Go-Jek In Indonesia: Seizing Digital Opportunities At The

Senior Research Fellow Andreas Pazi Raharso and Associate Professor Sia Siew Kien prepared this case based on interviews with Go-Jek. This case is intended for class discussion and learning, and not intended as source of research material or as illustration of effective or ineffective management. COPYRIGHT © 2017 Nanyang Technological University, Singapore. All rights reserved. No part of this publication may be copied, stored, transmitted, altered, reproduced or distributed in any form or medium whatsoever without the written consent of Nanyang Technological University. The Asian Business Case Centre, Nanyang Business School, Nanyang Technological University, Nanyang Avenue, Singapore 639798. Phone: +65-6790-4864/6552, E-mail: [email protected]

GO-JEK IN INDONESIA: SEIZING DIGITAL OPPORTUNITIES AT THE BOTTOM OF THE PYRAMID

Andreas Pazi Raharso and Sia Siew Kien INTRODUCTION As a developing nation with the world’s 4th largest population of 250 million people,1 Indonesia often paled in comparison to other countries based on various indicators of progress. Its GDP per capita of USD11,300 (2015 est.) ranked 132rd in the world, its life expectancy ranked 140th, and its income Gini coefficient – a measure of income inequality – ranked 108th.2 Yet, with its prospering economy, the pervasiveness of the Internet, and rapid smartphone adoption, Indonesia was fast becoming a rising star in Asia’s burgeoning technology scene. Go-Jek, a unicorn startup that revolutionised the informal transport and logistics business in the booming cities of Indonesia, was one of the fastest growing and most visible tech startups in Asia. Through its mobile app linking motorcycle taxis, known as ojeks, with consumers, Go-Jek offered on-demand transport, delivery, shopping, and a host of other personal services. Every day, the Go-Jek fleet braved traffic jams and nimbly navigated the bewildering vehicular jungles of Indonesian cities to provide these services. As of June 30, 2016, Go-Jek’s on-demand mobile platform had connected millions of customers to more than 200,000 ojeks and taxi driver partners, 35,000 food merchants and 3,000 service providers. 3 Go-Jek’s services could be found in more than 14 cities in the archipelago. Backed by heavyweight investors Sequoia Capital, KKR, and NSI Ventures, Go-Jek was valued at USD1.3 billion in 2016.4

HBSP No.: NTU131 Ref No.: ABCC-2017-013 Date: 10 July 2017

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THE FOUNDING OF GO-JEK Go-Jek was conceived by founder Nadiem Makarim5 when he was working as a consultant for McKinsey and Co. in Jakarta. Despite having his own car and chauffeur, he often resorted to taking the ubiquitous and cheap ojeks to get around Jakarta’s infamous gridlock. While he was more than appreciative of the service these motorcycle taxis provided, he was struck by the inefficiency of ojeks. Typically, ojek drivers spent eight to 10 hours waiting on roadsides, only to pick up an average of just six passengers a day. On bad days, some ojek drivers even had no passengers.

So you’ve got this huge inefficiency. Whenever you want an ojek, there will be no ojek. Whenever you don’t want an ojek, they will be crowding pedestrian walkways all over Jakarta… They are one of the few service providers that have no influence over their ability to get a customer. This was a market that was ripe for disruption.6

Nadiem Makarim, CEO, Go-Jek

And so, in August 2010, Nadiem launched Go-Jek. Initially, the business had only a call centre and 20 drivers, which Nadiem struggled to keep afloat. For the first three years, operations were reliant on radio technology; employees would call and deploy ojek drivers if ride orders were successfully placed. On January 7, 2015, with the backing of a private equity investor, Go-Jek switched to a digital technology platform and introduced an Uber-like mobile app to connect consumers directly to ojek drivers.7 (see Exhibit 1) The Go-Jek app offered three basic services: transport, courier, and shopping, all delivered by its army of ojek drivers.8 For these on-demand services to succeed, Nadiem knew that he needed to build trust between consumers and the ojek drivers.

“And to do this, you need trust. So, that’s what we set out to build… Your branding, your technology, give them uniform, give them a jacket, give them a helmet, give them an android handset – now you are ready to go.” 9


HOW GO-JEK’S MOBILE APP WORKED With the push of a button, customers could launch the Go-Jek mobile app and select their desired service (transport, courier or shopping), then indicate their current locations to view ojek riders close to them (see Figure 1). Customers seeking ojek rides would use the app to key in their intended destinations, after which a fare estimate would be displayed. Customers happy with the estimate would then submit their request for a ride. Once the request was sent, the nearest available Go-Jek rider would proceed to pick up the customer. Before commencing on the journey, customers would be handed a free helmet and face mask. For women who were uncomfortable with riding pillion with male drivers, Go-Jek offered the Lady Jek option – ojeks driven by females. Unlike Uber (which only accepted credit card payment at first), Go-Jek allowed its customers to pay their fares in cash.10 Nevertheless, customers could still link their Go-Jek accounts to their bank accounts or credit cards. For each ride, Go-Jek retained 20% of the fare as commission. To use the Go-Jek shopping service, customers would select “shopping” on the mobile app and fill up the address of the store, the items to purchase and the destination to deliver the items to (see Figure 2). The nearest Go-Jek driver would then head to the store, buy the items using his or her own money first (up to IDR1 million), and deliver the requested items to the stated delivery destination. Drivers would be paid upon delivery of goods to customers. Do

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To use Go-Jek’s courier services, customers would use the app to indicate the items they wanted picked up and delivered to specific addresses. Loss insurance of up to IDR2 million was offered to its customers by Go-Jek.

Figure 1 Go-Jek’s User Interface

Source: Brilio (2015, December 24). 5 apps to improve your productivity in 2016. Retrieved on March 2, 2017, from https://en.brilio.net/tech/5-apps-to-improve-your-productivity-in-2016-5-apps-to-improve-your-productivity-in-2016-151224m.html#

Figure 2 Go-Jek Mobile App

Source: Faith, A. (2015, July 13). Artificial intelligence. Retrieved on March 2, 2017, from http://annisafath08.blogspot.sg/2015/07/ Do

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GO-JEK’S RAPID RISE TO POPULARITY The idea of Go-Jek caught on and spread like wildfire after its move to digital technology. Go-Jek’s monthly orders grew by over 98 times from March to October 2015.11 According to a Go-Jek representative, “there were over 20 million bookings on our platform in June 2016, meaning that we are processing roughly eight bookings per second just last month.”12 The huge demand could be attributed to bad traffic conditions in Indonesian cities. Jakarta, its capital city, is the second most populous urban area in the world, with almost 31 million people living in the greater Jakarta area and 5.5 million vehicles.13 As many as 3,500,00014 commute daily into the city for work. Based on a Driver Satisfaction Index 2016 conducted by navigation appmaker Waze,15 Indonesian cities such as Jakarta, Surabaya, Bandung, Denpasar, and Bogor topped the list of cities with the worst traffic in the world. Traffic congestion is a major cause of productivity loss.

“The productivity that’s lost, caused by inefficient infrastructures, is huge. And productivity is not just related to economic matters but also quality of life for every individual. A person who spends two hours on his way back from office will be not able to see his child before he goes to bed. Or if a person is late for a business meeting, he can potentially lose the deal. So, the quality of life will be badly affected by the traffic inefficiency. (Go-Jek has a role) perhaps not in overcoming, but in mitigating the effects, (and in) reducing the inconvenience of the traffic (problems).”16


According to Universitas Indonesia,17 traffic congestion in Jakarta resulted in approximately IDR12.8 trillion (US$936 million) a year in terms of time, fuel and health costs. Go-Jek filled a gap in the market created by the poor transport infrastructure in Indonesia. Nadiem recognised the need for a service that would ease the pain of being stuck in traffic for hours and enable people to go on with their lives. “When traffic stops, lives cannot stop, and this was just the gap that we plugged,” said Piotr Jakubowski, the Chief Marketing Officer of Go-Jek.18

“An average car owner here will waste about four hours of their time, in fact, three to four hours of their time every day in a car,19 just to show you the scope of the issue. Go-Jek does not solve congestion but it does provide a very compelling substitute from having to use your own private vehicle…instead of you going out to get something, it comes to you.”20


In addition, Go-Jek also offered transparent fare pricing, eliminating the hassle of negotiating fare prices, and boosted the income of ojek drivers. Go-Jek’s mounting popularity occurred at an opportune time when Indonesia was rapidly transforming into a digital nation. Leapfrogging the desktop/laptop era, most Indonesians accessed the Internet directly from their mobile phones. According to a 2015 report by social marketing agency We Are Social,21 Indonesia had the fourth largest mobile cellular subscriptions in the world, with 325 million mobile connections. Indonesia also had 88.1 million active Internet users, and 36% of the population carried smartphones. Go-Jek had successfully tapped on the pervasiveness of smartphones in Indonesia to unlock huge market potential. Piotr said, “We happened to be at the right place at the right time with the right solution, and [Go-Jek] started a revolution. It is a heady time to be in this space in Indonesia.”22 Do

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SCALING UP FOR GROWTH With his prior experience in tech start-ups, Nadiem gathered a team of highly competent managers with both overseas experience and local knowledge and tasked them with developing core capabilities and driving Go-Jek’s growth trajectory. A key capability that Go-Jek immediately ramped up on was the design and architecture of its backend systems and technological infrastructure. Given the limited pool of tech talent in Indonesia, Go-Jek acquired two Indian startups, C42 and CodeIgnition in Bangalore to cope with scalability challenges in February 2016. All four co-founders of the startups were brought into the management team after the acquisition. To scale quickly, Go-Jek began recruiting ojek drivers aggressively. From August 11 to 14, 2015, Go-Jek held a mass recruitment at Jakarta’s Gelora Bung Karno Main Stadium, hiring 16,000 new drivers.23 Aspiring drivers signed up at Go-Jek’s booth and left (about four hours later) ready for their first orders, having filed the necessary paperwork and gone through the basic training (e.g., how to treat the passenger properly, how to use the smart phone, and how to drive safely). Despite being recruited by Go-Jek, these drivers were not referred to as employees; instead, they were called Go-Jek’s driver “partners”. Go-Jek called them partners to emphasise equality. Unlike a traditional employer and employee relationship in which the employer decides the SOP and almost everything else, driver partners basically had equal rights with Go-Jek. The agreement between the company and the partners could be terminated by either one of the parties, and all transactions were based on mutual understanding and agreement between the two parties. Go-Jek drivers used their own motorbikes. They would also use standard mobile phones provided by Go-Jek through an installment scheme to ensure conformity to the app interface, and received healthcare insurance and automotive insurance from Allianz through the company. During the heady days of mass recruitment and market penetration in 2015 and 2016, Go-Jek expanded rapidly from 80 to 1,600 employees, and from 500 to 200,000 drivers in 2016.24 PROTESTS FROM INCUMBENTS Go-Jek’s entrance disrupted the traditional ojek industry. The lack of clear regulations for new ride-hailing services had generated unhappiness among the incumbent ojek operators and drivers. Traditional ojek riders who did not join Go-Jek saw their incomes significantly reduced. One ojek driver, Heri Saputra, noted that his income had dropped from around IDR200,000 to IDR70,000 a day. “The ojek business is a tough business these days,” the 52-year-old lamented.25 In response to Go-Jek, some ojek drivers put up banners and employed intimidation tactics to keep Go-Jek drivers from entering certain areas.26 On November 16, 2015, some Go-Jek drivers staged a demonstration to show their unhappiness.27 In the same month, two men on motorcycles drove up to Go-Jek’s office in South Jakarta and fired shots at the building.28 The series of events culminated in a ban on Uber, Grab, and Go-Jek by the Ministry of Transport on 18 December 2015. However, on the same day, Indonesian President Widodo rebuked the ban and told reporters that innovation for public welfare should not be restrained:

“Go-Jek (and others) exists because people need its services. Therefore, regulation should not put these players at a disadvantage. Who creates regulation? Government creates regulation. As long as the services are needed by people, the regulation should support these services. We can temporarily delay enforcement until all our public transportations are already good and comfortable. Then, people can choose for themselves.”29

Joko Widodo, President of Indonesia

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AN OJEK FOR EVERY NEED – THE LAUNCH OF GO-LIFE True to its tagline “An Ojek for Every Need”, Go-Jek continued to expand its offering of on-demand services. In October 2014, Go-Life – a new non-transport subsidiary of Go-Jek – was launched. Go-Life was jointly headed by Dayu Dara Permata and Windy Natriavi (both ex-McKinsey colleagues of Nadiem). Built around Go-Jek core services, Go-Life aimed to provide a host of on-demand personal services to meet the local needs. “We are always striving for world-class excellence in customer experience and we look up to the likes of Amazon…. But we also want to embed local wisdom and nuances into our products and services. If you look at all these services that we offer, they are basically addressing pain points in the emerging countries. e.g., customers in urban cities. We’re talking about transport being a hassle, traffic jam is a hassle, similarly, food delivery, grocery delivery… these are very local problems.

“The fact that Go-Jek was a huge success among the grassroots economy… was helpful for us when we launched the next services. And when we say to them (grassroots), “Hi, we are from the Go-Massage, Go-Glam and Go-Clean, powered by Go-Jek”, (being) part of Go-Jek as an entity is very helpful because the Go-Jek name has built strong capability among the grassroots, of course… any service you launch under the name of Go-Jek, they will trust it…”30

Dayu Dara Permata, Co-Founder, Go-Life

The original three services (transport, courier, and shopping) evolved into: Go-Ride and Go-Car (car-sharing services), Go-Box and Go-Send (instant courier services), and Go-Food (food delivery) and Go-Mart (from delivery of grocery to electronics). New on-demand services launched included Go-Massage (massage service), Go-Clean (cleaning service), Go-Tix (ticketing service), and Go-Glam (beauty service). “We want to touch every aspect of our consumers’ lives,” said Dara.31 For the launch of every new on-demand service, Dara, Windy and their team would work on both the supply and demand issues. On the supply side, they sought to understand the requirements and the definition of these personal services (e.g., in deriving the service categorisation and pricing catalogue) and factoring these requirements into the user interface design in apps development (e.g., gender preference parameter for Go-Massage). Working closely with the business and technology teams, the progress of service development was systematically tracked and managed using agile methodology.32

“So we carry out a daily stand up, for 15 minutes daily, we stand up at the beginning of the day and at the end of the day. So beginning of the day, we align our purpose for that day. Three things that we always touch on: number one is ‘what is your focus of the day?’, number two is ‘are there any bottlenecks or road blocks ahead of you?’, number three is ‘do you need any help from the management team?’. And at the end of the day, it’s more retrospective: ‘how did it go?’, ‘what went well?’, ‘what needs to be improved?’, and then ‘going forward, what’s next?’ The next day, we touch base again… And we do this every day.”33


Dara and her team also had to address the challenges in dealing with individual service providers in the informal sector. Unlike a professional setting in typical business deals, Dara, Windy and their team had to interact at the individual level with average Indonesians.

“You partner with each and every individual; that means you are in-charge of onboarding each and every person. You have to make sure they have their handsets, their devices and that means you need to give (handsets) away to them or connect them with our microfinancing partners… No middleman handles the process in between.”34

Dayu Dara Permata, Co-Founder, Go-Life Do

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When recruiting and selecting these individual service providers (e.g., for Go-Massage), Dara emphasised service skills and mindset.

“We look at their hard skills, we look at their soft skills, just like employee selection or recruitment. The only difference is that we don’t look at the cognitive aspect, we look more at the skills. If you’re a cleaner, we will (screen) you on all the basic cleaning skills. If you’re a masseuse, we look at your massage skills. Soft skills are like ‘do you have a service excellence attitude?’ and ’do you know how and what it means to serve customers?’”35


Clients’ ratings and feedback from the Go-Jek apps were actively monitored to ensure quality service. Continuous efforts were made to enhance the professionalism of these individual service providers.

“At Go-Life, we have created an assessment centre and a training system where we hold minimal classroom sessions – in fact the real learning comes from online apps where we can coach workers to provide quality service. For example, if a service provider gets bad ratings from client feedback, we provide follow-up training to improve their service. We can push a video clip to their mobile phones for them to see how to do the job better. We can share a best practice as soon as it is created. We can create learning groups. At Go-Life we leverage technology to help workers in the informal economy learn how to do jobs professionally. We are also talking with the Indonesian government about creating a government-certified (formal) learning process.”36


On the demand side, Go-Jek also leveraged on technology to launch promotional initiatives to expand its customer base. Beyond traditional advertisements, Go-Jek introduced a referral program where customers are incentivised with fare discounts and credit points to refer their friends for these on-demand services. The referral program leveraged heavily on technology and had been effective in growing its customer base. As the Chief Marketing Officer, Piotr, noted, “We need to have a close connection with the consumers and push things creatively through product innovation and campaigns that engage not just when the consumers access the application but everywhere else too.”37 In June 2016, Go-Jek unveiled a Ramadan campaign. For the entire fasting month, Go-Jek partnered with Rumah Zakat, a non-profit organisation, to create dedicated drop points for consumers to send donation items using Go-Box and Go-Send, while also utilising Go-Pay as a payment platform for cash donations. After one year of operation, Go-Glam, Go-Massage, Go-Clean achieved double-digit growth every month.38 Customer ratings were also at 90% level, indicating a high level of customer satisfaction. As in August 2016, there were 15,000 service providers in major Indonesian cities for Go-Life alone. LEVERAGING ON ITS DATA ADVANTAGE The sheer number of transactions across the various Go-Jek services had generated enormous amounts of data for Go-Jek – a unique resource not easily acquired by traditional, non-digital organisations. Being data-driven was entrenched in Go-Jek from day one:

“Data is in the DNA of Go-Jek. We are very data driven. We capture all of the data across the platform, across the services. It is on a real time basis. We have lots of tools that we use to monitor the performance of everything. On Go-Food, on Go-Ride, on Go-Car, on everything. The entire management makes decisions based on data. How is it doing today? How was it doing yesterday? Were there enough drivers? Why is this going down? Data science (group) needs to use the data, Do

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Engineering (group) needs it, Product Managers need it, Marketing needs it. Everybody has a dashboard that he or she will look at every morning.”39

Madhu Iyer, Go-Jek Chief Data Scientist

Operationally, the data were analysed both from the “inside-out” and the “outside-in” perspectives. Inside-out perspective meant analysis from a system design perspective, e.g., the perspective of customers, driver partners, and merchants who were using the Go-Jek app. Was the response time fast enough? Was it taking too long to book a ride? Solutions to these issues typically required tweaking the system, e.g., tweaking engineering, algorithms, or the way data was captured. Outside-in perspective analysis was carried out at the level of service design or service standards. For example, were customers at certain locations not getting rides, or were drivers at certain locations experiencing low ride demand? Tweaks made were aimed at improving customer experience or generating higher income for drivers and merchants. Analysis often revolved around customers, drivers, and merchants: for example, monitoring the number of transactions a customer made in the last seven days, or comparing the number of rides a driver completed last week versus this week, or tracking how many customers bought from a particular merchant at a specific location. Insights or ideas derived from the data formed the basis for continuous service optimisation and new service innovation.

“Data has really enabled a lot of services for us, e.g., Go-Ride, Go-Food, Go-Pay… We see that the rush hour traffic is different from non-peak traffic, we see that certain geo-locations have got more activities than others, we know that people like to eat in this restaurant and they like to hang around this CBD area. So, hey, let’s provide some service there. Let’s build better (customer) experience there. Let’s see if we can now enable credit services like Go-Pay. Let’s see if customers can get more money to spend. So, there are a lot of things that have been built based on (these insights).We get intuitions from the data on better ways to render this service or to provide new services, then we experiment and when that experiment takes off, then new services emerge organically.”40

Madhu Iyer, Go-Jek Chief Data Scientist

Mahdu asserted, “We are continually trying to seamlessly cross-integrate and cross-facilitate to ensure that customers, driver partners, merchants and service providers have a better experience.” The plan was to complete the end-to-end integration of both the Go-Jek and Go-Life technology platforms such that Go-Life service workers could also seamlessly travel to various locations using the ride services of Go-Jek.41 In April 2016, Go-Pay was launched. With low credit card penetration in Indonesia at under 3.2%,42 it quickly became a popular e-wallet solution in Indonesia. The Go-Pay app not only enabled greater customer experience, but also added new data resources for further insights through data analytics. GO-JEK AND ITS SOCIETAL IMPACTS Beyond satisfying a basic need for transportation, Go-Jek’s services also contributed to improving work productivity.

“Go-Jek is not about getting you from A to B. Go-Jek is about you becoming more productive, and releasing the limits that life puts on you. In Jakarta for example one of the biggest limits is the traffic. And with Go-Jek you actually don’t even need to worry about it anymore, and not just because you can ride through traffic on a bike – sometimes that doesn’t even work because it’s that bad – but in order for you to get stuff done you can get everything done from wherever you are and you don’t have to worry about it…

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We have a saying here that might seem a little bit far-fetched but true: money can’t buy time, but Go-Jek can buy you time.”43

Piotr Jakubowski, CMO, Go-Jek

At the macro level, Go-Jek had generated new job opportunities in Indonesia’s informal economy.

“In most developing countries, the informal sector has ample opportunity to make a quick buck here and there. I don’t think unemployment is the core problem. It’s under-employment. Under-employment is the inability to actually make as much money as you want to, to earn as much as you want to, and this is what Go-Jek solves in a very, very elegant way because with a cheap Android handset, a helmet and motorcycle, people can work whenever they want, 24 hours a day, they can work from wherever they want.”44


To Nadiem, Go-Jek was an app that unlocked the informal economy.

“(This is) how Go-Jek views this digital shared economy… we don’t view it as a tech phenomenon. We view it as a very necessary and permanent evolution in the global economy. What is so special (about) this kind of app or multi-sided marketplace? Because it’s one of the few business models that not only optimises a particular market, it actually grows the market itself. It’s one of the only business models that concurrently grow demand and supply at the same time.

We’re coming to this point, a new technological paradigm that is the antithesis of this notion of scarcity. Go-Jek views the informal sector as an elastic resource that can expand in ways that we cannot even imagine. We hope to… show the world that social impact and scalable tech businesses are not only compatible but are, in fact, inseparable.”45


Indeed, Go-Jek had grown to become a pervasive platform that bridged socio-economic classes to offer a range of on-demand services. On the supply side, there were a huge numbers of drivers, delivery men, masseuses, make-up artists, and cleaners at the bottom of pyramid ready to provide their services. On the demand side, there were millions of Indonesian middle and upper class consumers with considerable buying power whose needs were unmet due to the dreadful traffic and inefficient information flow. Elaborating on what he meant by “growing the market”, Nadiem said:

“We did not become the largest online food delivery company by taking market share from competitors. We basically expanded the market exponentially by allowing every single driver to go and shop at any restaurant in the city to buy food for their end consumers. We didn’t take market share or steal businesses away from large logistic providers that had a 60-minute courier delivery. We created that segment, that category, altogether.”46


Andre Soelistyo, Go-Jek Group CFO and Head of Strategy noted that Go-Jek was committed “to push[ing] Indonesian society forward with technology and empower[ing] the hundreds of thousands of micro entrepreneurs on our platform across the entire nation.”47 The availability of this vast pool of labour in the informal economy was key to Go-Jek’s ability to scale up its fleet of service workers so rapidly. In the process, Go-Jek also helped to improve the lives of these drivers. On average, Go-Jek raised the income of these drivers from USD216/month to USD576/month while working fewer hours. Do

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Go-Life related similar stories. Individual service providers could bypass traditional business setups to offer their services directly to the customers. For example, Go-Massage improved masseuses’ average income from USD144/month to USD288/month. Previously, a masseuse worked with a massage salon and earned a commission of 10% to 20%, spending close to 12 hours a day at the salon. With Go-Massage, he or she could earn a commission of 70% from each customer and earn a decent income despite working only six hours a day. Nadiem noted that Go-Jek essentially “democratis (es) the ability to make money for anyone who wants to work harder.”48

“So this freedom, this autonomy enabled people who were either fired because businesses went out of business, or they could not get jobs in the formal economy because they didn’t have diplomas, and all these (other) reasons. Suddenly, there’s Go-Jek. And because of this efficiency in the market, they were able to earn two and a half times of the minimum wage.”49


Nadiem Makarim shared a story related by a 48-year-old low-income service worker:

“(The service worker said,) ‘My whole Iife was never part of something big. I never worked (as a regular employee) my entire life. I’ve been doing different things at different times, living on a very flat daily salary, daily wage type of thing. And only now I realised when I joined Go-Jek I’m part of something big. You know wearing this green uniform becomes my identity, and if I’m at the traffic light at the intersection of the road and I saw that the other guy wearing the same jacket, we look at each other and said ‘hi’ to each other, and we feel like we’re connected, and we’re like in this together.’ So that solidarity is one of the values that Go-Jek brings for this grassroot economy. And if you talk about the financial benefits, he said something like, ‘Now, I’m confident, I feel confident to walk into a mall because I have money to spend, I am no longer shy about going to the bank because I have money to keep there now.’”50


Metrics on drivers and individual service providers were closely tracked and monitored in Go-Jek, e.g., the number of people with improved income, and the number of hours people spent working. For example, the numbers showed on average that Go-Life masseuses worked only six hours serving three or four customers and they were making at least two, if not three times the salary they used to make. The liberating impact of Go-Jek went beyond individuals. By connecting small businesses directly to consumers and making purchases more convenient, Go-Jek helped them to improve their sales. Martabakku Menteng, a popular Indonesian sweet delicacy in Central Jakarta’s most affluent district, thrived on Go-Jek’s Go-Food app. Half an hour before the stall opened each day, drivers were already lining up to place orders for their customers. Martabakku acknowledged that around 30% to 40% of its sales came from Go-Food orders. THE NEXT STEPS Go-Jek continued to expand rapidly. In June 2016, there were over 20 million bookings on the Go-Jek platform, translating to roughly eight bookings per second just in a single month. Go-Jek was leading in each of its verticals. Go-Jek’s motorcycle transport service was the biggest service of its kind in Indonesia with more than 200,000 drivers.51 Rides continued to form the largest chunk of Go-Jek’s business, holding steady at 73% of all completed orders from October 2015 to March 2016. Outside of motorcycle transport, Go-Food was the second largest on-demand food delivery service in the world outside of China with over Do

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15 million meals delivered since its inception.52 More recently, Go-Jek also announced its collaboration with Tokopedia, one of Indonesia’s biggest online marketplaces, to provide package delivery service.

“My vision for Go-Jek in the next five years (is), we will become an application that responds and serves (goods and services) on demand. Whatever that’s needed in (the) nick of time. That’s our goal. (For) all service providers, including ojek, we will assist and continue to increase the income of our partners as we connect them directly to consumers. No middleman cuts their income so they can enjoy significantly higher income.”53

Nadiem Miakarim, CEO, Go-Jek

Go-Jek’s key funders were also optimistic: “With a rapidly expanding middle class, increasing urban density and a young demographic that is internet savvy, Go-Jek is well positioned to become the ‘go-to’ platform for high frequency daily services including transport, food, logistics and payment,” said Jeffrey Perlman, Head of Southeast Asia for Warburg Pincus.54 In August 2016, Go-Jek successfully raised a new round of USD550 million in funding from leading private equity groups such as KKR, Warburg Pincus, Farallon Capital and Capital Group Private Markets (see funding rounds in Exhibit 2). With a USD1.3 billion valuation giving it prestigious unicorn status, Go-Jek had the largest funding among all Indonesian startups. The capital injection would help Go-Jek become the “largest on-demand application of choice for all Indonesians.”55 MANAGING DRIVERS’ EXPECTATIONS Despite Go-Jek’s success, several challenges remained. One issue concerned the need to manage the expectations of the Go-Jek drivers. With more people coming on board as Go-Jek drivers, some drivers became preoccupied with chasing income (for instance, accepting ride orders to places they were less familiar with), compromising the quality of services. Drivers and service providers also had many grouses regarding various Go-Jek services. For Go-Food, for example, the high security requirements in many city offices and buildings in Jakarta meant cumbersome clearance procedures for Go-Jek drivers making deliveries. A Go-Jek driver could spend 45 minutes to one hour just to complete a simple delivery. Other cases involved drivers accepting delivery of heavy items (e.g., 40 cups of bubble tea) beyond Go-Jek’s weight criteria (max 7 kg). Such issues resulted in a lower income and greater work hazard for the Go-Jek drivers. Go-Jek also began to optimise cash burn and improve its bottom line. It was successful in reducing overall subsidies from Q1 2016 by over 70% while still maintaining steady volume growth during this period. However, the rate its drivers received dropped. 56 Go-Jek reduced the rate for the first 1-2 km from IDR15,000 to IDR4,000. Price per kilometer also steadily declined from the initial IDR4,000 to IDR3,000 and then to IDR2,500, sparking a protest at Go-Jek’s Yogyakarta office (see Figure 3). The change in compensation aggravated negative sentiments among some drivers as they struggled to cover smartphone, gasoline, and motorcycle maintenance costs. At the same time, the performance criteria set for the drivers had become more stringent. To receive a bonus, Go-Jek’s drivers had to maintain a 70% acceptance rate per day, a number that many drivers considered very difficult to achieve. Order cancellations could be triggered by many uncontrollable factors (e.g., customer cancellation, poor internet connection, time-consuming completion of order) and thus the stringent expectation was seen by some drivers as being unfair.

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Figure 3 Go-Jek Drivers’ Protest at the Company’s Office in the City of Yogyakarta

Source: Linangkung, E. (2016, August 15). Ribuan Gojek mogok massal, minta tarif normal dikembalikan. Sindonews. Retrieved on March 2, 2017, from https://daerah.sindonews.com/read/1131301/189/ribuan-gojek-mogok-massal-minta-tarif-normal-dikembalikan-1471235512 THE RISE OF OTHER COMPETITORS During its rapid expansion, Go-Jek faced intense competition. In August 2015, GrabBike – a motorcycle taxi service similar to Go-Jek – was launched in Jakarta.57 GrabBike drivers wore distinctive pea-green helmets and jackets, closely resembling the uniform of Go-Jek drivers. GrabBike was part of the well-funded GrabTaxi, which had successfully expanded into the Southeast Asian market. GrabBike first appeared in Ho Chi Minh City and Hanoi in 2016, making Indonesia’s capital its third trial destination. During the introduction of its service, GrabBike offered free rides from August 9 to August 31 throughout Jakarta. Within just a week of its beta launch, GrabBike recorded more than 8,000 rides. Operating on the same platform as GrabTaxi, GrabBike offered a seamless experience for those wanting to be able to choose between taxis and ojeks, fulfilling all transportation needs within a single app. While Go-Jek’s IDR10,000 (USD0.75) promotion was already a bargain, GrabBike undercut Go-Jek by offering a promotional IDR5,000 (USD0.37) flat rate for any ride within the city. Go-Jek took a 20% cut in its profit sharing agreement with drivers while GrabBike took 10%. GrabBike was able to do so because of the backing from its parent company GrabTaxi. Indeed, just a month after Go-Jek’s recent success of USD550 million funding round, GrabTaxi raised USD750 million from its funding partners led by Japan’s mobile giant SoftBank, and China’s Didi Kuaidi, to expand its services throughout Southeast Asia and, particularly, in Indonesia. While third-party data from App Annie still showed that the Go-Jek app had been downloaded over two times more than GrabBike, the competitive threats posed by GrabBike could not be trivialised. Other smaller players such as UberBike were also waiting on the fringe to grab a piece of the pie. Do

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THE NEXT GROWTH FOCUS? Internally, Go-Jek recognised the need to shift gears as it matured through rapid growth over the last few years. Amidst the demanding expectations from its funders, how should Go-Jek bet on its next phase of hyper-growth? Should Go-Jek expand Go-Life and become the platform to offer on-demand services for everything?

Offering more complex, on-demand tasks meant that more systematic efforts would be needed to standardise service offerings and tighten up service levels to sustain customer trust.

Alternatively, Go-Jek could expand its business to the other cities across Indonesia and bring its battle

for legitimacy beyond Jakarta. Go-Jek was already in 14 cities – Jakarta, Bandung, Surabaya, Bali, Makassar, Medan, Palembang, Semarang, Yogyakarta, Balikpapan, Malang, Solo, Manado, and Samarinda. When would the underlying economics of Go-Jek start to make less business sense (for instance, in cities with fewer traffic congestion issues)?

Or, should Go-Jek expand its geographical focus beyond Indonesia and follow the example of its

competitor GrabBike to regionalise its business model to emerging countries with thriving informal service sectors? After all, Go-Jek had been approached with opportunities to offer its services in Southeast Asian, African and Indian cities, which had enormous economic growth potential for a tech business like Go-Jek.

Meanwhile, the visibility of the societal impact of Go-Jek had made it a champion of technology for the nation. President Jokowi had asked Nadiem to make Go-Jek a role model in driving technological innovation to create new business opportunities that can benefit individuals and businesses at the bottom of the pyramid.

“I very much appreciate what Go-Jek has created. Go-Jek's app is very good and creative. But, there are numerous small shops in villages across Indonesia which are not yet connected through the application that creative industry can build. Small traders, farmers, fishermen, and all those related to small economies can be improved through creative solutions coming from such applications. All these creative applications will help the people from the bottom of the pyramid to increase their prosperity level.”58

Joko Widodo, President of Indonesia

What should be the next steps for Go-Jek?

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EXHIBIT 1

TIMELINE OF GO-JEK’S DEVELOPMENT

Year Event

1 January 2015

Go-Jek transformed its call centre operation (started in Oct 2010) and introduced a mobile app that offered transportation, courier and shopping services in Jakarta and satellite cites, supported by a fleet of 800 riders. It had also been partnering with corporations (about 90 of them) as a call centre and was morphing into a mobile-first company.

1 March 2015 Expanded to Bali with 300 riders. Fleet of riders in Jakarta and satellite cities expanded to 2,200.

1 April 2015 Launched food order service (GO-FOOD) and expanded to Bandung (West Java).

1 August 2015 Increased fleet to 30,000 riders and expanded to Makassar (South Sulawesi).

1 September 2015 Launched on-demand shopping assistant (GO-MART) and opened Gojek Tech Valley (GTV) in Yogyakarta as the centre for Go-Jek app development.

1 October 2015 Launched auxillary Go-Jek services: massage, make-up, and cleaning services (GO-MASSAGE, GO-GLAM and GO-CLEAN).

1 December 2015 Expanded to Yogyakarta, Medan, Palembang, Semarang, Balikpapan and launched an event ticket booking service (GO-TIX).

1 February 2016 Announced the acquisition of C42 Engineering and CodeIgnition, two engineering startups based in India. Established a product development centre in Bangalore, India. Fleet strength grew to 200,000 riders.

1 May 2016 Introduced an e-payment service (GO-PAY) in collaboration with BCA Bank (largest private bank in Indonesia). Expanded to Malang, Solo and Samarinda (Kalimantan). Announced collaboration with BlueBird, a major taxi company in Indonesia.

1 April 2016 Introduced taxi hailing service (GO-CAR) similar to Uber.

1 July 2016 Introduced a car maintenance service (GO-AUTO), providing mechanics on demand.

1 October 2016 Introduced drug pick-up service (GO-MED).

1 November 2016 Introduced top-up service for pre-paid card phone (GO-PULSA).

1 December 2016 Closed Go-Jek Tech Valley (GTV) in Yogyakarta and moved programmers to Jakarta.

1 February 2017 Announced new collaboration with BlueBird that allowed GO-CAR users to book BlueBird Taxis using the Go-Jek app.

Source: Compiled from various sources by authors.

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EXHIBIT 2

GO-JEK’S FUNDING ROUNDS

Year Investor

Mid 2014

Early Go-Jek investor NSI Ventures, the VC arm of The Northstar Group, invested an undisclosed amount in Go-Jek. At the time of writing, the Northstar Group is a Singapore-based private equity firm managing more than USD2 billion in committed equity capital dedicated to investing in growth companies in Indonesia and, to a lesser extent, other countries in Southeast Asia.

Mid 2015 Sequoia Capital, through Sequoia Capital India, invested an undisclosed amount in Go-Jek.

Early 2016 Rakuten Ventures and DST Global invested an undisclosed amount in Go-Jek.

4 August 2016 KKR, Warburg Pincus, Farallon Capital and Capital Group Private Markets and previous investors in Go-Jek, raised equity capital of over USD550 million. This round marked the largest investment for an Indonesian startup.

Source: Compiled from various sources by authors.

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Endnotes

1 Central Intelligence Agency (2016). Country Comparison: Population. Retrieved on March 2, 2017, from https://www.cia.gov/library/publications/the-world-factbook/rankorder/2119rank.html

2 World Bank (2013). World Development Indicators 2013. Retrieved on November 14, 2016, from http://hdr.undp.org/en/content/income-gini-coefficient

3 Lee, T. (2016, July 16). Go-Jek’s critical numbers leaked. Here’s its response. Tech in Asia. Retrieved on March 2, 2017, from https://www.techinasia.com/gojeks-numbers-leaked

4 Russell, J. (2016, August 4). Indonesia's Go-Jek raises $550 million to battle Uber and Grab. TechCrunch. Retrieved on November 14, 2016, from https://techcrunch.com/2016/08/04/indonesias-go-jek-raises-550-million-to-battle-uber-and-grab/

5 Raised in Jakarta, Nadiem Makarim obtained his MBA at Harvard Business School and worked for consulting firm McKinsey. From 2011 to 2014, Nadiem worked with various organisations in positions such as Managing Director for Zalora and CIO for Kartuku.

6 NewCities (2015, June 26). New Cities Summit 2015 - WhatWorks: Nadiem Makarim, GO-JEK [Video]. Retrieved on December 27, 2016, from https://www.youtube.com/watch?v=X1bB6qU8e4k

7 Lee, Y., and Ho., Y. (2016, March 23). Friends at Harvard turn rivals over ride-hailing apps in Asia. Bloomberg. Retrieved on November 14, 2016, from https://www.bloomberg.com/news/articles/2016-03-23/friends-at-harvard-turn-rivals-over-ride-hailing-apps-in-asia

8 Nadiem started PT Go-Jek Indonesia earlier in 2011. Using analogue technology, it operated as a call centre with a small fleet of ojek drivers. Customers would call and available ojek drivers would be dispatched to pick up the customers. But growth was slow and such services remained highly inefficient.


10 Bansal, A. (2016, November 18). Go-jek or go home. Retrieved on December 27, 2016, from https://rctom.hbs.org/submission/go-jek-or-go-home/

11 Lee, T. (2016, July 16). Go-Jek’s critical numbers leaked. Here’s its response. Tech in Asia. Retrieved on March 2, 2017, from https://www.techinasia.com/gojeks-numbers-leaked

12 ibid. 13 Cox, W. (2016, April 16). Largest cities in the world: 2016. New Geography. Retrieved on March 2, 2017, from

http://www.newgeography.com/content/005219-largest-cities-world-2016 14 Kusumawijaya, M. (2016, November 21). Jakarta at 30 million: my city is choking and sinking – it needs a new

Plan B. The Guardian. Retrieved on December 27, 2016, from https://www.theguardian.com/cities/2016/nov/21/jakarta-indonesia-30-million-sinking-future

15 Waze (2016). Driver Satisfaction Index 2016. Retrieved on December 27, 2016, from https://www.waze.com/driverindex


17 Jakarta Local Government (N.D.). Jakarta urban transport problems and their environmental impacts. Retrieved on 27 December 2016 from www.ui.ac.id/download/apru-awi/jakarta-local-goverment.pdf

18 Prasad, G. (2016, July 28). Go-Jek: Social impact, delivered on two wheels. Campaign Asia-Pacific. Retrieved on March 2, 2017, from http://www.campaignasia.com/article/go-jek-social-impact-delivered-on-two-wheels/428084

19 Owen, N. (2015, June 11). Jakarta's ill-famed traffic grief to residents but boon for some. Reuters. Retrieved on March 2, 2017, from http://www.reuters.com/article/us-indonesia-traffic-idUSKBN0OR09Z20150611


21 Lukman, E. (2015, January 21). The latest numbers on web, mobile, and social media in Indonesia. Tech in Asia. Retrieved on December 27, 2016, from https://www.techinasia.com/indonesia-web-mobile-data-start-2015

22 Prasad, G. (2016, July 28). Go-Jek: Social impact, delivered on two wheels. Campaign Asia-Pacific. Retrieved on March 2, 2017, from http://www.campaignasia.com/article/go-jek-social-impact-delivered-on-two-wheels/428084

23 Freischlad, N. (2015, August 13). Indonesian motorcycle taxi startup Go-Jek is hiring 16,000 new drivers at a sports stadium. Tech in Asia. Retrieved on December 27, 2016, from https://www.techinasia.com/go-jek-recruiting-16000-new-drivers

24 Interview with Go-Life co-founder, Dayu Dara Permata on Aug 15, 2016 at Jakarta Go-Jek HQ. 25 Chilkoti, A. (2015, December 22). Go-Jek: opening the throttle in Indonesia. Financial Times. Retrieved on March 2,

2017, from https://www.ft.com/content/d774419c-8a0f-11e5-9f8c-a8d619fa707c

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26 Budiari, I. (2015, June 11). Go-Jek drivers fearing violent resistance from traditional ojek. The Jakarta Post.

Retrieved on March 2, 2017 from http://www.thejakartapost.com/news/2015/06/11/go-jek-drivers-fearing-violent-resistance-traditional-ojek.html

27 Freischlad, N. (2015, November 16). Why Go-Jek drivers demonstrated in Jakarta today (Update: management responds). Tech in Asia. Retrieved on March 2, 2017 from https://www.techinasia.com/gojek-driver-strike-fizzled-driver-discontent-settled

28 Freischlad, N. (2015, November 4). Drive-by attack on Go-Jek office as discontent simmers inside and out (UPDATE: CEO responds). Tech in Asia. Retrieved on 29 May 2017 from https://www.techinasia.com/gojeks-driveby-shooting-anger-coming-company

29 On June 1, 2016 the government and the traffic police agreed on three minimum requirements that an app-based transportation service provider must meet in order to operate in Indonesia: Drivers must possess a valid driver’s licence, vehicles must pass the vehicle road-worthiness test and vehicle ownership certificates must be in the name of the respective legal entity that owns the vehicle (e.g., the company, cooperative, etc.). These minimum requirements made all app-based transportation service provider technically illegal as none of the app companies owned the vehicle. Source: Prihadi, S., & Armenia, R. (2015, December 18). Menhub larang Gojek, Jokowi: Aturan jangan bikin rakyat susah. CNN Indonesia. Retrieved on August 15, 2016, from https://www.cnnindonesia.com/teknologi/20151218111258-185-99074/menhub-larang-gojek-jokowi-aturan-jangan-bikin-rakyat-susah/

30 Interview with Go-Life co-founder, Dayu Dara Permata on August 15, 2016 at Jakarta Go-Jek HQ. 31 ibid. 32 Most agile development methods break product development work into small incremental steps that minimise the

amount of up-front planning and design. Iterations are short time frames (timeboxes) that typically last from one to four weeks. Each iteration involves a cross-functional team working in all functions: planning, analysis, design, coding, unit testing, and acceptance testing. At the end of the iteration a working product is demonstrated to stakeholders. This minimises overall risk and allows the product to adapt to changes quickly. An iteration might not add enough functionality to warrant a market release, but the goal is to have an available release (with minimal bugs) at the end of each iteration. Multiple iterations might be required to release a product or new features.

33 Interview with Go-Life co-founder, Dayu Dara Permata on August 15, 2016 at Jakarta Go-Jek HQ. 34 ibid. 35 ibid. 36 ibid. 37 Prasad, G. (2016, July 28). Go-Jek: Social impact, delivered on two wheels. Campaign Asia-Pacific. Retrieved on

March 2, 2017, from http://www.campaignasia.com/article/go-jek-social-impact-delivered-on-two-wheels/428084 38 Ali, S. (2016, April 22). Dua jelita di balik Go-Life besutan Go-Jek. SWA. Retrieved on March 2, 2017, from

http://swa.co.id/swa/business-strategy/dua-jelita-di-balik-go-life-besutan-go-jek 39 Interview with Go-Jek Chief Data Scientist, Madhu Iyer on December 21, 2016, in Singapore 40 ibid. 41 ibid. 42 Lukman, E. (2014, October 10). Money matters: Understanding epayments in Indonesia (#StartupAsia preview).

Tech in Asia. Retrieved on March 2, 2017, from https://www.techinasia.com/startup-asia-jakarta-preview-doku-epayment-state-indonesia

43 Timmerman, A. (2017, April 10). Go-Jek’s food delivery beats all Indian food startups combined: Piotr Jakubowski. DealStreetAsia. Retrieved on August 8, 2017, from https://www.dealstreetasia.com/stories/after-foodpanda-go-jeks-food-delivery-beats-all-indian-food-startups-combined-piotr-jakubowski-cmo-69821/


45 Lukman, E. (2014, October 10). Money matters: Understanding epayments in Indonesia (#StartupAsia preview). Tech in Asia. Retrieved on March 2, 2017, from https://www.techinasia.com/startup-asia-jakarta-preview-doku-epayment-state-indonesia

46 ibid. 47 KKR, Warburg Pincus, Farallon and Capital Group Private Markets (2016, August 4). KKR, Warburg Pincus,

Farallon and Capital Group Private Markets make substantial investment in GO-JEK, Indonesia’s leading on-demand mobile platform. Retrieved on May 5, 2017, from http://www.warburgpincus.com/content/uploads/2016/08/GoJek-Recevies-Funding-from-Leading-Investors.pdf

48 Rothberg, C. (2015, April 1). Go-Jek, the Indonesian transport app that’ll deliver anything to your door. Retrieved on May 5, 2017, from https://www.villa-bali.com/guide/go-jek-app-delivers-anything-to-your-door/


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51 Danubrata, E. (2016, April 29). Indonesian ride-hailing firm Go-Jek needs more funds in market fight-CEO. Reuters.

Retrieved on May 5, 2017, from http://www.reuters.com/article/us-indonesia-gojek-idUSKCN0XQ1P4 52 Interview with Go-Life co-founder, Dayu Dara Permata on August 15, 2016 at Jakarta Go-Jek HQ. 53 NewCities (2015, June 26). New Cities Summit 2015 - WhatWorks: Nadiem Makarim, GO-JEK [Video]. Retrieved

on December 27, 2016, from https://www.youtube.com/watch?v=X1bB6qU8e4k 54 KKR, Warburg Pincus, Farallon and Capital Group Private Markets (2016, August 4). KKR, Warburg Pincus,

Farallon and Capital Group Private Markets make substantial investment in GO-JEK, Indonesia’s leading on-demand mobile platform. Retrieved on May 5, 2017, from http://www.warburgpincus.com/content/uploads/2016/08/GoJek-Recevies-Funding-from-Leading-Investors.pdf

55 KKR, Warburg Pincus, Farallon and Capital Group Private Markets (2016, August 4). KKR, Warburg Pincus, Farallon and Capital Group Private Markets make substantial investment in GO-JEK, Indonesia’s leading on-demand mobile platform. Retrieved on May 5, 2017, from http://www.warburgpincus.com/content/uploads/2016/08/GoJek-Recevies-Funding-from-Leading-Investors.pdf

56 Freischlad, N. (2015, November 16). Why Go-Jek drivers demonstrated in Jakarta today (Update: management responds). Tech in Asia. Retrieved on March 2, 2017 from https://www.techinasia.com/gojek-driver-strike-fizzled-driver-discontent-settled

57 GrabBike’s founder, Anthony Tan, was a classmate of Nadiem Makarim at Harvard Business School. 58 Armenia, R. (2015, August 4). Jokowi puji kreativitas aplikasi Gojek. CNN Indonesia. Retrieved on December 27,

2016, from https://www.cnnindonesia.com/teknologi/20150804113625-185-69932/jokowi-puji-kreativitas-aplikasi-gojek/

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