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Exploring business model innovation for competitive advantage: a lesson

from an emerging market

Article in International Journal of Innovation Science · February 2021

DOI: 10.1108/IJIS-05-2020-0072

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Business
Exploring business model model
innovation for competitive innovation

advantage: a lesson from an

emerging market
Natasha Saqib Received 24 May 2020
Revised 19 August 2020
Department of Management Studies, University of Kashmir, Srinagar, India, and 29 October 2020
26 November 2020
Mir Shahid Satar Accepted 4 January 2021

Department of Business Administration, Saudi Electronic University,

Jeddah, Saudi Arabia

Abstract
Purpose – Emerging markets are witnessing rapid changes in their economy owing to the ongoing
liberalization and globalization. India, as one of the emerging markets in south Asia, is also experiencing a
dramatic change in its business ecosystem. This poses huge opportunities to the companies, both start-ups
and established ones. In this direction, the business model innovation offers a strategic renewal mechanism.
The study aims to explore the practices of an online transport network company (OLA) creating a distinctive
place for itself in Indian taxi service sector.
Design/methodology/approach – Methodologically, an exploratory case study of an India-based online
transport company (OLA) business model innovation is reported.
Findings – This paper reveals that OLA has been able to gain competitive advantage in the Indian
emerging market by developing an innovative business model with its distinctive features of personalised
customer service, asset sharing, usage-based pricing, collaborative ecosystem, agile and adaptive organising
and successful expansion strategies.
Research limitations/implications – This study adds to current knowledge concerning the theoretical
foundations and antecedents of business model innovation as a competitive advantage. The paper is
explorative in nature because the analysis is mostly based on literature review. Furthermore, in consideration
of the analysis of business model of a single company, further research is required to generalize the results.
Practical implications – The understanding of the intricacies of business model innovation can be of
great concern to existing and prospective managers and entrepreneurs of emerging markets.
Originality/value – The paper discusses the features of innovative business models and how firms can
make their business models more relevant to the competitive markets. As such, the study is hopeful to aid
practitioners engaged in the pursuit of beating the competition with innovation driven business models.

Keywords India, Emerging markets, Business model innovation, Innovation, Business model, OLA,
Competitive advantage
Paper type Conceptual paper

1. Introduction
Emerging markets have received much attention in the past decade and are now well-
documented (Bang et al., 2016; Jullens, 2013; Mostafa and Mahmood, 2015). According to the
“Ashmore Investment Management Limited (Ashmore, 2018)” report 2018, of nearly 200 International Journal of Innovation
Science
countries in the world, more than 160, or 80%, are classified as “emerging” and in total, 6 © Emerald Publishing Limited
1757-2223
billion people or approximately 85% of the world’s population lives in an Emerging Market DOI 10.1108/IJIS-05-2020-0072
IJIS country. Moreover, by 2025, annual consumption in the emerging markets will rise to $30tn,
up from $12tn in 2010 and will account for nearly 50% of the world’s total consumption
(Dobbs et al., 2012). Among the four large emerging economies (Brazil, Russia, India and
China), India and China alone, account for over 30% of the world population. The two
countries are slated to be major buyers of the world’s goods and services on the strength of
the growing prosperity of their consuming class and are known as “large emerging
markets” (Enderwick, 2007). While the emerging market like India is offering tremendous
growth potential (Ramamurti, 2004), they simultaneously posit unique challenges in terms
of its competitive landscape for both multinational companies (termed MNCs, hereafter) and
domestic companies. For the companies to capitalise market opportunities, they have to
tackle unique challenges (discussed later) of a developing market. The successful
introduction and development of products in the emerging markets require facing several
unique challenges including adapting business models to local context. The various steps
undertaken in pursuit of market capitalization are primarily innovations driven that make it
feasible to deliver the products as affordable, available and accessible. In this direction, a
pertinent approach emerged so far is the value creation for all business model participants.
The innovation in business models have been referred to as fundamental to circular
economies and sustainable development (Pieroni et al., 2019). Consequently, firms
illustrating innovative business models have capability to totally disrupt their respective
industries by changing the basic building blocks of their business models. These companies,
beyond any doubt, have been able to dominate and in some way monopolize their industries.
Studying these companies little closely, it is obvious that the source of competitive
advantage has changed. They have no revolutionary products and services, but unique
business models. The present research is an attempt to analyse the case of OLA cabs as a
business model innovation and attempts to demonstrate how the innovation in business
model has aided the firm in attaining the competitive advantage in the Indian emerging
market.
The structure of the paper is as follows. Section 2 reviews the literature on emerging
markets and business model innovation. Section 3 explains the methodology. Section 4
presents the case under study. Section 5 discusses findings from the case study. Section 6
concludes with implications for both theory and practice.

2. Literature review
In the first part of this literature review, we will present a short overview on the emerging
markets and Indian emerging market. This will be followed by a review of the business
model and business model innovation.
The term “emerging market” refers to a country that has experienced a relatively rapid
pace of economic development and has initiated economic liberalization and a market
economy (Arnold and Quelch, 1998). Emerging markets have become a powerhouse of the
global economy. As shown in Figure 1, emerging market countries today represent 59% of
total global gross domestic product (GDP) (based on purchasing power parity [PPP]-
adjusted USD), a notable expansion over the past decade, when these countries represented
less than 50% of global GDP. According to the World Bank, four large emerging markets
are Brazil, Russia, India and China (BRIC). The BRIC economies are growing at a rapid pace
ranging from 8 to 10% and are poised to overtake the G7 countries (USA, Japan, Germany,
France, UK, Italy and Canada) within next 35 to 40 years in terms of their collective GDP. By
2025, they could account for over half the size of the G7 countries (Suisse, 2015).
 Business
model
innovation

Figure 1.
Share of global GDP

2.1 Indian emerging market

In the global economic landscape, the relative importance of the Indian emerging market has
changed rapidly over the past three decades and has been attracting increasing interest from
marketers around the world (Shah, 2012). India has witnessed respectable average annual
growth rates of 5 to 6% since 1980 which accelerated to around 8% after 2003 before seeing
a slowdown afterwards. However, over the few years there has been a significant growth of
the Indian market which has resulted in the high GDP, India’s GDP is estimated to have
increased 7.2% in 2017–2018 and 7% in 2018–2019 (IBEF, 2018). India’s economic growth is
expected to remain above 5% in the next two decades and will become third, largest
economy by 2030 [PwC (PricewaterhouseCoopers LLP), 2017]. India’s gross domestic
product in PPP terms will grow to $30 trillion from $8.7 trillion in 2016, whereas USA will
grow from $18.6tn to $28.3tn. India will outpace the USA to emerge as the second largest
economy in PPP terms by 2040 [PwC (PricewaterhouseCoopers LLP), 2017].
Urbanisation is a key driver of economic development. By any measure, the Emerging
Markets have experienced a dramatic and exponential growth in their urban population
over the past three decades. As shown in Table 1, of the 20 largest cities in the world, 16 are
located in Emerging Markets and among those sixteen three are located in India. As a result,
urbanisation is taking place at a faster rate in India. It is expected to reach 40% creating
huge opportunities and turning some of India’s states into economic entities. The population
of India’s cities will increase from 340 million in 2008 to 590 million by 2030. India will have
68 cities with populations of more than 1 million, 13 cities with more than 4 million people
and 6 megacities with populations of 10 million or more, at least 2 of which (Mumbai and
Delhi) will be among the 5 largest cities in the world by 2030 (Farrell et al., 2005). The
emerging trends reflect that India will witness an urban transformation over the next few
years, the scale and speed of which has not happened anywhere in the world except in
China.
The Indian emerging market is also extremely young in terms of demographics with a
median age of 27 years, especially compared to other emerging markets. As per India’s
Census, the total youth population increased from 168 million in 1971 to 422 million in 2011.
India is seen to remain younger longer than China and Indonesia, the two major countries
other than India which determine the demographic features of Asia, (MOSPI report, 2017).
IJIS Population Density
Ranking City Population (million) (per sq km)

2 Jakarta, Indonesia 30.5 9,500

3 Delhi, India 24.9 12,100
4 Manila, Philippines 24.1 15,300
5 Seoul-Incheon, South Korea 23.5 10,400
6 Shanghai, China 23.4 6,100
7 Karachi, Pakistan 22.1 23,400
8 Beijing, China 21.0 5,500
10 Guangzhou/Foshan, China 20.5 6,000
11 Sao Paolo, Brazil 20.3 7,500
12 Mexico City, Mexico 19.4 8,400
13 Mumbai, India 17.7 32,400
15 Moscow, Russia 16.1 3,500
16 Dhaka, Bangladesh 15.7 43,500
17 Cairo, Egypt 15.6 8,900
Table 1. 19 Bangkok, Thailand 14.9 5,800
Expanded 20 Kolkota, India 14.6 12,200
urbanisation of
emerging markets Source: ASHMORE, IMF (2018), Demographic (2015)

India has 65% young population (the percentage of the population after 1980), out of which
443 million are millennial and 393 million are generation Z (Sachs, 2016). About 30% of
young Indians live in urban areas and are responsible for about 45% of the total private
consumption in the country and the urban population of young Indians is increasing at a
rate of approximately six-and-a-half percent per annum (Zaveri and Garg, 2005). It is
estimated that this young age bracket will contribute additional 2% per year to the
country’s GDP growth in the foreseeable future. This fact will have a strong influence on
consumption patterns and India’s consumer story. While these factors make the Indian
emerging market very attractive, it is also very competitive for MNCs and domestic
companies.
MNCs from developed countries are targeting growing markets like India, but these
markets do not mean easy markets. The success record of these MNCs in Indian emerging
markets, particularly that of American MNCs has been far from satisfactory. This is
reflected in these companies’ performance in emerging markets (Khanan and Palepu, 1997
and Ramamurti, 2004). In 2010, 100 of the world’s largest companies in developed economies
derived just 17% of their total revenue from emerging markets though those markets

Share of
83 17
Revenues
Figure 2. Share of Global
Markets’ contribution 64 36
GDP
to global GDP vs
leading global 0 20 40 60 80 100 120

companies’ share of Developed markets Emerging markets

total revenues from
given markets, 2010
Source: McKinsey and Company (2013)
accounted for 36% of global GDP (Figure 2) and are likely to contribute more than 70% of Business
global GDP growth between now and 2025. model
To be successful in the Indian emerging market, the MNCs need to consider many factors
given as follows:
innovation
 Time tested business models that worked well in the developed world, sometimes
fail in emerging markets, causing companies to incur losses and lose great
marketing opportunities. Marketers keen to grasp the opportunity in the Indian
emerging market need to develop business models that are unique to the Indian
context. Marketers can no longer try to apply concepts that have succeeded in the
western economies in the Indian emerging market.
 Success in the one emerging market rarely predicts success in other. All countries
within emerging markets are different. Therefore, MNCs cannot simply duplicate
the business models in the Indian emerging market that worked for them in other
emerging markets.
 For entering into any emerging market understanding consumers is inevitable,
MNCs really need to go where consumers are thus for entering the Indian emerging
markets MNCs have to understand Indian consumers.

Consequently, business models would require some careful adaptation to the Indian
emerging market and many caveats are needed to be considered by MNCs. While most of
the MNCs are not developing their business models effectively, few domestic companies like
e-retailer Flipkart, mobile-wallet company Paytm, hotel aggregator OYO Rooms, ride-sharer
OLA Cabs, learning apps company Byju’s and food deliverers like Swiggy are carefully
developing business models and understanding consumers to capitalize on the opportunities
offered by the Indian emerging market and to beat the competition from MNCs.
In 2010, OLA was founded in Mumbai, India, initially with the intention of challenging
what was generally considered to be the city’s inefficient and inadequate taxi service. Since
then, its strategy of relentless and audacious growth has enabled it rapidly to spread its
services nationwide. The rise of the company has wide implications that cover not only
transport, but also changing models of business and employment, urban planning issues
and patterns of mobility in the 21st century. A remarkable feature of the rise of OLA,
however, is how it has been based on a deliberate strategy of acting as a market ‘disruptive
innovator’.

2.2 Business model innovation

The concept of business model has attracted increasing attention from practitioners and
scholars in micromanagement research (Foss and Saebi, 2017; (Haddad et al., 2020; Wieland
et al., 2017; Zott et al., 2011). However, it lacks an established definition and clear theoretical
foundation (Wieland et al., 2017). The scholars use different definitions of business model in
different ways. Zott et al., 2011) defines business model as statements, descriptions,
representations, conceptual tools or models, structural templates, methods, frameworks,
patterns and sets of decision variables, among other descriptions. According to Osterwalder
and Pigneur (2010), business model describes the rationale of how an organization creates,
delivers and captures value. Zott et al. (2010) view a business model as a system of
activities that depicts the way a company “does business” with its customers, partners
and vendors. Further most of the researchers agree that business models refers to how a
company creates and captures value (Chesbrough, 2007; Kavadias et al., 2016; Zott
et al., 2011). Nevertheless, the features of the business model typically define not only
IJIS the customer value proposition and the pricing mechanism, but also indicate how the
company will organize itself and whom it will partner with to produce value and how it
will structure its supply chain. Fundamentally, a business model is a system whose
various features interact, often in complex ways, to determine the company’s success
(Kavadias et al., 2016). Business models also serve as important strategic tools in
innovation (Foss and Saebi, 2017; Zott et al., 2011) and market formation processes.
More precisely, Bashir et al., 2016 define a business model as the bundle of specific
activities that are conducted to satisfy the perceived needs of the market, including the
specification of the parties that conduct these activities (i.e. the focal firm and/or its
partners), and how these activities are linked to each other. This definition captures the
essence of what we believe lies at the heart of the business model concept, namely: a focus on
the how of doing business, as opposed to the what, when or where; A holistic perspective on
how business is conducted, rather than a focus on any particular function such as product
market strategy, marketing, or operations; An emphasis on value creation for all business
model participants, as opposed to an exclusive focus on value capture. And a recognition
that partners can help the focal firm conduct essential activities within its business model.
Similarly, most of the researchers, scholars and people from industry unanimously agree
on the growing importance, applicability and relevance of the concept of business model
innovation (Zott and Amit, 2008; Bashir et al., 2016). Researchers, scholars and top
executives unanimously approve that business model innovation is altogether a new form of
innovation which is distinct from product or process innovation (Baden-Fuller and
Mangematin, 2015; Massa et al., 2017). The benefits linked with business model innovation
beyond any doubt outstrip any other form of innovation (Lindgardt et al., 2009; Schallmo
and Brecht, 2010; and Snihur and Zott, 2013). Business model innovation has also been
described as the process of finding a novel way of doing business which results in
reconfiguring of value creation and value capturing mechanisms (Massa et al., 2017).
Aagaard et al. (2019) propose that business model innovation relates the technology to the
method of using business model canvases to developing novel business models. Researchers
also agree that business model innovation can occur even by changing only one of the
elements or components of a business model (Foss and Saebi, 2017; Lindgardt et al., 2009).
Literature has highlighted the importance of business model innovation to firm
performance (Bashir and Verma, 2017; Dunford et al., 2010; George and Bock, 2011; Zott and
Amit, 2008, 2010). Business model innovation has helped the companies to deliver more
sales, higher profit margins and greater cash flows than their competitors. Studies showed
that business model innovation, in particular, helps in the success and a valuable capability
of a firm (Aspara et al., 2010; Keiningham, 2020; Lindgardt et al., 2009; Chesbrough, 2007;
Amit and Zott, 2012). Business model innovation is critical to a firm’s ability to achieve
growth and long-term viability. It helps improve the value of products or services and/or
delivery of these offerings to customers. Economist Intelligence Unit (cited in Amit and Zott,
2012) surveyed more than 4,000 senior executives worldwide on the subject of innovation.
The findings highlighted that executives do not prefer new products and services as a
source of future competitive advantage but new business models. A similar type of study by
Pohle and Chapman (2006) highlighted that due to intensive global pressures, the focus of
top executives on business model innovations has increased and reached much higher than
expected before. The study further highlighted that companies who outperformed their
rivals and whose operating margins have grown at a much greater pace in the past five
years were putting twice as much focus on the business model innovation as the
underperforming companies (Bashir and Verma, 2017).
 More, specifically Business model innovation aids in reconfiguring of value creation and Business
value capturing mechanisms, thereby a competitive tool that cause companies to gain model
competitive advantage (Amit and Zott, 2012; Bocken and Geradts, 2019; Bashir and Verma,
2019; Casadesus-Masanell and Zhu, 2013; Desyllas and Sako, 2013; Massa et al., 2017; Zott
innovation
and Amit, 2007; Zott et al., 2011) .
To date, the literature contains notable contributions and evidence on successful
examples of business model innovation processes relating mainly to large organizations
(Chesbrough, 2007; Sosna et al., 2010; Amit and Zott, 2012; Johnson et al., 2008), although
Busines model innovation also refers to smaller organizations and startups (Haddad et al.,
2020; Klewitz and Hansen, 2014) Consequently, we focus on the following broad research
question: How business model innovation can be a source of competitive advantage for
start-ups in emerging markets?

3. Method
Qualitative approaches facilitate the understanding of complex phenomena (Yin, 2009), such
as business model innovation (Massa and Tucci, 2013). Furthermore, given the early stage of
development of research linking Business model innovation and competitive advantage
such an approach was felt to be necessary. This research has been designed as an
exploratory single case study (Yin, 1984; Eisenhardt, 1989; Eisenhardt and Graebner, 2007).
A case study is an:
[. . .] empirical inquiry that investigates a contemporary phenomenon within its real-life context;
when the boundaries between phenomenon and context are not clearly evident; and in which
multiple sources of evidence are used” (Yin, 1984).
In particular, we choose the single case methodology for two main reasons. First, we were
able to investigate under-explored phenomenon at various levels without being constrained
by initial decisions over the tools or types of data to use (Eisenhardt, 1989). Second, studies
pointed out the need to investigate the process of business model innovation (Bashir and
Verma, 2017) in a detailed and comprehensive way. Third, there exists limited prior
understanding on business model as a source of competitive advantage,
Consequently, we engaged in explorative historical case analysis. The strength of our
approach is that it allows the use of predetermined concepts from the business model and
cognitive literatures and perspectives, yet enabling us to simultaneously build inductive
theoretical propositions. The inductive theoretical work essentially builds links between the
conceptual constructs from which we started our historical inquiry. In contrast to
mainstream case studies that rely on contemporary materials and interviews, our historical
approach helps us to focus on the entire longitudinal process from a start up to becoming
market leader and finally to the profitable company. Also, we avoid most of the problems
typical in case studies. Especially, our rich historical data helps to deal with potentially
biased retrospective interviews and insufficient document information, which potentially
spoil qualitative case studies.
We choose to study OLA as an illustrative example of a company whose business model
has helped it to become market leader. Overall, OLA case lacks straightforward
generalizability but it offers conceptual representativeness to the extent that it can be seen
as a legitimate research setting to study business model as a source of competitive
advantage in theoretical terms. Our data collection was done as follows: First, we engaged in
historical analysis of OLA and its market environment in order to identify with OLA’s
evolution, as embedded in context. As a part of a larger research program, we started our
inquiry by collecting over 10 academic publications that focused on OLA’s history. This
IJIS collection was read to create a timeline of main historical events in OLA’s development and
to obtain an understanding of how other researchers have treated OLA’s business model
elements. At the same time, we collected newspaper articles, business magazine reports and
other public material that we triangulated with the academic research reports.

4. Research site
OLA Cabs (styled as OLA) is of Indian origin, online transport network company developed
by ANI Technologies Private Ltd. The company was founded on 3 December 2010, in
Mumbai by entrepreneurs Bhavish Aggarwal (currently CEO) and Ankit Bhati as an online
cab aggregator and now it is located in Bangalore. OLA started off as a platform that offered
weekend trips during the 2010 Commonwealth Games in Delhi. OLA then decided to make
point-to point transportation its main focus and moved its headquarters from Mumbai to
Bangalore. In November 2014, OLA got a variety to include an auto rickshaw on a trial basis
in Bangalore. After the testing phase, OLA Auto expanded from December 2014 to other
cities like Delhi, Cuttack, Pune, Chennai, Hyderabad and Kolkata. In December 2015, OLA
expanded its auto services in Lucknow, Bikaner, Kota, West Bengal, Mysore, Chandigarh.
Indore, Ahmedabad, Jaipur, Guwahati, Vijayawada and Visakhapatnam. Since its founding,
OLA has grown exponentially to become the leading app-based taxi provider in the country,
offering its service in 169 cities and towns. OLA has raised roughly $2.5 billion since starting
out in 2011 and is India’s second-most valuable internet start-up after an e-commerce payment
system and digital wallet company Paytm. The size of its expansion is illustrated by the
estimated valuation given at $5bn, making it India’s most valuable privately held technology
company. OLA had been acquiring companies over diversified fields to strengthen its position
in the taxi rental market. OLA acquired Taxi For Sure (TFS), one of its biggest competitors, on
1 March 2015 for an amount of $200m, the biggest ever acquisition in the car rental industry.
Following suit, in November 2015, OLA acquired Geotagg, a trip planning company, for an
undisclosed amount. Again, on 21 March 2016, OLA also acquired Qarth a mobile payment
start-up company. In December 2017, OLA acquired Foodpanda’s business in India. In April
2018, OLA made its second acquisition with Ridlr (formerly Traffline), a public transport
ticketing app. In August 2018 OLA financed Series “A” funding of the scooter rent start-up
Vogo, and in December, OLA invested another $100m. In January 2018, OLA expanded to
Australia’s first foreign market and eventually planned to run a service in Sydney and
Melbourne – arrived in Perth in late February. In January 2018, OLA extended into its first
overseas market, Australia and in New Zealand in September 2018. It has presence in UK also.
OLA acts as a third party contractor that connects customers and taxi drivers. OLA offers
different levels of service, ranging from economic to luxury travel. The company’ services are
provided through a free App that can be downloaded on any smartphone. It operates in
collaboration with both Google maps and PayPal to provide customers a cheap way to hail and
pay for taxis from their mobile phones. The customer can access information such as the
whereabouts of the nearest taxi, the name and rating of the driver and also track the route of
the journey while in the taxi. Customers also negotiate and pay for the service electronically.
The App allows customers to request a taxi within a short period of time (usually 2–5 min) and
set a meeting point with the taxi. It claims to clock an average of more than 1,500,000 bookings
per day and commands 60% of the market share in India.

4.1 Competitive rivalry

In a span of a few years, mobile app-based cab companies have drastically changed the face
of public transport in the Indian emerging market. OLA is at full throttle in the Indian ride
hailing market. Being a market leader, OLA faces a stiff competition from different
companies. In India alone, OLA is present in 160 cities and faces very stiff competition from Business
Uber, which appears to be the main competitor of OLA and has raised $530m ($2.5bn model
valuation) to compete with Uber. In the competitors list, the next competitors are Jugnoo, Ixigi
and Meru. With India being the second biggest market for Uber (though 5% market share),
innovation
competition got stiffer when OLA Cabs (60% market share) announced (on 2 March 2015)
about its acquisition of India’s second-largest cab company Taxi For Sure for $200m (Johnson,
2014). Similarly, the Australian taxi market is very important for OLA since after India, its first
expansion was in Australia. Competition exists and will always stay (Figure 3).

4.2 How is OLA superior to Uber

Becoming a market leader in the taxi market and maintaining it indicates that Ola has
services to offer to the market which are better than other service providers from the same
segment. Ola is different from other aggregator service provider or other segments in the
way that they themselves are the marketplace. This is because they list the rates and cars in
their system. This leads to price transparency and enables them to achieve customer trust.
Another feature that makes Ola superior is that they do not limit their services to the city
boundary. They offer car rental facility for outstation trips as well. Also, the ride later option
available with OLA makes it more customer friendly service. Ola also takes into account the
safety of the customer and thus has a 24  7 customer care service. The attractive price
package and variety in the fleet of cars target the moderate income segment which increases
their customer base. The GPs tracker in all the cabs to monitor the activity of the vehicle and
high visibility in terms of logo contribute to the success of the cab company.

5. Discussion
OLA’s Business Model: When OLA entered the urban transport industry in India as a
technology-based start-up, it had to compete in an already existing market place, namely the
private taxi industry in Indian cities. However, OLA’s strategy was entirely different. It did
not choose to compete with other established taxi service providers like Meru Cabs or Fast-
track. The existing demand for private taxis was quite low, compared to the demand for
auto rickshaws or public city buses. OLA further did not make a trade-off between
differentiation and providing a low-cost service, unlike Meru or Fast-track. But by launching
an app-based taxi service, it created a new market niche for itself which meant the entire
app-based taxi industry was up for grabs for OLA. However, the most important thing is
how OLA has transformed the traditional global taxi industry into a high-tech competitive
global market by creating a disruptive business model.

Market Share

MERU

IXIGO

JUGNOO
Market Share
UBER
Figure 3.
OLA Share of ride hailing
market in India as of
0 10 20 30 40 50 60
December, 2017 by
company
Source: www.Statista.com
IJIS According to Kavadias et al. (2016) if any business model has these features, it’s potential to
transform a given industry is also greater. We tested how many features OLA business model
displayed.
Kavadias et al. (2016) notes that a firm should, first and foremost, focus on a more
personalized service. Many new models offer services that are better tailored than the
dominant models to customers’ individual and immediate needs. Companies often leverage
technology to achieve this at competitive prices. OLA did the exact same thing. When it
started out in 2010, OLA tried to provide various kinds of services of which point-to-point
taxi service was only one. However, it soon realized that this would not be sustainable in the
long-run. So, they stopped all services except a point-to-point service which they made their
central focus. OLA uses a scheme whereby customers rate drivers. Via the big data
platform, a would-be customer can see on his or her mobile device the closest drivers and
their ratings. The rating system pushes drivers to offer clean cars and quality service, and it
also provides at least a bit of personalization. Allowing the customer to decide between the
closest car and the one (maybe a bit farther out) with the highest rating may not sound like
much, but it is still far ahead of traditional taxi services. Second, it made the competition
irrelevant by launching web and mobile versions of its service. When they started out, they
had both website and mobile app where you could book your ride. The app’s user interface
was simple and easy-to-use, and the fact that it was location-based attracted thousands of
people towards OLA in small and mega cities where demand always outstrips supply.
Because the app was location-based, it was very convenient for the customer as it would
show the number of OLA vehicles in his or her proximity. All they had to do was book the
ride and GPS would enable the taxi driver to locate the customer and pick him or her up.
With the conventional taxis, one had to go to the website, book ride for a specific time and
from a specific location. And there offered no flexibility whatsoever.
Kavadias et al. (2016) then notes the second condition firms should pay attention to,
namely: Asset Sharing. One widespread premise in business is that companies compete by
owning the assets that matter most to their strategy. Competitive advantage, according to
this belief, comes from owning valuable assets and resources, which tend to be scarce and
used over long time periods, as well as firm and location specific. Thus ownership (rather
than, say, leasing) frequently appears to be the best way to ensure exclusive access. But
what if assets are used infrequently or inconsistently? In these cases, digital technology, by
increasing transparency and reducing search and transaction costs, is enabling new and
better value creating models of collaborative consumption. As a result, ownership may
become an inferior way to access key assets, increasingly replaced by flexible win-win
commercial arrangements with partners OLA did well on this front. OLA, which allows any
driver with a qualified vehicle to provide taxi service OLA shares assets with car owners.
Sometimes assets may be shared across a supply chain. The sharing typically happens by
means of two-sided online marketplaces that unlock value for both sides: I get money from
renting my spare room, and you get a cheaper and perhaps nicer place to stay. Sharing also
reduces entry barriers to many industries, because an entrant need not own the assets in
question; it can merely act as an intermediary. Some innovations succeed because they
enable the sharing of costly assets.
Kavadias et al. (2016)’s third condition is for the firm to ensure usage-based pricing. Some
models charge customers when they use the product or service, rather than requiring them
to buy something outright. The customers benefit because they incur costs only as offerings
generate value; the company benefits because the number of customers is likely to grow.
OLA broke the value-cost trade-off. OLA could do this because they did not own any of the
cars in their fleet. This saved them sunk costs in the form of buying vehicles for their fleet
and maintenance costs (as individual drivers were responsible for their cars’ conditions). Business
This cost-saving strategy enabled OLA to offer its services at a low-cost. With the value model
creation as explained above (in the form of convenient, readily available, peer-to-peer
innovation
service), they not only offered taxis at a lower cost but also offered higher benefits for the
customers. Estimates indicate that app-based taxis cost 15%–25% lower than other taxi
services. Estimates show that app-based taxi services cost at least 15% less than traditional
taxi service providers. This holds not only for OLA but also for Uber and is a clear
indication of their low-cost approach to capturing the urban Indian market.
The fourth condition Kavadias et al. (2016) mentions is that a more collaborative ecosystem.
Some innovations are successful because a new technology improves collaboration with supply
chain partners and helps allocate business risks more appropriately, making cost reductions
possible. OLA has developed a collaborative ecosystem in which the driver assumes the risk of
winning rides, while the platform helps minimize that risk through the application of big data.
This way technology and business are integrated. This does not require much explanation in
our case because OLA’s business is based on technology, specifically mobile technology.
Initially, they offered both Web-based and mobile-based bookings. But, like some e-retail
companies such as Myntra, OLA stopped web-based ride bookings once it had crossed a
critical threshold of customers and made app usage compulsory. The fact that the entire
business runs because of mobile technology shows that technology is an integral, indispensable
part of OLA’s business model.
The fifth condition Kavadias et al. (2016) mentions an agile and adaptive organization.
Innovators sometimes use technology to move away from traditional hierarchical models of
decision-making in order to make decisions that better reflect market needs and allow real-
time adaptation to changes in those needs. The result is often greater value for the customer
at less cost to the company. The platform also creates agility through an internal decision-
making system that responds to market changes in real time. This lets OLA apply usage-
based pricing and direct drivers to locations where the probability of finding a fare is high.
In addition, sharing economy is an integral part of their business model and is illustrated
by the fact that OLA recently launched OLA Share, where you can share a cab with others
just like you do with Bla Bla Cars or Go-Cars. The only difference is Bla Bla or Go-Cars are
for inter-city or inter-regional commuting whereas OLA Share is for urban, local commuting.
This has furthered lowered the costs of taking a cab ride. The successful expansion of OLA
has been based on a deceptively simple use of modern technology, in which the initial
bookings, the route to be taken, the calculation of fares, and finally payment, are all made by
means of a smart phone app. In operational terms, this technological base is combined with
the economic concept of the ‘sharing economy,’ which aims to bring suppliers and
consumers together by making use of spare capacity. In the case of OLA, this means that,
given that a motor vehicle is typically idle for over 90% of the time, the driver of a private
car can download the OLA app and be put in touch with customers who are using their own
OLA smart phone app. Technology combined with the ‘sharing economy’ should mean a
more efficient matching of supply and demand than for traditional taxi services. In addition,
OLA employs variable pricing that can be applied to deal with periods of peak demand,
while both driver and customer provide ratings for each other. The ability of OLA to
challenge and often undercut the incumbent taxi operators has inevitably caused fierce
opposition to its services in many countries. Particularly for regulatory purposes, OLA
seeks to differentiate itself from its rivals by describing itself as a technology platform
rather than a taxi company, while it classifies its drivers not as employees, but as ‘registered
partners.
IJIS So this detailed description makes it clear that OLA performs pretty well on satisfying all
conditions as enlisted by Kavadias et al. (2016) for a greater contribution towards
revolutionising taxi service business in India.

6. Conclusion
This paper highlights how OLA has been able to gain competitive advantage in the Indian
emerging market by developing an innovative business model with its distinctive features
of personalised customer service, asset sharing, usage based pricing, collaborative
ecosystem, agile and adaptive organising and successful expansion strategies. The
contributions of our work can be summarized as follows. Theoretically, it adds to current
knowledge concerning the theoretical foundations and antecedents of business model
innovation as a competitive advantage. This significantly extends the literature that has
predominantly focused on competitive advantage without considering a business model
innovation perspective. Furthermore, the understanding of the intricacies of business model
innovation can be of great concern to existing and prospective managers and entrepreneurs
of emerging markets.
As the study highlighted that business model innovation is a source of not only value
creation but also competitive advantage, managers can thus target the emerging markets
more efficiently. In a way the practitioners or future entrepreneurs can ensure the
competitive advantage of their ventures by ensuring the proper knowledge, performance
and follow up of the process of business model innovation. Nevertheless, the analysis from a
single firm limits generalizability of study results. This accordingly furnishes a need for
future research in this direction. There is a need to further validate the results among other
such firms who are driven by business model innovations in emerging markets.

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Corresponding author
Mir Shahid Satar can be contacted at: [email protected]

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