“Intercity One Way Cabs for Hire” Business Case HippoCabs – The Transportation Catalyst
“Innovation is taking two things that already exist and putting them together in a new way.”
Tom Freston
This statement was held true in case of Sahil Agrawal (Sahil), CEO and Co-founder of HippoCabs, as the genesis of the business idea laid in a simple everyday incident when 21-year-old Sahil on returning from Germany landed at Delhi airport to board a connecting flight to Mumbai to meet his friends but decided to take a deviation and pay his parents a visit in Jaipur instead. Since the next flight to Jaipur was after eight hours he thought of other options. He initially thought of taking a taxi but on checking he found that it was turning out to be expensive as they were charging double fare, including return fare, for the one-way trip. Thinking a Volvo bus would be the best option, Sahil planned his jaunt accordingly. However, after waiting for a total of ninety minutes for the traffic to clear up and the bus to arrive, he got frustrated and contemplated he would had just booked a cab if he was expected to pay only one-way fare. After the entire ordeal of waiting for luxury bus, and then the bouncy ride which took him nearly eight hours to reach his destination, he thought of addressing the problem more closely. After discussing with several commuters, Sahil sensed that his dilemma was a common one, as people were diffident to opt for a cab because of the cost. People were opting for buses, which were affordable, but time-consuming with usually bumpy and monotonous rides and cab rides were ridiculously expensive..................
The Team
Sahil hailed from a business family where almost everyone was involved in family-run businesses including his father who was a textile merchant, thus risk-taking was ingrained in his personality. After his initial schooling in Jaipur, he proceeded to Karlsruhe Institute of technology (KIT), USA to pursue Bachelor of Science, Mechanical Engineering. But, soon after his first year in engineering he joined Purdue University, Germany as a transfer student. He had studied Entrepreneurship and Marketing at KIT before heading to Germany and had worked on various ventures of his own in US and Germany and gained diverse experience. Later, Sahil took off from Purdue University to work full time on his current venture – HippoCabs.............
Car Rental Industry and HippoCabs
In India, road travel was five times bigger13 than railways and business was segregated among bus and taxi service providers. As per report by Ken Research, a global aggregator & publisher of Market intelligence research reports, “Car rental market’s revenue in India was anticipated to grow at a Compound Annual Growth Rate (CAGR) of 35 per cent. Furthermore, this sector was projected to be worth more than INR 800 billion by 2019.” The market for car rentals in India witnessed unprecedented growth. The traction was primarily driven by the rise of the on-demand economy, technological advancements and rising tourists arrivals in the country. Indian car rental market was broadly segmented into organized and unorganized sectors..............
Growth and Initial Challenges
HippoCabs was committed to transforming the lives of those who offered rides and those who needed them. After launch of its services, within an year, they gained huge popularity among their customers so much so that 50% of their customer base constituted of repeat customers. This was possible due to high demand of one-way cabs and quality services which they were offering to their customers by leveraging technology. In next couple of months, the company expanded to major cities like Agra, Ahmedabad, Vadodara, Surat, Nasik, Shirdi, Chandigarh, Bikaner, Jaisalmer and also launched outstation cabs for their direct customers and for their B2B clients. The startup received warm response and in the early eighteen days of its inauguration, around 1,000 users20 were connected and were pleased with the company’s services.............
Business Model
Flourishing companies operate according to a business model. The elements of a successful business model (Exhibit I) highlighted four elements:........
Customer Value Proposition
It included target customer identification, analysis of the benefits customers seek, designing and delivering of the desired offerings. HippoCabs value proposition stressed on offering low-cost transportation to its customers that was easy to access and safe to use. HippoCabs target customers were outstation people belonging to tier I and tier II cities. They were usually professionals who had to attend a meeting or catch a flight..........
Profit Formula
This essentially dealt with the revenue model, the cost structure, the margins and the inventory turnover. The revenue model covered the market potential for the business which in the present case was not a challenge. HippoCabs structure was simpler, thus generating lower costs as there was no inventory, no paying of fees as they were not taxi operators but cab aggregators or network orchestrators matching drivers and passengers. Their drivers were partners not employees so they were prepared to accept lower revenue than normal taxi drivers...........
Key Processes
The systems and processes of the organization put in place for its day-to-day operations was highlighted in this dimension of the business model. A process driven organization was better equipped and more stable in handling situations. HippoCabs had made the best utilization of technology in sync with increased number of Smartphone users and rise in data usage. The whole process of booking a cab was automated and followed the steps detailed in Figure I.........
Key Resources
Resources played the most important role in delivering the desired customer value proposition. Resources included people, technology, products, partnerships and the brand. Starting from 2 employees HippoCabs had grown to employee strength of 22..........
Competition
Besides local unorganized Taxi operators and travel agencies HippoCabs faced stiff competition from a clutch of startups that had sprung up in various parts of the country to address the issue of taxi service providers charging double the fare for one-way travel. Ahmedabad-based Yatayat, Noida-based AHA Taxis, Delhi-based Scoot, Wiwigo.com, etc. were intercity taxi aggregators that pose threat to HippoCabs..........
Key Challenges
HippoCabs like most cab aggregators faced following challenges:
• Security and winning trust of customers was a challenge during usage of the service.
• Computation of profitable pricing for all routes was a problem.
• During rush hours waiting time for customers caused inconvenience.
• Heavily regulated norms of transportation industry had to be adhered to.
• ..............
Assignment Questions
I. What have been the key reasons for success of HippoCabs?
II. Analyze the business model of HippoCabs.
III. Suggest, with justification, the initiatives HippoCabs could take to sustain and grow.
IV. .............
Exhibits
Exhibit I: Elements of a Business Model
Exhibit II: Value Proposition and Service Offerings by Hippo Cabs
