Zantrik Founder and CEO, Al-Farooque Shubho, discusses Zantrik’s transition to a new business model, the behind the scene of a successful pivot, developing strong competitive moats, how to develop processes that work, the importance of withholding yourself from taking action to see the bigger picture, the importance of reflection, and much more.
Here are a few highlights from our conversation:
Initially, we thought that releasing an app and connecting customers with garages are the solution. But that was not the solution. Because most customers have garages they know. Yes, they could take services comfortably using an app but the quality assurance problem was not getting addressed. That's when we realized that probably we were trying to solve the symptoms, not the root problem. We realized that by solving symptoms we would not be able to move forward. We then did some studies to find some models through which we could solve the pain points of both garages and customers.
We tried to come up with a model that would solve the root problems of these two parties. We designed a Zantrik Standard model, which would standardize some garages with a standard service model. These garages will have unified decorations. Anyone will be able to spot that this is a Zantrik garage. These garages will have a standard pricing chart which will have all the pricing of car-related work listed on it. If you go to one of our Zantrik garages nobody will be able to deceive you. The price for a certain solution is standard across these garages.
We have made some important decisions to engage customers and become part of their daily needs. We have worked hard to identify where customers face severe problems.
Companies don't need to pay us anything for using the Zantrik Fleet. Our real business is not software. Our real business is the standardization we are putting together, and the ecosystem we are building. Zantrik Fleet users will go to the Zantrik garages and we get a commission from there.
When we try to solve a problem, we often pay more attention to symptoms than the main problem. We rarely pay attention to finding and solving the root problem and we don't do enough research. This is a huge lesson for me. As a result, we ended up investing in research and understanding the core problem.
I stay away from the action for a good amount of time every day. I don’t go to the office every day. I always want to have a bird's eye view. If I remain busy in action, I can't see where the problems are.
Future Startup
Tell us what are you busy with at Zantrik these days?
Shubho Al-Farooq
Right now we are going through a transition. It has been two years since we launched. In the first year, we acquired customers mainly using digital marketing - because it is cheap and easy and grew on an average of 30% MoM. We were doing good business. Everything was going great. But there was a problem - customers and the garages both were trying to cut us off.
Garages tried to cut us off because they could avoid paying us a commission and build a direct relationship with the customers. They requested customers that if you work directly with us, we could give you a discounted price. Customers were interested because they could feel that “if I go through Zantrik then Zantrik has some benefits in it”. So they thought “if I directly work with the garage I would be able to save some money”.
We used to generate over 1 crore taka orders per month at the time. But we could only execute a small percentage of that - about BDT 15 - 20 lakh taka a month, which means almost 80% of orders were not going through us. Many of these orders were getting executed outside of our knowledge between customers and garages. Our system could not track and account for that.
We were spending on marketing. We were engaging manpower. We were generating good orders. But at the end of the day, officially our execution was happening at about 20%. Consequently, we could not meet our revenue targets.
Eventually, we realized that this is probably not the right model. After much thought, we decided to fail early. Many companies would have moved forward with the model and tried to raise money and grow. In fact, many are already doing it. But we realized that this is not going to work in the long run and we will be an eventual failure.
We then did some homework on understanding why customers and garages were trying to cut us off and how we might stop both from happening. We spoke with garage owners across the cities and came to learn that they have some problems.
Most garages in Dhaka are temporary in nature. They need to move frequently. They rent garage space. Take some loans. Invest in the development of the garage. In two years, if the owner of the space comes and tells them that they would build construction on the site, they have to leave. It means they need to move to a new location and start from zero. As a result, these garage owners are always paranoid to ensure the return. They set goals like “if I invest 50 lakhs taka, I have to ensure the return in a year or two. Only then we will be able to sustain”. He gives tasks to everyone in his team to ensure the return of his money no matter what. As a result, customer service deteriorates, quality hampers, and customers suffer. No matter what we tell them, they are bound to do these things. Because they have no other option. This is one problem we have identified.
Then we focused on customers. We interviewed customers from different segments to understand what their pains are. We found some fascinating insights such as customers feel that there is no pricing standard. Different garages charge different prices and often the differences are huge and unjustified.
When customers go to a garage with a problem they often come back with more problems because technicians often suggest multiple problems so that they could charge more. Customers usually don't believe the first garage and then go to another garage, which often scares the customers with even more problems. We already know why garages do this because they have revenue targets. Customers often become confused because they are not automobile engineers. There is a limited option to check authentically the health of your car.
After-sales experience is bad. For example, you fixed your car and went back. But after a few months, a set of new problems came and you found out that the spare parts used last time were of low quality, and the technician that worked was unskilled. But you could not prove any of it. Now you get to spend more money to fix even more problems.
We identified three problems from the customer's point of view: 1) lack of standard in pricing 2) lack of quality assurance, 3) lack of after-sales service standards.
For garages, the biggest problem we identified is: since they need to move frequently, they are bound to work to achieve a target regardless of customer service and quality.
Initially, we thought that releasing an app and connecting customers with garages are the solution. But that was not the solution. Because most customers have garages they know. Yes, they could take services comfortably using an app but the quality assurance problem was not getting addressed. That's when we realized that probably we were trying to solve the symptoms, not the root problem. We realized that by solving symptoms we would not be able to move forward. We then did some studies to find some models through which we could solve the pain points of both garages and customers.
We tried to come up with a model that would solve the root problems of these two parties. We designed a Zantrik Standard model, which would standardize some garages with a standard service model. These garages will have unified decorations. Anyone will be able to spot that this is a Zantrik garage. These garages will have a standard pricing chart which will have all the pricing of car-related work listed on it. If you go to one of our Zantrik garages nobody will be able to deceive you. The price for a certain solution is standard across these garages.
These garages will use Zantrik App’s “Digital Job Card” feature to manage the life cycle of each maintenance work. This will allow vehicle owners to review the job card in a transparent manner using the Zantrik app. Every spare part, every task, and every service item will be listed with their price and warranty offerings. Vehicle owners can review this himself/themselves, can accept or reject it, and also s/he can send it for Zantrik’s review before approval. Once the job card is approved, the job is delivered and the payment can be made right within the app.
Third, vehicle owners can claim a warranty later if anything goes wrong using the built-in feature in the app. The warranty claim is accepted or rejected right within the app.
Now the question is why should garage owners join us?
We have garages of different levels - basic, medium, and premium. Now, basic level garages probably earn on average 100 taka, for example. Mid-level garages probably charge on average 200 taka. Premium garages charge 300 taka on average.
We are developing a pricing model that is 150 taka on average and will be applied to the basic level garages. But we are working hard to improve the service quality which is better than the mid-level garages. As a result, customers will get service of over 200 taka quality at 150 taka and garages will be earning more by giving better service with the same investment. It will be beneficial for both the garages and customers both. We are taking a 20% commission from the garages. Even after paying 20% commission, they can keep 120 taka. This is a win-win for the garages and us.
We don't need to generate customers. Whoever goes to these Zantrik garages, make payment at the pricing we fixed and we get a commission. We don't need to worry about customers or garages cutting us off because there is no question of cutting here. If you go to the garage and take service and make the payment, it will go through our system anyway.
With this model, we are promising to the garages that if you work in this model, we will generate 16 times more business for you than whatever you are getting now. The reason is simple. We are creating a standardization. There is no standardization in the automobile maintenance industry in Bangladesh today and we are filling up this gap.
This puts us on a pretty solid footing with both the customers and garages. Zantrik garages will give better service. For garages, customers have no reason to go to any other garage but yours because your service is better than others.
We will generate more customers for garages through various collaborations and initiatives. It doesn't really matter if you have to move your garage somewhere else because your customers are all on my platform. You are Zantrik Garage. You are MacDonald's for garages. You don't have to worry about customers. Wherever you go, customers will go there. This is something that has impressed these garages. We are piloting with 10 garages soon. Our target is that we will work with 100 garages by next year.
The beauty of this model is that we don't solely rely on digital marketing. In fact, our customer acquisition cost ideally comes down to zero because customers will prefer to get service from Zantrik garages.
This is a highly scalable business model. It can solve the root problem of the car maintenance problem rather than symptoms.
In the last 5-6 months, we have been working on this model. During this period, we did not run any sales activities. We did not want to burn ourselves. It does not make sense to burn money in the wrong model. We have worked hard in the last few months and we believe we have found the heart of our model. We are now working on how to generate sales from different channels.
The second important thing that happened in the last six months is that we have become much more tech-focused. We have tried to use technology and process innovation as the building blocks of our business.
Let me tell the consumer story of our technology development. We have a trend in our market that we will develop and launch an app and it will just work. It will just connect customers and be used by millions of customers. But in reality, it does not happen that way.
Customer story is that most products are not designed considering the consumer engagement issues as a result consumers don't end up using the app in the long run. Uber and Pathao are exceptions because these are in daily needs. Like it or not you have to use these. But the service marketplaces like us, we are not in the daily needs of people. We are not even in the weekly or monthly needs.
Let me tell you about car maintenance. You need to maintain a car on average once every 3-4 months. As a result, people tend to forget us. Yes, they try us out and feel good about it. But in 3-4 months, they forget about us. They don't keep our app on their phone either.
We have made some important decisions to engage customers and become part of their daily needs. We have worked hard to identify where customers face severe problems.
The people who own cars usually employ drivers in 90% of cases. They send drivers to refuel and fuel pilferage is a problem that everyone knows but there is no solution as yet. We have designed a scalable tech solution to address this challenge. Using this solution you can validate whether the driver refueled the same amount that you gave him. With this, we are solving a long-term problem for our customers and we are entering almost into the daily needs of our customers. This will be useful to everyone from individuals to transportation companies to businesses that have vehicles. We are going to release it shortly.
We have created a year-long maintenance calendar for all kinds of vehicle maintenance. We are launching the next version of our app with these features. We have been working on this for the last year or so.
In B2B, the companies have major pains. There are fuel pilferage issues and there are maintenance issues. Generally, in big corporations, there are independent departments for managing automobiles and transportation. These companies end up spending almost three times what they should spend generally. That's one problem. There are other problems such as bureaucracy, which slows down almost everything.
To solve these problems, we have designed a fleet maintenance solution. We have created a system that can completely bypass this old system. We are introducing a subscription model where you pay us a monthly fee and we will take care of your vehicles whenever there is a need.
Apart from that, we will provide a regular maintenance solution based on a yearly maintenance calendar. You can list all their automobile assets using the fleet management solution. You can schedule all their maintenance using the yearly calendar. You can track everything related to vehicle maintenance. You can track all the data related to vehicles and fuel costs, location of different vehicles, driving score, and most importantly, daily refueling. For example, the driver reported that he refueled for 1200 taka. Our backend AI engine would validate whether it is authentic or not.
We launched this fleet maintenance system a few months ago. We have already onboarded 8 B2B customers. We have 30 more in the pipeline. We are expecting a huge response.
Our goal for 2020 is to establish standardization in automotive maintenance and create repeat customers since we are creating highly engaging products. Our core strength is not an app or software. We are standardizing an ecosystem and letting people use that standard service through an app or fleet management solution. We have received invitations from multiple countries but in 2020, we aim to focus and solve this problem in Bangladesh.
Automotive services, refuel, maintenance, and driver combinedly is a USD 8 billion market in Bangladesh. The standardized platform that we have been building is going to affect every aspect of the automobile industry. If we can build a standardized platform, we will expand to all these verticals. We will build vehicle sales platforms, will build the driver marketplace, cashless fuel, and everything eventually. For us, Bangladesh is a big enough market to disrupt.
We don't really believe in the growth bubble hype. We want to build a profitable business at scale. This was the reason we kept our sales stopped and focused on fixing our business first. We are now launching these products as well as our sales process.
Future Startup
We last spoke with you in 2018. Now your model is completely different from what it was. Could you please tell us about the transition to your new model? More on the side of the execution of this pivot.
Shubho Al-Farooq
In 2018, our business was growing. From an investor's perspective, everything was working. But we could see there is cancer and to grow, we have to fix it. We were close to breakeven and were having an average of 30% growth. This was around June last year. But we decided to stop all these and remodel the entire business. I had to convince our investors and team.
Future Startup
But you had to give up on your existing business at the time? What was the size of your business at the time?
Shubho Al-Farooq
Yes. We're generating over one crore taka orders every month, which is exciting for a one and a half years old startup. Our final execution was about 20-25 lakh taka a month. From there our net revenue, which was roughly 20%, was about 4-5 lakh per month. But we were spending about 10 lakh taka per month. The unit economics was not right. Since the unit economy was not right, we had to stop. We could continue working and raise more money and so on. But it was never going to sustain. We would just end up like WeWork.
Future Startup
Many companies fail to make this kind of transition successfully. To make this transition successfully, many things had to happen at once. You can convince your board and team, have enough money in the bank so that you could stop your business and still be able to invest in new product development and so on.
Shubho Al-Farooq
The key challenge was convincing people and remodeling the entire business model. We had some runway and were in the process of closing a new deal with Bangladesh Angles. Fortunately, it was closed successfully. We were already in the Accelerating Asia program and we could raise some $150K from there. We had the strength to remodel our business despite having discontinued our old business model.
Future Startup
By the time you decided to make the transition, all these things already happened and you already knew that you could make the transition successfully?
Shubho Al-Farooq
I had that confidence. Fortunately, our partners and stakeholders including Accelerating Asia and angels from our Angel Network were convinced and understood our vision. They are senior people, smart and they understood the long-term game. It is a 20 years game and not a 2-3 year game. From that vision, this is the right thing to do. They have been supportive.
Future Startup
How big is your team now?
Shubho Al-Farooq
We are a team of 35 people now. Our tech team size is 10 people which is pretty big compared to our size. The business development team is also pretty big. By the end of this year, we will be close to 50 people.
Our other important strategy is to raise the minimum amount of money. Our first institutional investment, we raised that money only 4 months into our launch, we took half of what they wanted to invest, which is probably uncommon. We always wanted to follow a lean approach and do the best with that minimum amount raised.
We believe if we have a business model that works, we will always be able to raise. This is not an issue. If my model is not right, it does not make sense to raise a lot of money.
Future Startup
How was your Accelerating Asia experience?
Shubho Al-Farooq
It was a wonderful experience. Number one, we got a birds-eye view from there. We could see how we look like a market from the outside. How others see our industry, opportunities, ecosystem, our country, people, etc. We started to understand these things. Since we started to understand, we also came to learn how we should align our future vision.
Second, we met with founders and mentors from across regions and learned how they operate. In fact, the idea of standardization that we are pursuing now, part of the inspiration I got from some other startups. I learned a lot about how to grow in the B2B segment by solving problems, how we can enter daily needs, and how to solve a root problem by using technology, etc. I made new connections that have helped in raising money. Accelerating Asia is a good opportunity for us.
The other aspect is that after we entered the program, we have been able to build a positive perception about Bangladesh which was not there before. They were so impressed with our performance that they took five companies in their most recent cohort from Bangladesh. They are super impressed with Bangladesh. This is likely to have a huge impact on our ecosystem because Singapore is considered one of the important hubs for startups in this region.
Future Startup
How do you find the garages or how do garages find you?
Shubho Al-Farooq
We go to garages now. We are required to entice them to join our model. We expect that when these garages will be able to grow and build businesses, other garages will come to us seeing their success. In these three months, our goal is to invest in these garages. We are even helping them get loans through financial organizations. We are going into a deep integration with these garages. We are empowering them. Eventually, we expect other garages to come to us.
Future Startup
What does your agreement with garages look like?
Shubho Al-Farooq
They give us a 20% commission for every work they do for us. This is an unlimited agreement. They will continue to pay us a commission to the date they remain with Zantrik garage. If someone does not want to continue with us, we will remove our branding and remove them from our app.
Future Startup
How does your B2B fleet maintenance solution work?
Shubho Al-Farooq
We are getting good responses from B2B space. Everywhere we go people are excited because we are solving some root problems. We help companies fix inefficiencies and frauds in their systems. There are many players in the market offering tracking and similar services but they are probably not solving the real problems. Their real problems are the ones I mentioned earlier where they are losing crores of money.
Our entire system is free. Companies don't need to pay us anything for using the Zantrik Fleet. Our real business is not software. Our real business is the standardization we are putting together, and the ecosystem we are building. Zantrik Fleet users will go to the Zantrik garages and we get a commission from there.
With this offering, no one can replicate us. This is a customer acquisition effort for us. We are creating a strong moat. There will always be competition in every business. We are making it extremely hard for people to copy us and difficult for competitors to enter our verticals.
Future Startup
Do you see there will be a perception problem for being a free fleet management software?
Shubho Al-Farooq
We explain to our customers why our app is free and how it makes sense. It is actually not free. However, it may create some perception problems and we may come up with some premium features in the future. For example, fuel pilferage is a paid feature where we will be charging a certain percentage for every check because we are building an AI-driven system that will figure out the amount from images. We will charge 2% per transaction.
We are also releasing an AI-based app “Drive Safe” which can detect whether the driver is feeling sleepy and activate the fire alarm till he wakes up. This can prevent road accidents caused by falling asleep while driving. Worldwide this has a multi-billion dollar market, and we are going to launch this solution globally in a subscription model.
We have a long-term vision. By 2030, there will be one billion vehicles in the world. Of these, only one million will be smart. The rest of the vehicles will be of this generation. Smart cars will be smart i.e. driverless, and so on. These cars will be self-aware. But what the dumb cars will do? Our vision is to create products and solutions that will help these dumb cars to become smart about their maintenance and driving performance. With this, we want to expand across the world. Bangladesh is our testing ground.
Future Startup
What are some important lessons you learned in the past few years?
Shubho Al-Farooq
1. When we try to solve a problem, we often pay more attention to symptoms than the main problem. We rarely pay attention to finding and solving the root problem and we don't do enough research. This is a huge lesson for me. As a result, we ended up investing in research and understanding the core problem. This is the most important lesson for us.
2. The second most important lesson was to set our mission right. We ourselves were not that clear about what should be our five and ten years mission and how would we achieve those. We have worked on it and we now clearly know what we aim to do in the long run and how we will do it. We have converted our ambition into almost weekly goals.
We have designed tools to introduce the process in our organization. If we are not process-oriented, we can't set standardization for other people. We have become process-oriented in the last year.
Future Startup
How do you ensure everyone is maintaining the process?
Shubho Al-Farooq
I ensure that everyone in the team knows our mission. Everyone is excited about that mission and no one has any confusion. This is my job. I also make sure that if anyone has a question, I research the answer and reply to that person. I make sure that s/he is convinced or I learn something. I refine my plan and process as per their feedback and the learning process.
Number two, every problem that happens, my team knows that this is an opportunity. We then work on the problem and find out how to rectify it and ensure that it would not repeat in the future and how we can turn it into an opportunity.
Future Startup
How do you stay motivated and start your day in the morning?
Shubho Al-Farooq
I think setting the mission is important. You have to have a mission that has a huge impact - real impact. When I know that I'm doing something that could change the world someday, that's enough motivation for me no matter what happens. I ensure that I'm not alone. Everyone in my team works with the same level of excitement.
Future Startup
How does your day begin?
Shubho Al-Farooq
In the morning, I work on the tasks for which others depend on me. I stay away from the action for a good amount of time every day. I don’t go to the office every day. I always want to have a bird's eye view. If I remain busy in action, I can't see where the problems are. If I stay away from the problems for a good period of time and keep a bird’s-eye view, I can see where the problems are and can think clearly to offer solutions. This is one of the things that have helped me evolve in the last one and a half years to execute a transition of this scale.
When you are always busy doing, you can't think and see problems. If you remain busy with small things, you miss out on higher perspectives. This is why I stay away from actions on purpose, that helps me to see things.
Future Startup
What are some mistakes you have made that you would want other founders to avoid?
Shubho Al-Farooq
1. Trying to disrupt an industry without doing enough research and domain knowledge about the industry. We had a lot of assumptions.
2. Launching sales/marketing activity without finding the right product-market fit.
3. We should have involved mentors in understanding how to better use the money after raising funds. We understand now that we can get 4 times ROI from the same spend as we did before.
