers may be key, but it is narrative that people use to build the conviction to invest.

Business schools and consultancies take some flak for their reliance on quirky matrices and nifty mnemonics. But these have a place. Sometimes an academic work is largely an expression of something rather intuitive. The practical value lies in using a robust model to organise your thinking and lend weight to your own aptitude, analysis and ideas.

In her 2021 paper “Host Countries’ Level of Development and Internationalization from Emerging Markets: A typology of firm strategies”, my colleague Prof Helena Barnard rustles up just this sort of model. She proposes “a typology of four firm strategies to deal with different host location types: local optimization, global consolidation, brokering and niche filling”.

The experienced transactor may not find that groundbreaking. But picture yourself in a skyscraper, in front of your board, justifying a multibillion-rand expansion into a new country. In this instance, I don’t think “ground-breaking” is necessarily what you’d be after. Me, I’d want gravity; I’d want the comfort found in citing the work of a respected thinker who has done the groundwork that’s informing my Ethiopia brokering strategy.

Entering African markets

Even that most esoteric of academic pursuit, the doctoral thesis, can be distilled into deployable action items. My teammate Tess Onaji-Benson penned hers on “Host-country Risk, Corporate Political Strategies and the Subsidiary Performance of South African Multinationals in Wider Africa”. The 250-page behemoth explores “novel findings in mapping out the corporate political strategy landscape of an emerging economy’s [multinational entities]”. She combines qualitative and quantitative methods to investigate how South African multinationals deal with different institutional environments when entering other African markets.

My handy takeaway speaks to a misconception I hear often about doing business on the continent: “The institutions just aren’t there.” That, however, is only partially right. Sometimes institutions aren’t quite there. But very often they simply don’t exist in the formal ways one may expect in Sandton or Singapore.

Botswana’s kgotla, for example, appears nothing like the Southern District Court of New York. But for the New York Stock Exchange unicorn willing to understand this system, that represents an opportunity; it’s something multinational competitors may just ignore as an effective format for dispute resolution.

Another example lies in lobbying. The US has a highly formalised lobbying institution that’s vast, professional and regulated. Without mistaking lobbying for corruption, this is a legitimate gap for African businesses to fill.

Consider MTN in Nigeria. Initially it handled matters poorly, failing to appreciate the need to bring the government along with its plans. But, after suffering fines and ongoing clashes with the government, the company established an international advisory board. Made up of “prominent persons of considerable and wide-ranging experience”, including former presidents, this forum is designed (at least in part), to avoid friction turning into fines.

Done right, action feeds academia. Professors bolster practitioners. Pracademia makes perfect.

* The Centre for African Management & Markets at the Gordon Institute of Business Science conducts academic and practitioner research and provides strategic insight on African markets. Macleod is a founding member