The dynamic CEO of Olacabs talks about his unique business model and the magic mantra that has his fleet expanding exponentially covering a city a day...
It’s in the Forbes India list of five startups to watch out for in 2014. It is the toast of the venture capital (VC) circuit—in November 2013, the Series B round of funding it raised from Matrix Partners India and existing investor, New Yorkbased Tiger Global Management, has been pegged by market watchers to be to the tune of US$20 million. So what’s generating so much of media and market interest in Olacabs?
Bhavish Aggarwal, CEO and Co-founder, Olacabs, certainly does not look like Mandrake with a hidden magic wand. Dashing and young, he flashes a smile and explains the USP behind his business venture: “I think the magic simply lies in our focus towards deeply analysing and understanding the problems that Indian commuters face on an everyday basis and developing solutions that can solve them. The fact that we are good at technology gives us a definite edge as well.”
Ola had more than an edge in a business sector that had been at the mercy of a haphazard system. A business model with intense analytics, hi-tech and light assets was something that the transportation sector in India had never witnessed. Ola had a perfect winning combination.
In 2013, it was this tech-edge that gave Olacabs, launched in 2011, the confidence to take on Uber, the US market leader that is aggressively expanding its footprints in Asia. The other advantage of course is the native one—an in-depth understanding of the chaotic Indian traffic and logistics conditions.
“Unpredictability of public transport is the biggest problem that plagues commuters across different cities in India,” Aggarwal articulates urban India’s woes. “Public transport is not easy to access, does not run on schedule and offers very little comfort. Reliability and safety are issues of concern too.” It was an experiential journey though in 2011 that brought these painpoints home as a possible business proposition to the IIT-Bombay engineer.
“During a trip to Wayanad along with my friends I was stranded in the middle of the forest because we refused to pay extra money to the cab driver. This experience made me realise that although this sector has many players there is tremendous scope for improvement with the help of technology.”
Ola was founded to provide a viable alternative to commuters in India “who have always been at the mercy of irregular and unpredictable cab services”. Aggarwal “founded Olacabs with the intent of addressing these aspects” and is doing just that—taking his Mumbai-centric idea pan India. Currently operating in six cities—Bengaluru, Chennai, Mumbai, Delhi, Goa and Pune—with the fresh round of funding, Ola is aiming to take its fleet count higher, expand its operations to more cities and also improve technology.
Aggarwal credits his success to the profound simplicity of his business premise: “When a company is founded with the intent of providing an essential service to the public and works towards delivering good service consistently, it is natural for the demand for such a service to grow rapidly. That is what has helped us reach the top.”
To ensure this, Aggarwal is constantly pushing Ola a notch higher. In February this year, Olacabs took its intent a step further launching Ola Mini—a second range of cab service at auto-rickshaw prices—in Bengaluru. With this innovative model, it will also capture a bigger slice of the market. Ola Mini currently has a fleet of 250 AC compact cars like Tata Indica Vista and Ford Figo and commuters can hail a cab at `13 per km (US$ 0.20) with a base fare of `100 (US$ 1.61) for the first 6 km. The fleet will be increased to 1,000 by year end.
Its earlier fleet of sedans and luxury cars was at the last count 8,000 and growing. “When it comes to cab aggregation space, we are the leaders in the market,” says Aggarwal. But before the operation reached such scale, Aggarwal and Co-founder and CTO, Ankit Bhati did a thorough analysis of the market and found “inventory utilisation among small cab operators (ownership of 2–5 cabs) in India is an abysmal 40–50 per cent,” says Aggarwal. This gave birth to the idea of a car rental aggregator and pointto- point cab service provider who would remain asset light by bringing a large fleet under a single umbrella with state-of-the-art technology. But there’s more than the first mover advantage to Olacabs.
It is Ola’s advance technology expertise that differentiates it in the crowded car rental space. There are more than six to seven organised player in the over US$ 6 billion market that is growing at 20 per cent annually. However, 90 per cent of the market is unorganised leaving space for players like Olacabs with their techsavvy service.
“We have developed innovative apps (Android and iPhone) that enable customers to view and book Olacabs in real-time. At the press of a button, the app provides the position of all available Olacabs near the customer, on a map. The customer can simply click on the button ‘pick-me-up’ to book the nearest Olacab. No address detail needs to be fed. The app has the inbuilt feature to identify the customer’s location through GPS and the same is forwarded to the nearest driver,” Aggarwal explains the technology.
The backend technology is another big differentiator. “We have run analytics on the GPS and pickup and drop data collected by our cabs over years to develop a system with predictive capabilities that helps us in using our inventory better. Through our system, we are able to analyse the demand patterns in a city and our system feeds this intelligence back to our drivers thereby increasing their chances of finding a customer and reducing idle time,” Aggarwal adds.
Ola also offer services like SMS tracker using which a person can get an update about the whereabouts of his cab through a simple missed call. Another recently introduced feature is Ola Money using which customers can recharge their Ola accounts and the travel amount can be deducted directly from their account thereby removing the hassle of finding change to pay the driver after the ride.
India’s startup landscape is innovation driven. It is the power of ideas that is pumping up Olacabs too. One such big risk commitment was “Your cab arrives on time or we pay for your flight”, started in Bengaluru in September 2013—a rather high risk campaign. But Olacabs attributed their confidence to the power of intense analytics. In Bengaluru, despite the scale of operation (demand and supply equally high), the company brought down delayed pickups by almost 100 per cent to 0.9 per cent, to an average 7 minutes that it took to identifying the last mile to the customer’s gate.
On the ground, Aggarwal displays a maturity beyond his 28 years. For Olacabs, with its team of 500 employees managing an expanding team of more than 1,800 operators is a constant struggle. Aggarwals admits, “Maintaining consistent quality across all cities is a bit of challenge.” Ola has instituted a separate team which takes drivers through a training programme during induction. “The drivers undergo etiquette training and have to follow certain rules while dealing with customers,” explains Aggarwal. He concedes that while it is not easy to teach every driver to be polite and accommodative, “we at Ola instil a sense of ownership among our driver partners.” Each driver is made to feel like an owner and as a result he feels he owns every ride assigned to him. “This sense of ownership inevitably leads to good conduct and satisfied customers.” Ola seems to have analysed human nature perfectly.
There are other human-centric programmes that have helped Ola maintain its market leadership in the space. For instance, it promotes driver entrepreneurship. At its launch in Pune in January this year, it organised a Driver Mela where cab drivers who already possessed vehicles could get their cab evaluated and if desirous exchange it with a new one or buy a new or additional cars, all with the assistance of Olaassociated financiers.
“Our business model ensures that drivers benefit from being a part of Olacabs. We hope to continue creating entrepreneurs out of drivers in every city that we go to and help create a platform where drivers can get a consistent source of livelihood,” says Aggarwal. Ola also incentivises its drivers with medical insurance reimbursement and a free education scheme for children.
Fleet maintenance is another priority, carried out through a standard set of rules wherein every cab on the platform undergoes regular stringent checks. “This helps us ensure the level of quality expected from a brand like us.” It helps that the CEO has a background in computer science that enabled him to create a technology-enabled environment and support system. Each cab is fitted with an android device which monitors the number of hours clocked.
Under Olacabs unique business model of a cab service aggregator, the company does not own a single cab. It had to persuade various cab owners to come under the Ola umbrella. But Aggarwal had worked the idea out for himself when he floated Ola. “Owning a cab is not the most important aspect in the cab industry,” he discovered. As he says, it is more essential to get regular bookings to sustain in this industry. “Any driver who understands how this industry works knows this,” Aggarwal says, giving a glimpse into his perspicacious business acumen.
Ola ensures that cabbies do not have to wait for customers at curbs or taxi stands. “We provide a platform where drivers start getting bookings as soon as they enrol with us without them having to spend a penny on marketing their services,” Aggarwal says.
As benefits accrue, Ola’s credibility builds up in the market. With its advanced technology, it has created a marketplace where cabbies now seek the umbrella of its brand name. “We get a lot of requests from cab drivers to join our platform after they see the benefits that our existing drivers get. Initially we had to explain our business model to drivers to get them on board. However, today word of mouth drives enrolment. We don’t have to work so hard anymore as most drivers in the industry know and understand how they can benefit by tying up with us.”
With the focus on cabbies on the one hand and customer focus on the other—“our focus on ensuring that every trip that our customers take with us is a great experience is what keeps us busy and excited everyday”—Aggarwal has the “vision to expand services to every city in India”. We are watching this space eagerly.