Business School 101 & Understanding Your
Business Landscape
For the
last six months or so, I’ve been following the progress of this particular
business. Earlier in the year, they narrowly averted a small “issue” from
turning into a crisis, and I started to watch how they were handling it.
Honestly, I wasn’t impressed. Opportunity by opportunity was slipping away for
them to not only share their values, but to dig themselves out of an issue
which was fast becoming more serious than it appeared. Who, if anyone, was
doing their PR?
I
considered approaching them, offering them counsel. I saw an opportunity. I
started to connect to their management. But something held me back. Call it gut
instinct, or call it intelligence. But it held me back. And in the end, I was
right. Or at least, I was glad.
I guess
now, I understand why!
On the
surface it looked an amazing concept. A fantastic public utility, at a great
price (well, I thought so at least), and an opportunity to get people out and
about. A few bikes were at the entrance to my condo. They were new, great
condition, and they were being used. What a brilliant idea. Something for
everyone. Something that could get us healthy. Something that wasn’t complicated
to use.
What could
possibly go wrong? Multiple international success stories lauded the bike
sharing notion as a positive move forward. Case studies detailed how the
business model worked. How it helped communities. And how consumers benefited.
It had to
be a success. But, it wasn’t. Bikes were getting left on the sides of streets,
thrown into rivers and drains, and vandalized as they lay there in the tall
grass that the council forgot to mow. They forgot something – culture and
attitude.
Now this
isn’t meant to be disrespectful, but rather reflective of a society where
caring for the public good takes a back burner. Although Singapore and Malaysia
are different, their attitudes have some parallels. People care about their
things – they are not yet sufficiently trained to care about collective
property. Thus, a bike on the side of the road is not an asset to better the
community, but it is something to be taken advantage of, damaged, or simply
just ignored.
To be fair,
it’s not only the consumers are at fault here – oBike failed in its duty to
monitor their bikes, to put in place mechanisms to minimize the wastage of this
resource. Just head to the basement of the old SS2 Mall and look at the rows of
bikes that have sat there, underutilized for months. Look at the number of
broken and vandalized bikes scattered through KL’s urban neighbourhoods. Ask
people. “Yes, it’s a great idea, but it’s too hard to do the right thing”. This
my friends, is attitude.
Sadly, the
complacency of society was the ultimate downfall of what could have been an
amazing business model. But, we have to ask ourselves, do people deserve nice
things? No, not until they can show these nice things respect. Community
disrespect is everywhere in the form of vandalism, double (and triple) parking,
simple lack of manners. Until we rectify what underpins these issues – a lack
of civil awareness and responsibility – business models like oBike’s will not
work, because the community is not yet sufficiently equipped to handle the
responsibility of utilization.
They simply
saw a free ride.
Someone
forgot to look at the “attitude/behavior-readiness” of the market for the
business to succeed. Damn!
The
following analysis, from Channel News Asia puts things into a broader
perspective for Singapore. I’m guessing, Malaysia may not be far behind on its
coat-tails.
Commentary: oBike’s
closure, a cautionary tale about poorly conceived business ideas
oBike's closure shows that in times of
euphoria, poorly conceived ideas may get funded and survive for some time, but
they will meet their fate sooner or later, says NUS Business School's Nitin
Pangarkar.
 |
| File photo of oBikes parked at a bike rack in an HDB block. (Photo: Elizabeth Khor) |
SINGAPORE: The recent news of oBike’s closure
is a cautionary tale for start-ups and companies. I must say I did not think
that oBike’s end would come so swiftly, otherwise I would have withdrawn my
deposit with the firm in time.
So, what does the oBike closure in Singapore
mean?
1. BUSINESSES MUST CHART A PATH TO
PROFITABILITY
The first lesson here is that any business must
have a sustainable business model.
Lately, there have been a number of
money-losing ideas that have been jazzed up under the buzzwords of “sharing
economy” and “new business models”.
Sceptics of these companies are branded as
people who do not understand new technologies and are on the backfoot to
embracing the future.
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Not wanting to miss out on potential wins,
venture capitalists have been seemingly over-eager in funding many business
ideas that do not have sustainable business plans past five years.
But, with or without easy money from VCs,
aspiring entrepreneurs would do well to chart out a path to profitability. To
me, it was not clear that oBike had done this — to work out how and when it
would become profitable.
In times of euphoria, poorly conceived ideas
may get funded and survive for some time, but they will meet their fate sooner
or later. It is in the interests of entrepreneurial companies to think deeply
about the “when” and “how” of profitability.
 |
| The empty oBike office at Commonwealth Lane. (Photo: Amir Yusof) |
2. REALLY KNOW YOUR CUSTOMERS - HAVING THEIR
DATA DOESN’T MEAN YOU HAVE INSIGHTS
The second lesson is the ability to really know
who your customers are and what they want.
There is certainly value in collecting data
about customer behavioural vis-à-vis purchasing patterns, as what Amazon does.
However, to extract real insights that translates into actual value for the
business in the form of greater revenue from general purpose data such as
bike-riding patterns is challenging.
Unlike Amazon’s data about customer purchases
or browsing patterns, the collected data – information about renting a bike at
point A (say, near my home) and returning it at point B (say, near a hawker
centre or a supermarket) – has a very
weak connection to customer purchases, or even intentions that could have
helped oBike gain more additional revenue.
Even if some value can be extracted out of this
information, it is likely to be minuscule and hardly sufficient to justify a business
pricing below costs in its core operations (bike rental, in this case).
3. BE AWARE OF ERRANT CUSTOMERS
A third lesson from this story, and an
important one that young entrepreneurs may be missing out on, is about customer
behaviour and its implications.
Some percentage of customers are likely to be
errant - as in if they are not given incentives (either positive or negative)
to use or park bikes appropriately, they will be abusive to the equipment.
The loss ratio because of these types of
customers may be magnified by vandalism — a bike parked in a remote location is
far more likely to be vandalised than a bike parked in a busy place like an MRT
station.
The costs of collecting bikes parked all over
the place will also go up, and some are bound to be missed because of obscure
locations.
Thus there is an additive effect that needs to
be accounted for, such as parking, vandalism and costs of collection, which can
lead to an unexpectedly large negative impact on a business model. Any new
business model needs to factor in these kinds of additive effects.
 |
| An oBike ditched along a pedestrian path. |
4. INCLUDE COSTS OF COMPLIANCE BEFORE ENTERING
A MARKET
The fourth lesson is the need to build
capabilities within the start-up to mitigate regulatory changes in different
countries they operate in.
The oBike management seems to suggest that the
Singapore Government’s new regulations are too onerous. While the regulations
are indeed stringent and impose a number of costs in the form of new
requirements as well as potential fines, oBike should have seen it coming.
While the Singapore Government might want to
encourage the usage of bikes because bike-riding is environmentally friendly
and also eases pressure on public transport, encouraging bike usage cannot come
at the expense of Singapore’s image of a clean and organised city, which has
been cultivated over several decades.
Bikes parked at various places, some vandalised
with parts missing, were an eyesore in an otherwise clean landscape. Even in
other countries, bikes strewn around have invited regulations.
5. BUSINESS FOUNDERS SHOULD GET BASICS RIGHT
And the final lesson is that founders and
owners should get their basics right with their companies.
Disruptive technologies like artificial
intelligence and analytics may have opened up new avenues for earning revenues
and profits, but it is unlikely that the old rule for business success of
charging prices that will cover your costs will change. A price war for the
sake of capturing market share might bleed you dry.
Any new company in the bike-sharing space or
otherwise will do well to remember that.
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