The story of ground transportation in India is no different. Public transportation, save and except a few stray cases, continues to be abysmal. All of us thus have to deal with errant and arrogant autowallahs on one side or on the other have to endure the trappings of owning a vehicle - EMIs, fuel, maintenance, etc. Enter the cab aggregators - Uber, Ola, Taxi for Sure, and so on. Barring stray instances, they offer customers a good vehicle on demand, a courteous driver, transparent and convenient billing and at a cost that is comparable to local autos and cabs, all through a click or two. Not only are they trying to disrupt the model of car ownership but are also offering an alternative to the obnoxious auto and cab drivers who refuse passengers with impunity or charge arbitrarily. The reason behind this metamorphosis is the "platform play", where a marketplace for demand and supply has been created and made efficient, resulting in the customer getting a better value for money and clearly a superior experience.
Historically, middlemen have fulfilled an important role in getting goods from the manufacturer to the end-user. Because the intermediaries don't really change the physical attributes of an item, the only function they seem to perform is moving information. Electronic commerce thus reduces the cost of goods through the elimination of brokers and distributors, by automating the exchange of information directly between the producer and the user.
The proliferation of the internet and smartphones has led to massive consumer empowerment. With 250 million internet users in India and an expected growth rate of 39 per cent in rural and 29 per cent in urban areas, and with the smartphone user base expected to grow by 45 per cent next year, the internet is powering businesses and disrupting them. It has shifted the supplier-distributor relationship from a hierarchically layered structure to an open structure, the magnitude of which is still underappreciated. Many technological innovations have enabled businesses to expand exponentially. Many new start-ups don't really make anything. Instead of cutting out middlemen, they've become middlemen themselves, connecting people with specific genres of services or merchants. Successful examples of this globally include transportation providers Uber and travel rental startup Airbnb.
A similar transformation is taking place in the online retail space. Of India's $500-billion retail sector, $6 billion is presently transacted online. This might hit $100 billion by 2019. Thus middlemen will see redundancy growing, physical retailers will see business being taken away and retail real estate will witness low occupancy. Landlords will also need to adapt to the changes to their lessees' requirements. For example, real-estate developers may feel threatened on the retail side, but they will have other big opportunities - building warehouses, for instance.
Governments who treat "layered supply chain" players as their vote banks will be under immense pressure to increase protectionism. However, they need to understand the new world order and proactively frame legislation that creates better value and not hurdles for both producer and consumer.
Technology entrepreneurs generally focus on a unique opportunity and then scale up rapidly, in some cases making it a "winner-take-all market". Legislators cannot view these businesses from the prism of their traditional legislation of competition and monopoly. As long as the customer is not being compromised, monopolistic behaviour may not necessarily be a bad thing.
A couple of instances suggest that government response globally is not very thoughtful. Regulators and politicians in Europe are trying to strongly reduce the influence of US internet companies in general - and to damage Google and Facebook in particular. Both China and Russia have pushed for new international treaties governing cyberspace. China has also been heavily criticised for censoring the internet by blocking news or comment that it deems damaging.
Back home the response of our government is no different. The government expected everything to be hunky-dory once Uber was banned. It should have reacted not by banning taxi companies, but by putting in place the very regulations that they haven't implemented up until now. It singled out Uber, perhaps more because it is a high-profile, politically weak service, than because of any risks riders may face. Not so long ago, the Karnataka government also banned Amazon from selling electronics and several other products from its warehouses in the state. The government wanted Amazon to pay VAT as it wanted the company to take ownership for the products stored in its warehouse well before a customer orders them.
A forward-looking proactive government can be ahead of the curve and facilitate the ushering in of technology for better and more efficient business models. They must work towards helping in nurturing the development of a healthy internet ecosystem, one that boosts infrastructure and access, builds a competitive environment that benefits users, lets innovators and entrepreneurs thrive and nurtures human capital.
This kind of government support might be a key enabler in addressing some of India's own grand challenges - like the Digital India vision and the aspiration to create a number of smart cities. Gone are those days where a government could protect its businesses by playing the big daddy. In a country like ours where 60 per cent of our population is below 60 years of age, of which most are tech-savvy, the government cannot deprive its customers of any opportunity. This very population that has elected the government could be the one to oust it.
In other words, they need to consider the long-term societal impact rather than short-term political gain. Technology is after all just a tool to facilitate change.
The writer is managing partner at a technology-focused venture capital fund