- 24/03/2016
- Category: Commentaries
Author: Josia Paska Darmawan
Jakarta was in chaos. Thousands of taxi drivers gathered in the Capital last Tuesday to protest against e-transportation services such as Uber and Grab. They argued that the cheap price that these services have offered to the public is unfair. The Organisation of Land Transportation Owners (Organda) has also voiced their opinion against these services, questioning the legal bases of such business.[1] However, this was not the first time such a ruckus has happened in Jakarta. Ojek (motorbike taxi) drivers have spoken up against GoJek, a motorcycle transport application. They asked the government to ban GoJek as the rise of GoJek has decreased the daily income of conventional ojek drivers significantly.
With these cases of protest in mind, this article tries to explain the nature of e-transportation services provide recommendations for the government to accommodate both sides.
Disrupting the Conventional Business
GoJek, Grab, and Uber are examples of over-the-top (OTT) services.[2] These services would connect the supply and demand in a much more sophisticated way by using the internet. Let’s use GoJek as an example to explain this concept. As one of the biggest Indonesian start-up phenomena, they have founded their business using this very own concept. They would recruit motorcycle owners to become their partners. These partners would be able to use GoJek platform to connect with customers more efficiently as they don’t need to wait in certain places to get customers. They can do other activities while waiting for notification. It would also benefit the customers as they can order the service without having to go outside and wait under the sun. Therefore, we can see how these services create mutual profits from the excess capacity of their individual partners.
These services are clearly transforming the consumer experience in a good way, which can be seen from their meteoric rise in popularity. On another side, they also challenge the status quo of conventional transportation services in Indonesia. The emergence of e-transportation services arguably harms conventional taxis, angkots, bajajs, and ojeks as some of their customers are now using these new services instead. The competitive price and convenience that these services offer have successfully shifted the market from the conventional to the digital way. This resulted in a clash between taxi drivers and other providers of conventional transportation services against the e-services.
These phenomena can be considered as one example of disruptive innovation. Christensen, Raynor, and McDonald have set the definition of disruptive innovation on two arguments. Firstly, disruptive innovation is being defined as “a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses.” The second argument restricts the scope of disruptive innovation to a more specific context, which includes only companies that started their business in a lower-end or new market.[3] By this definition, services such as GoJek, Uber, and Grab are not considered disruptive innovation. However, Robin Chase rebutted this argument, saying that the definition of disruptive innovation needs to be expanded to include the creation of new value from assets that have already existed before – or in other words, the utilization of excessive capacity.[4] By the latter definition, we can see how these e-services have shaken up the transportation business, thus creating resistance from the old players.
What Needs to be Done?
Under Law No. 22/2009 on Road Traffic, e-transportation services such as GoJek and Uber are not recognized as a form of public transportation and therefore, should have been banned. [5] However, if we refer to this regulation, then ojeks should have also been banned – which is not necessarily the case. So, rather than sticking to the 6-year-old law, the government should create a new law that would accommodate this kind of service. It is about time for the government to update its road traffic law to suit up with the latest development in digital business.
The government needs to create a new law that also covers digital services and conventional peer-to-peer services such as ojek. The current law cannot address this issue as it does not mention anything about e-transportation services – which is quite understandable as the services had not existed in Indonesia at that time. It is necessary to set up clear regulation on the operations of e-transportation services to protect all sides – the e-transportation service providers, the conventional ones, and the consumers. The new law should include several aspects that would control the quality of the service and also the fairness between service providers, such as the number of vehicles permitted to operate, the regulation on tariff, and safety standards. With the current state of war between the old and new players, a new law is expected to be implemented very soon to avoid bigger problems in the future.
[1] Fithra Faisal, “Uber and Gojek just the start of disruptive innovation in Indonesia”, The Conversation, July 8, 2015, retrieved from <http://theconversation.com/uber-and-gojek-just-the-start-of-disruptive-innovation-in-indonesia-43644> on March 23, 2016
[2] Please refer to Dan York’s article entitled “What is an Over-The-Top (OTT) Application or Service? – A Brief Explanation” (Disruptive Telephony, http://www.disruptivetelephony.com/2012/07/what-is-an-over-the-top-ott-application-or-service-a-brief-explanation.html) for a concise explanation about over-the-top (OTT) applications and services
[3] Clayton M. Christensen, Michael E. Raynor and Rory McDonald, “What Is Disruptive Innovation?”, Harvard Business Review, December 2015, retrieved from <https://hbr.org/2015/12/what-is-disruptive-innovation> on March 23, 2016
[4] Robin Chase, “We Need to Expand the Definition of Disruptive Innovation”, Harvard Business Review, January 07, 2016, retrieved from <https://hbr.org/2016/01/we-need-to-expand-the-definition-of-disruptive-innovation#> on March 23, 2016
[5] Jakarta Globe, Grab’s Permit Could Revolutionize Indonesia’s Taxi Market: Expert, March 22, 2016, retrieved from <http://jakartaglobe.beritasatu.com/jakarta/grabs-permit-revolutionize-indonesias-taxi-market-expert/> on March 23, 2016
