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Julie Devoll, HBR
Welcome to the HBR Quick Take. I’m Julie Devoll, editor for special projects and webinars, and today I’m joined by Herman Widjaja, the CTO of Tokopedia, who’s with us today to offer insight into how Tokopedia leverages its digital infrastructure. Herman, thank you so much for joining us today.
Herman Widjaja, Tokopedia
Hi, Julie. Thank you for inviting me.
Julie Devoll, HBR
Herman, tell us about Tokopedia and how it is driving innovation in Indonesia.
Herman Widjaja, Tokopedia
Tokopedia is an Indonesian technology company founded in 2009 by William Tanuwijaya and Leontinus Alpha Edison. Both of them started from a very humble beginning, and they were raised and born in the remote areas of Indonesia. A bit about Tokopedia itself—the company’s name combines two acronyms, actually: toko, which is the Indonesian for “shop,” and “encyclopedia.” We are hoping that Tokopedia can be the encyclopedia for shops in Indonesia. A little background—seeing how Indonesians, who live in the world’s largest archipelago, are hindered by distance and technology despite having equal opportunities, Tokopedia made it its mission to democratize commerce in the country through technology. The lack of trust toward online transactions and unequal access to goods and services were what Tokopedia sought to address when it was cofounded in 2009.
Naturally, merchants move to big cities for better markets, while consumers have had troubles in actually finding access to goods. Assume that social networks and forums were there, were very popular, but they were not really fixing the problem. There were a lot of issues, like no proper inventory management systems [or] payment processing [and] no clear payment processing services, which end up causing online fraud. Many people ended up sending money or transferring money, but the item was never sent. The goods reached the buyer—or maybe the other way around—the goods reached the buyer, but the payment had never been completed. Cutting through the fog, William Tanuwijaya and Leontinus Alpha Edison realized that there was a need for a trusted intermediary between sellers and buyers to bridge their transaction. On August 17, 2009—by the way, August 17 is Indonesian Independence Day—on August 17, 2009, Tokopedia was launched and became that intermediary.
Through the Tokopedia marketplace, the company offers a free C2C business platform for merchants and buyers. It also offers fintech payment and logistics services. As [of] today, Tokopedia is the largest marketplace in Indonesia. We are serving more than 11 million merchants in our platform, in which most of them are brand-new entrepreneurs. We are able to reach 99% of districts in Indonesia. We are able to serve more than 550 million products with transparent pricing. And what’s cool about this is we have contributed more than 1% of Indonesian GDP. So that’s a bit about Tokopedia and where we are.
Julie Devoll, HBR
What were some of the IT and business challenges that Tokopedia needed to overcome to accelerate digitalization and become a digital leader?
Herman Widjaja, Tokopedia
Tokopedia was founded not as an e-commerce company; we were founded as a technology company with a mission to democratize commerce through technology, so technology becomes a very, very core critical component that actually served the accelerations. We have five core pillars in the technology team that became our guiding principles in our day to day.
The first one is that we believe in strengthening the platform. For us, platform stability, quality, and reliability remain our core mandate to sustain the Tokopedia business. Being able to run 24/7 is not only important but very critical and crucial to the growing [number of] customers, merchants, and partners in our ecosystem. The balance between moving fast and high quality needs to become a cultural transformation within the technology team.
The second one we call strengthening the security and privacy posture. Cultural transformation of security first and privacy by design is crucial and critical, especially within the Indonesian market. It is never too early or is never too late to embark on this journey. We just created a new office called the data protection and privacy office, and also a security office. We are aiming for Tokopedia to have world-class standards in security and privacy.
Number three, focus on consumer innovation—focus on consumer technology innovation. What is innovation? For me specifically, innovation is a by-product of a strong understanding of our customers—in this case, our buyers, our merchants, our partners, and our employees. It also is our willingness and empathy and passion to [use] our growth mindset to solve their problems and our agility and ownership to make it happen.
The fourth thing is AI-first and data-driven transformation. Data-driven transformation is the key to unlock AI-first vision. In [the] data office, they play a very crucial role in being the champion and catalyst for data-driven cultural changes at Tokopedia. We need to leverage data to make informed business product operation and technology decisions. Access to high-quality, secure, and mature preprocessed data is very important for growth mindset analytics to happen.
Finally, number five, one of my favorites, is financially optimized execution. As a digital leader, we don’t only focus on launching the coolest feature or launching the latest and greatest product. Those are great, but we also need to focus on adapting a good financial sustainability model. We need to identify the unique economics of our platform and ensure financial sustainability and growth.
Let me just recap the five things that become our guiding principles in the technology teams at Tokopedia. Number one is strengthening the platform. Number two, strengthening the security and privacy posture. Number three, focus on consumer innovation. Number four, AI-first and data-driven transformation. And finally, number five, financially optimized execution.
Julie Devoll, HBR
Tell us about the key elements of the digital infrastructure you built to enable this kind of growth and then sustain it going forward.
Herman Widjaja, Tokopedia
At Tokopedia, we are committed to giving our customers peace of mind, specifically in terms of reliability, scalability, security, and trust while using our platform. Let’s talk [about them] one by one. To ensure security, we invest in reliable monitoring, advanced sensors, and necessary security measures. To ensure reliability, we built and maintain a powerful, robust infrastructure capable of handling an ever-increasing number of transactions while ensuring a favorable customer experience. To ensure scalability, we built a flexible digital infrastructure that can scale on demand where businesses require. I think we continue believing in the make-it-better and a growth mindset in terms of our platform so that at the end of the day, our customers, merchants, and partners can feel secure. They can feel we are reliable. They can feel that they can trust our system while scaling and growing at Tokopedia.
Julie Devoll, HBR
What role did Equinix play in bringing together and interconnecting your digital infrastructure?
Herman Widjaja, Tokopedia
Equinix enabled us to connect our multi-cloud digital infrastructure and services via secure, reliable, and scalable interconnection. This allows us at Tokopedia to scale hybrid deployments easily to achieve network agility while directly connecting partners and providers easily, securely, and reliably. This means our customers experience zero disruption during their online transactions, while new technology like AI enables us to understand buying patterns and needs. We also leverage the Equinix platform to avail virtual network services. These virtual network services run on a modular infrastructure platform, which allows instant deployment and interconnection of network services.
Julie Devoll, HBR
Herman, what will Tokopedia look like in five years?
Herman Widjaja, Tokopedia
As a homegrown Indonesian company, we will continue to focus on Indonesia, serving the largest archipelago in the world. Just to give some perspective for everyone, Indonesia has the fourth-largest population in the world. The first to the third countries—U.S., China, and India—their markets are already fully digitalized. Now, Indonesia is quite an exciting market, where we need to be the next digitalized market. This means that we will continue bringing customer experience of intracity sales in tier-two and tier-three cities to the same level as those in big cities like Jakarta, Surabaya, Semarang, and those areas, with a hope to enable people to get anything they want locally at a cheap price with faster delivery times.
Julie Devoll, HBR
Herman, this has been a great discussion. I want to thank you so much for joining us today.
Herman Widjaja, Tokopedia
Thank you, Julie.
Julie Devoll, HBR
For more information about how to create your digital advantage, visit equinix.com.