Go-Jek : Uber for motorcycles in Indonesia
Class of 2011 HBS friends turned business rivals. How an Indonesian start-up has succeeded in making the Uber of motorcycles.
In a country where the traffic is among one of the worst in the world, Go-Jek and its founders have tried to alleviate the pain that commuters feel every day. Nadiem Makarim (HBS class of 2011) and his co-founders have been a first mover in aggregating the motorcycle taxi (called o-jeks) service and providing a platform in which o-jek drivers can register to provide services to customers whom are signed up on the platform. Potential users of o-jeks have traditionally shunned away from using the taxi service because the irregularity of quality of service from individual drivers and the potential that some may be dangerous. However, through the company systems such as education/vetting of drivers and GPS tracking on smart phones, it has opened up a huge market.
The company has been able to grow the business through indirect network effects. Hailed as the Uber of Indonesian motorcycle taxi industry, the company has been able to attract over 30,000 riders (Aug 2015) and accumulating over a million orders. As the number of riders increases, users will benefit from fast on-demand service. As users and service requests increase, riders will be more incentivized to register on the platform. They have recently went on a hiring spree of 16,000 riders to add value to potential users. The company has also used direct networking effects to increase user sign-ups. Go-Jek incentivizes users to recommend to other potential users by awarding them with points that will add up to free rides.
Go-Jek has also captured value from these network effects by offering different services through o-jeks. Although personal transport was the initial customer value proposition, they have added courier and food delivery services on top of the platform to expand user base capturing value from the customers that would not have used the service for personal transport and the customers that will use all the services offered. They have also captured value from the vendors that provide food and groceries in the process diversifying revenue streams. They are in the process of expanding services so that they can capture value in many different ways. For example, they have also partnered with an energy company to provide the delivery of gasoline and diesel.
The success they have enjoyed however, has attracted competitors to move in to the market. Earlier this year, South East Asian unicorn, GrabTaxi launched in Indonesia under the name, GrabBike. Founded by Anthony Tan (HBS class of 2011), GrabTaxi is a well-funded Malaysian-based company that is a major player in 6 countries and 21 cities across Asia. It has been interesting because the two founders Makarim, and Tan are close friends from Harvard Business School turned business rivals. Since GrabBike’s launch, the two platforms have been engaging in price wars and marketing for both firms have increased. Because GrabBike was a late mover in the market, they needed to offer lower prices to compete and provide promotions for free rides to take away market share from a price sensitive user base. Go-Jek seems like they are in control for now with 80% market share but with GrabBike’s deep pockets, it is safe to assume that they are threatened as GrabBike has dipped its prices to practically free. It seems Go-Jek will need to focus on customer service and value added through their experience in the market. Understanding customers gives them a huge advantage in creating value for customers and riders on their platform.
I completely agree that Go-Jek can win this war through differentiated customer service. I travelled in Bali and Jakarta during January 2015 and had a horrible experience using the for-hire taxis that aggressively look for passengers outside of popular bars and clubs. Instituting a driver ratings system, perhaps with geo-tags would allow Go-Jek to dominate organized competition in addition to the largely fragmented market of motorcycle drivers throughout Indonesia.
Instituting a driver ratings system is something that I forgot to put in. I think they are already doing this. Here is a section of their FAQ on their website.
How do I rate my driver?
At the end of the order, you can give ratings to your drivers. We take customer service very seriously in GO-JEK in order to improve our service, so please rate honestly and accordingly. Feel free to leave comments as well in the comments section.
I was working for GrabTaxi during Field 2 in Vietnam (also founded by an HBS alum). We talked a lot about GrabTaxi and discussed whether we can expand it to Vietnam. In the end, we decided that it is not quite there. Everybody owns a motorbike and the only reason not do drive yourself is, of you are drunk. Unfortunately, this is socially accepted and the demand (as far as we tested is) is not there.
Interesting to continue following this market!
Great Blog!!
Thanks for your interest. Its a very interesting case personally because I am friends with both founders as we did our RC year together in 2010. Both have enormous respect for each other and I think they’re still friends. Hopefully.
Nice Post! Very interesting to note that a lot of on demand services are having difficulties to scale in emerging markets due to inability to screen potential associates in their platforms (in this case bike drivers). Would be really interesting to see how Go-Jek is doing to screen and educate these candidates and incorporate drivers so fast.. I you know more about this please share it!!
Thank you for the post! Do you believe this platform is disrupting the current market consumption (bike hailing) by transforming it into a seamless experience or rather entering a non-consumption market (e.g., people who were previously using public transportation or had safety concerns)?
Also, who do you believe is the primary customer – a random rider for a short-to-medium distance or a regular commuter for a medium-to-longer distance?
I think they started the company to disrupt the current market consumption initially, but they ended up disrupting both the current consumption and non-consumption market by adding in the options of courier and food/groceries delivery service.
I think the primary customer target now is not necessarily riders only. Now that they have expanded in to food delivery/groceries service, they have increased the pool of their target market.
This is an interesting case Cal K.
Overall, I think that Go-Jek should have created ways to increase barriers to entry by developing a loyalty program that would have allowed its users to have status with the company. This would preserve their market share better once price wars start. Since the customer base is very price sensitive, I think that most customers would eventually op-out for the cheaper offering especially that any of these companies will not be able to enhance their customer service significantly compared to the other. If GrabTaxi keeps the price war for a long time, I would expected them to easily win the majority of market share.
I took some bike taxi rides this summer. They were not the safest (no helmet, old bikes) but the experience was not unbearable, so I can’t see how much more premium can a bike ride be.. I think it might be time for Go-Jek to enter other markets fast and create barriers to entry. If I were Makarim, I would have sold my business to to Tan.