It’s generally accepted by the start-up that it’s easy to take ideas that have worked in developed markets and reproduce them in developing markets.

Cultural nuances, differences in propensity to spend at both the personal and corporate level, as well as differing opportunity sets,  mean that it’s rarely as easy as stencilling a solution onto Asia inc.

Companies that are looking to expand or replicate themselves in Asia need to be mindful that each market is inherently different. Solutions that work in one market won’t work in another. Lacking a strong rule of law, companies and consumers are less likely to “take a chance” on an emerging brand and will tend to rely on established brands.

Also Read:4 ways corporates can work better with Chinese startups

Further, the opportunity sets can differ significantly as the cost of labour in Asia can be negligible when compared to developed markets. This can be leveraged, creating more opportunity for local populations and allows different business opportunities to emerge in developing Asian markets than would be possible in developed markets.

Cultural nuances

It’s easy to be complacent if you’re taking models that have worked in largely homogenous developed markets like the US or Europe and then try to apply that model to Asia.

Laws and cultures may be more-or-less similar across the EU, which has a population of 341m, or all of the United States of America, which has a population of 372m. This isn’t necessarily the case with Southeast Asia, which has a population of 641m — looks like a bigger market, but it is it?

Commonly, I see start-up decks that extrapolate the population to insinuate that the revenue opportunities could be larger in SEA than they are in the other developed markets. SEA is an agglomeration of thousands of islands and subsets of populations, some of which are ideologically opposed to others. The strategies that work in one market won’t necessarily work in another.

In one of the most egregious cultural faux pas that I’ve heard of, one company that had offices across the region appointed a new general manager. The general manager decided that there was no place for pictures of the King in the Thailand offices.

Anyone who has been to Thailand would have noted the pictures of the beloved King in restaurants, bars and any other establishment. There was a significant decline in company morale which almost led to an internal mutiny. This is an example of a cultural nuance that could only be understood by spending a bit of time on the ground and talking to people.

Don’t let the numbers fool you. While it’s large in aggregate, SEA is composed of a number of small and heterogeneous markets. Companies need to be aware of the cultural differences and adapt their strategies accordingly.

Propensity to spend

Brands and relationships are important in developing markets, maybe more so than in developed markets. In developed markets, people are able to rely on the rule of law and consumer rights regulations. These facilities are less prevalent in emerging Asia. As a result, it can take a lot of time and capital to build up the credibility to get consumers or companies to trust an emerging brand.

In Singapore, there’s the concept of Kiasu, which could be interpreted as being afraid of losing in a relative sense to another person. This means that people will want to have what someone else has but they would be less willing to take a risk on a new and unknown product — because there’s no one to be jealous of. This is a hurdle that new brands need to conquer to be successful in one of the more developing markets in Asia.

Further, Go-Jek, which went from a “transport app” to an “everything app” knew early on that they needed to be focused on cash usage because credit card penetration is around 1 per cent.

They knew that transactions were typically going to be small ticket items and built out their platform around that, taking advantage of the differing incomes in the country according to the propensity to spend.

The things that high-earning time-strapped employees in developed markets are willing to spend money on don’t necessarily translate to countries where subsiding is more important than self-actualisation.

Opportunity sets

The opportunity sets that are available in each geography are markedly different. Clusters and ecosystems naturally form around existing players. It makes sense that a company could exist to supply tools to cloud providers improving efficiency or reducing costs if it’s surrounded by dozens of companies that can pay for the services as well as help to iterate the product. Proximity matters. This is a reason that Silicon Valley has an edge as the tech hub of America.

The opportunity sets in Asia are different. Different opportunities = different solutions. One example of this is Sampingan, an Indonesian-based start-up that helps companies scale by connecting them to a network of trained freelance agents who perform tasks on a pay-per-performance basis.

This takes advantage of the personal nature of business in Asia (people talking to people c.f. digital advertising) as well as the large casual workforce and the lower cost of living (relative to developed countries). This is an opportunity that likely wouldn’t be exploited in other developed markets.

Summing Up

Entrepreneurs in Asia that are able to find solutions in an environment where it’s difficult to get consumers to part with their cash are more likely to be successful in developed markets. Once a company has ground it out in an untrusting market, it will be easier for them to operate in developed markets with trusted brands already on their roster.

Leaders that are able to spot the opportunities in small fragmented markets won’t have any issues in driving a wedge into the larger opportunities in developed markets.

If you’re building a business in Asia that could scale more broadly, please reach out!

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Image Credit: Mario Gogh

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