by Joeri Gianotten, Partner, AccelerAsia
Expanding a business into Asia is an endeavour full of predictable surprises and unpredictable ease. It throws up challenges where you least expect them, and offers up remarkable parallels with growing a business in other parts of the world.
The reasons for this are manifold, but the overarching one is that Asia is an infinitely diverse region — every country is very different, and even within each country, there are many communities with different languages, histories, and business practices. A corollary to this is that countries in Asia are at different levels of development when it comes to technology, and the way technology is used varies greatly from country to country.
Add to that the fact that many technology companies in the early/mid stage have only partially mastered growing in their own home markets, and you get a combination of factors that can present serious challenges towards smooth internationalization. However, the good news is that many of the aspects of growing a business in Asia are familiar (especially to European companies) as they have already dealt with similar diversity in their familiar neighbourhood.
It is nearly impossible to condense decades of AccelerAsia’s collective learning (and unlearning) into a few paragraphs. But here are ten points of interest and action to consider, that can make a substantial difference when expanding a business in Asia.
1) Rapid growth and market size
Southeast Asia is growing at a pace that is not seen in any other part of the world currently. Technology companies from the US and Europe — regions that grow steadily and somewhat predictably — are sometimes unaware of the true import of this breakneck pace, and often do not realise that their growth plans need to be fluid and flexible to take this into account.
For example, when the CEO of one our clients did a roadshow in this region, it was just his second time in Southeast Asia, and he was amazed by the development that Southeast Asia has gone through in the past 10 years.
Our client had been operating in Africa, but the size of the Southeast Asian market dwarfed even the African market in the mobile sector. Internet penetration and social penetration in this region is far higher than that in Africa, and growing at a double digit percentage.
In fact, social media penetration in Southeast Asia exceeds that in Western Europe, as does mobile connectivity — and in terms of sheer population, the latter is just over half the size of the former. In 2018, Southeast Asia became the region with the highest mobile penetration in the world (at 141 connections per 100 population).*
In one week we were in Indonesia, Thailand, Vietnam and The Philippines, and he was overwhelmed by the possibilities. Asia-Pacific presents a huge opportunity for European companies that are already used to doing business in multiple countries.
2) Diversity of the market
There is a big difference between Western Europe and a lot of Eastern European countries (which are also part of the European Union) in terms of economics, languages and cultural differences. Companies that are used to doing business in different parts of Europe will find similar diversity in Asia, scaled up significantly.
Southeast Asia is a great opportunity especially for European companies because they are already used to a lot of the diversity that may scare away certain American companies. American companies can solely focus on their own country until they make a $100 million+ company and then think about going overseas. But European companies often expand overseas a lot faster, so when they come to Asia, it’s good to identify which markets are ready for a specific kind of solution.
3) Building a local team vs remote control
Who will you send to Asia? Or will you hire locally?
Most of the time, companies send their most successful salesperson, but when this person comes to Asia, he/she may or may not have a network and starts operating all alone, instead of being part of an office environment. This has a big impact on both sides: he/she may not succeed here while the company loses a valuable resource in the home office.
People underestimate how difficult it is to work from home or alone when they are used to being part of an organization — not everybody can do that. Many people need to be a part of a team or have colleagues.
You can hire locally, and companies tend to hire staff who are very senior because they are looking for a regional Managing Director. But if there isn’t a lot of traction in the region yet, you really need enthusiastic and hardworking hustlers. The last time that an MD was cold calling or writing his own proposals and follow-up emails was a very long time ago. So while you are building your team, you have no revenue but loads of overhead expenses.
Even if hiring locally works and you manage to get your first customers, another difficulty we see is that the company’s headquarters are not yet fully ready to support the region. If potential customers know that there is only one employee present here and that the company’s primary technical resources sit several thousand miles away, they may hesitate and raise questions on your ability to deliver. This can get complicated across time zones and different support hours — we’ve seen many companies underestimate that.
The home office thus has to be 100% ready, and convey this adequately to potential local customers.
4) The intangibles: trust, culture and environment
When you start building a team, you start with a few colleagues, an office, building the culture, social and professional interactions, trust and cooperation among colleagues, etc — all of these take time to put together. Many of these intangibles grow organically, and it’s nearly impossible to fake or force them into existence.
A big value-add AccelerAsia provides our clients is that they start day one with a team. There are multiple business development team members working on a single client’s solution, and they are also part of a bigger team. Moreover, once the deal closed, we have a lot of operational resources here on the ground — almost half of AccelerAsia’s clients have a delivery or deployment person in the office, directly managed by their headquarters.
Creating a proper environment is the key for a team to be successful.
Anywhere in the world, good relationships can never compensate for a bad product, but if you have a good product with a good value proposition, trusted relationships can definitely shorten the sales cycle. You get clear answers very quickly, and by positioning a product just right, you can skip quite a few steps.
If you are a company in France, selling to another French company, they can look at you purely based on your value proposition and the merits of your technology. But if you go from France to Indonesia, for instance, you need to start working on establishing a level of trust, and building a network can help create this trust. An established network will be interested in dealing with you when you come up with a new technology. Customers who have successfully implemented your technology in the past are assured that you deliver on time.
5) Having a physical presence
A lot of companies in Europe ask us if they can start with some video calls with potential customers, but in reality, it’s never an effective method. If you want to do business here, come over, make the effort, and potential customers will acknowledge your seriousness by giving you their undivided attention and adequate time.
In the sales process we don’t have all the knowledge here on the ground sometimes, so we may need to call on a technical expert. In a demo presentation, we prefer to have someone from the home office dial in, but somebody from our team is always present in the meeting room to observe and to ask questions and respond to them. There are many non-verbal cues that are of critical importance in business meetings, which are very hard to pick up across often-poor conference call connections.
It is for this reason that AccelerAsia does not operate in China, Japan or South Korea at the moment — we do not have an on-the-ground presence there. We need to focus, and our focus is Southeast Asia, Australia and the Middle East.
The second part of this two-part blog will explore the final five points, such as finding the right time to expand, revenue model, market fit, and others.