Mistakes aren’t what you’d immediately associate with when it comes to winning Southeast Asia, but Grab’s co-founder Tan Hooi Ling assures there have been several made during the ride-hailing company’s seven-year growth story.
“Whenever I think about mistakes, I always think about my personal mistakes,” shared Tan with Financial Times’s Henny Sender at the Asia PE-VC Summit 2019 in Singapore. “I wish I could have learned to make more difficult decisions earlier and faster, and how to have tougher conversations…(These are) things I guess, our Asian culture doesn’t really prepare us well to do.”
Tan further admitted that she didn’t even foresee herself being an entrepreneur initially, adding that it was something she was quite averse to because it was “highly risky.” While pursuing her studies at Harvard Business School, she met co-founder Anthony Tan, after which the two started MyTeksi in the Malaysian capital city of Kuala Lumpur. The rest, as they say, is history.
Today, Grab is one of Southeast Asia’s leading “super apps” – a term Tan readily asserts wasn’t originally coined by Grab, even though it’s played a significant part popularising it. She added that China’s first super apps like Meituan, WeChat shaped Grab’s journey as a multi-service platform because they took “the super app journey the fastest”.
Tan acknowledged that unlike its ride-hailing predecessors like Uber, Grab didn’t have to tackle legacy players and vested interests because Southeast Asia was such an underserved market. This has helped Grab catapult its super app strategy significantly as a result.
“Over the first half of this year, our food business has tripled regionally. It’s tripled in Indonesia and in fact, it’s quadrupled outside of Indonesia. The only reasons why we can do that is that there is a huge customer need and we have a platform to leverage technology, customer knowhow, insights and local partners as well,” shared Tan.
Tan did not comment on Grab’s IPO progress, even though its paperwork with Uber shows that Grab has until March 2023 to go public before triggering a hefty $2 billion payout to the American ride-hailing firm.
“I think we’re not anchoring on ‘Hey, what does it take for us to get to an IPO?’ That, to us, is not an end milestone…What we want to build is an evergreen company that is sustainable, with a double bottom line, that will be here for generations to come,” shared Tan.
Edited interview excerpts with Tan Hooi Ling, co-founder of Grab:
I spent many years living in Hong Kong, watching the emergence of Didi and Uber from across the Pacific. It occurred to me that your timing is so much more fortunate in the way that you’ve conceived of Grab. Could you talk to me about what you learned from Uber and Didi, and what you didn’t learn from them in thinking about Grab’s business model?
Lots to unpack here. Let me try to take it in pieces. So I think the first bit around what are we today because the word ride-hailing was used a lot. And we’re clearly a lot more than that at this point in time. One and a half years ago, I think that was a different story and the trajectory of what we were trying to do was basically saying, Southeast Asia’s needs are way more than just trying to find a safe, efficient ride.
It took us six years to solve that first problem. How do we become the most trusted, most used service by our passengers, as well as our driver-partners for ride-hailing throughout Southeast Asia? We thankfully concluded that and are still deepening the relationship with Uber as a partner and throughout Southeast Asia as well.
But more importantly, we’ve also started expanding that to become Grab platform, the super app for Southeast Asia. For our consumers today, we are the preferred ride-hailing service. We’re also the number one food delivery partner. And we’re also the leading payments player in Southeast Asia.
And as I shared, a year and a half ago, that wasn’t true. Food and payments have been something we’ve invested in over the last year, and it’s grown tremendously quickly because of the ride-hailing history, trust, customer base, technology and partnerships we already built. So the question of what have we learned from Didi and Uber gets framed in that lens.
We learned a lot, particularly around ride-hailing. What’s the importance of technology? How do you build for scale? How do you think about the difference between a multi-geography and a similar geographical presence are some of the considerations that we have done.
Now, in terms of the multi-service super platform, we’ve looked more towards the Asian players, particularly the Chinese, because they’ve taken the super app journey the fastest. The word, “super app” was coined in China. It definitely wasn’t coined by us.
This concept of one platform, multiple services is super powerful because why do you need to download 15 different apps with 15 different services, when you already have your payments data in one, your historical preferences in one?
Because we saw that need in Southeast Asia – and we were extremely fortunate and lucky that relative to Europe or the US, Southeast Asia has been completely underserved when it comes to financial services, food delivery at scale via technology — we were able to quickly grow into those empty spaces.
Over the first half of this year, our food business has tripled regionally. It’s tripled in Indonesia and in fact, it’s quadrupled outside of Indonesia. The only reason we can do that is that there is a huge customer need and we have a platform to leverage technology, customer knowhow, insights and local partners as well.
You call it underserved. But you can also say that because there were no legacy players, you had a clean slate? Isn’t it an advantage to have what you call underserved, but you might also say very few legacy interests and vested interests?
We’re definitely not complaining. We’re lucky to have found ourselves in this sweet spot at this moment.
Depending on which report you read, Southeast Asia has 50-70 per cent folks who don’t have a bank account. Whatever the exact number is, it’s clear that it’s large, and it has a significant impact on lives.
I’ll give you one story that is on the top of my head right now. We have this GrabBike driver-partner, his name is Pak Rudy. He joined us probably four-and-a-half years ago in Jakarta, Indonesia. Before Grab, he was a construction worker in the odd jobs market, basically struggling to make ends meet. His monthly income, I would say, was about $100+ per month, working really hard. This guy is honest, diligent, and willing to put in blood, sweat and tears to make things happen for this family. But because of available opportunities, this was all he had.
After Grab, he’s now consistently earning 2-3x more than what he used to before. Even more powerful is now he was able to buy a second motorbike, which another one of his family members also uses to be a GrabBike driver. He bought it based on financial loans that we created and enabled with our financial services partners because we knew that our GrabBike drivers had a very specific need to buy or upgrade their bikes.
He would not have been approved for any loans by existing banks. Why? People like Pak Rudy are completely unseen by the existing financial system because his construction work was all paid in cash. Did he have receipts or invoices or papers that he could then give to the bank for his application? No. He was running $100+ a month without expenses. Could that have approved any loan for a bike? No. But we were able to do this. We were able to increase his income and also show the historical trajectory of how many hours he works a day.
How effective is he at his job? What kind of customer service does he get and therefore, is he a good GrabBike driver? Those things we were able to quickly unearth and provide to him because we’re applying the same super app platform and concept for consumers, driver-partners, merchant partners, and agent partners.
Do you think you will see a day where the ride-sharing app will just be one more use case, and payments and financial services will be far more important to Grab?
I think all are important. Ride-hailing being a use case, and not the only use case, has already happened. But I don’t think there will be a case where ride-hailing will no longer be a critical pillar for us.
Ride-hailing is still a very big niche in Southeast Asia. As long as the customer problem is there, car ownership costs are high, traffic jams are high, and giving our customers the ability to switch between two, three and four wheels depending where you’re at, we will always have a big unmet need and therefore, business in ride-hailing.
When I look at your partners, you have Hyundai, you have Toyota. What are the implications of the sharing economy and you look at cars which are evolving from being a thing to a service? Why do you have car companies like Toyota and Hyundai as your shareholders?
I think the reason why we have Hyundai is the same reason why we have strategic partners like Booking, Microsoft and regional partners like Maybank. The reason for that is because we’re all trying to figure out what’s the future of Southeast Asia’s needs, and how we can smartly work together.
What we all agree on is that the future is not going to be the same as today, the future will look extremely different with certain technology trends that we can guess, hypothesize, invest and test, but still requires a lot of collaboration and open-mindedness before we land on a final path. So it’s a shared understanding of the future, what we’d like to achieve as an end-outcome.
I think the good news for us is that after we struck the first few partnership deals, it started to become clear to different players in the world and in Southeast Asia that Grab is actually a partner that is quite serious about this partnership-first approach. And we execute what we commit to. Our commitments matter a lot, whether or not it’s in the contract, whether or not it’s in a conversation that happens.
But what specifically do Toyota and Hyundai do for you?
So if you think about our core business right now, ride-hailing, we heavily use a lot of different cars on the road. The first single thing is how can we help them provide access to affordable cars and the right kind of cars that are suitable for ride-hailing in Southeast Asia? That’s immediate.
In the longer term, what does the rise of electric vehicles mean? What does the Internet of Things (IOT) mean for ride-hailing, cars and their businesses? Ultimately, we leverage and rely on their products to serve our customers. If we can help them shape it better along multiple different dimensions like what I just shared, it’s going to be a win-win for all.
You’ve done so much for your drivers and partners in your ecosystem. What happens when we see autonomous vehicles for the industry, not just for Grab?
I think this is part of the reason why we’re always looking to the future and also why we’re taking the super app platform concept to driver-partners and merchant partners.
I’ll give you a stat, more than 80 per cent of our GrabBike drivers actually serve our customers and take jobs and get opportunities for more than one of our core business units. So in every single day or a week, they’re taking jobs helping passengers get from A to B, delivering food, delivering parcels, helping them top up the bills. We’re trying to create multiple income opportunities for them.
At the same time, we’re also we’re very, very cognizant that when you look at the traffic in Indonesia, Manila, Bangkok, Vietnam and the rest of Southeast Asia, autonomous driving is not going to be happening anytime soon. The technology is evolving quickly but the problem is even more complex than all of us initially envisioned. If we’re not able to solve that problem for less or more structured road and infrastructure in traffic conditions, I don’t expect it to happen anytime soon here.
Southeast Asia is blessed with young demographics. Does that mean that there’s much less pressure to develop autonomous driving in countries with young demographics? Do you have the luxury of a younger demographics and how important is that to your business model?
I don’t think that’s a key driving factor. I’ll go back to the role of technology in our evolution today and how we think about it. We’re not building technology for the sake of technology, because technology alone without the willingness, or that emotional attachment to use it, will never succeed.
Anybody can create a ride-hailing service. Many have tried, we tried and made many, many mistakes along the way. And we’ve realized that we could have the most amazing pricing algorithms behind it but if we don’t communicate why the price is at that level, what does it mean for the customer, and we don’t put ourselves in their shoes of understanding the user interaction and customer journey, the best technology in the world means nothing.
If I were to step back a bit – we’ve gone through three, four industrial revolutions today. In every one of those, there was always this big, dark cloud of everyone at that day and age asking, what does this mean for us? Are we going to become irrelevant whether it’s steam engines, mobile computing – all of these have always raised that question. And historically, that has been always a step forward, irrespective of what the other nuances have been and I have faith and trust that we will find a way to make that work for us as well in the future.
Everyone in this audience has been reading and talking about Uber and more recently, WeWork. Is there any contagion from Uber on you? Has it affected your plans for when you’re thinking of going public? What are the lessons that you learned from watching Uber go public?
I think we’re not anchoring on ‘Hey, what does it take for us to get to an IPO?’ That, to us, is not an end milestone. It is potentially one of the paths forward and we share this consistently. More importantly, whenever we have strategic discussions with my co-founder, Anthony, and our leaders, we always go back to the underlying principle of what we are here to do.
What we want to build is an evergreen company that is sustainable, with a double bottom line, that will be here for generations to come, irrespective of the lack of economic situations that are happening in a 135-year period. I know this is being grandiose, but that’s always how we’ve been at Grab because we’ve only been around for seven years.
We never knew we’re going to be a super app. But we’ve always wanted to be a stable evergreen company. And with that starting point, what that means is that in any business that we’re launching or building, there’s always clear economics. There’s always a clear path to profitability with key levers that you can decide to turn up or down, depending on what operation or time frame strategy we’re trying to implement.
We’ve been in a fortunate position right now, for example, I said, food is growing really fast. Payments, financial services is growing very fast. Thanks to the many investors and strategic partners that we have, we can continue growing at this point in time and invest into this business. Net-net though, even if you look at our ride-hailing business in our more mature markets and businesses, we’ve already turned profitable.
You call it the super app ecosystem. When is the sum worth more than the parts, and when not? There’s been talk of spinning out some activities. What do you think? Is the conglomerate worth more than the sum of its parts and might you spin out certain things?
I am not in finance here, which is why it’s interesting that I’m on the stage of all of you experts. I think the answer to that question depends on the business, the environment, the country. But my simple mind looks at it from a customer perspective. Where and how can we bring them the most value? And how can we ensure that the customer journey is as seamless as possible? How do we reduce the friction points? That’s where the super app idea came from.
We didn’t want to be a super app. What we realised was ride-hailing was a big problem. We’ve gotten to a point where we said, yes, I think we’ve mostly solved some of these problems today, we want to continue evolving and leveraging it. That turned out to be payments, financial services and food. And we decided to go heavily into both at the same time because we already have existing assets at scale.
So this year alone, we’ve actually launched 10 different partnerships and new services on the ground up. You won’t see all 10 of them in Singapore. But if you go throughout all the countries in Southeast Asia, you’ll see different iterations and combinations of them because we localize the services for each country’s needs.
Protectionism has become much more legitimate today. To what extent do you think that may become more of an issue for you?
We have an interesting situation in Southeast Asia. You’re completely right. It is a challenge, don’t get me wrong. And I think that’s the reason why it was underserved to date.
Why was it underserved? Because no single economy in Southeast Asia was big enough to scale. In other words, if you tried to build for just one country, the investments and the technology and the overheads required didn’t make sense. That’s what I meant by the inner conflicts with the path to profitability.
Southeast Asia does have a shared identity, there’s actually a lot of similarities in our user behaviour, even though there are just as many dissimilarities. We were able to find this interesting, unique meeting point where we could leverage both that diversity and the aggregated scale for what we have.
We’ve also been very lucky with the fact that we’ve had a longstanding relationship with all of our local governments and multiple ministries within each of those governments. Like any partnership conversation, where we always start with is – what are they trying to achieve and understanding that customer or partner’s ultimate end objectives.
But aren’t these governments trying to achieve something diametrically opposed to what you’re trying to achieve? When you come to terms with Uber here, the Singapore government said to GOJEK – please come to Singapore, we don’t want to see a monopoly. We want to see a very healthy competition. So don’t you, in fact, start out with very different agendas?
I don’t think so. I think the only reason why Grab is where we are today is because we’ve had numerous competitors today and still do. If you go back to our history, and even though it’s only been seven years, let’s stick with just ride-hailing. There’s always been more than one competitor, whether it’s local or global. Everybody remembers Uber, because it’s the name that was the biggest. But there were times where there was Easytaxi, there was a company from London that was also global called Hailo. There are many local and global players as well.
I think what we’ve learned is that competition is actually good, because it keeps us on our toes to figure out what alternative customer solutions could be out there that we haven’t tried and need to realize to form part of our solution set. And I believe that the day competition ends – which it won’t – we’ll end up becoming complacent.
Number two, our customers deserve choice. And three, we’re always going to fight to be best, right? That’s what we’re here for. And that’s what we pride ourselves in. And so I don’t believe it’s a diametric opposition. There are nuances to the conversation. But that’s part and parcel in every conversation.
When you think about the business going forward, you’ve always said Grab wants to help local people and local markets. Can you always find the right human capital? How challenging is that?
It’s always been challenging since the start. But it’s been getting much, much better recently because I think we’ve been able to attract more talent to Grab. Previously nobody knew about this company called Grabtaxi and trusted enough to put their careers on the line. And also because I think we’ve been able to show that being in a startup actually isn’t all that bad. In fact, it’s the new hotspot for most careers. My understanding back in business school during my time was consulting, banking…
And you went to McKinsey?
Yes, I had a scholarship bond with them. But very much nowadays, if you go back to Harvard Business School (HBS), or Stanford Business School, the highest preferred job industry is in the startup or starting your company, right? I think we’ve helped to bring that openness to Southeast Asia and because of that, the available talent to startups and Grab has grown tremendously.
When I first came to Hong Kong, I discovered that many of the first generation entrepreneurs were very ambivalent about sending their kids to HBS. They thought you would lose intuition and irrelevant to Hong Kong, let alone Jakarta. Would you advise audience to send their kids to HBS?
Full disclaimer – I did not go to business school because I was looking to be an entrepreneur. I did not even think of entrepreneurship as a potential career! In fact, it was actually something I was quite averse to, because it was highly risky. If your kids would like two years worth of liver damage, late nights, fun, lifelong friends, definitely please go for it. Those were my reasons. There are other people go because they also want to learn and study. (laughs)
But I think everybody has different paths to whatever industry job function they land in. I think we’ve grown up in an environment where we try to simplify history by saying, hey, these are the trends, look at the success cases, so that’s the only way and that’s the best way. I think that’s not quite true. Just because this current class of entrepreneurs seem to come from business school backgrounds, don’t assume that we’re the only people or the best people to do so.
In fact the running joke back when we were in HBS, the VCs were telling us, do you know that when we see one business school co-founder, we discount $100,000 from your valuation? And you have two! Of course, that has changed. So if there’s anything if I ever become a parent, the first thing I’ll tell them is go do what you’re interested in. If you’re interested and passionate enough to become an expert in it, there will always be value in what you’re doing.
You talked about mistakes along the way. What would you have done differently at Grab in retrospect?
Whenever I think about mistakes, I always think about my personal mistakes. I think (I wish I could have) learned to make more difficult decisions earlier and faster, and how to have tougher conversations.
We always talk about the fact that there are certain people that may not be suited to Grab’s culture. What do you do once you identify an individual that may not be performing as well, both within the performance bar and the cultural bar?
It’s easy to make an assessment, but what do you do once you have? When do you have to start having those difficult conversations with that particular individual? Do you have it only at the performance management review cycle? Or do you have it before? What happens when you’re a startup and you don’t even have a performance review management cycle yet? All of these things are many of those learnings.
Or maybe it’s about having a disagreement about the path forward. We’re all circling around the problem. I know there are three different people involved in the conversations, and different approaches to take. All of us feel equally as strongly about what we think could be the next step. But we need to make a decision and move forward. Those are the things that I particularly have learned the most from.
When I think about the version of me three or four years ago, and even today, we still continue learning. I think it’s those decisions, conversations, things that I guess our Asian culture doesn’t really prepare us well to do. These are things I always wish that we could have learned to do, or I could have learned to do faster.
Do you think Grab is not expanding quickly enough, or maybe expanding too quickly?
I think at this point in time, it’s about right. At the same time, that constantly changes based on the environment and our many decisions. The one thing about Grab is that we’re never stagnant, we’re always making decisions, every day, every week, and for us what is most important is not to try and always tow the perfect line every single day. It’s about having that band of confidence or band of error that we’re willing to take. And as long as that band trajectory moves up positively over time, and we’re making mistakes along the way, we’re going to be fine.