This article first appeared in Forum, The Edge Malaysia Weekly, on March 28 - April 3, 2016.

Asia’s most innovative and proactive businesses are finding ways to grow and thrive despite structural challenges. These companies are fuelling the region’s remarkable compound annual growth rate (CAGR) of 8%, which is more than double the global rate. While population growth and regional integration play important roles in this trend, successful companies’ ability to identify and capture business opportunities is an essential component.

Talent gaps, infrastructure deficiencies and unpredictable regulatory environments? These are challenges throughout the region, but they are not stopping a handful of highly entrepreneurial companies. Boston Consulting Group’s (BCG) recent report, “Overcoming Asia’s Obstacles to Growth: How Leading Companies Are Reshaping Their Environment”, studied several of these companies in an effort to pinpoint their common strategies for success.

The study found that successful businesses in Malaysia, China, India and five other Southeast Asian economies share an outlook that lets them invest in and shape their environment, rather than waiting for external challenges to be resolved.

The report’s authors call this common attitude the “first-mover mindset”. The first-mover mindset comprises three main attributes:

•    An entrepreneurial culture;

•    A long-term view that empowers companies to invest in areas beyond the traditional scope of their business; and

•    A willingness to create local partnerships.

The AirAsia experience

Malaysia’s AirAsia, one of five companies studied for the report, has become a giant low-cost carrier in little more than a decade, with affiliates in four neighbouring countries and 50 million passengers a year within Southeast Asia alone. Granted, the airline faces a number of challenges today but the underlying lessons are still relevant.

AirAsia’s founder, Tony Fernandes, launched his business in 2001 in the face of almost overwhelming challenges. Fernandes mortgaged his home and used personal savings to buy a money-losing, government-owned carrier without a jet fleet. The lack of open-skies agreements throughout Southeast Asia meant landing rights would be difficult, if not impossible, to get. Other countries’ laws required local majority ownership of carriers, seeming to block acquisition as a growth strategy.

Today, AirAsia operates a network of airlines in Indonesia, the Philippines, Thailand and India as well as Malaysia. The airline has opened dozens of new routes: one in three AirAsia routes did not exist at all before the carrier began service. Among these is the flight from Kuala Lumpur to Bandung, Indonesia, which began in 2004 and now flies 28 times a week, carrying 300,000 passengers a year.

Facing local ownership requirements for regional airlines, Fernandes entered cross-border joint ventures as a minority partner. He chose partners who shared his vision of budget travel and were willing to cede central management authority to AirAsia. The result is a network of nine affiliated carriers (so far) that offer consistent levels of performance and pricing.

The path forward

The significant structural challenges Asian economies face are likely to remain obstacles for the foreseeable future: educational systems that do not meet businesses’ needs; outdated, inconsistent and unwieldy governance; and overloaded and shaky infrastructures in both the physical world and cyberspace. Governments are making changes to help their economies become more competitive but those changes will not come fast enough for most companies committed to growth.

AirAsia’s success story shares several common elements with the other companies profiled in the BCG report: Indonesian conglomerate Astra International; S.F. Express, one of China’s most reliable delivery service; Wipro, a leading provider of IT services in India and the Middle East; and Unilever, which supplies some 1.5 million small, family-owned shops in South and Southeast Asia. These companies have taken proactive measures to improve their talent pools, invest in infrastructure and find opportunities in regulatory requirements.

Companies that want to adopt this “first-mover mindset” must follow these businesses’ lead:

•    Develop an entrepreneurial culture. India’s Wipro recruits and rewards employees who are able to solve problems, teach themselves what they do not know and are passionate about their work. S.E. Express offers a piece-rate compensation system heavily based on incentives, so couriers’ pay is directly linked to the number of packages they deliver;

•    Take a long-term view. Astra invests both money and time in nurturing executive talent, sponsoring a two-year, graduate-level management programme for 12 to 15 candidates each year. Last year, all the graduates of this programme accepted positions with Astra. Unilever’s grassroots Project Shakti offers business training and microfinance credit to women leaders in villages and isolated communities so they can set up their own businesses to distribute Unilever products. AirAsia chose second-tier airports as regional hubs not only because they offered lower fees and less congestion, but also because they had more slots available for a growing fleet; and

•    Create local partnerships. These partnerships may be public or private, with government agencies, schools, businesses and other stakeholders. The Astra First programme is a partnership with 14 Indonesian universities, awarding scholarships and leadership training to 80 promising sophomores who serve as “Astra ambassadors”. Locally based Unilever officials participate in regional associations that advise governments on food and safety regulations. AirAsia’s joint ventures with local owners are a core element of its growth strategy.

The emerging Asian economies are the world’s greatest growth markets. Companies that wait for external conditions to change are losing opportunities to the first movers that are changing the environment to accommodate their own business models. As BCG’s study showed, the true obstacles to success in these emerging markets are not talent, infrastructure and regulation, but a company’s own mindset.

Zarif Munir is a partner and managing director of BCG Malaysia

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