How to grow a tech business in Asia

Why Asia and why now

Asia is home to 60% of the world’s population and has grown into a tech powerhouse in the past decade. With several of the world’s most advanced economies and many promising emerging economies, the continent is increasingly a key growth driver for multinational companies. 

In the three years from 2016 until 2018, Asia contributed 52% of global revenue growth for technology companies, as well as 87% of global growth in patent output, 51% of global growth in R&D expenditure, and 41% of global growth in science and engineering articles. These numbers show the extent of the technological revolution that is taking place in Asia.

Perhaps even more exciting for companies seeking expansion is the fact that Emerging Asia will contribute 57% of global GDP growth from 2021 to 2025 (IMF, 2021). Simply put, if you wish to grow, look East! 

Despite the opportunities, expanding technology businesses in Asian markets can be a daunting process. On the one hand, Asia is diverse and made up of five major markets (China, The Indian Subcontinent, ASEAN countries, The Middle East’s Gulf Cooperation Council, and East Asia), each of which has deep cultural, societal, and political traditions that translate into unique customer expectations and market conditions. 

On the other hand, the region benefits from: 

• The fastest-growing market for tech-related businesses 
• Broad policy support from national and local governments
• Strong infrastructure for emerging industries such as EVs and green tech

There’s a lot to consider when planning how to grow in Asian markets. Let’s take a closer look at why Asia is positioned to become the leading economic region in this century.

1. Market size and growth

Over the last decade Asia has accounted for 52% of global growth in tech-company revenues, 43% of startup funding, and 51% of spending on research and development (Forrester, 2021).

Growth is expected to continue this year, in particular in countries like the Philippines, Vietnam, and India, where purchases of tech goods and services are expected to grow by 9.1%, 9.0%, and 8.7% respectively. Meanwhile China, Malaysia and Indonesia have strong foundations to support long term growth. 

Across the region, the sale of software is rising by 8-10% annually, with customer relationship management, business intelligence, digital experience, operational excellence, and human capital management projects all seeing significant traction.

2. Government support

Many Asian governments actively support developing and adopting technology in domains like renewable energy, advanced manufacturing, and artificial intelligence. 

During the pandemic, public-private partnerships were essential to South Korea’s track-and-trace strategy and national health QR-code programs in China and Singapore. Asian governments are also investing in programs that help enterprises access resources and information more effectively, such as Singapore's Economic Development Board. 

Some governments have become vital catalysts for emerging industries by offering preferential policies or funding for the development of technology to drive commercialization. In China, for instance, the government aims to develop a domestic AI industry worth $150 billion by 2030. India has launched several programs that link technology and social development, such as the digital ID program, as a strategic tool for delivering government services, managing budgets, and increasing financial inclusion. And Malaysia has formed digital free trade zones through which $65 billion of goods and services are expected to flow from 2020 to 2025.

3. Infrastructure

Asian countries have invested heavily in manufacturing, supply chains, telecommunications, and research infrastructure. This infrastructure makes Asia an attractive location to develop and produce technology, as well as driving the adoption of technologies related to operational excellence. 

5G - Four of the five companies that hold the most 5G patents are Asian (Huawei, Samsung, ZTE, and LG).

Electric Vehicles batteries - More than half the world’s patents for solid-state batteries were filed in Asia, and China has 79% of global EV battery production capacity.

AI - Asia produced 48% of AI strong patents and accounts for 42% of global start-up investment in AI technologies.  

Internet of Things (IoT) - Asia has 39% of the world’s strong patents and 56% of startup investment in IoT technologies. China currently has the largest market share at 26%, followed by North America and Europe at 24% and 23%, respectively. 

Manufacturing equipment - Asia accounts for 45% of the world’s strong patents and 40% of startup investment in manufacturing technologies. 

Renewable energy - Renewable energy is expected to account for an estimated 40% of average annual global energy investments through 2025, and Asia is a leading player. The region has the largest share of installed renewable capacity with 45%, compared to 25% in Europe and 16% in North America. And Asia is expected to pull further ahead, with 64% of new renewable capacity additions globally between 2020 and 2040, taking its overall share of capacity to 56% by 2040 (International Energy Agency, 2019). 

As elsewhere, the outbreak of Covid-19 globally has accelerated digitization in Asia, with companies actively adopting new technology to improve human and capital efficiency.  

Asian market characteristics

Despite the positive signals about Asia's long-term appetite for technology, it is important to remember that every market presents risks, and growth initiatives in highly competitive Asia markets must be approached with care.  

The recent COVID epidemic and the Russian invasion of Ukraine have highlighted the importance of scenario planning. Building a strong business in Asia requires a long-term commitment to the market. There will inevitably be unexpected competitive challenges, internal setbacks, and macroeconomic headwinds. Devising a well-researched growth plan that is robust in the face of change will increase your probability of success. That means studying Asian markets. Asia is not a monolith but is home to unique and dynamic markets with customer segments that value different product features and follow different procurement processes.  

To be successful in Asia, it is vital to understand the competitive, economic, cultural, political, and societal factors at play. 

With this in mind, three of the most common reasons companies fail to achieve their Asian growth targets include: 

Underestimating local competitors – It is imperative to understand the local competitors you are up against. Your technology may well be superior. But your local competitors will inevitably be better able to understand and adapt to changing market expectations. In Asia, speed matters. This means localizing a significant amount of decision-making so headquarters does not become a bottleneck when executing your growth strategy. Competitors will often also be less expensive. This does not mean that you must match their price, but it does require that you either explore lower-cost solution configurations or carefully justify your premium pricing.

Lacking local execution capabilities – It is difficult and expensive to build the full suite of capabilities in every important Asian market that you would have in an ideal world. Companies need to establish effective, long-term partnerships with local companies. These local partners can help to bridge the speed and know-how gap in every stage of the process, from product localization to distribution to aftersales service. Strong business relationships are built on mutual value creation and trust. There must be a clear incentive structure to motivate your partner long-term. And you must invest in building relationships with your partner's management team. Contracts mean somewhat less in many Asian countries than in Europe or the US. Relationships have impact everywhere. 

Misunderstanding local customer expectations – The days when a management team could sit in Detroit or Munich and define a portfolio strategy for Asian markets are long gone. Even in B2B sectors where cultural differences are less consequential, customer expectations can differ in many ways: UI/UX, feature sets, integrations, sales channels, service levels, procurement processes, pricing model, and pricing level. Successful companies localize decision-making in order to listen intently to their customers and partners. 

Localizing sales & marketing  

Many tech firms will first focus on building sales and marketing capabilities in Asia. In our experience, this requires investing in local capabilities and empowering local teams. A simple translation effort driven by headquarters is never sufficient. 

Localizing marketing for the Asian market can be a complex process, but building a strong foundation will provide the stability to manage unforeseen challenges as they arise. Here is a short list of best practices that we are see successful companies apply in Asia. 

Go local

Build teams that work in the market, speak the language, and understand local business practices. Then empower them to make tactical decisions without headquarter input, and give them a strong voice in strategic decisions. Local colleagues are best able to rapidly interpret and respond to customer needs. Headquarters will naturally want to control expansion plans but giving local management a strong voice will help to ensure that decisions are made based on an accurate understanding of market opportunities and forces.

Start small but agile

An agile, independent team is most likely to be alive to the cycle of change in local markets. In my experience, small independent teams are more likely to succeed than larger teams that are beholden to headquarters. How do you make your subsidiary agile and independent? Here are some tips: 

• Provide independent budgets so the local team can run. Keep the budget lean and require proper accounting, but don't dictate how money should be spent. 
• Set realistic goals and allow room for experimentation when finding product-market fit. Unreasonable targets close the door on exploration during execution. And when the deadline arrives and the target is unmet, you risk high turnover and low morale. 
• Allow job boundaries to blur. Emphasize results rather than activities. 
• Leverage partners, suppliers, government offices, and other third parties who can help you move and learn quickly. 

GM must be a builder and a communicator

The regional or country GM is a complicated role for a tech firm. This person will primarily be a glorified salesperson in the early stages of expansion. The critical success factors will be an existing customer network and sales ability. However, if the product gains traction, other competencies such as team management, strategic vision, and cross-cultural communication will quickly become as important. This tension between responsibilities and expectations leads to high turnover in the GM role. 

This then poses the question of whether to hire a young and ambitious sales leader who can grow into a larger role or an experienced professional who is initially overqualified but has proven ability to manage a complex sales organization. There is no right choice, and the decision often hinges on the ambition level of the expansion plan and on budget availability. Just be clear about which direction you are taking so you can plan accordingly to support your GM and meet his or her expectations.  

Let your local team be local

Hiring in Asia can be frustrating. You may struggle to find candidates that meet your expectation based on your home market. Compensation structures and levels will differ greatly by region. The onboarding process can prove complicated. And your company culture might not be a natural fit for your local team. 

Some of these issues are process-oriented. Local headhunters can make sure you tailor the job description and compensation package accordingly, use the right recruiting channels, and adhere to local laws and norms. Find a good recruiting firm and treat them as a long-term strategic partner rather than a one-time transactional headhunter.

Once your talent is on board, provide the team with flexibility in developing a culture and ways of working than fit them, while also actively building personal bridges to colleagues at headquarters. 

Tech product market entry

Many companies feel it is important to first enter the market via direct sales to learn how the market works and maintain service levels. In this case, early deals are often run as smaller pilots. These pilots provide proof cases for larger deals in the future, while allowing the company to build local capabilities and iron out tech stack localization issues on lower-risk projects.

Another route for expansion is the indirect sales model. The indirect sales approach allows you to lean on a partner to figure out cultural nuances in the sale process. The ideal partner will have a strong reputation with core customers, an effective sales force, and a strong financial or strategic incentive to prioritize selling your products. 

Content marketing

Content marketing is effective for B2B lead generation but much of your existing content will not be effective in Asian markets. It may be in the wrong language, emphasize the wrong value proposition, or be distributed in the wrong channels. Creating compelling local content is a long-term investment that will pay dividends for years to come.

Asian markets like China and Southeast Asia are mobile-first. Mobile apps are an accepted and widely used way to communicate in the workplace. And video or social media content can have a strong impact at the top of the sales funnel.  

To close, expanding to Asia can be challenging. The continent is made up of diverse markets with unique customer expectations and business environments. Regulations, laws, and cultural and societal norms will all differ considerably between countries. Your sales and marketing practices must adapt accordingly. 

Despite these challenges, Asia is a leading growth market for many technology firms. If you plan to be a global market leader, you must learn how to serve customers in Asia. As we emerge from Covid, Emerging Asia will contribute more than 50% of global GDP growth over the coming five years so the time to start is now.