Growth Strategy Lessons from the Middle East’s First Unicorn Start-Up

Hannah Bates: Welcome to HBR on Strategy, case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock new ways of doing business. Careem launched as the Uber of the Middle East in Dubai in 2012, with a mission to make life and work better for drivers in the region. It grew slowly at first, and then suddenly took off. Despite technical, cultural, and financial pressures, Careem became the Middle East’s first ever unicorn startup, valued at more than $1 billion. It was acquired by Uber in 2019 for 3.1 billion. Today, we bring you a conversation with Harvard Business School professor, Shikhar Ghosh, who studied Careem’s growth for a business case study he wrote. In this episode, you’ll learn how Careem scaled its operations and expanded into Africa and South Asia. That required many small and large innovations, from creating their own localized version of Google Maps for drivers to use, to figuring out how to work with local and national governments. You’ll also learn how the company recruited experienced technical and business talent to build the company from scratch. That was a special challenge in a region without a strong entrepreneurial ecosystem at the time. This episode originally aired on Cold Call in May 2018. Here it is.

BRIAN KENNY: Every so often, a new term appears in the business lexicon that becomes instant shorthand for an otherwise complicated concept. For example, “disruptive innovation” or “jump the shark.” And now, we can add “unicorn” to that list. Most often relegated to the realm of myth and fantasy, the unicorn entered the business domain in a 2013 article in TechCrunch, when Cowboy Ventures partner, Aileen Lee, used it to describe high growth startups with valuations of $1 billion or more. Unicorns are rare, they’re aspirational, and some would say they’re even magical in their ability to defy the odds. At the time of Lee’s article in 2013, there were 39 unicorns that met the criteria. Just three years later, there were 208, with a cumulative value of $1.3 trillion. So, which starry-eyed startup is next to join the list? Today, we’ll hear from Professor Shikhar Ghosh about his case entitled, Careem: Raising a Unicorn. I’m your host, Brian Kenny, and you’re listening to Cold Call.

Speaker 3: So, we’re all sitting there in the classroom.

Speaker 4: Professor walks in.

Speaker 3: And they look up, and you know what’s coming.

Speaker 5: Oh, the dreaded cold call.

BRIAN KENNY: Shikhar Ghosh is the course head for Founder’s Journey, a second-year course in the Harvard MBA program, and he’s been a successful entrepreneur for the last 20 years, having been the founder and CEO or chairman of eight different technology-based entrepreneurial companies. That’s quite a track record, Shikhar. Thanks for joining us today.

SHIKHAR GHOSH: Thank you.

BRIAN KENNY: So, you clearly understand this case from the inside out, you’ve lived it yourself a little bit, right?

SHIKHAR GHOSH: I’ve lived it a little bit.

BRIAN KENNY: Yeah. So I would ask you to start very simply by telling us, who’s the protagonist in this case, and what’s on their mind?

SHIKHAR GHOSH: What really got me interested in this case was that the protagonists were two consultants, and one of them had a problem, he had to have emergency brain surgery and almost didn’t make it through. And when he had to be flown from Dubai to the Cleveland Clinic, it wasn’t clear he was going to make it through, and when he did, he realized, all of a sudden, that he was one of the lucky ones. Not only had he made it through this, but he was in a position, he worked for McKinsey at that point, to do anything he wanted with his life. And so, he got to thinking about it in the hospital, and he decided that he was going to change the world for the better, and he was going to do that by building something, not just by advising people or thinking through issues. And then, at the same time, the second protagonist, Mudassir Sheikha, was at McKinsey, also leaving, but for different reasons. But it started with both of them leaving a very secure career to do something meaningful. Careem actually means generous, and when they started the company, they wanted to do something that would change the lives of people around them.

BRIAN KENNY: Yeah. And I suppose that a life-changing event like that in both of their situations is probably not an uncommon way for entrepreneurs to get whatever inspiration they need to venture out and try something new. How did you hear about Careem?

SHIKHAR GHOSH: I actually heard about it because our office in Dubai, the HBS Research Center there-

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: … told me, “This is a company you really should pay some attention to for your course over here on Founder’s Journey, because here’s a company…” First of all, there aren’t that many successful entrepreneurial ventures in the whole Middle East that we know about, not counting Israel. And they said, “Here’s this really exciting company that’s looking at the world a different way than the way traditional businesses in that region have.” And then, as I read up a little bit and got to talk to the founders, I found that they faced many of the same problems that we face here, and many very different problems than what we did here, but they were just a fascinating group of people in the way that they were approaching things.

BRIAN KENNY: Yeah. So for our listeners who don’t know, what business is Careem in, what do they do?

SHIKHAR GHOSH: So, think about Careem as the Uber of the Middle East.

BRIAN KENNY: Okay.

SHIKHAR GHOSH: So, they started off as almost a black car service, mostly to professionals, like consultants, and then from that, they’ve morphed into something that’s pretty close to, from a consumer’s perspective, indistinguishable from an Uber. Now, they’ve tailored it to the Middle East, the issues about women driving, about safety of women, cultural norms, the labor pool being mostly immigrant. There’s a whole range of issues that are unique to that area-

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: … and so, they’ve tailored the whole thing to that. But fundamentally, the basic service they offer is a ride hailing service.

BRIAN KENNY: Okay. Did the founders know each other before they both worked at McKinsey? Did they know each other when they were there, is that how they met?

SHIKHAR GHOSH: They knew each other but not that well, so they got to know each other really well through the process of trying to create something. And in that process, one of the first questions they had to ask was, Mudassir Sheikha is from Pakistan, this was his idea, and Magnus Olsson, who’s from Sweden, decided that this wasn’t an idea that excited him, and mostly because he said, “A car sharing service? That has no real purpose. It has nothing that’s going to change… I want to do something that’s really meaningful.” And then, they went out and they saw the way that drivers in the Middle East have to live. These people are not respected, they often live four or five to a room, they have to share beds, and they spend their entire period over there working seven days a week and sending all the money back home.

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: And it was a chance for them to take this class of people and give them respectability, give them professionalism, give them money, all of that, to completely change their lives. And so, when they reframed it that way-

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: … it completely changed the way they thought about the business.

BRIAN KENNY: And I found that really interesting, because most people who are starting an organization to try and have an impact in the world are thinking about the end user, so to speak, the customer in the equation, and here, these guys started with the employees.

SHIKHAR GHOSH: Right.

BRIAN KENNY: So, their play was really to improve the lives of the people who work for them, by, as you said, raising their level of respectability, and at the same time, provide a good service, obviously, for customers, otherwise you don’t have a customer base.

SHIKHAR GHOSH: Yeah. And I think that now, I just spoke to them a couple of months ago, and they’re looking at employing… These people are not directly employees, but giving employment to in the order of a million people in the region.

BRIAN KENNY: Wow.

SHIKHAR GHOSH: And so, it’s pretty remarkable. And they’ve been going into country after country where they’re doing the same thing, Pakistan, Egypt, Tunisia, just across the whole region. And for each of the people who comes in, they call them captains-

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: … they don’t call them drivers.

BRIAN KENNY: I love that.

SHIKHAR GHOSH: And they train them. They don’t just train them on how to drive a car, read a map, do those things, they train them on how to be professionals, and they insist that their service is a professional service, and these are professionals providing that service, therefore you deal with them a particular way. They train them how to be on time, they train them how to be polite, they train them how to respect process and procedures, all things that these people, nobody has taken the time to make them professionals.

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: And it’s really, really important to them.

BRIAN KENNY: The heart of the case really looks at how they scaled this operation, so can you talk about some of the challenges they faced? Because the case starts very early on in the very beginnings of the company.

SHIKHAR GHOSH: Yeah. So this is the first and the only company I know that measures its growth rate in 15 minute increment. So they literally, all their beepers go off, if they haven’t hit their target in 15 minute increments, they have-

BRIAN KENNY: That’s a little pressure packed day right there.

SHIKHAR GHOSH: You’ve got to fix it before the next 15 minute one comes in.

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: As they took off, it wasn’t just that they had more customers, it is that they had more cities, more countries, more cultures, more kinds of services. And I’d originally got intrigued by the company because of the growth. The number of customers they had went from 4,000 to four million, the number of cities went from four to 40, everything was a factor of either 10 or 1,000.

BRIAN KENNY: And we’re talking over a period of months here?

SHIKHAR GHOSH: No. So the first year was slow growth-

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: … and then the next two years is when they completely…

BRIAN KENNY: Okay.

SHIKHAR GHOSH: The hockey stick hit. And when that happens to a company, you go from a set of people who can share a pizza, to people who can be in a room, to people who now have to communicate in all sorts of indirect ways, and you, as a founder, have to deal with the issue that you can no longer control everything you do. Every decision is made by somebody else who’s two levels removed from you. And so, you have to do it by specifying your values, by setting up processes, all kinds of things that are very indirect.

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: And that’s a fundamentally different skill than starting up. In most companies, it takes much longer to get to scale, and therefore people have time to learn. In this case, when you’re growing… They were growing at 30% a month, so every two and a half months, you’re doubling, and that means that every six months, there are more new people in the company than people who’ve been there before.

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: And these people are coming from all kinds of other companies and other cultures, and holding together the culture, holding together even the operation, becomes a huge,monumental challenge.

BRIAN KENNY: Yeah. And they started, obviously, almost like a mission-driven organization in the way that they started; their values are critically important. How do you possibly inculcate those values when you’re growing at that rate? You can print them up, you can hand them out to people when they get hired, but was there anything that they tried to do as a way to really help people, new employees, understand the values of the organization?

SHIKHAR GHOSH: I think that in many ways, they would say that the reason they’ve been able to grow that fast is because of the values, that if you don’t have some common platform that everybody comes into and something that keeps getting reinforced, then people will disperse in 100 different directions. So just as a quick example, one of the things they did very early on was, most companies like them start by establishing customer service for their customers, for the end users, they had two sets of customer service people, one was for their users, and the other one was for their drivers. And so, the captains, as they call them, would have a dedicated place to call if they had a problem of any kind. This notion of saying, “If we have enough well-trained professional captains who are respected and respect themselves, then there’s no limit to how far we can grow.”

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: I think last year was when they achieved unicorn status. So they raised over $1 billion in valuation.

BRIAN KENNY: That’s remarkable.

SHIKHAR GHOSH: And I believe it’s the first unicorn in the Middle East.

BRIAN KENNY: Yeah. And they encountered some other issues that Uber hasn’t necessarily faced in the markets where they started. You talk about some of the innovations they did, having to create their own version of Google Maps, for instance.

SHIKHAR GHOSH: Right.

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: So not only do you not have the infrastructure that we have in the West, simple things like maps, addresses that count, but you also have regulations that are not clear. It’s not clear whether these things can operate. They had a number of situations where local governments would choose to do things differently than the central government had said they could do, where people were arrested, all kinds of issues of introducing something new into an environment that’s been quite traditional, and everyone’s trying to figure out, what are the new rules of this game? And in that process, they now have three founders, one is Saudi, one is Pakistani, one is Swedish. And then, the top team, I remember sitting across the table from them, and there was a Christian from India, a Hindu woman from India, a couple of Western people from Stanford, just a mixture of the whole world, and all of these people were working together to create something that was bigger than any of them.

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: And so, to me, it was just a fascinating example of what entrepreneurship can do and how much it can transform societies, and in the process of transforming the user and the user experience, it’s transforming what people think of themselves.

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: So Magnus, one of the founders, came over, he flew all the way from there for one class here, and I asked him, during writing the case, I just knew how busy he was, because he’d have slots of time, a few minutes at a time, and he’d be always traveling somewhere and going somewhere else, and I said, “It’s taken you two and a half days, because you’ve got to fly all the way here, do the classes, fly all the way back. Why are you investing so much time? We could have done a Skype call or something.” And he said, “This is a region I really love, and it has so few stories that are positive success stories where people have built up something that everyone’s proud of, and I want that story to get known across the world, and I’ll do everything I can to do that.”

BRIAN KENNY: Yeah. Well, and the other challenge they face that you address in the case is getting people to want to go to work there. So the workforce that’s skilled to do the jobs they have that’s there can get more money working someplace else, maybe that’s not as true now that they have achieved unicorn status, but in the early goings, it was hard to find the right people who were willing to come and work those hours for that pay.

SHIKHAR GHOSH: Yes. Probably their biggest scaling challenge was finding experienced people who wanted to work for a startup, and who even had the skills, because of you don’t have an entrepreneurial ecosystem, you don’t have a supply of people who know what it means to be in a uncertain, disorganized environment that’s growing really fast. And then, when they brought in senior people, they faced the risk of those people diluting and changing the culture, because they came from larger companies, and what they wanted to do was to be a model for how other people around could actually build companies and meet the unique needs of that population. They’re now looking at expanding their businesses to other lines of business, but in all cases, the foundation of the company is really about doing good for the region.

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: And you hear that, you hear people talk about values a lot, you rarely see that being really core to what they do.

BRIAN KENNY: Yeah. So how did the MBA class go? You don’t need to give away any secrets, but I’m just curious as to how the students responded, and was there anybody who had used Careem’s service?

SHIKHAR GHOSH: There were a number of students who were very familiar with Careem. In fact, we had two students who had visited their offices. The other perspective that students really found intriguing was, normally, all these cases are written from the perspective of the founder struggling through all these problems. What I tried to do here was to have one of the employees who had to live with the chaos of the growth, describe her experience in it. It turned out that she was one of our students here. And just through, she called me one day and said, “I hear you’re writing a case on Careem. I was there, I saw what a mess it was.” And most of our students are going to be in the position of being a joiner, not a founder. And in these very fast-growing companies, the point that she made was you can sit in the company and complain about why nothing works, and processes don’t come in, and how we have to work so hard, and founders make all the mistakes, and so on. Or you can change and say, “I have to fix this, that it doesn’t matter if I’m not technically a founder, I’m a creator of this company.” And she took that posture, and was able to be quite effective across a range of things. But fundamentally, the job that has to be done when you join these companies is very different from the job that has to be done if you join an established company. She gives a little example of the first day that she was there, she met the founder, and she said, “Okay, what do you want me to do?” And he said, “Well, you tell me what you want your title to be, and you tell me what you want to do.” And over the next six months, she did eight or 10 different jobs.

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: So, the rate of learning there’s much, much higher, but the rate of disorganization is also much higher.

BRIAN KENNY: Yeah. I’m sure people listening right now can easily self-identify if they have the tolerance to thrive in a situation like that, or if it just scares the heck out of them.

SHIKHAR GHOSH: I think what I’d say is that you actually don’t know that. It might scare the heck out of you, and you might do really well in it.

BRIAN KENNY: Yeah.

SHIKHAR GHOSH: What you can be sure about is that you will learn a lot, about yourself, about your limits, about what it means when you stretch your limits beyond what you’re comfortable with. It’s a little bit like mountain climbing in that you could have a much more comfortable time watching National Geographic on your TV, or you could try and climb the mountain yourself. And if you did that, you’d be uncomfortable every moment of the way, but when you come down, you’d probably say, “That was an amazing experience.”

BRIAN KENNY: Yeah. And you could accomplish something great.

SHIKHAR GHOSH: Yeah.

BRIAN KENNY: Shikhar, thank you for joining us today.

SHIKHAR GHOSH: Thank you.

Hannah Bates: That was Harvard Business School professor, Shikhar Ghosh, in conversation with Brian Kenny on Cold Call. We’ll be back next Wednesday with another handpicked conversation about business strategy from the Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review. We’re a production of the Harvard Business Review. If you want more podcasts, articles, case studies, books, and videos like this, find it all at hbr.org. This episode was produced by Anne Saini and me, Hannah Bates. Ian Fox is our editor. Special thanks to Maureen Hoch, Adi Ignatius, Karen player, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you, our listener. See you next week.