Week in Review: It’s not easy to be a digital winner

  •  Tough to scale even when nations in growth markets have many of the pieces in place
  • The curious acquisition of Redmart by Alibaba powered Lazada, what’s the real story?

I HAD an interesting conversation this week with the head of Accenture’s Growth Market business, Gianfranco Casati, who was in Kuala Lumpur for the official launch of Accenture’s latest Global Delivery Centre facility. (My article on that facility and Accenture’s use of robos will be out next week.)
I actually disagree with Casati’s belief that the environment exists today for small companies to emerge from almost any country and go on to build digital businesses at scale for themselves.
That’s too bullish a view for companies coming from growth markets, which is Casati’s focus. His view is based on the assumption that increased pervasiveness of digital connectivity has collapsed borders, therefore allowing companies from any nation to hit scale and with technology not being a competitive barrier as well, where, thanks to cloud services, companies from say, Africa, have access to the same technology as those from developed nations.
I think you also need to take into account the strength of the talent pool available for those companies to hire and help them execute. And even if a country has a deep talent pool, as in most countries, top tier talent would rather work for large local companies or multinationals.
And equally important for companies to have any chance to succeed is being in an ecosystem that supports digital companies or startups if you wish. At its core, that ecosystem means the entrepreneurs driving these emerging companies are not alone and have access to support, be it financial be it emotional/mental.
And even when you have all these factors in play, your chances of emerging from a growth market and becoming a regional, global player are tiny, I say.
Just look at Singapore’s leading e-grocer, RedMart, having to sell itself to the Alibaba powered Lazada. While the valuation is not given, I highly doubt it is a sale that will have RedMart investors popping the champagne.
Yet in RedMart, you have a small company, it’s from a small country but which enjoys access to a fast maturing digital/startup ecosystem and with access to good talent. But they didn’t scale even though one would think the skillset and capabilities they built up delivering a hyper local service with a 2-hour delivery window, can be ported over to other large cities in Southeast Asia.
My point with mashing the RedMart example with Casati’s belief, is that, even when nations have almost all the ecosystem components in place to support the creation and then growth of digital companies today, achieving regional or global success is still as hard as ever – maybe even harder.
Meanwhile, I personally found it curious that both Lazada and RedMart brought in pricey sale brokers in the form of Goldman Sachs and Credit Suisse to close their small deal. And on the surface level, the rhetoric from Lazada about being able to leverage on the fulfillment capabilities of RedMart rings a bit hollow.
It is already common for e-commerce merchants in Kuala Lumpur to offer their customers two-hour delivery options leveraging on the existing pool of logistic providers. I don’t recall anyone needing to make any acquisition to offer this service. Makes you wonder what the real story is behind this deal.
Meanwhile for startups, the real story is that the formation of the Asean Angel Alliance on Nov 1, could eventually pave the way for angel investors in the region to start making cross border club deals. Nothing is going to happen in the near term but if this alliance takes off and angels in the region start forming stronger bonds between themselves, and if some Asean level regulation comes in to provide a fillip here, you never know.
I have already had two entrepreneurs call to ask if I could connect them to some of the angel clubs from Asean. So I know entrepreneurs will welcome the closer bonds angels across the region build as that will lead to greater investment options for them.
And, finally, in Malaysia, the forward looking Securities Commission Malaysia has introduced six registered peer-to-peer (P2P) financing platform operators, thus making Malaysia the first country in Southeast Asia to regulate P2P financing. The six were chosen from over 50 applications – giving you an idea of how strong interest is in providing this new form of financing. You can expect the other SEA countries to follow suit as well – sooner, rather than later.
Wishing you all a restful weekend and a productive week after.
Previous Instalments:
Week in Review: Convergence accelerates between Old and Digital Economy

Week in Review: MatahariMall gets its wings, Be Lazee sees its clipped

Week in Review: Online has to be core for Brick & Mortar retailers says Alibaba’s global MD

Week in Review: That, sweet (pungent) smell of $ for early stage startups
Editors Picks:
Malaysia first to regulate P2P financing, after SC introduced six P2P operators

Asean Angel Alliance aims to boost investments, growth

The digital opportunity for nations

Review: Honor 8, defining mediocrity

It really is a small world after all and IBM tells you why

XL Axiata enters the black with US$12.25 mil net profit, revenue declines

Microsoft prepares to barnstorm VR market

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