June 13, 2014
A special thanks to tilyanPristka in Indonesia for sponsoring the Indonesia edition of our Global Startup Report.
In this week’s chapter 26 entrepreneurs share their thoughts on how business mindset works in Indonesia.
I think the business mindset here tends to be very localized. People don’t want to share their ideas and they don’t want investment to give up ownership of their great idea. Also, the investment landscape is a lot less developed should you be an entrepreneur searching for investment to grow your business.
Another thing I hear is that the growth mindset is less aggressive here, and that is arguably changing. More and more startups are seeing great traction and recognition world wide. It’s definitely a fast emerging market and why bigger investors like Sequioa Capital have their eyes sharply focused on Indonesia.
Asia in general is a fast emerging market in terms of tech innovation. Indonesia has the massive market to take on that innovation, if the shoe fits. That is why we are seeing so many e-commerce, mobile, gaming, chat and payment options booming here and quickly becoming over-saturated. I chose to go with a more conservative, less sexy innovation 😉
Some business and companies are still old-fashioned, where bureaucracy and hierarchy are important to them. It doesn’t only apply to governmental bodies, but also through major companies.
When dealing for a business, some key points such as ‘who are you’, ‘how do i know you’, ‘what do people say about you’ and ‘what’s in it for me’ often being considered in decision making process. It’s not enough if your products/services is so good, you will still need to build a good relationship.
The business mindset in the country, to me, is quite unique. While we know business has to create values or add values, In Indonesia, sometimes the startup founders are just too lazy to think about it.
In 2013 – 2014 the startup fever in the country declined significantly compared to the year 2011-2012. Many startups closed during 2013-2014 due to some reasons such as:
1. Not having a solid business model.
2. Still unsure of what value it gives/ creates to the market.
3. ‘Followers’ or ‘Clones’ of the successful business model in other countries failed to understand the market and even the business they ‘follow’.
4. Too many Zuckerberg wannabes. They forgot what they are building is a business, not their idealism. Idealism can’t feed your stomach.
5. Ego and idealism gets in the way, way too often. Most surviving startups learned it the hard way, including me.
6. Over reliant on Investors and thinking that after they have one, then they can chillax.
I think at the end of the day, the mindset of business should be the same in every country, “”how to create values/ add values to the market”” or “”how to find solutions to the problems””, don’t build business because you think it is “”cool””.
@BayuEkaputra Gellies Media
There is a social aspect to business meetings in Indonesia. They do like to get to know a little about the person they are dealing with away from the business side of things, so don’t get down to the nitty gritty straight away, nor expect them to.
First, many Indonesians have very low self esteem in creating products. We think that our mindset was culturally prepared to just follow, buy, and use overseas products. Indonesians often assume that local products would never be as good as imported ones. Since we live in both Indonesia and USA while growing up, we realize about this problem. Indonesians are actually as smart as people from other countries; we just need to be more confident with our skills and abilities.
Second challenge is the market. The market is still evolving. Many people have the newest android or iOS smartphones, but most of the features or apps aren’t used. The consumers are not yet ready to take on any innovative technology.
Third challenge is infrastructures. Jakarta is probably better prepared with all these infrastructures supporting new technology, however most of other areas are too far behind.
Last challenge is capital. With little investors that believe in the startups, it is often very hard to get capital when you are starting up. Even if you do get funding for the first round, if you’re not yet profitable within a year or two; most investors won’t continue to fund your startup.
Therefore, many Indonesian startups focus on creating products which can generate quick profit. (Being innovative is often out of consideration when the startup focus on being profitable within the 1st year of starting-up).
In Indonesia people believe in having money with small risk high income, this actually works here as most people here do not demand a high quality product, cheap is the matter.
Business is generally more laid back. You have to push things to happen faster.
Startups are still a new concept in Indonesia, many still do not understand why we create startups, but this is improving every day with local incubator programs encouraging growth such as Ciputra and Telkom – even local universities starting to sponsors their students ideas now.
Indonesian people are generally afraid in taking risks, that’s why you must consider their fear in your plan to entice them to support you.
When dealing with most businessmen (and the government people), they only consider the short-term personal benefits, rather than considering the mutual and long term benefits; for something that they are actually paid to do. So show them the long-term benefits first then lock in their commitment.
In e-commerce industry, online payments (i.e, credit card) works well only in certain areas like flight, hotel and few others things. Most people still prefer going “old-skool” with bank transfers, e-banking or cash-on-delivery (CoD) for online shopping.
The cost of doing business may be low. With that said, the efficiencies can be low. Indonesians tend to work at a slower pace. And the country has the most number of holidays, so it’s important to plan and inform your employers or contractors the deadlines despite the holidays.
I think entrepreneurs everywhere have the same mindset except that in Indonesia, the law enforcement is very weak.
Indonesia is similar to any of the developing countries. Lots of poverty, huge population of lower-middle class people.
Indonesia people have great potential. They are creative, visionary, and talented. It’s just a matter to build their character to match with the company culture.
Most Indonesian people generally tend to be interested with what most locals talked about. That’s why social media and online media play such an important role in here. So, build a good brand image at the very first time you launch your business and try to maintain it as much as possible via spreading the positive vibe through viral campaign. In my opinion, that’s how everything works in Indonesia.
Most of the time in-person meetings are always required in Indonesia, as trust and networks are always the keys to everything when you do business here. In almost any industry, many people will only be open to a formal business meeting with someone who has been recommended or introduced by one of his/her networks or has a good reputation within the industry.
Since I rarely go abroad, I cannot say much how it is different to elsewhere.
Generally, the population is lazy and have big dreams. I feel that it is the opposite of South Korea, which is very hard working, yet many do not have big dreams.
They generally have a positive outlook on their future (even if they are lazy), got tricked a lot with ponzi schemes, get rich quick schemes, bad investments scheme, etc.
They want to make quick instant money. Not to a lot of the population prefers to work on job that doesn’t require brain processing power. Such as bank teller, admin, support staff, etc.
Note that I mostly mention the bad things, the good thing is there, you and I know it, so, act accordingly and fit where you can.
You are in charge to control your own business as soon as you build a start up in Indonesia. Indonesian youngsters were not born to be businessmen, but professional workers mostly.
Majority of the market don’t trust online products. They are still comfortable with physical face to face meetings or calls. This is also one of the reasons why internet penetration in Indonesia is low.
Low credit card usage. The most popular payment method is still ATM/bank transfer. It accounts for at least 80% of online transactions. A lot of websites still do not provide credit card or Paypal payment methods because of several reasons, only a few credit card payment providers exist in Indonesia (Veritrans, Doku) and the process of getting the credit card payment method installed on the websites take 2-4 weeks.
Thus, there are few companies that can accept credit card payments within a year. Even when you have credit card payment installed on your website, people don’t use credit card a lot because of trust issue and fear of fraud. It will take time before people have a change of mindset about online transaction with credit card.
People want to be served. When you get first time users to use your product, typically they don’t check the how it works section or FAQs. They will call, message or email you asking how to use your product. People don’t like to explore things, they want you to explain things for them.
Slow decision making. Majority of the people tend to compare products before buying and even when they have found which product is suitable for them, they tend to delay the purchase. When you deal with B2B customers, it gets even worse. You might have to convince many people over a series of meetings.
Indonesian investors still focus more on the natural resources industry and property business. They still don’t believe in the digital industry, and that’s why there aren’t many local investors that invest in digital startup. Moreovers, they are mostly followers, not innovators.
They tend to imitate foreign model business. Then since the customers are the trend follower type, business model cloning is still considered as the entrepreneurs’ main option because it’s less risky.
Collaboration is the best mindset work in Indonesia.
This depends on the type of business. People honor relationship they have with each other.
Sometimes you can win a project because you know someone at the top level of a company. Having small margin but big volume is okay, we have huge potential as a market.
The business environment in Indonesia is really good. There is still room for improvement, but everyone is progressing to make it better. So in the environment like this, we must be more creative to make our ideas work.
Good news is there is a lot of opportunity. More simple solutions can work here. You must know and target your market precisely, and know how to make your solution work for your market.
The businesses here still operate traditionally, and are very new to embracing technology. Whereas in other countries, reliance on technology to improve efficiencies is much more prevalent, in Indonesia, especially in the F&B and restaurant industry, because cost of labour is lower, there is less emphasis on improving efficiencies using technology.
Some talent can be found easily on social network or job site in general. But some of great talent are spread on many cities, you have to roadshow to many cities to create events and attract them to come to your event. The other source of great talents are universities that have a good name in Indonesia.
Finding great talent can be a big challenge. Network thoroughly and work through references, it tends to work much better than job portals.
Business mindset in Indonesia is still developing. Lot’s of young entrepreneurs who are under-30-years-old are interested in developing online businesses.
Young people are starting to realize that the internet can help people to make a new business.