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CHAPTER II

VALUE PROPOSITION

II.1. Strategic Situation Analysis

This part of chapter describes global as well as local market and industry analysis

of self-storage industry.

II.1.1. Macro environment

It is important to understand the long-term forces and how they might evolve on

the business. By recognizing and understanding the relevance of these changes

faster than the competitors, the company can gain advantage (Cheverton, 2004).

The PESTEL framework explains different forces, consists of political,

economical, social, technological, legal and environmental (Cheverton, 2004;

Johnson et al., 2005). There will be impacts on the competitive environment

when any of these forces change (Johnson et. al, 2005). Priority should be set to

focus on the forces with high probability of change and high impact on the

business (Kermally, 2004).

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Politics. Indonesia has maintained political stability through the achievements in

the reform years, such as: a free press, democratic institutions and a transition of

power to local governments. In 2008, Indonesia had just emerged from a decade

of economic crisis and political transition.

While the government makes improvement in enforcing the law and reforming

weak institutions, the program is still incomplete. Indonesia’s infrastructure

challenges need to be prioritized as well. The pace of reform in public

administration and the judiciary as well as in combating corruption is seen by

many people as slow.

After more than a decade since a mass decentralization program was initiated in

Indonesia involving 530 local governments, vertical coordination across

government levels has become more complicated. The success of Indonesia’s

decentralization will depend on the ability of districts government to fulfill the

required services for people, the control of government officials’ policies as well

as a fair and transparent electoral process.

Legal. In the last five years, Indonesia has been developing a new improved

policy of national and international logistics system. As a response of the

Presidential Instruction No. 5/2008 regarding Focus of Economic Programs

2008-2009, the Coordinating Minister for Economic Affairs (CMEA) started to

prepare a national logistics blueprint.

The results can be found in the Presidential Regulation No.26/2012 under which

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the Blueprint for the Development of the National Logistics System (Sistem

Logistik Nasional, thus, SISLOGNAS).

The Government have prepared the National Long Term Development Plan

2005-2025 (Law No.17/2007) to transform the country into a developed country

in 2025. In an effort to achieve this, a Master Plan for the Acceleration and

Expansion of Economic Development of Indonesia (MP3EI) has been developed,

through the issued of Presidential Regulation No.32/2011 in May 2011.

Law No.25/2007 concerning Investment (“the Foreign investment Law”)

regulates foreign direct investment (FDI) by granting a right of entry to foreign

businesses through a government licensing procedure formally managed by

BKPM. In the form of a limited liability Foreign Investment Company or “PMA”

incorporated in Indonesia, the investor can hold up to 100% ownership, or

between 45% to 95% of ownership in certain industries, depends on sectors and

business fields. Except in an 20 industry sector which is listed as closed to foreign

investment on the Investment Negative List (“Negative List”) as a part of Foreign

Investment Law under Presidential Regulation No.36/2010. The rest are open if

certain conditions are fulfilled.

Economy. Asian Development Bank and Bank of Indonesia have estimated that

Indonesia’s economic growth will reach in the range of 5.2-5.6 percent (year on

year) in 2016. Being driven by the raise of household consumption due to lower

inflation and pay raises of the civil service, this figure is a slight recovery from

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current year economic prognosis. There is a strong influence from other factors

as well in the 2016 economic outlook such as persistent low commodity prices

and weak export figures.

GDP growth could increase to 5.4 percent in 2016, compare to 4.9 percent in the

previous year. On the other hand, inflation is expected improving to 4%-5% by

the end of 2015. Indonesian President Joko Widodo unveiled the first instalment

of a stimulus package aimed at luring more investment, boosting consumer

spending, and supporting a currency that has weakened to 17-year lows.

Moreover, the finance ministry has removed the value added tax (VAT) in the

transportation sector in October 2015 to lower logistic costs.

As a mature and developed industry, self-storage has been growth in the USA

and Europe where there has been a growth in the middle classes. In Asia, Ernst

& Young predicts that for the next 15 years, middle class segment will grow to

contribute for 75% of global middle class. With its large domestic consumption

base; Indonesia’s middle class has grown rapidly as well, from estimated 38% of

the population in 2003 to 57% in 2010 or well over 100 million people, with 7

million being added each year. Improving employment outlook and wage growth

are expected to support the Indonesian consumer story.

According to the Self-Service Association (SSA), US self-storage industry was

valued at $24 billion in 2014, and public self-storage companies have

outperformed the S&P 500 consistently. However, the concept of this service in

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Asia is relatively new, especially in China and India as Asia’s largest markets,

although in some countries such as Singapore, Japan and Hong Kong, the

business has been around for quite some time.

Social. According to McKinsey Global Institute (2012), urbanization in

Indonesia is increasingly driving economic growth, with the share of the

population living in cities could reach 71 percent in 2030 from 53 percent today

as an estimated 32 million people are expected to move from rural to urban areas

over the period 2010 to 2030. By 2030, additional 72 million people could live

in urban areas. Jakarta could become a megacity, with ten million or more

inhabitants, with a population of more than 12 million by 2030. The city’s

population is growing at 1.1 percent a year, 0.3 percentage points higher than the

national rate of population growth. After years of rapid population and GDP

growth, Jakarta’s GDP is not expected to expand faster than national GDP

between now and 2030, with Jakarta’s share of national GDP to remain stable at

around 20 percent.

McKinsey Global Institute (2012) also cited that other cities are growing at a

faster average rate. Small middle weights cities will increase their share of GDP

to 37 percent from 32 percent today. Large and mid-sized middleweights with

populations between two million and five million, are growing at the fastest pace

and could together make up 27 percent of GDP by 2030 from 17 percent today

(Figure 10).

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Figure 10. Growth of cities in Indonesia (McKinsey Global Institute, 2012)

Indonesia young population could dominate the workforce by more than 40

million in 2030. Indonesia has one of the world’s youngest demographic profiles

where 60 percent of the population is below 30 years of age, and the population

is growing at a rate of 2.5 million a year. Unlike the many countries and regions

around the world grappling with constraints on growth caused by their aging

populations, Indonesia has the potential to continue to reap a demographic

divided. Employed workforce could rise to 152 million in 2030 from 109 million

today, adding 2.4 percentage points of a year to GDP.

Technology. The internet in Indonesia is growing more than 20 percent per

annum due to development of digital communication and it’s expected to have

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100 million of connected users by 2016. Most of users are relatively new to the

medium, and this gives the fast increasing number of entities to change their

online behavior in using digital media. There is significant shifting for how

companies interact with their consumers to communicate their products and

services as well as enable them to transact. Supporting by this changing trend,

Indonesia has a solid base to launch e-commerce business. Still Indonesia’s

broadband access rate which only 1 percent, lags behind other peer countries such

as Vietnam, who has more than 4 percent. The World Bank has revealed that

every 10 percentage point increase of broadband penetration in low and middle-

income countries would accelerate 1.4 percentage of economic growth, this

figure is better than high-income countries. Driven by low rate of broadband

penetration in Indonesia, mobile internet will remain to be the preferred service.

In the case of logistic services, there are some choices of technology which have

been utilized. Some devices such as RFID (Radio Frequency Identification) and

GPS capability are very common in the other side of the world. However, such

technologies or devices become hardly accessible in many areas of Indonesia

which has some infrastructure limitation such as Sumatera which has electricity

supply problem. This should open market opportunities for local or overseas

logistics technology providers who can provide alternate solutions to the existing

infrastructure available at the same time being acceptable for the level of local

people expertise. Online portals that enable logistic providers to easily meet their

demand such as freight company and shipment customers, in the highly

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conventional trucking industry represent an untapped opportunity of the market.

Efficient solutions that benefit from Indonesia’s high penetration of cellular

phones are the most successful technology appliance and present possibility for

further improvements.

II.1.2. Sharing Economy

Sharing economies enable persons and groups to make money from underutilized

assets, by sharing physical assets as service (The Sharing Economy Consumer

Intelligence Series Report-PricewaterhouseCoopers, 2015). Sharing economy is

about sharing the knowledge of goods and services to better exchange them

through disruptive technology. The characteristics include decentralised

exchange, focus on access of the resources, important role as the facilitator of

exchange, and self-governance mechanisms. (Institute of Public Affairs

Australia, 2014).

PricewaterhouseCoopers also revealed that sharing economy could be

distinguished by 4 (four) core pillars:

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Digital platforms connect excess capacity and demand

• Hosted through digital platforms that enable more precise, real-time measurement of spare capacity and connect to those in need

• Growing number of digital devices make easier to match supply and demand

Transaction that offer access over ownership, in some forms:

• Renting • Lending • Subscribing • Reselling • Swapping • Donating

Collaborative forms of consumption

More comfortable with transactions that involve deeper social interactions of exchange (trusting strangers to complete services)

Branded experiences that drive emotional connection

Experience design is important to drive emotional connections. By providing consumers with ease of use and confidence in decision-making, a company shift from a transaction-based relationship to become a platform for an experience (more like friendship)

Table 1. Core Pillar of Sharing Economy

Some examples of sharing economy:

No Fields Brands 1 Hospitality and Dining Airbnb, CouchSurfing, Feastly 2 Automotive and

Transportation Uber, Lyft, Sidecar

3 Retail and Consumer Goods Poshmark, Neighborgoods, SnapGoods 4 Media and Entertainment Spotifiy, Wix, SoundCloud

Table 2. Examples of Sharing economy companies

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II.1.3. Self-Storage Industry

CBRE Global Research (2015) has defined that self-storage is a commercial

property that enables customers to rent units on a short-time period for the

purpose of storage. Typically for domestic use. The American Heritage

Dictionary provides the following definition of the adjective self storage: “Of,

relating to, or being a commercial facility in which customers can rent space to

store possessions.” The Self Storage Association defines self storage more

precisely as the term applied to facilities offering rental on a month-to-month

basis where the tenant applies the lock and has sole access to the unit. No

bailment is created by the facility by taking the care, custody, or control of the

customer’s goods.

Self storage is used by a wide range of consumers with different needs that may

include:

• Homeowners and businesses in need of temporary space for overflow of

property or inventory

• Those in the process of relocating

• Property stored in relation to an estate in transition due to death, litigation,

restoration, etc.

• Businesses in need of space for general control of inventory, records, supplies

and equipment

• Businesses that are expanding or contracting

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• Businesses storing seasonal displays

• College students storing books, desks, etc. during summer

• Military personnel in need of low cost space or are on temporary duty

• Seasonal visitors with household items and sports equipment

The evolution of self-storage business, like most products, can be broken into

five phases – development, introduction, growth, and maturity. In the US, the

most advanced self- storage market, the development phase occurred between the

1950’s and 1960’s. After an introduction phase in the 1970’s, third generation,

modern self-storage facilities started to permeate the market and the US self-

storage industry subsequently entered into a phase of rapid growth. From 1984

to 2004, self-storage space per capita in the US increased from 1.2 to 5.0.

Currently, maturity has set into the US market with growth (as measured by self-

storage space per capita) slowing from double digits to 4.6% from 2004 to 2014.

As an industry, self-storage has not yet entered the decline phase but certain local

markets may be on the decline due to changing demographic or over-capacity.

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Figure 11. Self Storage Development Cycle (CBRE Global Research, 2015)

Despite the fact that the evolution of self-storage in Asia has lagged 20 years

behind the US, Asia has gained benefit to drastically reduce the development

phase due to proven operational and business model in the US, UK, and Australia.

Starting in the 2000’s, self- storage in Tokyo, Hong Kong, and Singapore has had

a 10-15 year introductory phase. Now, Asia self-storage is transitioning into the

growth phase, and the rapid expansion of self-storage facilities is expected in

Tokyo, Hong Kong, and Singapore. As self-storage grows in prominence,

investors are increasingly being drawn into this alternative investment.

In Porter’s (1980, 2008) five forces model, an industry can be defined as a group

of competitors who are producing the same kind of products or services which

competing with each other within the industry. To survive, companies need to

distinguish themselves from others. (Stalk, 2003). By mapping the role of

customers, competitors, barriers to entry for new entrants, suppliers, and

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substitutes, Porter’s analysis is important to understand competitive market

dynamics. The framework helps organizations identify their competitive

advantage, their business strategy, and what improvement that might need to

improve its strategy (Lindenberg, 2001).

No Porter’s Five Forces Descriptions

1 Barrier to Entry

• Profitable markets attract new entrants, which erodes profitability.

• Dependent on the obstacles to entry within an industry. It will make it hard for new entrants to enter the market.

• Example of a barrier to entry: - a large capital investment in machinery

needed to produce. - legalization or other governmental forces

on specific industry

2 Substitutes • Might based on a product-by-product basis, or • Substitution of need, (new products or services

rendering existing goods obsolete)

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• Substitute products can lower industry attractiveness and profitability

3 Buyers • Indicates how easy it is for buyers/supplier to drive prices down or up.

• They determine the attractiveness of an industry.

• The power of buyers/suppliers, if they are limited, will be bigger and bring a great influence on the price of the products.

• A concentration of buyers or suppliers, could bring constraining effect on the strategic freedom of a company.

• Price sensitivity or the costs of switching buyers/suppliers are important risk

4 Suppliers

5 Industry Rivalry

• Selling similar products within the industry. • The key driver is the number and capability of

competitors in the market. • Many competitors, offering undifferentiated

products or services, will reduce market attractiveness.

• Elements of importance in this regard are industry growth rates, the structure of industry, strategic goals of companies and exit barriers of an industry (Porter, 1980, 2008).

Table 3. Porter’s Five Forces Descriptions

Barrier to Entry will be considered a low in the next future, knowing this

business is quite easy to be copied, hence in this thesis we would like to build a

strong value proposition and solid business solutions that is enhanced with

technology – application to track and inventoried all the goods from the

customers. The current shipping and handling company will transform into this

valet storage business in the future.

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Substitutes. The number of substitute product is very high. Besides competing

with potential customer who would like to store their belonging into their

relative’s house, or who would like to store it into garage, smaller room, or put

their belonging unorganized. Potential customer also like to give the non

frequently used items to someone else or they might throw them away.

Buyers. The number of potential customer is also high with the growing segment

of middle classes and apartment residences. Customer who does not understand

the value proposition and the best practice of valet storage will not value and

considered valet storage as the solution to store and keep the belonging. A good

advocacy will be needed to show and tell the customer of this storage solutions,

and get the potential customer to try and store their belonging. There’s also a

challenge to retain the existing customer to renew the storage services for the

future. With a promotion and good readiness to the customer will be a key in

winning and growing the storage services.

Suppliers is deliberated as a middle to high elements because the dependency to

suppliers such as storage properties (house, warehouse, shop-house), boxes,

container and transportation partner is quite important. The easy access to obtain

transportation fleets or vehicles, boxes, container and properties to be rented will

be the flexibility to reduce cost and provide options to enhance the storage

services business.

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Industry Rivalry, can be considered as low. The competition would comes from

current traditional self-storage in the market such as: rajasimpan, however in the

field valet storage and sharing non frequently used items in Indonesia, we don’t

see any rivalry, especially in Jakarta and its greater area. This will be the first yet

innovative start up business in Indonesia.

II.1.4. Market Profile and Opportunity

(Jayantha and Hui, 2012) have studied about housing conditions across various

cities/countries in their journal discussing “Housing Consumption and

Residential Crowding: The Case of Hong Kong”. One of their goal of the study

is to evaluate levels of housing consumption and residential crowding in Hong

Kong compared to other global cities. The following table shows the comparison

result with some updates data for Singapore, taken from the latest annual report

of Singapore Housing Development Board (HDB).

Table 4. Average Floor Space Country Comparison

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In an effort to better understand the space constraints of residents, a privately

owned company named Extra Space Self Storage of Asia, has conducted a survey

of 1,000 people in Singapore in 2014. The survey involved people between the

ages of 25 and 65 and included a wide range of housing types, including one-

room Housing Board apartments, condominiums and properties for which the

inhabitants own the land.

The result from responded participants have revealed some facts from their

behavior:

o 56 percent believed they thought their homes were too cramped.

o More than 60 percent said they had never tried to unclutter their living

space.

o Nearly 40 percent said they hold on to items they no longer use, with more

than one-third indicating they have not used some belongings in the last

three years.

o The vast majority of residents, 70 percent, said they dedicate a room in their

home for storage.

o The most popular goods in home storage include gifts, keepsake items,

memorabilia and old photos, with 63 percent of respondents saying they

keep those types of belongings.

o Nearly half of respondents, 49 percent, said they hold on to unworn clothes,

and

o 47 percent keep old paperwork and school notes.

o In all, 88 percent said they were bothered by the clutter in their homes, but

less than half said they were prepared to deal with it.

In February 2016, Livible Inc., a valet self-storage services in Seattle, has

released findings from an online survey it conducted to gauge consumer attitudes

toward valet-style and traditional self-storage. The survey gathered responses

from 522 respondents in Chicago, Los Angeles, New York City, San Francisco,

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Seattle and Washington, D.C.—all markets that have a valet-storage presence.

The age range of respondents was 18 to 65, with the same number of respondent

between men and women.

Compared to the previous last year result with identical survey material, the

percentage of respondents who indicated they preferred valet or on-demand

storage to traditional self-storage increased from 42 percent to 63 percent.

Among the reasons respondents ranked valet storage higher than traditional self-

storage:

o 62 percent preferred saving time by not having to visit a unit to store or

retrieve items

o 47 percent indicated they liked the idea of not having to transport

belongings themselves.

o A majority of respondents (51 percent) indicated they believe valet storage

is less expensive than traditional self-storage.

o In all, Baby Boomers, Millennials, urban dwellers and women favored valet

storage to traditional self-storage by a 2-1 margin.

o The latest survey reveals the rapidly growing preference and need for more

convenient on-demand storage alternatives. Millennials and downsizing

boomers, who are increasingly living urban lifestyles, are driving this.

o 29 percent of respondents who said they preferred valet storage to self-

storage cited an online visual catalog as a reason.

o 25 percent of those who preferred valet storage indicated they were

“physically unable to move” their belongings.

o The majority of responses (56 percent) came from those living in single-

family homes, with the remainder in apartments. Just three-tenths of 1

percent had experience using valet or on-demand self-storage.

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II.1.5. TOWS Matrix in Self Storage Industry

According to Qawasme and al-Rousa (2009), “SWOT analysis denoting

strength as a competitive advantage”. Key issues from the organizations or

businesses environment and strategic capability can be identified in a SWOT

analysis. It is a very effective way of identifying the strengths and weaknesses

as well as opportunities and threats an organization faces (Anheier, 2005).

Using the SWOT framework helps an organization direct its attention and focus

its activities into areas with greater opportunities while being aware of its

limitations and external threats (Andreasen & Kotler, 2003). The framework is

simple enough to adopt and there is very little specialized skill needed needed

in conducting the strategy formulation process (Kong, 2008). However, it

depends on how decision makers integrate their analyses of internal and

external factors (Kearns, 1992). Besides the SWOT matrix is useful to create a

confrontation matrix in which internal aspects (strengths and weaknesses) will

be associated with external aspects (opportunities and threats). (Andreasen &

Kotler, 2003; Pickton & Wright, 1998). By using this confrontation matrix the

important relation between internal and external matters will be obtained to

define a strategy. The TOWS matrix (Weihrich, 1982) is used to summarize

and pair various factors, with the intention of finding a new strategic initiative.

Strengths or weaknesses are paired with opportunities or threats so there will

be four different pairs that can be made.

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In this case, given several related business facts internally and externally, the

TOWS analysis will be utilized to formulate the possible strategy to address

business potential in self-storage industry.

TOWS Matrix Strengths (S) • Innovative business idea • Lean business process

Weaknesses (W) • Lack of experience in sharing

based economy and storage business

Opportunities (O)

• No available competitors currently

• Raising of middle class market

• Underutilized properties • Growing penetration of

internet and mobile apps • Huge market of

apartment residents • Various choice of

delivery partners

SO Strategies Creating new business idea which incorporates valet storage and sharing economy business out of underutilized personal or household items

WO Strategies • Focus on selected target market

to develop experience and business competence

• Alliance with other partners (property owners, delivery partners) to reduce risks

Threats (T) • Current people behavior

to store non frequently used goods

• Lack of self-storage service or sharing economy awareness

• Legal issues

ST Strategies • Aggressive market

education through online marketing and attractive gimmick program to potential customers

WT Strategies • Focus on selected target market

to develop experience and business competence

• Aggressive market education

Table 5. TOWS Matrix Analysis

II.2. Strategy Formulation

II.2.1. Self Storage Business Model Canvas

“Business Model Canvas” (Osterwalder, 2010) theories have used to develop

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and analyze proposed or current business model in the organization.

The Business Model Canvas creates a common understanding of a business

model throughout the organization and all its stakeholders. It is a graphical

description of how an organization goes from value proposition to satisfied

customer. The Business Model Canvas consists of nine related building blocks,

which defines the structure of business model, focusing on four main areas of a

business:

• Customers

• Offer

• Infrastructure

• Financial viability

The full nine building blocks are:

No Related Issues Building Blocks

1 Value creation

• Customer segments • Value proposition • Channels • Customer Relationship • Revenue Streams

2 Internal efficiency

• Key Resources • Key Activities • Key Partnership • Cost Structure

Table 6. Business Model Canvas Issues

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The blocks are visualized in the figure below: (Osterwalder, 2010, p. 15).

Figure 12. Business Model Canvas

Customer Segments.The groups of people or entities an organization intent to

reach and serve are defined as the customer segments. In order to better fulfill

customer needs, an organization may divide its potential customers in distinct

segments with following considerations:

• Require certain offer

• Served through different distribution channels

• Require different relationships types

• Substantially different profitability

• Willing to pay for distinct aspects of the offer

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In the Customer Segments building block it is important to identify for whom the

organization is creating value and who their most important customers are

(Osterwalder, 2010, pp. 20-21).

Value Proposition. The value proposition represents the collection of products

and services that became the reason why customers turn to one company over

another, either a quantitative or qualitative nature. Value proposition creates

value for a distinct customer segment. Examples of value proposition such as:

price, design, cost reduction, customization, performance.

Channels. The channels building block identifies how an organization interacts

with its customer segments and how their value proposition being delivered to

the customer. The main objective is to raise value awareness, to assist customers

evaluate the value proposition and to allow customers to purchase certain

products and services.

Channel Types Description Direct Sales force, Web sales Own Own stores Indirect Partner stores

Wholesaler

Table 7. Channel Types

Customer Relationships. The customer relationship describes the relation types

that would be provided by an organization to its certain customer segments. The

aim is being driven by the organization goal to manage customer acquisition,

customer retention or boosting sales.

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Revenue Streams. The revenue streams describe the organization’s generated

income from certain customer segment, where income is the cost subtracted from

the revenues. Revenue stream is often considered to be the most important part

of a business model. Revenues may be divided into two types: transaction (one-

time-buy) and recurring revenues. Examples of generated revenue are:

• Asset sale (physical product)

• Usage Fee

• Subscription fees

• Lending/renting/leasing

• Licensing

• Brokerage fees

• Advertising

No Pricing Mechanisms Descriptions

1 Fixed menu pricing Based on static variables

• List price – fixed prices for any value proposition

• Product feature dependent • Volume dependent – quantity of

purchase

2 Dynamic pricing Based on market condition

• Negotiation – negotiated by two parties

• Yield management – inventory at time of purchase

• Real time market – based on supply/demand

• Auctions – competitive bidding

Table 8. Pricing Mechanisms

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Key Resources. Key resources describe the most important assets needed to

ensure the business model work. It consists of some underlying issues such as:

what it needs to to deliver the value proposition, reach its markets and maintain

its relationships and to earn revenues. Some types of resources may be considered

as key resources such as:

• Physical

• Intellectual

• Human

• Financial

Key Activities. Key activities are the most important things which an

organization must perform to operate its business. Key activities describe the

activities required to deliver the value proposition, reach markets, customer

relationships and to earn revenues.

Some examples of key activities are:

• Production

• Problem Solving

• Platform/Network

Key Partnerships. The key partnerships define required network of suppliers

and partners from an organization to ensure the business model work. A company

may wish to establish a partnership for reasons of:

• Optimization and economy of scale

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• Reduction of Risk and uncertainty

• Acquisition of particular resources and activities

Key partnerships may have the following form:

• Strategic alliances

• Cooperation: Partnership between competitors

• Joint Ventures

• Buyer-supplier relationships to assure reliable supplies

Cost Structure. The cost structure identifies all incurred costs to operate an

organization business model. The costs involved in the cost structure are

considered necessary to create and deliver value, to maintain customer

relationships and to earn revenue. The focus is to minimize the cost wherever

possible when opting for a cost-driven business model while cost is of lesser

concern when opting for a value-driven. For the latter the focus is on value

creation for customers. There are two cost structures in a business model:

• Cost-driven

• Value-driven

Traditional self-storage space is generally rented on a monthly basis and option

to long term leases with lower cost than office or retail space per square foot

basis. Customers typically rent based on the space they need and leave whenever

they want. Individual customers usually storing household goods, whereas

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business customers usually storing excess inventory or documents. A recent

study from Self-Storage Association shows that the average length of rent for a

typical customer is 11 months, and 24 months for the average business customer.

Some facilities offer additional features for sale to assist customers in packing

and safekeeping their goods such as boxes, locks, and packaging supplies.

Stored items are generally not covered by the facility's insurance; customers may

cover the stored items by their own insurance policy (if such policy has coverage

for items stored off the premises of the insured) or may purchase insurance to

cover the items (the facility may offer as a service through a third-party carrier,

or require the customer to purchase as a condition of rental).

The rented spaces are secured by the customer’s own lock and key. Self-storage

company employees do not have access to the contents of the space and generally

not liable for theft. A self-storage company does not take possession or control

of the contents of the space unless a lien is imposed for non-payment of rent, or

if the unit is not locked the facility may lock the unit until the tenant provides

his/her own lock. Self storage is a practical resource for small businesses, since

they can easily add more space as they grow without have to expensive long

term leases. Moreover, it provides businesses with a way to reduce costs, should

they need to downsize. Self storage is also useful for college students and

seasonal visitors who may rent space for a season, and for military personnel who

go on temporary tours of duty, but intend to return to the area, and for those who

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can't afford to rent more living space. Below is the generic business model of

traditional self-storage.

Figure 13. Conventional Self Storage Business Model Canvas

The advantage of using self-storage space is increased flexibility, low cost,

convenience, and value.

II.2.2. Idea Generation

A strong relation can be made between the growth of self-storage as potential

business and the growth of middle classes. People in the middle class segment

have more expendable income and expectations with their standard of living,

particularly the goods they own and the lifestyle they follow. Higher living

standards and more expendable income bring more items for the house. As

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property prices increasing and affordability to upgrade to larger properties

becoming more expensive and difficult, self-storage has grown around the

increasing middle classes as a solution to their needs. It can provide a spare space

to store goods that either under utilized or too large. PriceWaterhouseCoopers

Macro Consulting (2009) has developed income distribution models that estimate

the size of different income groups in certain cities in the world up to 2025 in

Future consumer markets report: The growth of the middle class population in

selected cities. According to their report, the size of the middle and upper classes

in Jakarta is expected to experience a more modest rise by 2025 with following

figures:

Figure 14. Size of mid and upper classes Jakarta 2008-2025 (PwC, 2009)

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There are also simple facts that makes the self storage business would create new

market from customers who have never used self-storage before, since people in

Asia also need:

• Temporary storage driven by life events such as marriage, new born, death,

renovation, house moves, etc

• More reliable storage for their sports gear, hobbies, collector’s items, wine

collections, or clothes

• Convenient business solution for storing business records and excess

inventory

Nowadays, self-storage business has evolved to more than individual storage

rooms where customers can store their goods. A recent study in Hong Kong from

Ipsos consulting firm found that most of non-users of self-storage (71%) said they

would look for the service on the internet. Since the target customer is part of the

growing middle class, increasingly online and actively using the mobile internet,

a new service approach called “valet storage” then emerges to combine the new

requirements of self-storage customers with online technology. Valet storage

companies usually provides boxes for small volumes storage. They send boxes

to the customer, picks up the storage items, and stores them in some place for a

fraction of a traditional storage company cost. All boxes are carefully catalogued

and can be delivered back to the customers should they request it.

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As a result of this evolving service, several valet storage providers have been

established in the US (MakeSpace, Clutter, BoxBee) and Hong Kong in 2014,

such as AirBox, Boxful and Spacebox.

II.2.3. Value Proposition

A strong relation can be made between the growth of self-storage as potential

business and the growth of middle classes. People in the middle class segment

have more expendable income and expectations with their standard of living

There are four pillars of customer value, Holbrook (2006). Firstly, customer value

is interactive where it involves a relationship between the customer and goods or

services. This interaction is mandatory to form a value. Secondly, relativistic,

where value is: comparative, situational and personal. Thirdly, value rests to a

judgment of performance or outcome, where value can be expressed in the form

of: attitude, affect, valence, evaluation, opinion, satisfaction, behavioral tendency

and choice. Lastly, customer value resides in a consumption or use experience

(rather than in a physical product or service).

As a basis of value proposition, the key dimensions of customer value will be

different under four situations, Rintamaki et al. (2007). Firstly, as economic value

become the customer’s key motivator, the value proposition should focus on

price. Secondly, as functional value become the key motivator, the value

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proposition should focus on solutions. Third, as emotional value become the key

motivator, the focus should be on customer experiences. Fourth, as symbolic

value become the key motivator, the value proposition should focus on meaning.

Based on the traditional competitive strategy, the value creation strategy

emphasis to offer new solution for customers, with no relationship with

management and competition, and replaces the sum-zero game between rivals in

the market with developing more markets (Kim & Mauborgne, 2005). Kim &

Mauborgne (2005) also suggests the Blue Ocean Strategy as a competitive

strategy in which the competition is made irrelevant through an approach that

pursues differentiation and low-cost to open a previously un-tapped or under-

served market. As the cornerstone of the Blue Ocean Strategy, Value Innovation

is about driving costs down while in the same time driving value up for buyers.

Figure 15. Value Innovation Diagram

Value innovation is created using the four actions framework. The frameworks

asserts that in order to achieve value innovation, a product/ service delivery must

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raise and create value for the market while simultaneously reducing and

eliminating services less valued by current and future markets.

Figure 16. Four Actions Framework

Given the situation that this valet storage business would be the first of its kind

in term of innovative self-storage business in Indonesia, therefore we proposed

to use Value Innovation approach to identify its value proposition. The following

Value Innovation Curve compared relevant values between traditional self-

storage and valet storage business.

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Figure 17. Valet Storage Value Innovation Curve

As a result of value innovation approach, there are several value proposition that

can be offered to the customers.

No Value Proposition Valet storage service

Rajasimpan.com (other traditional self-

storage)

1 Minimum storage

1 (one) single plastic box (50L)

• 10 cbm (cubic metre square)

• Carton box to store documents. Minimum 10 cbm

2 Standard item size

• Stored items must be put in the standard box

• Unstandardized items in the size of one man carry

No standard items defined

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3 Pickup and delivery service

• Pickup and delivery is available as standard service

• Requested delivery based on particular items

• No pickup and delivery service as standard service.

• No delivery provided based on particular items

4 Utilizing app as CRM tool

• Using app and website to request and track pickup and delivery operation

• Available catalogue feature in the app or website

• App and website to settle online payment through credit card, debit card

No app/website provided to manage customer transaction

5 Accessibility

• Established drop point outlets in the strategic location to provide service in the nearest neighbourhood

• Close partnership with apartment building management to provide additional feature to their standard services

• No drop point outlets provided.

• No partnership with apartment building management

6 Sharing economy benefit

• Additional service of rent and swap utilizing the mutual benefit of sharing economy among users

• Customers can monetize their underutilized items by renting them to others

No sharing economy benefit applied

Table 9. Valet Storage Value Proposition

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II.2.4. Diamond Strategy Model

A strategy is a concept which integrates several important elements and external

factors to achieve firm objectives. Identifying a good strategy requires defining

related elements of strategy. In order to assist our strategy formulation prior to

strategy implementation phase, we have decided to employ Hambrick and

Fredrickson (2005) concept regarding 5 major elements of strategy that need to

be considered in the strategic management process. These approach of strategic

elements form a structure called “Strategy Diamond” analysis which consists of:

Elements Descriptions

Arenas

The areas a firm will be active, whether in term of : geographic, products/services, channels, market segments, technologies or value-creation

Differentiators

The significant features/attributes which make a firm superiors among its competitors

Vehicles

The possible ways to participate in the arenas, include acquisitions, alliances, organic investments or growth

Staging Strategic steps to move a firm

Economic Logic

The way a firm could generate profit.

Figure 18. Strategic Diamond Analysis

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The possibility of a firm to perform well in the implementation phase is greater

when the five elements of strategy are synchronized and strengthen each other.

II.3. Strategy Implementation Model

At the phase of strategy implementation, we believed that Porter (1985) value

chain model have an ideal approach to identify common key activities to all

businesses in terms of value generating activities. The model examines different

activities performed by a firm in systematic way and interaction between each

activity. This approach is important to analyze the source of competitive

advantage. The value chain divides a firm into a set of generic categories of

strategic activities which determine the firm’s relative cost basis for offering

product differentiation. (Porter, 1985) firm’s value chain is based on nine generic

categories of linked activities.

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Figure 19. Porter’s Value Chain Analysis

II.4. Strategy Evaluation and Control Model

In order to ensure that our implementation strategy have been conducted

effectively in the right manner, we need a management approach to provide

feedbacks on internal processes and business outcomes, this feedbacks would

become a justified reason to improve business performance and results. Kaplan,

Norton (1992) have developed a management and measurement system called

Balanced Scorecard for Performance Measurement, which centralized on

financial metrics as the ultimate result measures for company with additional

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perspectives from customer, internal process and learning and growth as the

drivers to build long-term value of shareholder.

Figure 20. Balance Scorecard for Performance Measurement