{"id":7358,"date":"2015-12-09T23:20:21","date_gmt":"2015-12-10T04:20:21","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/careem-why-is-it-winning-the-competition-with-a-global-giant-like-uber\/"},"modified":"2015-12-13T11:43:27","modified_gmt":"2015-12-13T16:43:27","slug":"careem-why-is-a-local-startup-winning-the-competition-with-a-global-giant-like-uber","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/careem-why-is-a-local-startup-winning-the-competition-with-a-global-giant-like-uber\/","title":{"rendered":"Careem \u2013 Why is a local startup winning the competition with a global giant like Uber?"},"content":{"rendered":"<p><strong><iframe loading=\"lazy\" title=\"Careem makes Christmas wishes come true!\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/KkH7WuLS8hs?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/strong><\/p>\n<p><strong>Careem \u2013 Why is it winning the competition with a global giant like Uber?<\/strong><\/p>\n<p><strong>Introduction<\/strong><\/p>\n<p>Careem in Arabic means \u201cgenerous\u201d. That is the name of the startup in Dubai where I was a very early stage employee. The philosophy is to be generous to customers, captains (that\u2019s what we call our drivers) and colleagues while working with the regulatory authorities. \u00a0The attached video, which I made while at Careem last year, shows this spirit of giving especially in the upcoming holiday season.<\/p>\n<p>Careem is a 3-year old hyper growth startup in the Middle East in app-based car booking space. It is the market leader in the Middle East with presence in ~20 cities and Uber is it&#8217;s main competitor. It just raised $60 Mn in Series C funding last month and was awarded Gulf Business Best Startup of the Year.\u00a0Will Careem, a local start-up drive out a global giant like Uber from the Middle East like Alibaba drove out eBay from China? Well I guess only time will tell, but I do believe it&#8217;s very well positioned to do so for the reasons\u00a0below.<\/p>\n<p><strong>Business Model<\/strong><\/p>\n<p>It\u2019s business model is a legacy of how it started. It was started by 2 ex-consultants in Dubai who used to travel a lot around the Middle East.\u00a0They saw that while the hotel and flight bookings were seamless, arranging a reliable\u00a0car for the team\u2019s transportation needs\u00a0was a huge pain point in the region.<\/p>\n<p>So they left their job and started a company with pre-scheduled bookings only so that they could have buffer time to arrange a car, not having a loyal fleet yet. We first started supplying pre-scheduled cars to firms that had their people moving a lot around the region to unlock a lot of demand at one go and also to\u00a0ensure a steady stream of revenue as we were bootstrapping. The value proposition to these big companies was a very easy\/user friendly interface to book a car in any city, reliable guaranteed on-time service and tailored invoice with all data on their usage patterns.<\/p>\n<p>These business men\/women started using Careem for their personal travel as well and that is when the need for on-demand (NOW) bookings arose. We\u00a0then moved to on-demand after several months as by now we had secured enough supply to be able to have a decent ETA.<\/p>\n<p>So although we are essentially in the same business as Uber, our business model is both B2B and B2C with 2 main products \u2013 pre-scheduled and on-demand (NOW) bookings. We charge clients on a per km and per min basis much like taxi cabs.<\/p>\n<p><strong>Operating Model<\/strong><\/p>\n<p>In order to make our business model successful we had to do a lot of operational changes to suit local needs.<\/p>\n<ol>\n<li><strong>Customer call centre<\/strong>\u2013 The people in Middle East are much less tech savvy as compared to the US and hence we had to build an entire call centre and have a 800\u00a0number so that people who didn\u2019t use apps could call in to make a booking. People also could report any issues by calling in and having someone to call up at a company just reinforced their trust in our service. This was supported by the fact that we could get people from South Asia to work at\u00a0salaries\u00a0much lower than in the US.\u00a0 As we scaled, we moved our call centre from Dubai to low cost locations such as Egypt and Saudi Arabia.<\/li>\n<\/ol>\n<ol start=\"2\">\n<li><strong>Pay by cash<\/strong>\u2013 The credit card penetration is also very low in the Middle East because of both the security perceptions and the fact that interest is not considered to be good in Islam. Hence to grow our business we had to tweak our operating model to start accepting cash by riders like you would pay in a taxi. It had a lot of underlying logistical issues that needed to be put in place but everything worked out perfectly because we had B2B bookings on invoice and some B2C bookings on credit card for which we needed to pay the captain whereas other B2C cash bookings where the captains needed to pay us. This mix of bookings was such that the net transfer was from us to the captain at month end\u00a0sohe just needed to collect the cash from the rider but was not needed to do a trip to our office to drop the cash. Also, since the captains has extremely low working capital, they were happy to be paid a part of their earnings before the usual pay day.<\/li>\n<\/ol>\n<ol start=\"3\">\n<li><strong>Our own locations database<\/strong>\u2013 The GoogleMaps in the Middle East are not as accurate as they are in the US and there is frequent construction so roads keep changing every few months. Hence in order to ensure a good quality of service, we had to build our own database of locations so that customers could choose from that dropdown list for a pickup location. This was especially important because you couldn\u2019t just drop a pin for later booking which might originate from a different location where you were while making the booking. A typical later booking was made anywhere from a couple of days in advance to an hour in advance of the pickup.<\/li>\n<\/ol>\n<ol start=\"4\">\n<li><strong>Book for someone else<\/strong>\u2013\u00a0This feature was a key because most of the B2B bookings were made by assistants for their bosses or by businesses for their clients. Also, a lot of people used to book Careem to pick up kids from school or take elderly people in the household around town. So our web and mobile apps allowed people to book for others using either cash\/ other\u2019s credit card\/ their own credit card or invoice as the payment method.<\/li>\n<\/ol>\n<ol start=\"5\">\n<li><strong>Captain call centre<\/strong>\u2013 We also realized that the captains were often new to Dubai having migrated from South Asia recently so they faced problems in figuring out the right route to take and also in understanding English especially due to the various accents of our customers who were immigrants from Australia, Europe, US, Africa etc. while guiding them to their location. Also, there were some security concerns from customers. Hence we decided that captains were not given the customer&#8217;s contact information to ensure\u00a0both security and a better customer experience. If the captain\u00a0had any questions, he\/she would call our operatives who in turn trained to deal with customers will convey the information to the customers. They also guided the captain turn by turn if the need arose so that he\/she could reach on time to the pickup. As more and more captains had this on the job training and an average captain started earning much more than they did before, the churn reduced and they\u00a0stopped leaving Dubai to return home and instead started getting their families to Dubai. We could be much more hands-off later on especially with the well trained captains. Some of our captains quit driving and joined our call centre for a better lifestyle.<\/li>\n<\/ol>\n<ol start=\"6\">\n<li><strong>Captain Loyalty<\/strong>\u2013 This space is a winner takes all market in my opinion because\u00a0of the virtuous cycle involved. The more captains you have, the better will be the ETAs, hence more people will choose you over competition and hence more captains will want to work with you because you have more work for them. Hence, earning the loyalty of captains was key. We put a loyalty system in place and\u00a0set targets for the 4 different tiers. A captain was supposed to be online on his device for a minimum threshold\u00a0and accept a certain percentage of bookings we offered to remain in a given tier or move up a tier. If he did his part, our algorithm ensured that he would make a certain amount per month which increased as he\/she moved up the tiers. We were able to do this because we had pre-scheduled bookings which we could assign to a captain far from his target irrespective of his location because these bookings were atleast 1 hour out. Using this we were able to promise them a certain earning every month in such an uncertain market which Uber couldn&#8217;t. We also did quarterly events for our captains to get their feedback to tweak our system and to make them feel heard. We usually used to communicate within a week the changes we did in our system based on their feedback which made them an owner in our success and also made them proud. And then irrespective of how much money Uber used to promise them, they believed they owed it to us to not work with Uber because we genuinely cared for them. Even if the money swayed some for a short time, they always came back to us.<\/li>\n<\/ol>\n<p><strong>Conclusion:<\/strong><\/p>\n<p>Hence I believe Careem is a winner because it&#8217;s operating model is very well aligned with the context of Middle East and its business model. It has identified exact pain points in the Middle East and has turned them to its advantage. This is why Uber who is trying to copy their US model has not been successful in the Middle East yet and I don&#8217;t think they will in the future if they don&#8217;t adapt to the local needs. Like eBay couldn&#8217;t succeed in China due to the strong foothold of Alibaba. Though adapting to local needs, I think, does not work with Uber&#8217;s business model which is to grow and expand extremely quickly by replicating their model in multiple cities. Hence, they can&#8217;t keep tweaking it in individual cities as its very time and effort intensive and does not scale fast like the current lean team city launch model.<\/p>\n<p><em>Sources:<\/em><\/p>\n<p>Conversations with people at and outside Careem in the Middle East.<\/p>\n<p>My experience while working there.<\/p>\n<p><em>Disclosure:\u00a0<\/em><\/p>\n<p>I think Uber is a great company but has just not done that well in the Middle East as it has elsewhere for the reasons stated above. I by no means am trying to undermine what it has achieved otherwise.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Careem &#8211; Why is it winning the competition in the Middle East with a global giant like Uber?<\/p>\n","protected":false},"author":575,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[1158,1161,1160,1162,308,1046,1159,1157,8],"class_list":["post-7358","hck-submission","type-hck-submission","status-publish","hentry","category-cab","category-competition","category-dubai","category-global-giant","category-lyft","category-middle-east","category-taxi","category-transport","category-uber"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Careem \u2013 Why is a local startup winning the competition with a global giant like Uber? 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