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If you only have a couple of minutes to spare, here’s what investors, operators, and founders should know about building a great company, according to Kevin Aluwi.
- Do the hard things. To build a great startup, you have to move fast. But you shouldn’t let urgency distract you from tackling big, thorny problems. Doing the hard things is one of the most effective ways to build true defensibility.
- Protect your principles. Having clear company principles helps your team make faster, better decisions. It’s easier to act autonomously when you have a clear framework to follow. Failing to protect these values can shift your company towards an “exception-based” culture.
- Pay your debts. Every time you make a sub-optimal corporate decision, you create a “debt” that must be paid. This is true across engineering, product, and marketing teams. To avoid debts spiraling, keep track of them and proactively pay them down.
- Build a brand. If you’re building a good business, you’ll inevitably attract competition. For consumer companies, it’s essential to create an impactful, differentiated brand. If you do it well, you’ll outcompete better-capitalized opponents.
In April of this year, super-app GoTo debuted on the Indonesian Stock Exchange (IDX). It represented the country’s largest IPO of all time and one of the most significant listings of 2022. By the end of the first day of trading, GoTo had surpassed a valuation of $31.5 billion, making it the third largest company on the IDX.
For Kevin Aluwi, it represented the end of one chapter and the beginning of another. After co-founding the ridesharing platform Gojek in Jakarta in 2009, he drove its maturation into a regional super-app spanning food delivery, financial services, and small-business software. Significantly, Gojek established itself as an economic engine, creating thousands of jobs and contributing more than $7 billion to Indonesia’s GDP.
In 2021, Aluwi also oversaw the merger between his company and e-commerce player Tokopedia, creating GoTo, the entity that entered public markets this year. (The Generalist correctly predicted this merger several months earlier.)
Gojek’s scope, scale, and success have given Aluwi a unique constellation of skills and experiences that make him an ideal contributor to The Wisdom List. In getting to know Aluwi over the past few months, I’ve also found him to be a particularly thoughtful, expressive business thinker capable of cutting to the quick of thorny issues and articulating solutions. Our discussions have improved my thinking and how I seek to grow The Generalist. I am sure that many others will benefit from his words.
Here is Kevin Aluwi’s hard-won wisdom.
Lesson 1: Do the hard things
Startups often prize speed above everything else. While fast execution can be a moat, over-optimizing for it might distract you from constructing stronger defensibility. As a CEO, you want to build a company that tackles really, really hard problems head-on – even if they take more time. There’s a good reason for this: hard things for you are also likely to be hard for your competition. You want to stack so many solutions to hard problems that when your rivals look at what you’ve constructed, they retreat or look for shortcuts instead of trying to compete head-on.
We didn’t embrace this for the first two years of operating GoFood, our food delivery product. Like Postmates in the early days, GoFood was a delivery service that relied on humans more than technology: when you ordered something, a Gojek driver went to a restaurant, stood in line, paid with their own money, and then delivered it. We didn’t integrate with kitchens or offer payments. It was a good enough product, built during a period in which we prioritized growth, but it didn’t solve the tough problems.
One such problem was that even though GoFood was growing fast, its reliability was mediocre; only 70% of customer orders were delivered. We needed to do better, which meant we had to do the hard things.
Over the next one and a half years, we did exactly that. We connected GoFood’s service directly to restaurant cashiers and, in some cases, directly to kitchens. This helped us save cashier time and get better data on which meals were available. We integrated online payments so drivers wouldn’t have to pay upfront and get reimbursed. We even created machine learning models to help us anticipate when drivers should arrive for pick-up, improving the network’s utilization and reducing customer waiting time.
Making these changes was not easy. It involved significant engineering time, customer research, and onboarding and educating more than 500,000 restaurants across Southeast Asia. But it made a difference, significantly improving GoFood’s reliability and raising our conversion rate from 70% to more than 90%. We turned the difficulty of delivering a very reliable product (now a customer standard) into a moat.
When competitors came to try and win this market, they saw we not only had a lead from a customer perspective, we had gone through the pain to build a sophisticated product. They’d have to be ready to commit years of engineering time to offer a comparable service. Doing the hard things pays dividends in the long run.
Lesson 2: Say no to great ideas
Many leaders say this, but it’s worth emphasizing: focus is everything. It is so, so important. And as Leif Abraham said, having focus doesn’t mean saying no to bad ideas; it’s saying no to ideas you think are exciting, high-potential, and easily justifiable – and doing so because you don’t want to give even 0.1% less to your existing business. Focus should be painful.
Gojek has been a spectacularly unfocused company at times. In our early days, we experimented with ideas as crazy as on-demand massages and in-home cleaning. One of the best examples was our grocery delivery product back in 2015. It all made sense on paper: we had a network of drivers, a large customer base, and grocery is a massive market. It was a natural fit with opportunities to cross-sell. And so we did it.
What happened? We built a bad grocery delivery product that took resources away from our successful ridesharing and food delivery businesses. Grocery delivery turned out to be a much more challenging product than we expected, and we didn’t have the resources to make it great at the time. Competition heated up around our core business and, in the years that followed, we had to play catch up against our rivals.
The truth is that if your business is like Gojek’s, a small number of products will drive nearly 100% of the value. Spend your time and resources on the places it matters most.
Lesson 3: Foster a principled culture
Every CEO wants to build a principled culture, but it isn’t easy in practice. The pragmatic reason executives seek to create this environment is that when a company has clear principles, employees can make better decisions with less guidance, increasing the likelihood of bottom-up solutions and decision-making speed. For example, if your company has a principle of “obsessing over the customer,” a value popularized by Amazon, specific product and marketing decisions would be values-aligned or misaligned.
You’ll find many incentives to deviate from your principles as you build your business. Maybe you’re lagging behind your revenue projections and feeling pressure from investors in one quarter. You know that you can make up the difference if you make an add-on opt-out by default (think about how some airlines automatically add premium travel insurance). Do you do it, even if it runs counter to your principle of customer obsession?
Violating your company’s values comes at a high cost. While you might get away with a couple of transgressions, over time, you create a different culture than the one you intended to. If you’re not careful, you’ll end up with an exception-based environment, where decisions are made based on what’s convenient (or who’s in charge) rather than on stated principles. A side effect is that you create a more top-down culture because employees no longer understand how to make decisions themselves. Instead, they defer to those in power.
In the earlier example, you might have told employees that a company value is customer obsession. But if you choose to add an opt-out upsell, you’re showing them that this principle should be compromised when it gets in the way of meeting targets. The real, implicit value is business first, then customers. What should they do during similar situations in the future? Most likely, they’ll wait for you or another leader to make the decision.
Startups require compromise and quick decision-making. But whenever you’re tempted to act against your company’s principles for expediency’s sake, recognize what you’re risking.
Lesson 4: Proactively pay your debts
Engineers know that when you write scruffy code, you create technical debt. Like financial debt, this has to be paid down at some point – usually by devoting development resources to refactoring the product to work more smoothly and reliably.
The truth is that this isn’t reserved for engineers – every function is capable of accumulating debt. Imagine, for example, that you’re looking to recruit a Head of Marketing but are struggling to find a great candidate. You have a choice to make: do you keep waiting for a perfect fit, or do you compromise?
Neither is a perfect decision. Startups operate in a state of extreme scarcity and urgency, and you usually can’t hold critical positions open indefinitely. But hiring someone that’s only a partial fit creates an organizational debt that has to be paid off at some point. And, like financial debt, the longer you leave it, the larger your bill can grow and the less flexibility you’ll have in the future.
For example, let’s say you hire someone suboptimal for the Head of Marketing role. For a few months, you’re relieved to have filled the position. But pretty soon, that Head of Marketing is devising the rollout plan for a new market, allocating budget, and hiring team members. If they’re not the right fit, there’s a good chance that rather than solving your problem, they’ll end up creating a dozen new ones. Digging your way out might involve unwinding the entire team.
Every company faces issues like this. Since we were building a super-app at Gojek, we initially incurred a lot of product debt. When we deployed a team to create a new product like food delivery, they’d borrow components from ridesharing and build on top of them for their own needs. This was debt that worked at the beginning when we only had a couple of teams, but over time, the different services in the app became less and less coherent. UI/UX varied depending on which part of the app you were in, creating an inconsistent and sometimes confusing customer experience. Eventually, we realized we had to repay the product debt we’d incurred, so we designed a live library of components that every team had to use. Anytime we changed the live library, it populated across the different product lines. It was a significant improvement, but we should have been aware of it earlier and tackled the problem before it became so pronounced.
Ultimately, it’s inevitable that your startup will take on technical, operational, and product debt. The important thing is to stay on top of it. Have your teams catalog the debt they believe they’re incurring, and rather than reactively addressing it when crises occur, proactively create a plan to pay it down.
Lesson 5: Build a differentiated brand
It’s not enough to have a 10x better product. If you’re trying to build an epic consumer business, you also need an exceptional brand. This becomes increasingly important over time as competitors recognize the opportunity in your space and as you expand beyond your core customer demographic. In both instances, you’ll need to articulate your company’s value and differentiation to customers clearly.
At Gojek, our brand was a big part of why we could compete against better-capitalized firms. Before mid-2015, we had only raised a $2 million Series A. (Editor’s note: competitor Grab had raised $680 million by then – giving them a 340x capital advantage. Uber, of course, had even more money to burn.)
We stood out from rivals thanks to our brand – and the work we put into building it. We emphasized that Gojek was an Indonesian company that planned to be building in the country for the long term. We also made it clear that we looked out for the drivers in our network, telling their human stories in our campaigns. Our ultimate promise to consumers was that we provided the best service because we cared – about the country we were from and the people that worked on the platform.
Of course, it’s not enough to say these things – you have to do the work. We were the first rideshare company in Asia (and I believe the world) to support driver tips. We also host quarterly meetings with drivers and couriers to listen to their feedback and better understand their needs. We also use this time to tell them what we’re working on, even if it might not be news they’re happy about. This transparency has helped us build trust with them and, by extension, our customers.
Even if you don’t have the deepest pockets, there’s no reason not to have the best story and most impactful brand.
The Generalist’s work is provided for informational purposes only and should not be construed as legal, business, investment, or tax advice. You should always do your own research and consult advisors on these subjects. Our work may feature entities in which Generalist Capital, LLC or the author has invested.