It is a time of unprecedented growth in Southeast Asia (SEA). Over the last few years, commercial innovation and investments have boomed. And investors are taking notice: $24 billion has been invested in Southeast Asian tech since 2015, according to a recent report by Google and Temasek.
There is a lot of opportunity in the region as it continues to grow. The same report predicts that Southeast Asia’s internet economy will reach $240 billion by 2025 — $40 billion more than previously estimated.
But scaling in SEA can be a challenge. It is one of the most diverse regions of the Asian continent, divided by politics, language and culture. Levels of development also vary from market to market: Singapore’s modern and metropolitan infrastructure contrasts starkly with Cambodia’s ongoing struggle to maintain a passenger rail service, for instance.
All of which means that there is no “Southeast Asia answer” to any question. But for startups, there are ways to overcome these challenges and turn this diversity into an opportunity as you expand your business across the region.
1. Refine your processes before you scale
Focus on perfecting your processes, such as product and service delivery, before you scale the process up. Because SEA is very diverse, you need to first understand what works well for your customers — and your business.
For example, there are many payment options available in Southeast Asia. Cash is still the dominant payment method, but mobile payment platforms like Grabpay and Alipay are on the rise. Lazada, Alibaba’s biggest Southeast Asian e-commerce operation, understood this challenge and got creative with how they serve their customers across the region, allowing customers in different markets to pay for goods in a variety of ways that suited them.
So, as an expanding startup, you want to try what works well with your customers: is it cash on delivery, collection codes at the local post office, credit card payments or bank transfers? And which ones make the most sense for your business? Once you have this knowledge, put in the resources to make sure that they run smoothly in your core local market before you scale.
This same thinking applies to all aspects of your business, from operations to customer service.
2. Hire local talent to gain a deep understanding of the market
It is important to recruit local talent for each market that you want to scale into. Beyond the advantages that this will bring for following local rules and regulations, having an intimate knowledge of local cultures, consumers and commerce is key to succeed in this highly fragmented region.
This includes basic things, like understanding the most popular marketing platforms and social messaging platforms in their country. For example, Line is popular in Thailand, whereas WhatsApp leads in Singapore and Malaysia.
This is the approach that Go-Jek chose when expanding in Southeast Asia. For example, in Vietnam the company hired local “founder” teams who are responsible for local service offerings and related businesses.
When you hire local staff, it is important to maintain good communication across national boundaries. Helping far-flung employees to understand your vision and goals is necessary for managing international teams and an aspect to scaling up businesses that is often neglected.
3. Hire — but also fire when necessary
When scaling your company, finding the right team is key. But it's not just about hiring more people: it might also mean changing the roster of people that you have. As the company expands, sometimes that means letting people go when the company’s needs have outgrown their skills and knowledge — the teams that you hire when you started a series A, may not be suitable when you get to series D.
Even founders should not be immune. Singapore-based Sunningdale Tech Ltd. co-founder Koh Boon Hwee “fired himself” from his own company in 2008 after four years at the helm. Sunningdale shares have nearly quadrupled in the decade since he let others step in. Alibaba and Tencent’s expansion into the region has also forced changes in leadership.
Be prepared to have that conversation with your staff, and to be flexible in terms of hiring and adjusting roles to fit the company as it expands.
4. Partnerships keep you competitive in the global marketplace
Partnering with a company in SEA that compliments your business offering can be a good way to expand in the region, even when it might not necessarily be an organic fit. Not only can a partnership benefit customers, but it can also strengthen your presence in new markets. For example, Lazada leveraged a strategic partnership with Danone to help it become a key platform for brands to reach Southeast Asian online shoppers.
In fact, cross-border alliances by Southeast Asian companies help local players go up against global rivals; thanks to partnerships with regional players such as Indonesia's Lippo Group, Singapore-based Grab was able to compete against Uber — which is valued at $72 billion — on home ground.
5. Raise capital to build a competitive moat
Raising capital is key to being competitive in SEA — even if your product or business model isn’t. If you’re able to raise hundreds of millions of dollars before your competitors, that could be a deterrent against other companies invading your market. They simply may not have the resources to compete.
Ride-hailing companies in SEA are a good example of this. Despite its decacorn status, Go-Jek is not profitable in its core business: transport. Yet, it remains Indonesia’s most valuable technology startup and one of the most talked about companies in the market. It would be hard for a new transport company to launch successfully in Indonesia now.
Of course, the strategy of spending heavily to eliminate the competition doesn’t always work out, as Uber’s departure from the region can attest. But many startups that do succeed, have employed it at one point or another.
The opportunity is wide open for businesses to expand in Southeast Asia, as investors look to capitalize on the significant growth potential in the region. Keeping the above 5 points in mind as you scale your business will help you navigate this incredibly diverse marketplace of potential future customers.