Where are the Malaysian unicorns?
Expert points out the absence of home-grown super application companies
PETALING JAYA: Super applications are attracting the attention of investors, having witnessed investments worth US$43 billion (RM182.29 billion) between 2016 and 2019, but Malaysia has failed to grow or even house one super application or unicorn company (startups valued at US$1 billion and above) in the country, according to EY Parthenon Asean leader Joongshik Wang.
Malaysia reportedly struggles to grow unicorns due to its smaller population, lower gross domestic product (GDP) per capita compared with neighouring countries, and fewer international investment opportunities.
Wang said more than 80% of unicorns in Southeast Asia are concentrated in Singapore and Indonesia, while the number of emerging unicorns in Vietnam is growing.
“Although Malaysia has high market maturity of digital economy, interestingly, we do not see unicorns in Malaysia. Many of its digital ecosystem are not (provided by) local companies but taken by other countries in the region,” Wang told reporters yesterday at the virtual media launch of an EY study “Building Successful Digital Ecosystems in Southeast Asia”.
Some of the leading digital natives in Southeast Asia are transforming into super digital platforms, by delivering interconnected services through an integrated experience – from ride-hailing, food delivery, grocery, logistics, through health, lifestyle and financial services, the study found.
Further, the growing digital ecosystems in Southeast Asia have the potential to generate revenue opportunities of US$23 billion by 2025, from about US$4 billion in 2019.
Wang said that being part of a digital ecosystem allows businesses to leverage the network effect to create a competitive advantage. However, to do so, companies must get their digital transformation strategy and capabilities right. The question is whether they should design or join a digital ecosystem, and there are three strategic choices that businesses can undertake: buy, build or partner.
“While the established, traditional firms given their large user base, reach and capital assets are well-placed to orchestrate a digital ecosystem, they are often outpaced by the emerging digital natives that are ahead in digital adoption.
“Most traditional firms have been focusing on their core business and may be hesitant to build a platform-based business due to legacy systems and corporate culture. Thus, traditional firms are turning to collaborating with e-commerce and lastmile platforms to offer digitalised, streamlined and omnichannel experiences to their customers,” Wang said.
The EY report highlighted three key considerations that organisations should consider when navigating digital ecosystems including evaluate the organisation’s digital ecosystem maturity, define the business model, and implement the ecosystem.
The report said that while digital transformation is a business imperative, participating in digital ecosystems is a game changer that can create long-term value and competitive advantage.
“A digital ecosystem is an interconnected set of offerings that fulfils consumer needs in one integrated experience, comprising businesses across different sectors that collectively offer a broad range of products and services,” it said.
The report revealed that collaborative consumption and the sharing economy have been rising in Southeast Asia, driven by the region’s average internet penetration of 63% and a growing tech-savvy middle-class that is rapidly moving up the socio-economic ladder. This is paving the way for sharing models across different sectors such as mobility, travel and hospitality, and real estate.
It said that between 2016 and 2020, Southeast Asia witnessed technology transactions worth US$408.5 billion. Mobile applications, cloud computing, artificial intelligence, big data and analytics, blockchain and Internet of Things were the areas that saw the most investments.
EY Asean regional managing partner Liew Nam Soon said consumer-focused digital ecosystems are forming across Southeast Asia to deliver value at unprecedented speed and scale, in response to industry digital disruptions and accelerated by the pandemic.
“Digital interactions in both B2B and B2C activities are expected to stay and gain ground even after the pandemic, and enterprises in Southeast Asia will be seeking to transform their business digitally to drive profitable growth as well as work with partners to provide solutions leveraging technology to address value gaps,” he said.