Building A Localisable Product
There is a big difference between building a scalable product and one that’s localisable. In fact, a truly scalable product is also localisable.
This nuance is often missed when founders calculate their total addressable market (TAM). This is because they look at shared customer characteristics in particular countries (e.g. language) and assume that their product will resonate.
This is less of an issue for founders in the US and China. The high internal consumption in these countries keeps founders busy serving domestic customers.
In smaller countries, like Australia, founders are forced to look offshore to scale. Historically, this has meant planning a US market entry. Access to capital is relatively high in the US and due to the culture of innovation and venture capital, founders can more easily map to investors who are aligned with their opportunity. The second reason for considering the US is the ability to understand consumer trends. Target customers are relatively homogeneous between both countries.
That said, the trade-offs are also apparent. The US is a large geography with diverse sub-cultures, multiple time zones, a nuanced (and highly litigious) legal system and unstable trade and immigration policy.
While these factors are surmountable, they do impact business development and increase costs. The point, however, isn’t about cost. It’s that for the most part product doesn’t require significant changes to be localised to the US.
This isn’t true when it comes to Asia.
Building localisable products for “Asia”
Like 45 countries make up Asia. Technically there are 48 if you include Russia, Kazakhstan and Turkey, each of which has land in Europe.
Like English is spoken by some 300M people but dwarfed by the 500M who speak Hindi and 1.4B who speak Mandarin and Cantonese.
Each country also has a unique collection of sub-cultures and most have a growing middle class who look to western lifestyles for inspiration on how to live.
These characteristics create a unique set of opportunities and challenges for founders in Australia and across Asia.
There is the opportunity to help fuel new consumption. And there is potential to supply remedies that help deal with the impacts of that consumption (e.g. in personalised healthcare for a growing obese population).
The challenge lies in localising products for a selected number of countries and cultures. In the same way that this challenge should not be underestimated, the opportunity should not be ignored.
A checklist for making a localisable product
I have learned a number of lessons from building companies in Asia. And because introducing Drop into selected Asians countries will be a large focus for my team over the foreseeable future, I would like to share how I am thinking about this opportunity.
I caveat this by saying this framework will evolve and I look forward to connecting with other founders and investors to discuss further.
1. Acknowledge the nuanced pain-point
While the regional macro conditions might suggest an opportunity, each geography will have a nuanced version of the story. It’s also important to acknowledge that growth and consumer adoption in developing markets can be very different compared with that of developed markets.
This can be due to consumer sophistication or the preparedness of the market to receive the product. In other words, there might be products and services already meeting existing needs or the problem you are solving hasn’t been realised as a problem yet. In any case, invest time on the ground understanding the issues in detail. This will help design with the end customer’s culture and their potential adoption rate in mind.
2. Be partnership driven
A local business or government partner will need to vouch for your business for you to be taken seriously. While this can throw up a slew of new (and unfamiliar) relationship management practices that require proficiency, being of the mindset that your product can add value as part of existing product or platform is important. I’ve written before about the value of growing as an ingredient product.
The caution is that western founders often do a poor job of understanding their Asian competitor landscape. This is usually because they aren’t connected into the venture ecosystem (or have difficulty Googling who to look for) but it can also be because they naively believe their product couldn’t possibly exist in Asia (big mistake)
3. Incentives are (still) superpowers
Identify and understand the flow of incentives including those that relate to financial benefits, control and status (in and across organisations, industries and governments). The conclusion might be that your company and brand should attempt market entry independent of a local partner. I would be surprised if that were consistently the conclusion.
4. Quality wins
While cost is an important factor of closing deals, some countries in Asia can present a quality premium. This is true to a number of countries including but not limited to Singapore, Australia and New Zealand. The high standards that companies need to adhere to in these countries can be a key advantage and one that should be leveraged.
5. Optimising for language isn’t enough
Language is an expression of culture. And culture is complex. The best illustration of this is to consider any language you are familiar with. Each one (including English) contains different dialects and while translation software is improving, creating a language-specific version of a product in and of itself won’t cut it. Because more often than not, it will miss important cultural cues. This can at best hamper growth. At worst, it can blow back on reputation and product.
One Last Thing…
Up until the mid-2000’s many Asian-based companies, particularly those in consumer electronics, invested heavily in ‘westernising’ their brands to increase their appeal and capture market share. The rising consumption in many Asian nations and the opportunity this presents means that companies don’t just have to create localisable brands, they need to compete with local incumbents.
So here’s the punchline: Identify and engage with the best possible partner(s) to learn and build compelling, localisable brands and products.
You could start by going it alone but experience tells me that would be a mistake.