There is a widespread perception that startups are better prepared for the digital age than established companies. After all, startups are at the forefront of most disruptive innovations and breakthroughs.
But there is more. Most “millennials” seem to prefer working for a startup or younger, fast-growing company. They have the impression that startups are just much more “fun”. The entrepreneurial spirit, the risk appetite, resilience, the “being part of something bigger than yourself” are all attractive features. Even the “uncertainty”, can be a source of excitement and motivation.
There is no doubt that a “startup culture” is necessary for surviving in a digital world of global markets, exponential technological growth and shorter innovation cycles.
Yet, larger, more established companies are also thriving in the digital age. Think Amazon. More and more experts predict that this will be the first “$1 trillion company”.
Also, there are many different types of startup. The reality is that most of them struggle to scale or have a hard time surviving in the current, highly competitive, business environment. And let’s be honest, the vast majority of startups aren’t disruptive or innovative. Most startups are just bad “clones” of an already successful business model
So, why is there so much discussion about how startup companies are changing the way we live and work? What can we really learn from successful startup companies? And, what is the essence of the “startup culture” that so many companies desperately want to embrace?
3 Features of the Most Successful Startups
I have written before on these types of question, but — somewhat unexpectedly — I recently received inspiration during a business trip to Jakarta.
It wasn’t my first time in Indonesia, but as soon as I arrived I noticed a lot more “green” compared to my previous visits.
It didn’t take me long to figure out where all this green was coming from.
Green is the main color of the jackets and helmets of the local on-demand motorcycle service, Go-Jek (motorcycle taxis are known as ojek). Go-Jek offers a ride-sharing app which makes perfect sense in a large and congested city, such as Jakarta.
Go-Jek started in 2010 as a call center where commuters could request ojek drivers on-demand. During the first years of its existence, the company didn’t grow or scale. It was only in 2014 (after Uber and Singapore-headquartered Grab had entered the Indonesian market with their car-sharing services) that investors showed genuine interest in Go-Jek.
Right now, Go-Jek is considered to be one of Indonesia’s hottest startup. It has unicorn status and is the largest consumer technology company in Indonesia.
Go-Jek’s founder Nadiem Makarim received the Asian of the Year Award in 2016 from The Straits Times, and the company recently secured a new round of financing of US$ 1.2 billion from Chinese Internet giant Tencent. Go-Jek was the winner of a fintech award given by Bank Indonesia in July 2017.
What is perhaps most important is that Go-Jek has had a remarkable impact on the economy in Indonesia. In the words of the Head of the Jakarta government’s Economic Bureau:
“Go-Jek has changed people’s behavior, that’s for sure.”
But, none of this explains why I am really excited about this company!
Why should the rest of the world care about Go-Jek? What is so special about this particular company? What distinguishes it from Uber or Grab, both of which have also launched motorbike taxi services in Indonesia?
The short answer is that Go-Jek has understood and embraced the three most important considerations when starting and growing a business in a digital age:
1. Build an ecosystem
Organize the business as an open and inclusive ecosystem that attracts users and engages all stakeholders.
2. Leverage technology to deliver constant innovation
Focus on designing a range of innovative products and services that gather together diverse technologies to deliver an “irresistible” and “sticky” user experience.
3. Adapt to the environment
Adapt firm products and services to the specific demands of the local environment(s) in which the business operates.
This is the essence of a “startup culture” and it is by adopting these three strategies, that a business can put in place a culture — “business DNA”, if you like — that is innovative, dynamic, and maximizes opportunities for success in a digital age.
Let’s look at each of these three elements in more detail, as they play out in the case of Go-Jek.
Go-Jek definitely isn’t a “ride sharing company”. In fact, it isn’t a company in the traditional sense. Go-Jek differs from traditional organizations in that it doesn’t manage assets and workers according to well-defined hierarchical and static processes and procedures.
Go-Jek takes a different approach. The founder has a visionary view on how to manage and grow a business. It is a vision of a company that looks to minimize those things that kill energy and ideas (think bureaucracy, hierarchy, rules):
“The bigger we grow, the looser our control is. We allow different teams and leaders to run their teams their own way. The team leaders are free to develop their own management approach, so long as they can achieve their targets.”
The results are astonishing. Go-Jek has become a thriving and dynamic ecosystem without settled vertical or horizontal distinctions, or even a clear distinction between the inside and outside of the Go-Jek business.
Go-Jek seems to understand that the challenge today is mobilizing the capacities and resources of all stakeholders and engaging them in a more collaborative and inclusive style of organization. This results in better choices and products, but also creates a working environment that allows a business to recruit and retain the best staff.
A leadership approach based on f_reedom and responsibility_ enables a constant and relentless flow of new ideas, talent, and capital through the ecosystem.
This has made Go-Jek a genuinely exciting ecosystem that offers much more than a ride-sharing app and service. When opening the app on a mobile phone, users have a choice between a plethora of products and services. These currently include Go-Ride, Go-Car, Go-Send, Go-Food, Go-Mart, Go-Box, Go-Glam, Go-Clean, Go-Massage, Go-Tix, Go-Med.
At the end of 2016, the ecosystem consisted of more than 250,000 two-wheel and four-wheel vehicle drivers, 3,000 service providers and 35,000 Go-Food merchants.
The pattern of behavior and interaction among all the participants (including investors and partners) in the ecosystem has created a bar-raising culture of symbiosis and reciprocity.
It is not only about how the participants in the ecosystem meet, talk, trust, share, interact, collaborate, team, experiment, and grow together. Go-Jek is an ecosystem in the biological sense of a “community of organisms” interacting in a particular environment.
This push for “win-win” solutions could eventually even benefit Go-Jek’s competitors. For instance, Indonesia’s largest taxi operator, Blue Bird, partners with Go-Jek. Other competitors, particularly logistics companies, understand that they also have to evolve and improve their services.
Go-Jek’s Ecosystem. Source: CrunchBase
What Go-Jek understands is that the most successful ecosystems in a digital age are focused on constantly designing and delivering innovative products and services for their platform/brand. These products and services gather together diverse technologies across multiple sectors of the economy.
The aim? To deliver a range of products and services that can easily become embedded in the everyday life of users. Products and services need to be rich enough that users want to use the platform more of the time and have the opportunity to do more on that platform than anywhere else.
Go-Jek gets it. The business model is to use technology to find more users for their platform, and to constantly give them additional reasons to engage more intensely with the platform.
In this way, everyone — and not only users — can be “locked in” to the Go-Jek ecosystem. The Go-Jek delivery service, for example, has not only benefitted the drivers and the customers. Other service providers and merchants view Go-Jek as the savior in “Jakarta’s traffic-clogged economy”.
In order to make the ecosystem irresistible to its consumers, Go-Jek offers an interactive and social app that includes a loyalty program Go-Points. The algorithm gives customers intermittent and unpredictable rewards (similar to a slot machine), varying from vouchers for Go-Jek services to iPhones, iPads and laptops.
“The opportunities and challenges at Go-Jek are beyond thrilling. Being fully aware of its operations, we immediately knew that our resources and technology would certainly complement and accelerate product development at Go-Jek. Moreover, the fact that our work would help millions of Go-Jek mobile app users in Indonesia is something we are very excited about as well.”
This was the statement of the founder and CEO of app creator and developer company, Leftshift (after the company was acquired by Go-Jek).
This statement shows the crucial role that technology plays in creating, maintaining and developing Go-Jek’s ecosystem. It should therefore come as no surprise that Go-Jek is active in investing in, partnering with and acquiring startup companies.
- To deal with the demand to constantly innovate, Go-Jek had to set up an R&D centre. One of Go-Jek’s investors introduced Nadiem Makarim to the founders of India-based startups, C42 Engineering and CodeIgnition, and they have been credited with having “saved Go-Jek from imploding”.
- Acquiring foreign startups has facilitated product innovation and improved the user experience inside the ecosystem. The acquisition of Bangalore-based healthcare startup Pianta, for example, added home healthcare services to Go-Jek’s ecosystem.
- Go-Jek engineers are involved in data mining and analytics to understand and protect the ecosystem. Recently, these engineers started to partner with artificial intelligence and machine learning company, CloudSek, to help prevent and monitor cyber threats to the ecosystem.
- Technological developments should not be looked at in isolation. This became clear during Go-Jek’s first Go-Hackathon in March 2017. The winners of the hackathon were active across the areas of connectivity, AI and the Internet-of-Things.
The third element is adapting to the specific demands of the local environment. This is something that also distinguishes Go-Jek from its direct competitors, Uber and Grab.
The fintech service, Go-Pay, is a great example of the importance of adapting the business model to local circumstances. Go-Jek successfully introduced an electronic and mobile payment system in the still largely cash-driven Indonesian economy. It was integrated in Go-Jek’s app in April 2016, and currently accounts for more than half of all transactions.
Nadiem Makarim is very clear about its success:
“We’ve never seen a market adoption like Go-Pay.”
The introduction of this service was successful because Nadiem understands the needs and demands of the local environment. He understood that many households are unbanked in Indonesia.
In order to enable these households to participate in the financial sector and promote financial inclusion, Go-Pay had to allow users to give cash to Go-Jek drivers. Money will then immediately be transferred into their account. Adding to the Go-Pay account can also be done from a bank account or ATM.
Clearly, Go-Pay offers tremendous opportunities for all the participants in the Go-Jek ecosystem. Particularly when Go-Pay can be used to pay other merchants and service providers.
Nadiem Makarim believes that Go-Pay could “morph into a lucrative business”. Of course, this will only happen if Go-Jek is able to keep up with technology and innovation.
How to Make a Thriving Ecosystem Sustainable?
There is no doubt that the “ecosystem” model is replacing traditional economic theories about organizations, firms and markets.
The Internet, algorithms, online ratings, artificial intelligence, provide instant access to all kinds of information (with minimal effort). This provides almost unlimited opportunities for companies to bind users into the ecosystem, to set up partnerships and to engage in constant innovation across multiple sectors of the economy.
Go-Jek (and other successful startup companies) have leveraged the opportunities of a digital age to develop a new style of organization and new business models.
The most successful, innovative companies understand that trust, value and wealth are created through the creation of dynamic ecosystems, instead of the static, hierarchical management of workers and products.
Large and established companies also recognize these opportunities, but they continue to rely on existing structures, processes and procedures. It is hardly surprising that the shift to a digital age has proven enormously challenging for them.
This brings us to the role of regulators and other policy makers. They also need to re-think every aspect of what they have been doing and focus on ensuring that the regulatory environment is conducive to building and maintaining flourishing business ecosystems.
Of course, this is much easier said than done. All levels of government struggle to adapt to the fast-changing realities of the digital age. Rapid technological change makes it difficult to identify and agree on an appropriate regulatory framework. The result is that regulations often prohibit, or otherwise limit, the commercial exploitation of the opportunities created by constant technological innovation.
Go-Jek experienced this in December 2015 when the transport minister of Indonesia stated that “services that demand payment using a private vehicle” are illegal. Fortunately for Go-Jek’s ecosystem, the President intervened and rescinded the statement.
No doubt, this was the right thing to do.
Ecosystems can be fragile — especially in an early stage — and clumsy regulatory action can have terminal effects.
The lesson? Regulators should not interfere before they have developed a better understanding of their role in this new world of business ecosystems.
And, what is that role? Well, that is a story for another day.
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