Cover Story: Digitizing a Nation

COVER STORY

GO-PAY is GOJEK’s digital payment platform and is bridging much of the unbanked in Indonesia with the formal economy for the first time.

GOJEK

Digitizing a Nation

Bringing about socioeconomic mobility in Indonesia through digitization with GOJEK 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 GOJEK, transforming the developmental path of an entire country.

Founded in 2010 by Nadiem Makarim, GOJEK launched as a ride-hailing platform for Indonesia’s ojeks (i.e., motorcycle taxis) and became the country’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, boasting more than a million drivers and 100 million monthly transactions.

For investors hoping to enter Southeast Asia’s largest and arguably most important market, as Indonesia’s GDP makes up 36.5% of the ASEAN economy, GOJEK is a compelling case study for success with an unparalleled user penetration and industry reach (World Bank). In early 2018, the

company surpassed its target US$1.5 billion fundraise and closed the round with Google, Tencent, Meituan-Dianping, JD.com, BlackRock, and Temasek Holdings as investors, among others.

GOJEK’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 local entrepreneurship, defined as a developmental model based on community interaction, rests at the heart of the business, as Makarim describes GOJEK 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 mean a lack of basic access to digital tools.

It’s difficult to overstate how profound an impact digitization can have; Pathways Commission stated 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.”

The effects of digitization are evident for GOJEK’s drivers and merchants; unemployment rates in Indonesia have decreased steadily in the past decade, from 8.5% in 2008 to 5.1% in 2018, and much of this decline can be credited to sharing economy platforms like GOJEK (Trade Economics). By reducing unemployment and underemployment in Jakarta and other cities, the company was able to increase overall urban labor mobility and flexibility.

While Makarim considers GOJEK’s social mission to “be the pulse of the company” and “a natural outcome of business operations,” adhering to this vision was at times an uphill battle, as he 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, 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.

In line with this intention, GOJEK has rapidly diversified its offerings to 19 products across the logistics and lifestyle verticals, as well as one digital payments platform and one loyalty program–all of which leverage the substantive user base from its early ride-hailing success. GOJEK’s lifestyle arm GO-LIFE alone offers on-demand massages, at-home personal styling, automotive solutions, and professional home-cleaning, where vendors are mostly merchants who lacked a sales channel.

Another example of GOJEK’s efforts to bring users into the digital economy is the introduction of its 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.

GO-PAY is a regular fixture of daily Indonesian life, as over 200,000 merchants accept GO-PAY as a payment method.

GOJEK Founder Nadiem Makarim at the GOJEK headquarters in Jakarta.

GOJEK

Users can purchase everything from coffee to groceries in-store and online, use QR codes to pay at hawker stalls, and even donate to non-profit organizations.

In a country where public trust in financial institutions is low and credit card penetration is less than 3%, the ability to make online transactions not only further strengthens the super app’s indispensability to users, but more importantly, provides the unbanked and underbanked access to financial services they were previously excluded from (World Bank).

“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.

GOJEK currently offers 19 services ranging from transportation, food delivery, groceries, massage, house cleaning to logistics, as well as one digital payments platform and one loyalty program.

GOJEK

GOJEK

GOJEK

GOJEK’s dexterity in pinpointing when and what product to launch reflects the company’s scrupulous examination of each market, and is another determinant for its success. Makarim believes it’s crucial to be “on the ground listening and finding ways to deepen 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 GOJEK could be.”

This exacting approach to timing and understanding the risks, challenges, and opportunities of the market also extends to GOJEK’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 GOJEK. We didn’t want to enter these markets blindly and needed to find the right people within these markets who shared the GOJEK ethos and ambition,” says Makarim.

Always one to do things differently, GOJEK has also adopted a hyperlocal expansion strategy that emphasizes the importance of strong local teams. 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,” and finding “highly driven and creative talent focused on solving local problems,” which goes back again to the company’s social mission.

“The GOJEK business model has proven to be effective at empowering people across Indonesia. We want to see if our Southeast Asian neighbors can similarly benefit from our approach to address their everyday problems,” says Makarim.

That being said, the super app space in Southeast Asia is highly competitive, primarily with regards to Singaporebased Grab. Believing that competition is healthy and valuable for consumers, Makarim is confident about GOJEK’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.”

GOJEK Founder Nadiem Makarim.

GOJEK

Makarim and GOJEK’s President Andre Soelistyo (far left) at the launch of GO-VIET on September 12, 2018 in Hanoi.

GOJEK

GO-VIET is operated by a local founding team and is supported by the GOJEK team in Jakarta.

GOJEK

“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 GOJEK, including GO-VIET’s launch in Hanoi, pilot of its entrepreneurship program GOJEK Wirausaha (‘entrepreneurs’ in Bahasa), and partnerships with leading firms such as DBS Bank for the company’s 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 GOJEK 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 reach within Indonesia. Understandably, a constant goal for the company is to optimize the GOJEK experience for drivers, merchants, and users, which can be a challenge when there exists no precedent for the super app business model in Indonesia.

GOJEK has 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 GOJEK is trying to execute.

GOJEK also has an investment arm GO-VENTURES, which encourages and supports innovation in Southeast Asia and beyond. The company’s support for entrepreneurialism is longstanding and ingrained in its culture, as merchants are taught entrepreneurial skills and guided through business processes when they onboard. Such efforts can include helping a food vendor reach more customers using food delivery or assisting an unlicensed beautician through the process of registering their business.

When Melinda Gates was in Indonesia as Co-chair of the Pathways for Prosperity Commission on Technology and Inclusive Development in October 2018, she commented that “GOJEK 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 with this sentiment, Makarim believes that since “business and society are intertwined,” “business must shoulder the responsibility to build capacity and to equip future generations insofar as they are able to.”

However, he acknowledges that the public sector and businesses need to work together to develop a vibrant digital ecosystem in all markets.

“Policies and regulations often have to play catch-up. Alongside civil society and industry experts, businesses should play a vital role in informing policy-making through ongoing discussions with government. This is the best way to ensure that policies and practices are relevant and take care of the most vulnerable,” says Makarim.

The Pathways Commission study also found that setting prices to recover investment in digital infrastructure will never be affordable to the most marginalized in society, which means business interests and profitability will continue to limit digital inclusivity–a problem Makarim tries to address with multilateral efforts.

“Pricing people out from access to the digital economy is a myopic approach to achieving sustainable profitability. We believe with careful planning and optimization, and effective engagement with decision makers and the government, eventually everyone should be able to participate in the digital ecosystem.”

Having pursued a business model once deemed “counterintuitive,” as “people dismissed the idea of efficiently organizing ojeks as impossible,” GOJEK exemplifies how disruptive entrepreneurship can provide solutions to inequity.

Digital inclusion is just one of the world’s pressing socioeconomic concerns; the significance is that startup leaders must recognize the irrevocable link between innovation and human development, and use this understanding to create ventures with purpose. Min is Jumpstart’s Editor in Chief.

Nadiem’s Advice FOR entrepreneurs

Don’t listen too much.

Input is important, but know that you will learn more by doing the thing you really want to do, rather than listening to too many experts to find the best way to do it.

You can start listening once you make the leap. But if you never start, then you’ll never get there.

Question everything.

Most people do not really know what they are talking about. Be super scientific, and don’t just believe what people say. Research and test everything yourself.

The cyclicality of business is the only constant. Don’t give up easily, ride out the ups and downs, and learn from each experience.

Stop trying to be someone.

Many young people dream of becoming a high profile figure without realizing those people were trying to solve problems rather than trying to emulate someone else.

You have a much higher chance of success obsessing about the problems you want to fix.