Global manufacturing is on the cusp of a major reset through the COVID-19 and beyond, which opens up new avenues for enterprises in Southeast Asia (SEA). Supply chain as a business function breathes “connectivity”, both logistical and digital into businesses.

Southeast Asia has a strong foundation in logistical connectivity and can lean on the success stories of Indian startups to build digital connectivity and scale-up. Almost 80 per cent of volume and 70 per cent of the value of global trade happens through the sea, of which 60 per cent passes through the South China Sea.

When it comes to digital connectivity, it is projected that the digital economy of SEA will triple its current size by 2025 and breach the US$300 billion mark.

Enterprises in SEA are sitting on a pile of opportunities and if they can leverage the digital transformation of their business processes as some leading Indian tech startups have done, they will be able to synergise the best of both worlds; logistical and digital connectivity.

When it comes to scaling up, Indian startups can serve some important lessons that hold relevance for enterprises that are looking to deepen their roots in SEA economies. These are as follows:

Adopt a product mindset instead of a service mindset

The Indian digital ecosystem has been through three stages of maturity: outsourcing, software services, and now software products. Currently, India has 30,000 active technology startups with more than US$4 billion in funding, and the trend towards software products has only continued to grow.

Enterprises in SEA need to embrace a product mindset right from the word “go” to create new avenues of value creation apart from cost. Price sensitive models provide a cost advantage but also make customers price-sensitive, thereby heightening the risks of erosion of market share to competitors.

Also Read: What it means to have a product-first company

Third generation Indian startups that have focused on products are extracting higher margins as compared to those with a focus on outsourcing and services.

Building the MVP from the ground up

SEA –like India– offers a lot of cultural, economic, and geographical diversity. For enterprises in SEA to transcend the challenges emanating from a diverse customer base, they need to replicate what some leading Indian tech startups have managed to pull-off.

The latter have embedded diversity into the core visualisation of their minimum viable product (MVP) while building it from the ground up. This has allowed them to be more agile and correct the course of their product development strategy to fit customer needs. Indian tech startups have been able to differentiate their products by embracing pluralism in pricing, compliance, regulations, and governance, language, and device categories across the web and mobile platforms.

Reduce supply chain length

SEA economies, like India, offer significant synergies owing to the demographics and high rates of GDP growth rates. The six SEA countries that comprise of ASEAN together have a total population of 600 million people which is larger than that of NAFTA, a combined GDP of US$2.3 trillion, and total goods exports of US$1.2 trillion.

For a region that is as diverse as India, it makes sense for enterprises to explore opportunities to stay in proximity to the points of consumption, reduce the length of the supply chain and thus, reduce distribution and downstream logistics costs.

Digitalise supplier networks

One of the major challenges of operating in a geographically diverse terrain governed by different governments is supplier collaboration. The weakest link in the supply chain and procurement network can set off a ripple effect on the manufacturing of finished goods.

For instance, if one out of 50 suppliers for an automotive OEM fails to deliver its components of the right specifications at the right time, it leads to a delay of eight days in the downstream distribution of the finished goods.

Also Read: Will South Asian tech startups thrive in the new normal?

Indian startups are leveraging digital procurement platforms to improve the accuracy of their bidding processes and make their strategic sourcing more performance-driven. SE Asian enterprises can look to explore digital procurement to navigate across their supplier networks across several countries in the region.

Focus on core competence

Focus on core competence has enabled Indian tech startups to stay cost-competitive. They have been able to migrate towards an analytics-driven culture to map their competence, build their category expertise, and specialise while outsourcing everything else.

SEA enterprises need to do the same to scale success in the region; pivot their make or buy decisions on data, manufacture what they should, and procure everything else from suppliers that can provide it at a better cost.

One of the prime reasons for China’s cost competitiveness in addition to cheap labour is its procurement of intermediate goods from SEA. Enterprises in SEA need to leverage the cost-advantages of local manufacturing of intermediate goods and consumables such as MRO items, packaging, spare parts, accessories, and low-value components of finished goods by embracing the digital transformation of their procurement.

Leverage automation to access new markets

SEA, like India, is the home to some of the world’s most tech-savvy consumers which presents a great opportunity to enterprises in the region. With the roll-out and scaling up of the Adhar initiative, e-governance has enabled 1.2 billion Indians to have biometric identities.

This has, in turn, enabled higher financial inclusion through the creation of 500 million bank accounts for the previously unbanked and created tremendous opportunities for fintech startups, digital payments platforms for B2C transactions, community lending, crowdfunding, etc.

Also Read: A beginner’s guide to the B2B e-commerce business

Similarly, SEA enterprises need to leverage opportunities presented by the automation of business processes to access new markets, reduce transaction costs, and costs of customer service. Disruptive technologies hold great potential for SEA enterprises and can create an additional annual impact between US$10 billion to 20 billion, approximately accounting for 5-10 per cent of the projected annual GDP of SEA economies in the next five years.

Embrace B2B e-commerce

SEA and India share a common trajectory of cross-border commerce and distribution which is likely to gain higher momentum after the COVID19 pandemic. The roll-out of the Goods and Services Tax (GST) in India based on the principle of “one nation one tax” boosted inter-state commerce and distribution by transforming the country into a compact and borderless economic union.

Similarly the existing strategic and economic partnerships enabled by ASEAN offer a tri-polar edifice to the global supply chain from Japan through SEA to the US. Interestingly three ASEAN member nations are home to the suppliers of OEMs in Japan: Singapore, the Philippines, and Malaysia.

The strengthening of cross border trade partnerships in ASEAN in combination with B2B e-commerce models can enable SEA enterprises to reimagine cost and technical efficiencies in trade and distribution, just like Indian startups have done in the aftermath of the GST.

This will allow SEA enterprises to not only leverage export opportunities in the United States and Japan but also explore endogenous growth opportunities within the region of SEA.

–

Editor’s note: e27 aims to foster thought leadership by publishing contributions from the community. Become a thought leader in the community and share your opinions or ideas and earn a byline by submitting a post.

Join our e27 Telegram group, or like the e27 Facebook page

Image Credit: Priscilla Du Preez on Unsplash

The post Scalability lessons from Indian tech startups for enterprises in SEA appeared first on e27.