Businesses in Asia Pacific (Apac) are riding the wave of regional success, powered by strong economic growth and an energised business landscape.
Despite global economic turbulence, Apac is projected to account for 60% of global GDP growth in 2024. As this impressive growth boosts regional opportunities, Apac companies need to strengthen their business building capabilities to compete and thrive.
Corporations in Apac have an encouraging recent history of evolution. Many have prioritised developing digital capabilities, integrated new digital talent and adopted powerful working methodologies.
As new technologies like AI rapidly emerge and evolve, companies need to adopt an effective “business building” approach that encompasses the invention, initiation and expansion of innovative products and services with high-growth potential.
Understanding Apac’s business building landscape
In order to understand the priorities and preparations of business leaders in Apac, BCG X — the tech build and design division of Boston Consulting Group — surveyed over 400 senior leaders across the region about their business building efforts. The results are outlined in our latest report, Navigating Business Building in Asia: Insights and Trends.
Eighty per cent of executives surveyed say business building is a major priority for their organisation, with these companies pursuing five high-growth opportunities each year on average.
Apac leaders are also reinvesting almost one-third (32%) of their company’s annual revenue into launching, acquiring or co-launching start-up ventures. More than half of these leaders (57%) viewed their investments as being successful.
Yet, despite the energised landscape, 40% of leaders say their companies are not well-prepared for pursuing new high-growth opportunities. For them, the main reasons for failure in business building include the inability to find a viable business model and lack of product market fit. This is often down to lack of rigour in the business building methodology or a failure to properly vet business models and markets upfront, prior to investment. If businesses do not do their homework, they are primed to fail.
This indicates to us that businesses in Apac may do well in business building within existing areas of operations, but are struggling to find a foothold in innovative new spaces beyond their core business operations.
In addition to building new businesses from scratch, mergers and acquisitions (M&As) are enjoying renewed focus in Apac as a path to capture new business opportunities. With economic headwinds pushing down valuations, there are clearly some appealing acquisition opportunities for organisations to consider. At BCG X, we clearly see there are a number of attractive assets on the market at fair valuations, with multiples having come down in recent years.
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We believe that in today’s markets, M&As can complement your organisation’s business building strategy. That sentiment is why almost two-thirds (65%) of Apac leaders say there is now a higher focus on M&A than in the previous year within their organisations.
A word of caution, however. M&A might be an encouraging opportunity today, but it is important that businesses do not rely too heavily on this single growth strategy. As markets pick up in the future, premium valuations may return, narrowing M&A opportunities and potential returns.
Are you prepared to business-build?
So, where does that leave leaders looking to capture growth?
We have identified nine strategic assets which leaders in Apac should leverage to maximise their success in business building, split across distinct categories of Core Assets, Organisational and Collaborative Strength, and Technology Capabilities.
Core assets
Brand: A strong brand is crucial for gaining customer trust and standing out in the market.
Financial position: Healthy cash flow and robust financial position enables a company to sustain operations in growth areas.
Sales and distribution: Access to sales and distribution networks enables an organisation to efficiently reach customers faster than fresh start-ups.
Organisational and collaborative strength
Talent: Skilled and experienced individuals are essential to execute innovation.
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Culture of innovation: Culture should underpin an environment that encourages the pursuit of new ideas without the fear of failure.
Strategic partnerships: Collaborations with other companies, universities, community groups and government agencies can provide additional resources, capabilities and/or market access.
Technology capabilities
Technology: The requisite technology and necessary technical tools and systems must be in place to deliver products and services.
Data: Data drawn from inside and outside the company should underpin informed decision-making.
Intellectual property (IP): IP, including patents, trade secrets and methodologies, is fundamental to providing competitive advantage.
Our study reveals 71% of respondents have five or fewer of these strategic assets available, and only 4% of companies claim access to all of them. The assets most frequently lacking are intellectual property, sales and distribution networks, brand and data which can be leveraged.
What steps should businesses take? A well-designed preparedness plan is vital to help guide business direction. This should include investment in underlying capabilities, rather than individual business building efforts. With this in mind, we have some clear recommendations for what business leaders aiming to build new businesses should do.
First, develop a robust talent strategy. This means finding that sweet spot between nurturing in-house talent and infusing fresh perspectives. New talent can spark fresh ideas, sidestep preconceived organisational mindsets, identify new market gaps and run lean experiments to explore new market opportunities.
Next, implement rigour in your business building methodology. Our experience shows corporate venturing has higher odds of success compared to traditional start-ups and corporate venture capital when the right process is followed. Ensuring a thorough methodology for research means designing products which better meet customers’ needs and building viable business models with a genuine chance of success.
Collaboration with venture-building studios can also help businesses power up their business building efforts. These studios offer specialised expertise and methodologies that not only improve product development, but also work alongside internal talent to improve the knowledge and experience of in-house teams.
Finally, it is essential to foster a culture of innovation. BCG X has worked with numerous companies across the Apac region to foster a culture of innovation by introducing rigour in methodology, governance and operational processes. The right mix of talent and inventive direction provides a powerful uplift to positive innovation culture that cannot be understated.
Companies should embed a proper business building methodology backed by an innovation mentality if they want to achieve success. Leaders looking to foster a culture of innovation should adopt a streamlined business building methodology to support innovation methods, effective operational processes and resources, strong governance structure, genuine prioritisation of organisational culture, and pathways and incentives to inspire entrepreneurial talent to pursue business building.
We know from our own experience what an exciting region Apac is for business. The realities of this ambitious business landscape are clearly seen in the attitudes of leaders who responded to our report. Now, it is time for businesses to take the next step and embrace the fundamentals required to embed a truly effective business building strategy for their organisation.
Hanno Stegmann is managing director & partner, BCG X
