Bank on It: Companies That Are Changing the Rules, and the World

ladies and gentlemen please welcome your panel on bank on it companies that are changing the rules and the world moderated by LinkedIn's managing news editor Caroline Fairchild welcome to day two of Milken my name is Caroline Fairchild I'm a managing editor at LinkedIn we have a global team of editors making sure that the news and views in your feed are accurate and relevant for your industries we actually have a great conversation going on about this very conference on LinkedIn right now we encourage you to share and check out the insights from your fellow attendees using hashtag mi global all right to the matter at hand out see here the Amazon of South Korea the carvanha of Europe let's see over here the uber of Singapore and the Airbnb of India this is how my counterparts in the media have portrayed these companies in the press and we are going beyond the headlines here today to actually tell you about what these leaders are doing within their markets and how it's not as simple as saying that they're taking these companies and what's going on in Silicon Valley and replicating them elsewhere because what they're doing is disruptive it's different and it's not like their counterparts here in Silicon Valley so I'm encouraging us all to really get in the weeds here so that we leave this discussion with a better understanding of the nuance behind this massive markets that each of these leaders is talking about and leading through their companies so I'm gonna start and I want each of my panelists to explain in one sentence one sentence only I know it's hard sometimes what they believe to be the biggest misconception about e-commerce ride-sharing and hospitality markets in their home country respectively BOM I'm gonna make you my first victim I don't think the the problem statements are usually the same the the needs of the customers are the same I think in our case the biggest misconception is one that the solution will be the same to those problems and second of all we're based in Korea and one of the biggest misconceptions about career is that it's a small market it's the fifth largest e-commerce market in the world actually on pace to be the third largest e-commerce market in the world after the US after China and the US so we operate all across continental Europe and we have a platform that buys and sells used cars from many channels so many channels and I think what is underestimated is the size of transactions the number of transaction size of the market in a developed market like Central Europe the used car transactions are actually three times higher than new car transactions so it's a lot more liquid and and also the unit economics are better than selling new cars so we see much more and more retailers shifting towards new cars first of all thank you for having me here I think the biggest misconception is that we are the uber of Southeast Asia the better analogy to think through is the uber plus and financial plus mate one of the region and it's because the problems that we're solving expand and extend so much beyond mobility into financial inclusion capital formation and all of these combined together as a platform is where we're heading over the next five years thank you for having me here the biggest misconception for oil is that we are our distribution centered business whereas what we really are is more of a fulfilment centered business we really are more about upgrading the hotel's helping operate the hotels and then comes the fine layer of distribution so that's a very key misconception which we face almost everywhere we go now if you're dying boring in the misconceptions I just want to take a quick poll make sure everyone's still alive in the audience here so who here is heard of grab cool all right what about audio okay coupon Auto one alright not a lot of hands for a lot of those companies so I think what would be great is if each of you could just give us the high level landscape of the market and kind of the subscription and really the massive size of each of your businesses so that's appreciated before we dive in we are the largest e-commerce platform in Korea actually I think we're the largest fulfillment private fulfill many e-commerce company in the world we're growing over we're about a eleven billion dollar run rate growing sixty five percent year-over-year right now we have essentially built out an Amazon like fulfillment network but on top of that because the country doesn't have a UPS like infrastructure we built out the ups of the country as well so we have the largest directly controlled delivery fleet in the country as well so it's an end-to-end from the mobile click all the way to your door delivery integrated e-commerce platform in addition to that we've also launched a payment platform much like PayPal that's doing about eight billion dollars run rate growing over two hundred percent year-over-year so also building out an ant financial like business and also entered food delivery leveraging our logistics capabilities as well so really a consumer internet platform in the market okay yeah I couldn't already see a red line here where we have things in common so we are the biggest market maker in Europe last year we traded over five hundred forty thousand cars we solve two problems one is a consumer wants to sell their car there must be an efficient ecommerce like way to do it online to offline but really the click of a button booking your appointment going there on the spot solving the customers core problem and the second problem we're solving is on the b2b and we're car dealers need supply when you drive by car dealerships you always take for granted that the lots are filled and say hey great they've got this great inventory but if on a good Saturday they sell 10 cars guess what on a Monday they need to get 10 more cars to be to have this reach again and put them on the market and on the back of this based on our own needs we have also built one of the biggest to g6 players and finish vehicle logistics we do over me in car movements a year opening the network novels of our partners in the future for even more players and and of course finance is the topic that also comes up when you say okay how can we can we make lending easier perhaps to people who do not have the visibility in their credit scores were smaller dealerships new starters startups in that company in our industry how can we help them and we also lend to them I think we're grabbed that the best way to to think about grab is to compare and contrast the market in the US with the market in Southeast Asia and I think when you look at us startups there is a singular focus on a one-size-fits-all approach so the notion of providing a service that wins the heart of a millennial living in San Francisco if you're able to develop a service that wins our heart then the assumption is then you'll be able to win the hearts of the middle-class American in Middle America and so it's a one size single playbook I think what we found is Southeast Asia is incredibly heterogeneous on one extreme you have crazy rotations of Singapore and on the other extreme you have Who Wants to Be a Millionaire and so that the demographics are quite large and quite quite disparate and what that means is there has to be a very specific intentional hyper focus on being very very localized some examples when you talk to the consumer in Southeast Asia in countries like Philippines or Thailand more consumers traveled by a motorcycle or these three will tuk tuks than they do by car and so if you're a right sharing business in the u.s. the general approach is to try and form fit everyone and move them into a four-wheel vehicle the approach that we took was to really work within the consumer behavior of our demographic and then hyper localized the service to fit the demographic needs of our consumer and that's in the general approach that we take on hyper localizing the services and the products for for customers and the size of grabs business can you talk a little bit about that I know it's really small which is why you probably avoided it no so last year we became the first company first technology company to hit over a billion dollars of revenue in the region and what's been extremely notable is not just the growth in ride-sharing but then all of the other services that we've developed on top of that which includes food delivery mobile payments mental services and we see tremendous growth in those underserved markets yeah I won't get to that I'm sure okay so we are a technology company that happens to be in hospitality we run more than 650 thousand rooms across the globe as we speak across 19 countries and we are adding about 60,000 rooms every month which by far we are the fastest-growing hotel chain across the globe we are the number one in India we are number three in China and we have presence in multiple other countries where we will be in the top five in most countries that we operate in and very early stages of growth beyond this we are also the number one vacation rentals player in India and it's a full-stack model where we not only go in and provide the brand so all these hotels have to or your brand multiple brands but for your brand but we also provide the fulfillment supports all of the hotels run on our technology we own the pricing revenue management and distribution and most importantly we take decisions on how you upgrade the asset what investments go in how dependent maintenance happen on the asset so it's a very deep stack business on the fulfillment side and which is growing at scale so that's the most interesting part for us great so massive markets massive companies massive opportunities for a disruption let's get into how you did it and how you succeeded in getting this big and what's next to come bomb I want to start with you because when we first talked about this you equated maybe the better word is diss equated what you're doing at coupon with early versions of planes which had flapping wings can you let the audience know kinda what you were talking about yeah I think your bar we're sitting in the audience here listening in I would say this is what we're doing in a nutshell you know a lot of times when when people early models of man this is what I was telling Caroline and this is not my analogy it's something that I read in the innovators dilemma actually early models of man a lot of early technology innovation came as a result of observing nature so birds flap their wings to get lift early models a man also had planes that that flapped and try to generate lift that way but the reality is that steel wings have different constraints so the way that you generate lift with steel wings is very different from the way that birds generate lift and it's the same thing here I think fundamentally the forces of consumers are the same people want more selection lower prices more immediate gratification and whether it's hospitality or out of sales or internet e-commerce customers want the same things in every markets but the but the constraints in each market are very different and the way you solve the solutions around those constraints will be very different so for in our case fast delivery does that look like Amazon's fast delivery it does not because consumers in Korea have very different lifestyles they they typically work very late the average elementary student this is depressing for my kids comes back from school and after-school classes at 10 p.m. 10 p.m. so the typical consumer whether you're working you know mom or dad or a kid it really has downtime after 10:00 p.m. so the way that we solve for fast delivery was figuring out how to get fast delivery for people who were ordering in the middle of the night in the middle of a night so now we have over 40 times Walmart's selection that can be delivered within hours not only during the day but overnight if you all place an order ad at midnight you'll get it before 7:00 a.m. in the morning and that's you know it was a difficult problem constraint for us to work around but I think as a result of really customizing our solutions around the constraints in the market to fulfill universal needs we built something I think that's that's really unique and that's what's behind our growth and I mean you spoke a little bit earlier about the constraints in Southeast Asia given the localized demographics and how they vary from country to country what's your example of you know the poor kids who are going to school until 10:00 p.m. in South Korea so just to build on on BOMs point about that kind of constraints I think there is often a notion that you can't have it all it has to be either price or service and one of the biggest constraints that we see particularly from US startups is the notion of a customer is a customer that's very narrowly defined it's a customer that buys goods on the e-commerce it's a customer that buys a used car or it's a customer that that rents a room for the night the the way that we were pushed to market is the customer that we're going after is a digital first mobile first consumer and what that means is the way that we engage with our customers is quite much broader than simply selling or providing a singular product and service to to our customers which is why when we launched this journey we focused on the notion of a super wrap platform where if you're able to provide the most relevant services to your customers on a daily basis and within grab we ever saying that high frequency will always kill the frequency high frequency services create habituation it creates behavior changes and if you're able to create a portfolio of services that provides the most relevant daily services to our customers in their mobile life then your share of wallet share of mine share heart share continues to grow over time and the way that you're able to engage with their customers then becomes much deeper much more holistic than selling you know XYZ products and I think that that notion of creating a super app platform to enable that behavior changes what we've been very much focused on and how can you started Auto one with your co-founder and co-ceo as you pointed out before we got on stage when there were other players in the market what did you do differently that you think really made you stand out and be in the position that you are today as leader I think I mean the first one and a half years we were German only company and there was really about digital experience in an industry there was not so digital in 2012 so if I wanted to sell my car and we tried it out so he tried to sell a car and calling around dealerships and just seeing what happens and was not so good experience if they ever answered the phone or effects machine answered the phone or a lot of funny things happened but at the end of the day we couldn't understand it because we were ecommerce people we were coming we're not coming from the car industry we're coming from an industry or we said I needs to be a toll-free hotline it's me ticketing system that needs to be response time is we service levels all of this that you learn when you say customer first customers customer first and then you say hey I want to try this super expensive coat that is mostly in the European countries the most expensive coat people own because they rent they don't have so many real estate properties sophistical II was telling my most expensive coat and nobody wants to transact and that was that cars really interested with and and the market is huge we're talking about hundreds of billions of euros why aren't people answering the phone so ok that's we started with a website and said you must be able to have a very guided funnel so that everybody who's also not an expert can actually assess the value of their car and when they want to go on and transact with us 24/7 you must leave your shop must be open so if you and it's my favorite example we do a lot of TV ads around NFL so NFL means in Germany that's 3 a.m. on a Sunday because of the time difference we must be able to offer you an appointment at 3:00 a.m. when you watch NFL and say oh yeah right I want to sell my car there next Monday morning and 9:00 a.m. you can book a slot and you don't just send out an email and wait for an answer and hope that they get it it must be a life hooking system we immediately get a response where somebody follows up or you get a text message and says we are really happy and we want you here and this is what will happen this and then transparency yeah that's the next step where you say it shouldn't depend on you as a person if you will sell how you will sell in which price will get for your car because that's not we're pricing the car right so we have a very digital industrialised process when we do these thousands and thousands of times a day where we digitalize your car we take an iPad we do the test drive we have underbody scanners they have AI that analyze the picture and we've looked at millions of millions of cars we know exactly what is relevant these days and there was the she wants a national level that already solved a lot there was already hyper growing company and then after after one and a half years we said ok we are European company and one now looking back one of the investors once told me you're an EU poster child now why we have freedom of goods we have freedom of services we have freedom of capital and we are one of the few companies that can really leverage on this we can buy in any country in the EU and sell in any country of the EU so now all of a sudden you take a very very local market and expand it to all the borders of the you that you can imagine and there is so much potential to drive the prices or the highest price to the customer that we're really successful in making the customer happy and we do mystery shopping beating the market that's all benchmark what you get locally if you get on average 20% more from us then that is driven by technology that is driven by the fact that we connect the market end to end that you can drive to a branch in Barcelona and there might be a buyer in Helsinki but you don't actually have to drive there thank God but you can transact with us of course so I think what's interesting just what Ming just said Ming said you can't have it all I think actually grab is trying to create a world can have it all and I think all the one is to I actually think we have a motto our slogan from the early days of the company even when we had a very different business model was create a world where customers ask this one question which is how did I ever live without coupon which means this we believe there are two types of companies a type of company that creates just kind of incrementally better services or products or a company that creates such exponentially better value to the customers that customers say how did I ever live without this and we believe and I think this common thing that I'm hearing from both of these two gentlemen here is that technology allows us to break the trade-offs that typically we we take for granted in our world and that's how you get exponential value or greater value so for example you get a marketplace like Auto one and you get now all of a sudden you're you're shopping selection expands across borders and you have the convenience of ordering booking a car while you're watching something on TV but the typical trade-off there is that you lose trust visibility there's no transparency and you broken that same thing with a lot of the things that grab has done and we've we feel the same way for us the trade-off is that you know yes people want that immediacy and want the delivery within hours but typically in the u.s. I think if you get delivered within hours you have to trade off with selection so a typical prime now store has about thirty thirty thousand items on average I believe so when you want something within hours you give up selection if you want something if you want full selection you have to wait the way we try to break it is but by integrating end-to-end now we have over two million items that can be delivered within hours and of course if you are willing to wait longer a day up to a day you get millions more but I think that's the common thread that I hear here that when you find the constraints and you find those trade-offs how do you break it with technology I don't know if I'm representing your company accurate I love it and I think even if you want to visualize it when you look at the headquarters and will be same for every company yeah we have only one line of water going into the building and if if what I wouldn't work for day we could live with three fiber lines at different corners of the block if somebody tells the street open an Internet is down we have two more up things and I think that that shows a little bit where is the emphasis what could people live without and what couldn't they we could drink water from bottles and we'll survive 24 hours no internet will be really tough for organization and I want to bring I mean I've into this conversation so I mean I have a lot of people might think of all you owe me like oh it's Airbnb in India but the model is very different so let's talk a little bit about the model why it worked for you in India and the other markets that you're exploring sure so before we start let me share that India today as we build the business is about a third of the business for us so the model definitely has gone beyond the boundaries and is scaling in other places as well the model fundamentally is built on a very important fact 90% of hotel rooms worldwide are part of assets which are 100 rooms or smaller in size these are small buildings and historically a lot of the hotels that this panel and lot of us are trained to see are basically the large buildings 200 250 rooms and larger in size and historically a large portion of this 100 room and lower buildings these hotels continue to be fragmented independently owned across the world now as in as hotel your'e who owns that site and is running this hotel you don't have the right tools that you need to run the show so you do not know how to do pricing and revenue management you don't know how to build content you don't have the right technology to run the show it's a small hotel and you do not know how to invest in that said to get more returns from your money so there are tons of problems that this hotel your faces so this is or goes in and we are the franchising brand for these small hotels and we have used technology again to break the barriers of how would you make a small asset operate as efficiently as a larger asset so you basically use technology to figure out how you overcome the barriers that traditionally existed because of which these smaller assets were not seen and not part of the main economy and as we do that we have improved our capabilities and it's a deep fulfillment level capability where globally now we operate in about 700 cities across the globe where we can sit across the table with an asset owner and we can do a deal in three meetings so the decision-making is all enabled on an app with all the data streaming in because at the end of the day the decision is based on data coming in you know signals coming in you have a team which grows in and transforms the assets and upgrades the asset which also uses technology to make decisions and the decision is to optimize capital versus the look and feel of the asset which versus the return that you will deliver on the asset technology we have all mobile technology which you can use to basically operate the hotel and run the hotel and finally comes distribution so Airbnb is a great partner and we really respect what they have built the the solution works really well when there are no underlying fulfillment issues but when there are underlying fulfillment issues you got to do what bomb and Kupang did in Korea you need to go and build those solutions because those solutions don't exist for the business and that is what we are doing everywhere we go because for these fragmented hotels across the globe a lot of fulfillment solutions either are clunky and not right fit for them or don't exist at all let's switch gears a little bit and talk about competitors and partners and how you think about that being obviously uber and grab have quite the history and are still involved today what can you tell us to bring us behind the headlines a little bit to help us understand why you think the grabb brand really won out in Southeast Asia just before I address that question I wanted to go back to to the point about using technology to level the playing field in the supply side and helping small SMEs compete with the Hilton's of the world I think technology can also help on the demand side on the consumer side and one of the the beautiful things about technology is it makes the services that we all want cheaper every single day it's a very powerful deflationary force for good and so particularly in the context of Southeast Asia India we're now at a point where the last billion of consumers now have access to nearly the same digital mobile services as the first billion of digital consumers in the US and broader developing market or developed markets and I think what's very powerful about that notion of the last billion is the realization that many of these consumers the last billion are working in the informal economies of the world similar to what what I was doing these are informal workers their cash economy company or workers they don't have a w-2 they don't pay taxes and because of that they don't have access to modern financial systems they don't have access to bank accounts certainly not credit cards capital formation is really very very difficult for them and I think companies like all the four of us I think are creating the opportunities whether it's on the supply side or the demand side to lower the cost bring these market participants into the formal economy where they can benefit from capital formation capital funding and supply side opportunities for everyone and that includes obviously for automotive and the ecommerce as well particularly for the long tail supply side so just I think both sides are very very important to bring together yeah on on your second question regarding competition and ultimately competition is great we we are always fun of saying iron sharpens iron and the best part of competition is consumers and their expectations of us continue to increase each and every day if today bomb has a million products available same day next year consumers will accept expect two million three million to three every year the quotation go goes higher and that's an incredibly important part of what we all all four of us try and do in our businesses I would say the key the key concept for us was being hyper hyper local and understanding that the best way to address the needs of our consumer is not to change their but to develop a service that fits into their normal consumer behavior patterns don't force a consumer who prefers a $1 motorcycle ride to get into a black car four wheel don't force the consumer that prefers an open-air bus in Manila to get into a Lexus when you think about the financial services opportunity don't force consumers to use credit cards why because most consumers don't have credit cards in Southeast Asia less than 4045 percent of consumers in the region have access to even a bank account much less a credit card and so rather than forcing that consumer to go along the same journey as the u.s. consumer banking credit card mortgages create a new flow for that consumer that meets his or her requirements needs and solves a real problem and if you're able to provide and tweak the the services to meet that that inherent demand and I think you can build very durable companies that address parts of the market that were structurally I would say inaccessible to most companies from a global perspective but if once you unshackle the once you unlock that that consumer segment what you find is they're extremely productive they're extremely consuming and these are wonderful market segments to be serving BOM can you talk a little bit about how the customer flow as Ming puts it is different at coupon than say at Amazon and what you're doing to make sure that you're not foreseeing customers to do things they don't want you know we don't really think of when you say customer flow you mean just in terms of yeah in terms of what you mentioned that there are a lot of orders that come in after 10:00 p.m. and you guys having to create infrastructure to support that yeah yeah are there other things that are going on a coupon that you think you know can't be replicated or specific to the Korea market that your service you know it's interesting the constraints are different I think it's interesting to hear about Ming's mark it's constraints where people don't have credit cards but oftentimes these constraints I think Ming was saying that competition is a blessing I think constraints are a blessing because even though there are unique constraints in our market that have forced us to take on extra challenges challenges beyond what Amazon took on its turned out to be a blessing because the solutions that it's led us to I think are as applicable in the US market as they are in Korean market so we didn't have the luxury of a US Postal Service subsidizing our business we didn't have the luxury of a UPS so we had to build our own fleet that seems that seems like a disadvantage but it ended up giving us this end-to-end integration not only an infrastructure of a technology building it up from the ground up that's now allowed us to do this delivery and the solution is this you know I'll just recount a quick story I a month ago we had a colleague join us from the US and you know in one of our meetings unrelated I asked her how she was settling into Korea Seoul Korea and I asked her you know how how was everything anything you missed from back home and she burst you know kind of blurted out and got very emotional and she said you know I don't miss Amazon at all I'm so in love with this company and you know at first I thought she was just doing it to flatter us but she recounted the story about how her daughter was having trouble adjusting to school and she was so busy settling into a new country selling to a new job that she kept forgetting to buy her daughter a ballerina she's her daughter's taking ballet classes at school and she she didn't have she forgot to get her a ballet uniform or ballet dress and so her daughter had been practicing in plain clothes and her daughter had been embarrassing her she's in a new school is she doesn't have friends as it is and she's practicing and playing clothes and she'd kept reminding her mother that she needed one and she kept forgetting and it so happened the day before I asked her this question her daughter had come up to in the middle of the late at night and said mommy did you remember to get me my ballet clothes and she'd forgotten she completely forgotten and she said just on the off-chance just on the off-chance that or dawn delivery had this product she checked and because we carry two million products Daan delivery we had a ballet we happen to have a ballet dress in her daughter size so she got it before 7 a.m. put it on her David to her child before she went to school so I say look the constraints that forced us to build a solution or unique to Korea but who wouldn't want this service anywhere in the world so I think oftentimes it's not that the solutions are that unique or that applicable only in certain markets it's that we are all solving for universal human needs the constraints are different and constraints are a blessing just as competition can be I think Thomas Edison said that the necessity is the mother of invention and it's absolutely true except you have to have the way to win in this market is not by bringing in solutions from other markets and copying and pasting it that would be like flapping your wings it's really to take the customer need seriously to not Bend the customer to fit your solution but to bend your solution to fit the customer with all the constraints that she has in the market it's that little ballerina gonna be in your next ad campaign no no you know actually the whole time she was telling me the story I was thinking to myself gosh I wish I were recording this user of bomb service I'll mention one very clear difference in the customer journey and the customer flow is is very creative and use of convene stories as pickup drop-off last-mile logistics points and for me you know when I wake up and go to work the first thing I do is I usually drop off at a convenience store I pick up my coffee I think recognizing that that is part of the cut the consumers daily habit I think is a very powerful now can you go one step further we went and we made a hundred percent of our deliveries to the door a hundred percent is we took it again can you just the constant I think what takes you to the next level is to not settle because the customer will never settle and to just challenge yourself and say how can you give the customer how can you let the customer have it all because if the customer has it all they can't live without you they'll say how did I ever live without oh yo without grab without Auto one without coupon and I think every if there's a common thread here we are customer obsessed we are trying to give them everything and the way we're trying to give them everything is by using technology and really integrating it end to end I mean now can you speak a little bit you talked earlier about the lack of infrastructure in a lot of the hotels that you're partnering with in India how are using your product to solve for those needs in a way that is scaleable and so customers can it's it's incredible that this question follows what Guam was saying I think India you know lack of infrastructure is basically many constraints which come in because of the environment in which you are building your business so for example if you compare the US or the UK and compare it with India in the US or UK all the hotels they don't really really worry about what will be the laundry solution for them you know there are other companies which are at scale taking care of that problem for you you don't really worry about training schools because there are formalized training schools from which you get hospitality stuff you need to go in and recruit you don't really care about you know cleaning solutions because they exist at the right cost at the right trice available to everyone right when you come to India and these are just few examples when you come to India there aren't many hospitality schools so as you start building and scaling up if you realize that we will have to go down and we now run 23 hospitality schools in India 1,500 people graduate from the schools every month right and they get absorbed in the operated business basically least business where we lease and operate hotels now and similarly we we built our own laundry solutions we have you know done research and sort of try to optimize the operating cost of the hotels to a certain degree where these become capabilities which can be then transported and these can be used to improve existing setup in any country that we go to now as we think about the UK or the u.s. we know a lot more about hospitality staff training solutions in terms of how do you leverage technology to train people faster how do you do one time versus refresher trainings there's a lot of depth which we bring to the table because of which we are able to really improve a solution that already exists now these are a few differences but the underlying theme as BOM rightly pointed out because of constraints you are exposed to a rich set of opportunities and I think add to that these companies sitting on this table being technology first companies so every solution that you bring to these constraints is a technology for solution and a lot of economies that we go to have not solved these constraints in a technology first way they have a solution which exists but it is not tech first or not mobile first all right I want to switch gears a little bit and talk about the US market this year many are lauding as the year of the unicorn IPO with a lot of the companies that are in your spaces but here in the US rushing to the public markets BOM you have an interesting past with twin with the idea of going Publix as do some of the other panelists on this stage why wasn't the right strategic solution for where you were with the company and how are you thinking about the private public tug-of-war uh you know I can I I'm not saying this as a I'll just speak from my experience we were at a stage where at the time we had built a profitable fast-growing business but that hadn't invested in the end-to-end fulfillment the integration and as a company that is embarking on a massively transformative investment phase much like I think your Netflix engaged in when it was a deep your DVD player sorry a rental business and and was transitioning to a streaming business I had a lot of trepidation looking at the market as to whether we could navigate that long term investment easily with public market investors and this is where I think the private sector has been incredibly helpful to driving innovation for the customer for the long term you know Softbank was able to soften gave us a billion dollars against that vision and we were able to embark on building you know building a long-term play for the customer that we knew was going to be very disruptive truly transformational for the customer but taking a profitable business and in making a nonprofit in the short run to try to build that foundation was not something I think there have been great CEOs like Reed Hastings that have been able to navigate that I was a little uncertain at the time of my ability to do that and I'm so grateful that there are long-term truly I mean a lot of investors say that they're long-term but that there are a few investors that really have not only the means to be long term but the guts to be long-term and and we're you know I certainly feel blessed to be to be a partner of Softbank and it's worth noting that everyone on the panel has taken quite a considerable check from South Bank and they are I mean I would underwrite that and I think it's the red line here when you see everybody who says I want to go deeper in the value chain and I think that is not what the first wave of internet investors asset light investors marketplace only app only investors wanted to see and now you have a you have companies here in all these different industries that say I want to go one level deeper because I'm tech first because I understand what really scares but it still cost money just because it's tech doesn't mean it's free and who is willing to really give you the confidence to build that and and I have to agree that when you sit down with masa and Rajeev and the team that they really asked why you're not building it yeah yeah this is the layer but these are incumbents and and we good he's like why aren't you building this is this better for your customer yeah we'll just pay out on long run yes why are you not building this and and I think we've all answered yeah why I make sure you not building this otherwise we're sitting here but it really gives you confidence it really gives you confidence that you're allowed to build something that's great down to the last level of fulfillment and that will be last mile for us we have your car trucks there could be refurbishment centers where just say this is capex but there's capex for something it will make it greater for everybody and not only for ourselves but opening it for other players on the market and I think I mean when you think about logistics and your efforts there every every incremental player who uses your pipeline actually is bringing the incremental costs down but to play devil's advocate here a little bit if the argument is that you need to stay in the private markets in order to be able to create that deep infrastructure and create those experiences that the customer wants because wall street can't handle the short-term fluxes of that and what it might do to the business customer expectations are always increasing so when will it be the right time to jump to the public markets if these are constantly things that customers are gonna be asking for more and more just to jump in there I think mmm I think Rajeev misra yesterday mentioned are the best I think Softbank provides courage to to many of its portfolio companies I don't think oh yo would be in the u.s. would not talk back I don't think bomb would have lots more logistics without so I think and for us I certainly know that the the confidence and the support that's offering is provided for us to really think about how do you expand your business from purely mobility to a super a platform where now you're becoming a true financial services company that navigation is extremely difficult to do in the public markets and I think that long-term investment the ability to both vertically integrate invest capital into creating true moats around our businesses and creating marginal improvements and marginal advantages on our margins and our services over time I think it's a very powerful ability that that public companies think they don't have as to timing I think we all balance each of us the various stakeholders and shareholders and our and our businesses we all have early stage investors we have late stage investors and there's always a time right place in the right time but for now particularly for it I think the four of us in massive hyper growth opportunities I think that time is certainly not necessarily now and I mean talk to us a little bit grab is expecting to raise another two billion from strategic investors this year what can you share in terms of the problems that you're hoping to solve with those with that funding yeah I I think the the first the the largest opportunity that we see is again taking the informal markets and migrating and unlocking those consumers from informal markets into the formal markets and I think the journey from taking a cash consumer who's used to saving his or her savings as cash underneath his or her mattress and converting that into value on your phone which can then be used across multiple ecosystems that that journey is is a very interesting journey for us that requires us to really invest into the opportunities I'll just mention one of the power of in part of the vision fund family there's an incredible breadth of portfolio companies that come and bring benefits to each of us we have a partnership with oh-yo on hotel bookings we have partnerships with tokopedia on e-commerce we have partnerships with ping on on healthcare and if the notion is to develop a true platform is a real daily super app platform the last thing we want to do is to do everything ourselves and the notion of having the entire force and the power of vision fund provide best-in-class services but for ourselves helping them adapt and localize those services for the local market context like that's a very very powerful powerful to manage for us navi na VI even shaking your head a lot how is go thinking about the potential road in the future to IPO and staying in the private markets yeah I think something which is most important to acknowledge every entrepreneurs or company's decision to go down IPO has a lot of variables right and the decision is customized to the company the situation the opportunities in front the growth trajectory the the you know P&L how that's looking like so there are a lot of variables the two things for us very similar to what everyone is talking about the two things for us that stand out one we not only feel we are faced with this unbelievable opportunity in front of us where we believe what we have done so far is a fraction of what we could do potentially and two it's it's not just the availability of capital we are shaping the vision together of how will we move and conquer new challenges which will exponentially create value in the organization I think public markets while they are amazing there are certain attributes of partnership there are certain attributes of building the vision which in a private market are easier to get around and easier to focus on the key for all of us would absolutely be to understand the public markets and keep building the sustainable elements of the business which are which come with you know if you are a public company so how do you make sure that you are governed with the best principles possible how do you make sure that you are you build the highest levels of accountability towards the society towards your stakeholders right so there are a lot of elements which are positive elements which come as part of being a public company and as long as we are continuously moving and imbibing those elements as well whether you're a public or a private company at the end of the days are sort of you know very tactically is a question where the money is coming from right and there are some great private companies as well at this point of time that never went public so this this question again you know it's a very it's a question which is very personal to the journey of the company to the ambitions of the company but we are all very fortunate that in the journey we have some really really unbelievable partners in Softbank sort of anguish and fun and sun sand and the ability to shape the vision together and the ability to improve the execution over time is something that has to be incredibly valuable as well I want to go back to something that Ming said in his earlier remarks about this notion that Silicon Valley is creating companies and products for rich kids in the Bay Area and that seems to be working well for them but it's not working in other markets because though the market says are heterogeneous as you said but the reality is the market here in the u.s. is very heterogeneous as well so I would love to get your guys's thoughts on why the approach in the US I mean we don't know if it's working we don't know these companies are gonna make any money but why that approach in the u.s. it's scalable at least and perhaps it isn't in your own markets I can start and I can share a few examples of how things are so different in India was at the u.s. so India basically skipped the desktop generation but 90% of people who have access to Internet in India got their first access to internet on their phones right that leads to a very very different set of behaviors that you see in the market for example hotel bookings you know are still about 45 to 50 percent on the desktop in this country right whereas in India about 95 percent of hotel bookings are happening on on your phone right so it's a very different attribute altogether but if you see this is an average picture of the u.s. there will be lot of variability across the country we acknowledge but there are completely different dimensions of variability that get added when you change the geographical setting and there are many such examples so there is variability of course across geographies across demographic groups here but there are new dimensions that get created and added when you you know jump orders and go to a completely different country and I mean now you're thinking about expanding into the US what's the opportunity there for oil very happy to see that there is tremendous opportunity so that's we have been spending some time here we are served in the pre-launch phase we see that one about seven between 70 and 75 percent of the assets continue to be independently run and these are independent on 10 years running the hotel not having access to all the tools and the facilities that we talked about so there is a tremendous opportunity for us to bring our core capabilities to this market customize these capabilities so they're very effective in the local ecosystem solve the needs of the consumers at the economy and the medical me segment by creating a better assortment for them through our hotels but most importantly look at the real estate owners and solve their problems allowing them to make more money higher yield on their assets and making their life easier - our technology and Tovar end-to-end platform I can know this one to you because I've heard from you in a while make sure you're still awake I'm scaling I mean the US market and why these companies are so focused on the US market is that they are also lucky enough that it's a huge market you have a single market that is large enough you have one jurisdiction your own currency and then if you want so agreeing with your term that the constraints actually help if you have to puzzle your way together and if you have to cope with several jurisdictions then it's not so hard to incrementally add another one we do business in over 30 countries which means of course in every country the law is different and then how ownership changed and now transport and paperwork but if you've done it three times four times five times you have an idea you have a blueprint you have a checklist of saying wait a second in Italy we at least and Spain we have these challenges let's at least have a look how it looks in these other countries and and there is something that is that is good on the one hand on the other end can slow you down or or cost you more or be more inefficient and and the US startups have the advantage that that they sit in one hub where they have access to talent a lot more access to capital and we in Europe and and the very interesting market here so that's why we see a lot of companies being successful and very long staying in the home markets I think even the Amazon when I look at it and I couldn't believe it it's very large it's a very important player in Germany how many European countries they were not present and even in the beginning of 2010 Elevens major markets though they hadn't even moved out there so I think that is our transition it's our home turf that is what we understand and and also protects us from from from competition hmm how many thoughts over therefore why the Silicon Valley way of building products doesn't translate abroad I mean III I don't want to sound like a broken record really the constraints constraints are different I mean I can give another example which is in in in our market the delivery trucks are by law the regulated and and they cannot be bigger than about half the size of a UPS truck so even though we have the benefits of having high density most Koreans live in packed and high vertical buildings that should lend itself to more efficient delivery because our trucks are so small they have to keep going back and get getting and get refilled we've replenished and that kills all the efficiency gains that we would have gained from from the density so what we eventually had to do is it forced us to solve that problem by getting rid of boxes so even for sensitive items like detergents that we actually if you I'm getting into the minutiae of e-commerce but a detergent bottle if you put it horizontally call it a liquid bomb there's one of the most sensitive things usually bubble wrap it put air cushions and in a big box but a box is 30 percent air it's it takes a lot of materials it's not environmentally unfriendly consumers hate it because they have all this probably you can relate when you order a lot online you have boxes piling up in the house you have to figure out how to recycle so what we did was we said ok we have to figure out how put more items into this small truck to make sure that we can deliver to customers efficiently and we designed a process because we controlled end to end that got rid of boxes for over half of our items we're now moving closer and closer every day two to a hundred percent without boxes which means even a bottle of detergent doesn't even get bubble wrap around it and yet our damage rate is lower now we can fit more almost twice the number of items that we could fit in before because of creative ways and our cost end to end is lower there's no fuel loss from going back and forth box material cost is less packaging time is much faster when you don't have boxes and most importantly customers love it so these are again when you are in an environment that you're blessed with with a lack of constraints that can actually be a curse in the sense that it doesn't force you to to invent and innovate beyond beyond for the customer I think we have time for one more question so I'm going to throw up a jump ball here what didn't we hit on that you think that the audience needs to know before they get on with their Tuesday it's Tuesday right ok ok yeah yeah I didn't hear that what what's something we haven't heard on that you think the audience needs to know either about your company or what the themes that we've been talking about anything come to mind we hit it all good job we're gonna have someone ask a question because you guys didn't have anything to say let's let's do that sure oh and you almost gave up was there any time that's a good one all I'll mention right before our merger with you birth no I actually on your first question I I think I think the the questions I should be asked are how how will how will companies like like us really address the next Billy the last billion of consumers in a in a durable way and and helps that last billion achieve the same same access their services as the first billion I think that market opportunity and those specific ways to address that whether it's in the supply side or demand side is something that will be will be quite quite amazing great well I want to thank my panelists for an amazing discussion and thank you guys so much for joining us such late in the day I hope you guys enjoy the rest of your conference thank you [Applause]

Channel: Milken Institute

Views: 23,555

Rating: 4.8562875 out of 5

Keywords: Milken, Institute, innovation, tech, unicorn

Id: QUWbesaVXB0

Length: 57min 48sec (3468 seconds)

Published: Tue Sep 10 2019