How New-Age Startups Are Challenging Traditional Business Models

Posted on August 25, 2016 in Entrepreneurship

By Epi Ludvik Nekaj:

Editor’s note: Epi is the Founder of Crowdsourcing Week, an organisation and platform that connects people with the latest ideas and best practices in crowdsourcing and crowd innovation, globally.

The second largest populated country in the world – India – is today the world’s third largest startup ecosystem where disruptors are bridging gaps in on-demand services, employment, resource utilisation and digital literacy, among others. But are these technology-enabled startups transforming the traditional economy? Let’s explore.

There are less than 30% internet users of the 1.3 billion population in India. The estimated number of smartphone users in India will be over 600 million by 2020, a near three-fold jump from current slightly less than 200 million in 2016. Government initiatives such as Digital India may accelerate the adoption of technology but here is where real transformation is happening. Three areas of disruption are taking India by storm: Assets (accommodation, household goods and transport), Services (domestic help, household chores and service delivery) and Expertise (education, online staffing and healthcare).

Technology disruptions on peer-to-peer platforms are seen more commonly in tier one and tier two cities, and on platforms in the asset category such as Oyo, Stayzilla (rented accommodation); Ola Cabs, Wiwigo (rented cabs); Jugnoo; TukTuk; Telerickshaw (rickshaw aggregators); Orahi, rideIT; Ridingo (carpooling); Food Panda, Faasos; Swiggy (food and beverage aggregators); Olx, BookSellBuy; Quikr (old assets, classifieds portals). These have built trust among participants – and participants are building their own trust currency within these platforms.

Along with taxi and rickshaw aggregators, logistics startups such as Moovo, Shipsy; InstaVans, Maalgaadi and Blowhorn are bringing digital literacy among one of the most unreached sections of the population i.e., drivers of trucks and loading vehicles by providing them with smartphones and internet connectivity.

A similar disruption is seen in the services category where platforms such as Helpr, Housejoy, Handyhome, Mr Right and UrbanClap have made the delivery of domestic help or household chores services possible at doorsteps of users. They are also organising an unorganised sector of skilled professionals such as mechanics, laundry workers, house maids and plumbers who are now finding jobs more easily.

The Expertise category is witnessing the transformation in the education, jobs and healthcare market. Coursera – the marketplace for online courses – has 1.3 million Indian users. Other notable platforms in the sector are TutStu; Zeroinfy; Online Tyari; Edgefxkits and Pyoopel (MOOCs, online tutoring) and FlexIT, Crowdstudio and Banana Bandy (job/creative gig portals).

Then there’s the Indian healthcare market, which is expected to touch $280 billion by 2020, clocking a CAGR (Compound Annual Growth Rate) of over 20%. The healthcare delivery sub-segment today accounts for 65% of the overall market. Platforms like Practo, Portea Medical, MedGenome, Lybrate and Medwell Ventures are bringing healthcare expertise, lab tests, medicines, medical reports and records online while maintaining crucial patient data on secured cloud platforms. And, what about finance? I guess I’ll leave it for another post.

The middlemen aren’t entirely eliminated, they have only changed. Yet, as I had shared in a previous article, it has definitely empowered users today, thereby solving their most complex problems in a personalised manner. However, there are some regulatory challenges.

1. Most regulations are based on traditional business models and don’t specifically address on-demand enterprises or peer-to-peer platforms. For instance, there are regulations for traditional taxi operators but none exists for on-demand transport platforms.

2. Insurance policies are especially outdated in the wake of sharing economy business models.

3. Inadequate rules for background checks pose challenges to onboard security personnel, drivers, mechanics, etc on technology platforms.

4. Each state has its own set of service tax and other compliances, so startups face delays and bottlenecks in scaling up.

India has barely touched many of the 14 parts of crowd economy, which are are essential if it were to become an active contributor to the crowd economy. Undoubtedly, India promises big potential, considering the presence of unorganised sectors and startups who are sourcing user-generated knowledge, which are yet to taste the potential of people-centric and people-powered platforms. These startups have succeeded in getting the participation of people and the platform, two of the 5 Ps of the Crowd Economy (people, purpose, platform, participation and productivity). But they are yet to fully fathom the purpose leading to productivity of the crowd economy.