Go-Jek or Grab won’t be as big if not for each other: Nadiem Makarim

Go-Jek CEO Nadiem Makarim
Nadiem Makarim, chief executive officer of PT Go-Jek Indonesia, sits for a photograph an interview in Singapore, on Tuesday, Nov. 29, 2016. Photographer: Ore Huiying/Bloomberg via Getty Images

Indonesia’s ride-hailing leader Go-Jek recently announced details of its planned expansion to Vietnam and Thailand as rumours gained ground of it being offered additional funding by its investors to accelerate its overseas growth.

In an interview with CNBC’s Christine Tan, Go-Jek founder and CEO Nadiem Makarim talked about expansion plans, rivalry with Singapore-headquartered Grab, Uber’s exit and IPO plans.

Makarim reiterated his preference to list Go-Jek in Indonesia, saying “the path to profitability is something that is the main criteria for the timing of an IPO”.

Excerpts:

Ok Nadiem, good to talk to you. As the founder of GO-JEK, you’ve built this entire startup into Indonesia’s biggest and first unicorn. You specifically hone in on two-wheeler ojeks, where did you get this idea from?

Originally the idea came about from my own frustration with taking ojeks everywhere in Jakarta. I was an avid ojek user and for me, it was all about beating the traffic, but the pricing was super un-transparent, I couldn’t find them during rush hour a lot of the times and there was generally a reliability issue. So the idea was “Ok, what if we can take the fastest motor vehicle and have them not only perform human mobility operations but also potentially move stuff around in the fastest way possible”, that’s the whole premise behind GO-JEK. Two wheels are faster than four!

So you found a problem and decided to fix it?

Yeah, and I think a lot of people did not believe back then that ojeks could be professional and could be trusted, so that was very frustrating for me because I got to know many of them personally and I sent them on a variety of errands including delivering my own laptop somewhere else or buying some food. And so by getting to know them I quickly realized that this informal sector is incredibly valuable.

You’ve basically built GO-JEK into an entire ecosystem beyond ride-hailing. Unlike other startups which focus on just one industry, you did the reverse. You tackled multiple industries, multiple businesses and scaled up. What made you push GO-JEK in this direction?

We love to be either counter-intuitive or slightly counter to prevailing beliefs and when we began everyone told us that you have to be only good at 1 thing, because if you’re not super good then no one will use your product or other people will come and circumvent you with better technology, more money etcetera.

But I think the mindset that we had in the beginning is that a customer is not a ride-hailing customer, a customer is not a food delivery customer, a customer is not an e-payment or an e-wallet customer, a customer is just a customer. He or she is a human being with day-to-day problems, and we built a product around the frictions that an average person experiences in their day to day life.

We are a platform that fixes things, we make things more efficient, and the opposite extension of you and it just eliminates friction.

And you basically kept riders busy throughout the entire day?

Exactly. So there are multiple benefits of that model that we understood, but in the beginning, we were heavily criticized for that mindset because we fundamentally believe that the user wants a 1-stop shop support tool, especially in Asia where people tend to want to have all their services on a single platform. And we quickly learnt that that had a huge amount of benefits from the supply side efficiency in which they were actually being utilized all day.

In the morning riding to work, lunchtime delivering food to office workers, they were delivering e-commerce packages in the afternoon, and then rush hour they’re delivering people back home and then at night they were delivering food to homes.

It’s all extra income to them?

Exactly, it’s all incremental revenue, and we cover the utilization which then creates a huge amount of efficiency also in our pricing and information structure which is the reason why we’ve been so much more efficient than just the single vertical that has to purely compete with the drivers on pricing.

You’ve made a significant move into online and digital payments with the launch of your e-wallet Go-Pay. You’re using this to move beyond the GO-JEK ecosystem and you say this is the next stage of growth for the company – is this where the big money is for you?

We’re not just addressing the unbanked, we’re also addressing the underbanked, the underbanked is a big, also another a big segment of the Indonesian population that may have a bank account but does not transact in any way digital or in any way cashless.

Big news this year, Nadiem. In May, we had Uber saying it was calling it quits, pulling out of Asia and selling its struggling business to Grab. What was the first thing that went through your mind that day?

Uh, it was a mixed feeling, it was a mixed feeling.

Were you celebrating?

I think in one sense despite the fact that we compete with each other, the elimination of a player, especially Uber – who we had a huge amount of respect for because their technology was incredible and they were the pioneers, it was a little bit of sadness that they were out of the fray. However, in a sense now that there’re only 2 players, it has also created a sense of excitement that there is now a little bit more clarity about what the competition is. A 2-way competition is a lot simpler to manage than a 3-way one.

Well, soon after you announced you were going to expand overseas into markets like Singapore, Vietnam, Thailand and the Philippines. Are you trying to fill the void left behind by Uber?

I think yes and no, I think the plan to go international had preceded that merger.

But it was good timing though?

It was, it was, but I think a lot of serendipitous things happened to GO-JEK, it’s kind of one of our key core strengths, getting right timing, haha, but I think that expanding internationally was about providing an option for people and markets. Everyone loves options and I think that’s the critical part for the consumer side.

For us internally, I think we’ve built quite a large company and service in Indonesia, and a lot of us here really want to see whether or not this model is exportable, have we stumbled upon a new way of actually moving an emerging country forwards digitally or is it so specific to Indonesia, and that level of curiosity is very high with everyone in GO-JEK. So for us, it’s so exciting to be able to go outside of Indonesia to be able to see whether or not these models are replicable in a different cultural context.

Well after months and months of planning you finally announced this week you’re going to make a move into Thailand and Vietnam. Essentially you’re tying up with local partners to venture overseas and you’ve created these very different brands in each of the markets as well. What exactly does this partnership mean to you at the end of the day? What do you want to get out of it?

It depends on the local team whether or not they want to change the brand name, so some countries may not want to change the brand name because they feel like GO-JEK is an especially good name and has a good brand essence. What these local teams and partnerships actually mean to us being able to translate our concept to the local context, so the idea of this partnership is two things.

First, we are mentoring them on what we’ve learnt to be successful, and what we’ve learnt that doesn’t work in Indonesia. The second element is also a little bit of the mentorship part where we guide heavily upfront but the hope is that over time they will be able to actually craft a unique market-led strategy both in terms of selecting which products to launch, the sequence of how to launch, and how they want to do it as well as how they would like to price it, how they would like to actually recruit and hire and how they want to position the brand in the market.

So in terms of ownership and control who has more control? Who has majority control in these overseas markets?

Well, I’m not at liberty to discuss the specifics of the structure but I can tell you that in terms of managerial influence we try to give as much autonomy as possible to each of these local teams

But you have total control?

Well if I give them autonomy then by default we shouldn’t have to.

But in terms of revenue and profit sharing, do you have majority control?

Uh, I’m not at liberty to share details of that, yup.

So here in Indonesia, you’re dominating the ride-hailing business but overseas, clearly Grab is the larger rival after having bought over Uber. Any lessons you can learn from Uber’s failure here in Asia?

I think the first learning is that it is extremely hard and expensive to defend a single vertical, that was probably the biggest insight, that in order to retain and engage a user you need to cut across multiple moments in their transaction life, and because we upfront invested it in multiple experiences, we’ve created the perception of GO-JEK as the home, the platform and the hub. I think in many ways pure ride-hailing players were not able to achieve that, so I think that was the key insight, that if you want a very defensive, long-term sustainable platform, it has got to be a platform, you’ve got to have multiple services and they’ve got to be reinforcing each other, you’ve got to create synergies on supply, you’ve got to create retention strategies on demand.

Now if we launch a new product on our platform, our user acquisition to that next service approaches every time because we’re just converting existing users to try a new thing, then a new thing, then a new thing, so the cost of acquisition of every new customer for every new vertical for us continues to drop. That is a very positive cycle so the more verticals you layer on to this platform, the more your monetization, the higher your return on every customer that you bring on to the platform. It doesn’t matter where they came from, they might have come from transport ride-hailing, they might have come from Go Car, they might have come from Go Food, they might have come from Go Pulsa or Go Tix, but the point is once you’re in, then getting them latched on to a different service to solve one other part of their life is a lot easier and a lot cheaper.

Let’s talk more about competition. What are you going to do to give Grab a run for their money? Are you going to be throwing hefty discounts to customers and riders and passengers?

I think promotions are a necessary part of any strategy.

So you will do it?

Promotions? Of course, of course, we’ll do promotions, will we be irresponsible in how we promote and create the wrong kind of incentives for both the drivers and the customers? No, we are not at the stage where we have to do that anymore, we can do this in a sustainable way, in a smarter way. We’ve refined many, many techniques and we were born out of battle, we understand exactly how to manoeuvre and create efficiencies in promotions and grow the market. The other advantage of coming in is, when you’re the small guy coming in you’re spending a lot less than the bigger guy who has to defend. We’ve been on the defence this whole time and now we’re switching turns, where we’re going to be on the offence and creating options for both the drivers and customers.

So if you look at it from both the customers and the drivers’ perspective, if you have a one-player market your willingness to try the second option is very, very high. Every driver wants an option, every customer wants competition and so I think that is the biggest driver that will ensure that we are – define it as you will, successful in each of this markets – the pull from both the consumers that deserve and want a choice and from drivers who want options and I think that is going to pave the path, that’s going to pave the way for us to come in hopefully relatively smoothly.

As you expand overseas into Southeast Asia, do you think you have what it takes to outdo Grab in the long run?

I definitely believe we do. We would not have taken these actions and taken these calculated risks if we didn’t believe that we could do that in the long run.

You think you can outdo Grab?

I think across a variety of aspects in doing a tech startup, we have competitive advantages. We have a very consumer-centric product engineering team, we have an incredible culture of collaboration and risk-taking in the organization, and in the technology industry it’s an only person, that’s all you have. Your software is simply a reflection of how well your people and your teams operate so the competitive advantage of the greatest collaborators and team members and leaders that we have in GO-JEK, that’s the long-term sustainable advantage.

As I understand it, you and Grab founder Anthony Tan both attended Harvard Business School together. Are you both good friends?

Um, we’re friends, I think that there’s competition and so we talk less nowadays. Haha, but I have to say that it’s been a crazy journey from us talking about these ideas in business schools to where we are now. I think that a lot of people misperceive what competition is because they see everything in opposition, but in reality, neither GO-JEK nor Grab would be as big as they are now if it wasn’t for each other. If there wasn’t this fierce competition, the market would not have grown this big.

Each team would not have been challenged to innovate, to try and out-innovate each other and we would not be now two of the largest tech companies in Southeast Asia if it wasn’t for that competition. So it’s tough when you’re in the moment, when you’re in the battles, when you’re in the trenches and there’s a lot of tussling and a lot of bad blood and everything, but when you take a step above and you realize that actually competition is a necessary requirement to scale, then it changes. You see in a weird way your enemy as kind of a supporting figure in actually fighting against the real enemy which is the old way of doing things. That’s actually the real competition we have.

The market is so big. The market for payments, the market for food delivery, all things food, the market for transport, we’re barely scraping the surface of how big these markets can become in the region, and as we become bigger and bigger I think that that mindset is also important to have and competition is super necessary.

You founded GO-JEK in 2010. You’ve actually built a fleet of over 1 million riders and drivers here in Indonesia. What did you set out to do right from the beginning to build up a reliable fleet of riders and drivers?

First of all, at the beginning we would never have thought that we would have a million drivers, a lot of people had the same idea but what did we do different is we actually had the courage to take it all the way, and when you put faith and an incentive to a group of people that were for the most part ignored by society and by companies it creates such a powerful sense of pride and belonging that the quality organically emerges. Our drivers are our customer as well. We don’t directly employ them but we try to give them as many benefits as possible. We give them full accident insurance when they’re on the job, we provide the cheapest national rate for private health insurance that they can subscribe to, and we give them a variety of safety driving training.

So you actually treat them like actual employees?

We try to treat them as respectable humans who take pride in their work and therefore should be protected against the downsides of the things that they do at work. I think that’s the principle and that’s the spirit because without the drivers there’s no GO-JEK. We’re just the software and at the end of the day the drivers have to do the hard work

They’re your life and blood.

Yup.

You’ve got a lot of people to look after.

Haha, yup.

What’s your secret to attracting such a powerful list of investors?

I think we’ve been incredibly lucky for a variety of reasons. We’re one of the few companies who have always over-delivered on what we promise and we make sure that we consistently do that at every round of funding. There is no other company in the world that has attempted to do as many things as GO-JEK has.

So you’re a unique model by itself?

Yes and the amount of learnings of a GO-JEK operating in multiple markets and at this scale is also incredibly valuable to them because they’re seeing a new kind of model of a transactional platform.

A new animal?

Exactly. A new animal growing up and every one of these strategic investors as well as financial investors see Southeast Asia as a market that is both strategic and can be easily monetized.

I know you’re eyeing a public listing. Where would you list?

Ah, where would I list? So, I do not have the answer today.

Where would you like to list?

If you ask me personally, something that has always been a bit of a dream for me is actually to list in Indonesia, that’s something that would be an incredible source of pride for the country and for the company as well. So I don’t know what the future entails but my personal hope is that we can list here in Indonesia

When would you list?

That I do not have the answer, I do not have the answer but it’s definitely our intention to list.

Do you have any internal growth metrics, targets you want to meet or hit before kicking off an IPO?

Ya, I think that the path to profitability is something that is the main criteria for the timing of an IPO.

So when would you like to be profitable?

N: As soon as possible, there’s just so much room to grow, and to invest further into the growth of that market continues to make sense so I think that we won’t know the answer to that question until we see what happens in the first 6-12 months in these other markets as well. I think that will play a very important part in the consideration of when to IPO.

But personally when would you like to be profitable?

As soon as possible.

Give me a timeframe.

A few years, a few years, that’s the hope.

Right now like any fast growing startup, you’re actually burning cash to grow the business. What’s your user growth rate and transaction volume like?

Oh, our growth rate is very, very healthy, especially given where our scale is today.

What is healthy?

I cannot share exact numbers, I apologize, but some of our verticals even at such a large scale have doubled in just a year and it’s remarkable to see that level of month-on-month growth.

We have 20-25 million monthly active users just in Indonesia alone and it continues to grow. Transaction growth is actually where most of our growth is coming from, from people trying a new service and then liking that service and then it increases their frequency on the first service that they do and then they discover, “Oh maybe I should use GoPay and add this cashless option,” and then the convenience of that leads them to transact even more and they develop loyalty, so the deepening of each of our users to create higher frequency actually increases growth even more than acquiring new users.

But operationally, right now, you’re profitable?

Uh, I’m not at liberty to disclose that.

So Nadiem as the founder of GO-JEK, you’ve been hailed as the poster child for start-up success here in Indonesia. Did you ever think you would come this far?

No (laughs).

Not at all?

Absolutely not.

Not in your wildest dreams?

No, no.

What are some of the valuable lessons that you learnt along the way? Any hard learnings?

Everyone can align on a vision, it’s very easy, but it’s how to get there that’s the hard part, and having a lot of people with very different ways on how to achieve that vision is extremely beneficial, so surrounding yourselves with people that say no or say there’s a different way is so critical. The other thing that I learnt is that you need to find people whose motivation is far greater than the task at hand. They have to be willing to want to be part of something greater than themselves because that’s the only way you’re going to get people who will deal with the pain during the down,

They stick with you through the long haul?

They stick with you through the long haul. Everything looks like it’s just going up, up, up but a lot of people don’t see many downs along the way up. That mental resilience can only be achieved if those people are here to achieve something greater than themselves, so that was another learning.

You’re going to be 34 years old, you have an MBA from Harvard Business School. You’ve worked for many companies, the consulting firm McKinsey, then you worked for Zalora Indonesia, Lazada Indonesia, then in 2011 you launched GO-JEK. You’ve spent the last 6, 7, 8 years building up an entire ecosystem, now expanding into e-payments and expanding overseas. How would you describe your leadership and your management style? What is Nadiem Makarim like in person?

Well, part of my personal learnings were understanding that if you don’t evolve your leadership style for where your company is at the moment, then you will render yourself useless very quickly. So I think that my leadership style at the beginning was a lot more assertive, a little bit of micromanagement and a lot more I want to control everything

Only because you have to be?

It’s debatable whether you have to or not but that was the path that I chose in the beginning. As the company scaled and we had more and more talent and we had more and more things to do, that feeling of having to control every single outcome began to frustrate me and it wore me out. However I had to shift my mindset and actually understand that the people closer to the ground, teams working on the actual problems were much closer to the problems than I was, and that first shift in understanding that “Hold on, they actually could have a much better solution than what I would have guessed,” was the moment that I think my leadership style began to shift. But it’s a constant tension and it’s hard because sometimes as a founder you feel like you know what’s right, and it’s a natural instinct to have.

It’s a struggle?

I’ve been here longest right, I should know! But that’s kind of the things that we lie to ourselves about as leaders and the higher you go and the bigger your company gets, people also become less reluctant to tell you what they actually think.

Are you a demanding boss?

You could say that, yes, I think so; I think you have to be. The point of inflection in the leaders that I mentor and coach is the moment by which they realize that they could achieve something that they thought they couldn’t, and to do that sometimes you have to stretch their imagination first and stretch their effort and then at the end of that cycle they realize “Oh my god, look at what I achieved, I never thought I could achieve that” and that gives them the confidence to then go on and build on their own.

So you’re a tough boss?

N: I can be tough, yeah I can be tough. I’m an honest boss and sometimes honesty means saying things that are not easy to hear but I expect the same out of my team for me

And finally as the founder GO-JEK now steering the startup overseas, what is your ultimate ambition for the company? What do you dream about? What’s your vision for GO-JEK?

If you ask me personally, I hope that GO-JEK will be talked about 10 years from now, 20 years from now as the company that proved technology is actually the key enabler in unleashing an economy, in making it leapfrog into the next stage of societal evolution, that technology creates so much efficiency that the scalability of any type of positive impact that you’re trying to create can be achieved because we’re in this mobile tech revolution. So that’s my hope, my hope is that this is going to be the blueprint for development across the world.