Uber and Free Market Economics

Uber has changed the way we travel within cities. On a recent trip to Jaipur, the first thing I did on reaching the city, was to top-up my PayTm wallet to get going on Uber. (yeah no card-on-file yet 🙂 )

Uber Free Market Economics

And over the next 3 days I took more than 12 rides across the Pink city. Here are some of the interesting observations I had:

  • Jaipur is really a small city – Only one ride was over Rs 100/-. All others barely crossed the Rs 75/- mark. Given the distances are not too much, the per ride fare is expected to be low. This is a critical point because the supply-demand balance can be easily titlted in a small-population. Also the per ride metrics are sensitive to even the slightest changes.
  • Free market economies tend to be cyclical – Almost all the drivers I spoke to talked about the good old times they have had, driving around as Uber cabs upto almost 6 months back. It seems back then Uber was super aggressive in signing up cabbies and were paying as high as Rs 1800/- per day. Guaranteed. This came down to 1600, 1400 and now is at 1200/-. And its all because of the immensely huge supply. Most cabbies now complained of getting too few rides on a daily basis. Add to that the low average per ride fare and it is clear that this city needs volume of rides to be high. Or to quickly reach an optimal sweet-spot of supply and demand match. As the word of tough times (for the cabbies) is spreading,  fewer are joining and many who had joined Uber are reportedly quitting it. Some can’t even pay their loan EMIs.
  • There is no consistency of vehicle experience – I got from a Nano to an Innova under UberGo. Firstly, UberGo is where most customers go, hence even cabbies are registering themselves as UberGo. So you are better off choosing an UberGo. The Innova guy said that he wasnt getting any rides so he switched from UberX to Uber Go. Also it seems you make the same per ride across both categories. Hence UberGo seemed a logical preference. The Nano guy was proud of his decision, he claimed that he would recover his investment much faster. And thats true. I think this is a classic example of how the market evolves when its close to a free market.
  • Drivers understand and give importance to rider feedback – I have never seen so much sensitivity from an Uber Driver towards the feedback/rating. To have been able to crack this is really commendable on Uber’s part. The drivers have strong appreciation for this feedback being utilized for giving them ride bookings. Again, there might not be a completely transparent system but the fact that information and feedback is flowing across the supply and demand side, is strong enough motivator to influence decisions.
  • Locals are avoiding taking own vehicles – Lot of areas constantly face bad traffic due to construction activities. Parking is a challenge. Most of my local friends have either started using an Ola or Uber over self-drive or are seriously considering to do so. Atleast till the fares are this low !

Update:

And back in Delhi.

  • There was a surge charge of 1.9X due to high demand and unmatched supply I guess. This allowed UberX  guys to also pick up UberGo customers without formally registering into the UberGo. Complete reverse of what’s happening in Jaipur. I guess Delhi customers prefer the more spacious UberX and there is sufficient demand therein.
  • The first cabbie who picked my request, called me and asked me where I need to go (instead of asking me where to pick me up from), and hearing my destination – declined. Just put the phone down and on my Uber screen I was back at fresh request. No way to even go and give feedback on this bloke ! So I guess Delhi cabbies have a hack to the feedback-driving-behaviour loop also. Land of Jugaad !!

Embrace APIs – Digital Banking Toolkit

Digital is the latest buzzword in banking. Not only are the bank boardrooms echoing with digital keywords, its what seems to be driving the pitches at most IT and Management Consulting firms.

And rightly so !

When the data tells us that 9% of the population already uses Mobile Banking, we know that Digital Banking Revolution is already upon us.

India Internet Statistics
Source: We are Social

In the last article, I mentioned, how the Digital Banking Journey will be different for each bank and why it might be a good idea for the banks to play to their strengths.

Equally important is to acknowledge and understand, that partnerships will be essential in this journey.

And what enables partnerships to work (apart from a culture and mindset) is a technology architecture that is geared towards APIs.

APIs are like Legos – you own some, some you borrow – but put together you make something exciting.

While the consumer technology companies understand this, banks have traditionally been slow to embrace deep connects into their systems. The risk is too high ! After all banks have been trusted with the consumers money and data.

But to stay viable, banks will need to embrace partnerships, learn to publish and consume APIs, while still not compromising the customer promise.

 

Digital India – its already here

Today’s the launch of the Digital India initiative and quite a coincidence that I had an experience which makes me believe that Digital India is already here.

Digital India

Here’s what happened.

I was in Mumbai and called for an Uber. I started talking to the cabbie to understand the target market for a specific use case for mTuzo . We are pitching to banks that with mTuzo we can help move their debit card customer from an ATM only to ATM + POS relationship.

So I asked him which bank account he gets his Uber payments in – it was a SBI account and it was his choice. Uber gives him complete freedom to choose the banking partner.

Next I asked him if he had a debit card for that account . Turned out he did.

I asked him if he’s been using that card at ATM or for shopping also. As expected he had been using it only for cash withdrawals.

Probing further I asked him what if he got 15-20% discount if he shopped using his debit card, would he consider switching from cash to card. And his response just stumped me.

He said he’s already used his card for online purchases at SnapDeal. He did his first purchase using COD (cash on delivery) but once he was sure that they delivered just fine, his next transaction was through his debit card,

Let me repeat that – a 30 something male who has been driving a cab in Mumbai for last 10 years, is only schooled till class 10th, who uses his debit card only for cash withdrawal, has used it online at SnapDeal.

And what really really shocked me was his first purchase on SnapDeal. I can bet you will never be able to guess it.

 

 

Take a few guesses…..

 

 

 

…….

He bought a selfie stick for Rs 300 (after a 66% discount). A selfie stick !!!!

I rest my case, Digital India is here.

Maybe we need a Digital Bharat initiative.

 

Can someone ever be truly selfish

selfish

(of a person, action, or motive) lacking consideration for other people; concerned chiefly with one’s own personal profit or pleasure.

This definition is inherently flawed.

Can someone be truly selfish

Why?

I can explain it in two steps:

  1. Very simple – I have come to believe that the only way any of us can get true happiness and peace is by helping others.By being compassionate
  2. Now, if we are truly truly selfish we should try to maximize our happiness at every opportunity possible. Right?

So going back to point1, how can we get that happiness & peace?  ….. its by helping others.

Hence if you really are selfish, you will do what the world sees as acts of random kindness and unselfishness.

Agree?

Play to your strengths – Digital Banking Toolkit

Nadal is the king of clay. Given a choice of surface, I guess he would choose clay 9 out of 10.

We all get it – one should play to one’s own strength. Its obvious in sports, but most of us fail to apply the same rule(s) in business.

keep-calm-and-play-to-your-strengths

As most banks embrace digital, this is one rule we should not forget.

Look at the bigger PSU banks in India – it’s fair to assume that they have a big list of areas to focus on when it comes to going digital:

  • Channel migration of customers onto internet banking and mobile banking
  • Higher activation and spends on their credit cards
  • Straight Through X-sell campaigns
  • Improving the customer on-boarding experience
  • Reducing TAT for customer transactions and queries
  • …..and so on

It sure can be overwhelming to look at such a big list. One might also be tempted to look at the success stories of the likes of ICICI, Citi or HDFC Bank and try to replicate their strategies.

Will that work? Chances are it won’t !

Why? Because those banks are different. Different in terms of their customer profiles, their capabilities and their partner eco-systems.

When I look at the RBI’s data on ATMs, POS, Credit and Debit cards for Nov 2014 – its clear to me that for PSU banks, ATM presents a unique opportunity.

Digital experience starts from a conversation, an interaction or a transaction – and for PSU banks these are happening in plenty on their debit card portfolio at the ATMs.

SBI has 23.6K onsite and 22K offsite ATMs.And they had 2.4 crore ATM transactions !

Their digital strategy should have a clear ATM story:

  • What opportunity does the ATM transaction present ? E.g. the bank knows where the customer is at that point of time. Using solutions like mTuzo they can share Offers-near the ATM and migrate customers from ATM to ATM+POS.
  • Citibank has just launched Funds Transfer functionality through ATMs. Or one could do mobile recharges.
  • PSU banks do not have an aggressive sales culture. This could be used to their advantage at the ATM, where its not a warm body pushing a product but maybe the thank-you screen which is “suggesting” a product basis past behavior of the customer.

Hence, for any bank embarking on a digital journey, its imperative to ask – What is our strength?

And align the roadmap to play to these strengths!

Digital success needs a matured partnership mindset

I believe that smart matured digital players will need to develop deep integration with their partners.

Let me explain why.

With the growing consumption of digital media, there is considerable noise that a consumer is now exposed to. This would mean that the brands have a fast shrinking window of opportunity where they have their prospects attention.

Most brands do understand this and hence have started investing heavily in better designs and more meaningful content.

But when it comes to acquisitions, it seems that this underlying assumption is usually forgotten. Maybe the acquisition teams are overwhelmed by the amount of digital data they are expected to digest and optimize for. In order to increase the leads volumes, most brands usually explore new partners who have possibly captive audiences.

In many cases these captive audiences are merely email id lists/bases that the partner has sourced not even built. And this might be the root-cause of my recent bad experience with a MNC Bank in India.

I have been using a premium variant of this bank’s Credit Card very regularly for the last 8-10 years. I have my email registered with the bank’s card team where I regularly receive official communication from the bank.

Interestingly I received am email for a gold card from the same bank on the same email id. This wasn’t a proposal to downgrade the plastic, but an email to take up a new card from the bank. I was confused. So I checked the email headers and discovered that this was sent by some partner of the bank who had my email id on its base.

The bank didn’t scrub the partner’s base for emails already registered by existing customers. I can understand why the bank would not want to scrub and give back a base to the partner. Because then the partner could do a delta check and figure out which email ids are registered with the bank.

Nevertheless the bottom line is that the customer experience was significantly compromised.

So what could the bank do? What should other brands do?

Partnerships in Digital WorldI feel they need to pick & choose partners carefully and then deeply integrate with them. They should in fact look at sending emailers from their own servers so that scrubbing is done real time and the partner just gets a report of how many emails were shortlisted for the blast rather than a list of which ones were shortlisted or rejected.

Even if the partner is just worth the customer base it holds, banks would need to step up and control the subsequent stages of the lead generation process. On personalized platforms like emails, its customers can not be treated like New To Bank (NTB) applicants.

In today’s world, we talk about data quality and data velocity. Maturity in both these aspects is possible only through an eco-system mindset and not in the current vendor-client approach.

It would definitely add to the cost of acquisitions. And there might be other better, cleaner solutions but the current process just does not cut it.

Big Data, medicine and Dr Gregory House

I am a big fan of House. BIG FAN !

I guess what I really like is the infectious curiosity of Dr Gregory House and the very extreme personalities of the characters at this clinic.

In my overly simplistic understanding of medicine, there are two parts to it – diagnosis and treatment.

And our Dr House excels at the former. He is able to connect the seemingly unrelated symptoms with behavioral patterns, genetic history and what not. And it is fascinating how the power of inference and hypotheses testing leads his team to find the true nature of what really inflicts the patients.

dr-gregory-house

What I wonder is that this might have been a super impressive set of scripts way back in 2004-2012 (yes the series is that old), but would it be as impressive in today’s age and time.

Experts say that Big Data or analytics is effective if the 3Vs are encouraging – volume, velocity and variety. In case of healthcare they talk about a 4th V – veracity or data accuracy.

Increasing number of our records are getting digitized – so the volume surely is exploding.

Wearables that track real time pulse, Blood pressure etc are already an expected norm. Patient specific information is definitely flowing at a very high velocity within the healthcare eco-systems.

Variety of data, might get addressed when data-sets from individual data-networks (like EMR co’s, hospitals, health insurers etc) are purged for confidential and individual data and insights shared on a common platform/network.

Given all these indicators, do you see a time when Big Data scientists will put a Dr Gregory House in every hospital that can afford such systems? The trick might be to find the best set of tests to conduct to confirm the existence of disease(s), and this is something that machine-taught algorithms can do nicely.

Would machine learning really help connect dots in the medical outliers?

Crowdsourcing from a captive audience – New approach to complimentary breakfasts

Crowdsourcing is all the rage. And restaurants seem to have caught the fancy.

There is this guy who is spending a good time just getting real feedback before he decides what and where of his restaurant. A few restaurants have decided to skip the printed menu completely. Who wants to pay professional photographers when the customers can click the dishes with their smartphones and create a more powerful visual menu?

Crowdsourced restaurant

So let’s take the example of the first guy – are restaurants keen to know which dishes to keep in their menu? In most of the cases – Yes !

Does crowdsourcing help? Yes !

The data becomes more reliable with increasing volume.

But the challenge remains that if the customers are not repeat (as Groupon showed us) and if they are just looking for the next cullinary adventure, then crowdsourcing might not be too helpful at all. 

Why? Because we may be using the knowledge of segment A to cook and serve a dish for segment B ! There is no positive reinforcement for the individuals who gave feedback. Do they go back and see their feedback implemented?

But take the case where a restaurant has a captive audience.

Let’s say you checked into a hotel. Chances are the breakfast is complimentary and most of the guests would end up eating at the in-house restaurant. And on most days, in a typical hotel, there would only be a small majority of non-guest walk-ins for breakfast.

So shouldn’t the hotel/restaurant try to understand what the guests would like for breakfast? Well I guess if I recommend this to a 5 star hotel, they would say “Sir, our breakfast spread has been carefully crafted after years of research on what our guests typically like. Thats also the reason you will see so many dishes and cuisines. We really care about what you want… Blah Blah Blah”

But consider this. There might be a Bollywood festival in town and suddenly there are more Indians who want Aloo Parathas.Or a Tamilian wedding with guests staying in the hotel, who would all love a dosa.

Well it need not be so drastic, but wouldn’t it be great if the restaurant could ask me what I would like to have. And then maybe come up with the dish over the next few days of my stay. If there are others who like it. Would it not make me thrilled, would it not make me feel special. My guess is it would.

It would also make the chef’s job so much more challenging and exciting.

And also allow the hotel to stay connected with the guests – guests are not just a room number or ID in their CRM systems.

What do you think?

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Image Credit : http://mashable.com/2014/03/19/dinner-lab-crowdsourced-restaurant

Impact of un-utilized assets : A Mathematical Model

A few weeks back I was wondering what happens when we buy a car but don’t drive it. While the automobile industry witnesses a growth but is it something that increases the drag on the economy.

I spent a few hours to work on a very simple model to find what happens in various consumption scenarios.

Approach:

I had to create a simple-one -product economy. Hence  I assumed that

  • Our economy produces cars each worth Rs 12 lakhs.
  • Average utility lifetime of the car as 1lakh miles
  • Additional spends required based on consumption as 5 Rs per mile

I also simulated 6 different scenarios from a household’s perspective. namely:

  • Scenario 1: Normal usage. Uses for full life of the product
  • Scenario 2: Stops using after a time. Does not sell it or buy another
  • Scenario 3: Stops using and sells it off but doesn’t buy another
  • Scenario 4: Stops using, doesn’t sell and buys another which is used
  • Scenario 5: Sells this and buys another which is used
  • Scenario 6: Doesn’t sell, buys another, stops using that also and buys a 3rd

Once these assumptions were plugged in, I calculated a few ratios and interesting things emerged.

 Unutilized Assets

  1. The value derived from each product drastically changes between two similar scenarios where the old stuff is traded vs where it is not sold. Does this mean that in a resource constrained economy, a market place optimizes the return of invested resources through higher utilization?
  2. In the scenario 6, income generation is highest for every 1 Re spent by the households. So maybe hoarding is a good strategy when domestic income generation is important. On the contrary imagine if we do this in categories where we import the products – we might be supporting Chinese economy more than we ever wanted to.

Not knowing fully well what these ratios meant, I spoke to my Professor friend Dr Dash who gave some very interesting path of analysis. Essentially what he mentioned was that I should look at this top down rather than at a micro level. He also mentioned about ICOR – Incremental Capital Output Ratio – how much additional capital do we require for each unit of GDP increase. E.g. an ICOR of 3 means we need 3 Rs for every 1 Re contribution in GDP.

  • Assume a market size of 75 Bn USD and lets say one third of this is from private cars. Hence a market of 25 Bn USD
  • Now assume that 5% of all cars produced in a year lie idle, which means about 1.25 Bn USD worth of cars remain idle. (and this is incremental value of locked capital every year)
  • So with an ICOR of 5 , these un-utilized cars translate into 6.25 Bn USD worth of capital that is “wasted” every year.
  • But where it became tricky for me was that whether the asset is utilized or not, the GDP is impacted depending on ICOR. So is this a case of smarter capital allocation? Would this “wasted capital” helped us in producing some other more needed product or service?
  • A very interesting and probably extreme case of this top-down analysis would be the scenario where the asset is imported. In such a case, a reduction in “wasted capital” would result in better trade-balance
  • With a marketplace, if 40% of these cars are sold in the second-hand market, then we free up that much capital.
  • Moreover with cars available at a lower price, many category shifts might happen. E.g. say a Maruti Alto being sold in the second hand market might attract a person who was in the market for a 2 wheeler earlier.

How to save the Boiling Frog?

Boiling-Frog
Source:inflexion-point.com

We have all heard about the boiling frog phenomenon – Put a frog in boiling water and it would immediately jump out. Instead keep a frog in cold water and heat the water slowly, the frog would just boil to death.

While I don’t know if this experiment was ever done or not (one guy actually tried it and uploaded a YouTube video), or whether the frogs of today are smarter than their ancestors, but the underlying phenomenon is all too common in the corporate world.

Companies fail to see the “inevitable change” in consumer behavior. They fail to notice or counter the growing might of a competitor.  More often they fail to see the gradual but sure detoriation in culture, motivation of their teams. All because it happened gradually.

So I was wondering what are the ways to avoid a Boiling Frog phenomenon?

  • Get a frog from outside every once in a while : No brainer right? A frog which is not in the gradually-heated-waters would know that there is something wrong. The water is already too hot and they should jump out. Why then do most companies shy away from bringing in fresh talent? Why do we feel afraid of getting people from diverse backgrounds – unrelated industries, different academic, economic and cultural backgrounds.
  • Have a thermometer track the temperature : Consumer surveys, market research, risk metrics, red flags etc – we do it all , still this happens – you would say. Well, sometimes you need a frog who can read the thermometer ! Would you want the frog to see just the temperature, or would you want to show how much temperature has risen, or show that its now in the danger zone or better still sound an alarm loud enough that makes the frog jump out of water 🙂
  • Let the frog see that the water is being heated : If our frog was smart and put in a transparent container, chances are it would see the flame or the burner. It might also note the rising temperature in the thermometer even if it doesn’t feel the heat yet. Will it help business leaders if they have real-time feed from the market about whats really putting them under stress.
  • And if nothing works, just pull the damn thing out yourself.

Are there other ways to save the boiling frog?