Over the last decade, the rising popularity of the sharing economy has extended to ride-hailing services, which has transformed the way we commute globally.
Burgeoning demand for this new travel modality is already reflected in the industry’s growth forecasts, especially in Southeast Asia. The region’s ride-hailing industry is expected to grow at a compound annual growth rate (CAGR) of 6.3 per cent – almost double the global average.
Uber and Grab have long established themselves as major ride-hailing players in Southeast Asia. But despite sharing an industry, both have very different approaches to research and development (R&D).
Grab’s approach appears to be more market-driven, led by insights from customer feedback. In contrast, Uber seems to be more science-driven, emphasising the breadth of its patent portfolio and aiming to diversify its patent base across multiple technological fields.
There is a wealth of academic literature exploring the relationship between intellectual property and corporate technological strength. In the case of Grab and Uber, patent applications highlighted the difference in strategies both adopted to grow in Southeast Asia.
With the acquisition of Uber’s Southeast Asian operations by Grab in March 2018, it appears at first glance that Grab’s market-driven R&D has given it an edge. This raises an interesting question: is market-driven or science-driven R&D more important as a competitive enterprise strategy?
Grab’s ascension story
In 2012, Grab started as the undeniable underdog compared to Uber. However, it grew quickly and soon cemented its position as a leading competitor, culminating in its Uber acquisition in Southeast Asia by 2018. In that year, both Grab and Uber had comparable market shares with active users of around 25 million and 22.3 million, respectively.
One key lesson derived from Grab’s continued success was the importance of localisation as a strategic approach to effectively engage diverse, fragmented markets over the long term. This was the forefront of Grab’s plan, and the company focused on developing a sound understanding of customer preferences and making intelligent investments in infrastructure.
Choosing a differentiated strategy enabled Grab to secure a broad swathe of the market. By 2021, Grab had surpassed its predecessor and was the category leader in Southeast Asia – top-ranked in mobility, delivery and e-wallet services.
Also Read: What you ought to know ahead of Grab’s IPO
Patent filings as a leading strategy indicator
Patent filings can be a leading indicator of future service offerings in different geographies. Using PatSnap’s Innovation Intelligence Platform, we reviewed the patent applications of both Grab and Uber between 2015 to 2017, noticing specific differentiators between both companies that influenced their respective growth strategies in Southeast Asia and eventually led to Grab taking the lead.
Based solely on the number of patent applications, Uber appeared to have an overwhelming advantage. They had a significantly higher number of patent applications per year, including an all-time high of 19 applications in 2016 alone, while Grab only had one patent in that year.
Before their acquisition, Uber submitted 38 patent applications within Southeast Asian jurisdictions. In comparison, Grab applied for only 15.
However, numbers alone do not tell the whole story. While Uber had more patent applications before 2018, Grab focused on tailoring its applications to meet local consumer needs, adjusting its services based on local market conditions, and engaging in collaborative R&D with market experts across Southeast Asia.
We also found that while Uber’s applications were principally in Singapore, Grab was diversifying its patent applications more broadly, with some 30 per cent submitted across other regional jurisdictions.
Uber’s hesitation could be attributed to regulatory differences and frequent changes in rules across Southeast Asian countries for ride-hailing. The Philippines first introduced new regulations in May 2015 and temporarily ceased services in some regions.
Malaysia’s regulators only passed bills to legalise ride-hailing in 2017, while Indonesia changed their regulations several times in 2017 and limited ride-hailing rates in 2019.
These cases highlight the uncertain legal environment the industry is exposed to, possibly affecting the tradeoff between potential returns on investments and securing a presence in local markets through the protection availed by intellectual property rights.
But despite that, Grab’s patent presence demonstrates its keen appreciation of and strategy in approaching Southeast Asia as a diverse set of 10 different markets. The company tailored its offerings to address local needs and forged ahead with its patent applications, which highlights its relative strength against Uber in these markets.
As we reviewed significant patents across two critical dimensions in the ride-hailing industry– the provision of services and requests for such services– it was evident that Uber focused on covering the bare business essentials in its applications, which was matching customers with suppliers of ride-hailing services. In contrast, Grab recognised market gaps and created value by striving to plug them.
It focused on identifying under-supplied regions and availing relevant information to drivers. It even applied for patents covering technologies to forecast request patterns in specific geographical areas to enhance driver reliability and availability further.
Unsurprisingly, Grab’s patent applications have been a leading indicator of its rising valuations in later fundraising rounds.
Also Read: The 27 Indonesian startups that have taken the ecosystem to next level this year
Letting the results speak for themselves
Patent filings may be public, but what is unseen is the work engaged before that stage– the activities are undertaken with a keen eye to customers’ preferences, and tailored solutions thoughtfully crafted to address them. We believe that Grab’s success can be attributed, at least in part, to its IP strategy– as reflected by its patent applications.
While the outlook for the ride-hailing industry is promising in Southeast Asia, it is clear that – as with all industries – the region’s fragmented markets and unique dynamics require an in-depth understanding of a diverse set of local needs.
Grab’s patent filings reflected its decision to pursue a localisation strategy that aimed to provide customised solutions across each market, instead of expecting the market to adapt to the solution.
The results speak for themselves. Today, Grab is Southeast Asia’s largest ride-hailing company and operates in over 465 cities in eight countries – and this is only the beginning of more to come.
This article first appeared on Vertex Holdings’ Newsroom.
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