Digitizing A Nation
Facilitating socioeconomic mobility in Indonesia through digitization with GO-JEK Founder Nadiem Makarim
By Min Chen | Proverbial warnings against the dark side of technology frequently point to how machines are gradually replacing parts of the workforce, rendering many vocations irrelevant and individuals, jobless. But this notion fails to account for instances where technology is conversely creating opportunities through connectivity and, in the case of Indonesian super app GO-JEK, transforming the developmental path of an entire country.
Founded in 2010 by Nadiem Makarim, GO-JEK launched as a ride-hailing platform for their namesake ojeks (i.e., motorcycle taxis) and became Indonesia’s first unicorn in just six years. What began as Makarim’s Summer pilot project at Harvard Business School became a company currently valued at US$5 billion and boasts half a million drivers, 15 million weekly active users, and 100 million monthly transactions.
For investors hoping to enter Southeast Asia’s largest and arguably most important market if accounting for GDP, as Indonesia makes up 36.5% of the total ASEAN economy, GO-JEK makes for an exceedingly compelling case with their unparalleled user penetration and industry reach (World Bank). In early 2018, the company surpassed their target US$1.5 billion fundraise and closed the round with Google, Tencent, Meituan-Dianping, JD.com, BlackRock, and Temaesk Holdings as investors, among others.
GO-JEK’s remarkable growth is firstly attributable to Makarim’s mission for the company since inception, which is “to use tech to solve everyday problems and to create positive social impact.”
This narrative of providing tech solutions rests at the heart of the business, as Makarim describes GO-JEK as “a platform that tries to fix things by increasing access and efficiency” for “everyday people with everyday problems.” In an emerging market like Indonesia, everyday problems often means a lack of basic access to digital goods and services.
It’s difficult to overstate how profound an impact digitization can have; Pathways Commission states in their ‘Digital Lives’ report that “digital exclusion–both in terms of access and effective usage–is not random; it mirrors, and risks exacerbating, long-established inequalities.” The report’s proposed solution is to create a digital ecosystem where “people would be connected to a rich offering of digital services that are locally relevant and contribute meaning and benefit to the user’s life.”
For GO-JEK’s drivers, the effect of digitization is evident; according to Makarim, “GO-JEK successfully reduced unemployment and underemployment in Jakarta and other cities, which in turn, increase labor mobility and flexibility.”
While he considers GO-JEK’s social mission to “be the pulse of the company” and “a natural outcome of [their] business operations,” adhering to this vision was at times an uphill battle, as Makarim and his team were pressured to specialize and focus solely on ride-hailing in the company’s early days.
“We had bigger dreams. We recognized the potential of ojeks to increase efficiency far beyond getting people from point A to B. We saw little warungs, or mom-and-pop shops, and single mothers with the potential to earn decent money but are without proper access to a decent volume of customers, so we provide them with the necessary access to maximize their potential,” says Makarim.
Inline with this intention, GO-JEK has rapidly diversified their offerings to 18 products across the logistics, lifestyle, and digital payment verticals, leveraging the substantive user base from their early ride-hailing success. GO-LIFE, the company’s lifestyle services arm, alone offers on-demand massages, at-home personal styling, automotive solutions, and professional home-cleaning, where vendors are made up of merchants who previously didn’t have a channel to promote their services.
Another example of GO-JEK’s efforts to bring users into the digital economy is the introduction of their digital payment platform GO-PAY, which can be used as an e-wallet and allows users to top up their mobile account and pay bills.
In a country where public trust in financial institutions is low and credit card penetration is less than 5%, the ability to make online transactions not only further strengthens the super app’s indispensability to users, but more importantly, provides the unbanked or underbanked access to financial services they were previous excluded from.
“One of the ways in which GO-PAY is different is that it does not aim to replace traditional financial institutions. Instead, we build strong partnerships with these institutions and work together towards the common goal of increasing financial inclusion across Indonesia. As of November 2018, GO-PAY has partnered with 27 financial institutions in Indonesia for this purpose,” says Makarim.
GO-JEK’s deft in pinpointing when and what product to launch reflects the company’s scrupulous examination of each market, and is another determinant factor in the company’s success in scaling regionally. Makarim believes it’s crucial to be “on the ground listening and finding ways to deepen [their] understanding of both the demand and supply end.”
He adds: “The saturation point for consumers is still very small. There’s plenty of room to grow across all the services and lots of space to explore new areas where we can bring greater efficiency to the market. We’re barely scraping the surface of how big GO-JEK could be.”
This exacting approach to timing and understanding the risks, challenges, and opportunities of the market also extends to the GO-JEK’s unique expansion strategy, as the company only entered foreign markets last year–a contrast to the typical expansion timelines of competitors and companies of this size.
“International expansion was a huge step for GO-JEK. We didn’t want to enter these markets blindly and needed to find the right people within these markets who shared the GO-JEK ethos and ambition,” says Makarim.
Always one to do things differently, GO-JEK has also adopted a hyperlocal expansion strategy that establishes a local founding team to run the business, rebrands the platform to resonate with local users, and operates a separate app for each country, namely GET in Thailand and GO-VIET in Vietnam.
Each local team has the independence to run operations, but is fully supported both on the technology and business development side by the team in Jakarta. Makarim states that this decision was made based on “research and extensive engagement with locals,” finding “highly driven and creative talent focused on solving local problems,” and again goes back to the company’s social mission.
“Pricing people out from access to the digital economy is a myopic approach to achieving sustainable profitability.”
GO-JEK Founder Nadiem Makarim
“The GO-JEK business model has proven to be very effective at empowering people across Indonesia. We wanted to see if our Southeast Asian neighbors could similarly benefit from our approach to addressing their everyday problems,” says Makarim.
As always, growth has not been without its challenges, as the super app space in Southeast Asia is highly competitive, primarily with regards to Singapore-based Grab. Believing that competition is healthy and valuable for consumers, Makarim is confident about GO-JEK’s competitive advantage, of which he credits “an extremely talented, consumer-centric product engineering team, a positive culture of collaboration and risk-taking in the organization.”
“Our people are passionate, energetic and strongly believe in our mission. We avoid getting side-tracked by noise from competitors,” he adds.
For Makarim, 2018 marked a number of significant milestones for GO-JEK, including the launch of GO-VIET in Hanoi with Indonesia’s President Joko Widodo in attendance, the pilot of their entrepreneurship program GO-JEK Wirausaha where they trained over 700 micro, small and medium enterprises (MSMEs) in three months, and partnerships with leading firms such as DBS Bank for their beta launch in Singapore.
“Each step of the way has been truly memorable and valuable. We are proud of the people that have made this happen, humbled by how far we have come, and committed to continue learning and improving as we grow,” says Makarim.
This year will see GO-JEK continue to expand regionally to reach the company’s vast addressable market of Southeast Asia’s middle class, all the while increasing service scope and penetration within Indonesia. Understandably, a constant goal for the company is to optimize the GO-JEK experience for drivers, merchants, and users, which can be a challenge when there exists no precedent for the super app business model in Indonesia.
They’ve received backlash from drivers in the past over concerns about market disruption–a persistent issue for similar sharing economy platforms like Grab and Uber. Makarim responds by saying that “no product or service is perfect,” which is why they are improving driver engagement so they can “best understand and address their concerns.”
Fundraising is also an ongoing process in 2019, although Makarim notes that it’s important to “always look at the quality instead of quantity of money raised,” and strategically align with shareholders who are the world leaders in the key verticals GO-JEK is trying to execute.
GO-JEK will also unveil plans for their investment arm GO-VENTURES this year to encourage innovation in Southeast Asia and beyond. The company’s support for entrepreneurialism is longstanding and ingrained in their culture, as the process for onboarding drivers and vendors is designed for sustainable, independent growth.
Merchants are taught entrepreneurial skills and guided through bureaucratic processes. Such efforts can include helping a food vendor reach more customers through food delivery or guiding an unlicensed beautician through the process of registering their business.
When Melinda Gates was in Indonesia for her role as Co-chair of the Pathways for Prosperity Commission on Technology and Inclusive Development in October 2018, she commented that “GO-JEK drivers and GO-LIFE talents serve as a case study for how digital tools can help to increase growth and inclusion by connecting people to more stable employment and income.”
Consistent to this sentiment, Makarim believes that since “business and society are intertwined,” “business must shoulder responsibility to build capacity and to equip future generations insofar as they are able to.” But he acknowledges that bureaucratic processes and business interests are obstacles to the development a vibrant digital ecosystem in some markets.
With regards to the former, “policies and regulations often have to play catch up” when faced with pace of digital transformation, necessitating the involvement of civil society, industry experts, and businesses to keep governments informed when engaging in policy-making discussions.
As for business interests, Pathways Commission study finds that setting prices to recover infrastructure investment [for digital access] will never be affordable to the most marginalized in society, which means that business profitability will continue to limit digital inclusivity–a problem Makarim would address with multilateral efforts.
“Pricing people out from access to the digital economy is a myopic approach to achieving sustainable profitability. We believe that with careful planning and optimization, as well as effective engagement with decision makers and the government eventually everyone should be able to participate in the digital ecosystem.”
Although having pursued a business model that was once deemed “counterintuitive,” as “people dismissed the idea of efficiently organizing ojeks as impossible,” GO-JEK exemplifies of how creative entrepreneurship is both disruptive and able to provide market-based solutions to inequity.
Digital inclusion is just one of the world’s pressing socioeconomic concerns; what’s significant is that startup leaders must recognize the irrevocable link between innovation and human development and permeate such values in their company’s culture.
Min is Jumpstart’s Editor in Chief.