COVID-19 in Southeast Asia – The Ramifications

COVID-19 in Southeast Asia is ruthlessly upending value chains and bringing a sobering call to ASEAN Inc. for more bottom-line focus.

Over the last weeks, the number of COVID-19 cases in Southeast Asia has been exploding with persons having existing preconditions at the highest risk. This has its parallels in the corporate world. Companies with underlying bottom-line issues are less likely to survive.

Along these lines, is COVID-19 more culprit, or more catalyst?

Traditionally, large amounts of Southeast Asian companies have a strong topline bias when it comes to strategy – more than a decade of unprecedented market growth has led to excessive revenue focus. Cost management has often been pushed from corporate strategy radar screens. Due to COVID-19, that is being upended.

In order to dampen widespread negative effects on the economy, many Southeast Asian governments have been urgently working on all fronts to contain the freefall of corporations in their country. However, the speed and thrust of country-wide emergency response (liquidity support, tax deferment, and state aids) are currently not at the benchmark level defined by leaders like Singapore. While receiving emergency support, and forward-looking post-COVID-19, ASEAN Inc. should establish more bottom-line strength and resilience by itself.

We should see more bottom-line profitability focus from ASEAN Inc.’s corporate strategy teams. There should be stronger calls for the operational restructuring of single players and beyond, i.e. entire value chains. Two perspectives will matter post-COVID-19.

From an industry sector perspective, business and operating model evolution is a matter of addressing structural weaknesses brought about by market evolution and new players. For example in regards to the Trade War and Digital, the industry needs to be fiercely devoted to mitigating common structural weaknesses. Through focused effort, the industry will see past this crisis. For automotive distribution industry examples, I urge you to check our Changing Lanes study.

From a functional perspective, adopting operational excellence practices (e.g. through rapid spend compression and adaptive supply chains) will accelerate recovery and drive the robustness of operating models. Through a singular focus on operational excellence, ASEAN Inc. can emerge stronger and more resilient. Our Operational Crisis Response document (sample chart is shown below) is a useful guide to stem the short-term decline.

As history guides us, early response with a post-COVID-19 scenario in mind will bring ample benefits that extend way beyond the end of the current pandemic. It is our intention and our hope that the end of this crisis arrives sooner than later.

In the meantime, please take care of yourself, your family, your neighbor, and each other.