Is cultural intelligence the missing ingredient of growth? – UKTN

While working in Singapore, I once openly challenged a fellow Western colleague during a business meeting. An hour later, we shared a friendly lunch as if nothing had happened.

A Singaporean colleague was puzzled. “How can you two be so friendly after such a disagreement?”

It highlighted an important cultural difference: Western management techniques like “disagree and commit” often champion healthy debate in decision-making. In contrast, many other cultures prioritise harmony and consensus, where direct critique can be seen as disruptive rather than productive.  

This personal anecdote reflects a broader issue I’ve seen repeatedly: companies underestimating the critical importance of cultural intelligence (CQ) – the capability to understand, adapt and effectively navigate cultural differences – when entering new markets. 

I was reminded of this when reading about Deliveroo’s exit from Hong Kong on Monday.

One of Deliveroo’s problems in Hong Kong, where eating out is cheap, was failing to grasp local buying habits with its premium prices. Hong Kong is a market which Panmure Liberum analysts said was “one of the most discount-sensitive in Deliveroo’s portfolio”. As such, competitors like Keeta and Foodpanda – to which Deliveroo will sell some of its assets upon leaving Hong Kong next month – had the upper hand.

It’s not the first time Deliveroo has had CQ issues. It exited Australia in 2022 following clashes with its government over its gig worker model, which ministers said was a “cancer” on the economy.

Of course, Deliveroo is far from the first to fail after lacking CQ in a new market, and it won’t be the last. In the 2000s, Ebay, with its cold Western-style auction system, failed in China because it didn’t grasp the importance, in Chinese culture, of social connections between buyers and sellers, and did not provide a messaging function to cater for this. As a result, it was wiped out by competitor Taobao, which did provide a messaging platform.

Even subtle cultural nuances can derail an expansion strategy. Walmart’s failed entry into Germany was due, in part, to its insistence on applying US retail practices such as mandated “hearty greetings” from staff at the checkouts. German consumers found this awkward rather than welcoming. A seemingly minor detail, but one that highlighted a deeper issue: Walmart failed to localise its customer experience.

So what does this tell us? Too often, companies assume international expansion is an operational challenge: setting up distribution channels, securing regulatory approvals or adjusting pricing models. 

But the reality is more nuanced. CQ is not a soft skill but a strategic capability that directly influences business outcomes. Companies that embed CQ into their market entry strategies can accelerate adoption, mitigate risks and drive sustained competitive advantage.

For businesses seeking to integrate CQ into their market entry, three core principles are essential:

1. Deep market insights: Move beyond surface-level market research. Deeply understanding cultural preferences, buyer behaviours and societal norms is critical to crafting localised strategies.

2. Localised operating models: Successful international entrants invest in on-the-ground expertise. Hiring local leadership, engaging local partners and adapting and tailoring supply chain decisions to local contexts can significantly drive market fit.

3. Adaptive go-to-market strategies: Flexibility is key. Companies must be willing to rethink pricing structures, customer engagement models and marketing strategies, ensuring alignment with local cultural expectations.

Deliveroo’s missteps in Hong Kong serve as yet another reminder that the way a company wins in one country may not be the way to succeed in another. Ultimately, companies ignoring CQ will find sustainable growth elusive, while those embracing it will unlock new paths for success.

Nigel O’Neill is founder and CEO of Tarralugo, a consultancy which helps clients sync digital technologies with their business goals.

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