There's no "Southeast Asia Strategy" Pt. 1: Geography/Infrastructure
A single approach? Nope. A single market? Maybe if you squint.
I’ve worked on Asia Pacific market entry for approximately 8 years now, both for my employers and as an independent consultant. Once the obvious big markets are out of the way, inevitably I/my team get some version of this ask:
“We need a Southeast Asia Strategy one-pager. How do we enter this region in the shortest time possible? What’s the silver bullet go-to-market?"
(Bucky’s stakeholder, 201x - present)
To which my response is usually bewilderment or a snort.
Southeast Asia is no doubt the future; the region’s young, enterprising 650m population is a huge base for both supply and demand of innovation, goods and services. Couple that with crazy growth (and we aren’t anywhere near the top) and leapfrogging connectivity and it makes complete sense why everyone wants a piece of the SEA pie. The problem is there is no such thing as a Southeast Asia strategy, because there is no such thing as Southeast Asia.
That statement is a little extreme, but it is indeed better to think about Southeast Asia as a bunch of very loosely associated, entirely different entities. This series will explore the vectors along which SEA is fragmented, and talk about what companies should do about it.
This week, let’s begin with the fundamentals: geography and road infrastructure.
Why does geography matter?
Simply put, things and people need to move. Goods and services need to reach consumers, labour needs to reach places of productivity (arguable but we’ll get to that). This has multiple implications for companies:
Scale infrastructure defines how quickly you can scale. Can you get what you sell into rural areas rapidly? Can you employ more people where you’re based, or attract people to live there? How will they commute?
Competition Is poor infrastructure a moat for you (other companies are put off by it) or a barrier (local incumbents can navigate it better).
Costs what are your logistics and transportation costs going to look like? Can you still turn a profit if your product needs to cross a mountain range?
Individually, these are solvable problems for every single market in SEA. The issue is when you try to solve for all of them the same way.
One simple way to look at this is road density:
that’s a 6.6x variation between just the top two countries, not to mention across the board. Road density is a great indicator for access, because more road per square km means more ability to move resources and outputs. Tons of variation across countries means you need a very different plan for each.
The same story plays out if we look at density of other means of transport too. It’s the same with rail length
airports
and port volume.
Tellingly, there is a really big difference in how the countries invest in transport infrastructure. This implies that the shape of things is not set to change any time soon.
The numbers don’t tell the full story.
Brunei looks good in terms of investment only because their population is less than 0.5m.
Indonesia is just massive. There will always be headroom for investment and infrastructure (this in itself might be an opportunity if one can get past regulatory hurdles!)
Although the Philippines has 729m of road per square km, their National Economic Development Authority estimates that only 15% are paved, which challenges business operations in anything but the most urbanised areas (which themselves are famous for their traffic jams).
Thailand has decent numbers in many areas, but is mostly flat: this means a higher susceptibility to flooding and other natural disasters.
Vietnam is developing rapidly, but is constrained by natural geography: the country is long, narrow and mountainous. This limits flow of goods and services North and South.
Cambodia and Laos lag meaningfully in infrastructure, while Myanmar looks like it’s improving on paper, but the utility of the built infrastructure doesn’t translate on the ground.
Finally, it’s worth thinking about where all those roads, rails and planes lead to: urbanisation levels vary widely across Southeast Asia. What this means on the ground is you might have tons of road length that leads.. nowhere (hello, Naypyidaw Highway).
So what should companies do?
The obvious answer is “have a different strategy for each market” but it’s worth looking at a few specifics. The beauty of Southeast Asia is just how quickly technology is connecting disparate regions, and I think that’s one area of leverage. A few things to consider:
Better GPS coverage and digital mapping can solve for many road access issues GoJek and Grab are the obvious callouts here, but even smaller companies like Lalamove use route optimisation to reach people in even the most remote areas.
Digital logistics management better supply chain and logistics management (real time tracking, better routes, identifying bottlenecks) = better logistics. Kargo comes to mind first, but there are many.
Drones yes I kid you not.. If roads won’t get you there and planes can’t land, send a drone. There are tons of initiatives trying to build just that, like Skyfront. Then there are companies like AirMap which improve drone aerospace management. Tapping into the hardware and software needed to really commercialise drone logistics might help companies completely skip the transport issue, especially in archipelagos like Indonesia and The Philippines. And don’t forget, drones need not be aerial.
Go Mobile Not everything needs to physically move. Southeast Asia’s advantage is it’s rapidly growing connectivity, and for app developers (especially gaming, with the population skewing young and male) this presents a golden opportunity. We’ll talk more about connectivity in a future post.
Beyond leveraging technology though, I think the key to a successful transport/infrastructure-dependent strategy in Southeast Asia is the same as the key to succeeding across any vector here:
Go local a country-level or even city-level approach is the best call, and staffing teams with people who know the markets intimately is a must-do. If your investment framework says you can’t go after every single market, just pick one and do it well. The scale comes later.
Don’t generalise There are probably lessons you can learn from each market that are valuable regionally, but these need to be applied with caution at best, and not at all most times.
Accept the chaos scaling in a fragmented market requires a high level of zen amidst chaos. Things will not work, things will not be repeatable across borders, things will befuddle. That’s ok.
Next week
Next week we’ll look at how culture and language fragment across the region, and what it might mean for companies. It should be evident why I’ve spent less time on what companies should do: there is no one answer. Expect the same next week, and across this series, but I hope to include a few anecdotes or examples of local companies who are solving for fragmentation in interesting ways that should spark your imagination.
media I’m consuming this week.
3 recommendations to help you learn and grow.
“The paradox of Apple” - Another Podcast
Anything Benedict Evans gets at least some of my attention, and I’ve been enjoying his podcast with Toni Cowan-Brown quite a lot. Two things that I’ve pondered from this episode (that will probably turn into my own posts in the future):
Apple started out wanting to make everything themselves and failed miserably because they couldn’t capitalise on how partnerships scale. They then outsourced nearly everything and made trillions. Now the pendulum is swinging back; first in chips and maybe soon in displays.
During the era where Apple figured out partnership (and ruthless execution thanks to Tim Apple), they became excellent curators: the best camera sensor here, the best chip there, the best graphics here, all beautifully packaged and held together by a ribbon of software that “just works” and a “walled garden” app ecosystem that in reality spans millions of use cases at your fingertips, integrated across all Apple’s device surfaces.
Mystery Plague That Killed Singapore’s Angsanas
A piece of Singapore history that I was completely unaware of. This was fascinating, and very inspiring for my other side project (subscribe here or here if you’re into nature things!)
How to buy a chicken sandwich in Shenzhen - Rest of World
The How To Buy series in Rest of World is great in general, but this one was timely as I’ve been reading a lot about China as they open up. If even KFC are livestreaming, there’s probably something there. I personally am decidedly old-school and will do my purchases in an app, thank you very much.
I feel like this is largely a commentary on strategies to overcome the physical connectivity and heterogeneity of SEA. Will love to hear a piece on the digital infrastructure of SEA and approaches businesses can consider. Would these pan out the same as described in the article (highly localised strategies for individual countries) or would we begin to see some consistency across the board?