Uber for Tractors is a catchy phrase for a business model, but is it any different from the popular ridesharing business model of Uber? This curiosity was the beginning of professor Priyank Arora’s collaboration with Hello Tractor, a technology startup with operations in 12+ countries in Africa and Asia. Like Uber, Hello Tractor is a sharing platform that allows farmers to request mechanization services from tractor owners who are willing to use their equipment to provide such services. Since its inception in 2014, Hello Tractor has helped 2.5 million farmers gain access to mechanization services, which are otherwise out of financial reach for these cash-contained and smallholder farmers.
Priyank Arora, an associate professor of management science in the Moore school, and his collaborators (Dr. Can Zhang at Duke University and Dr. Olufunke Adebola at Deloitte) initially worked on developing a routing tool for Hello Tractor to help the tractor owners serve geographically dispersed service requests in a profitable manner. This data-driven tool reduced the need for tractor operators to crisscross broad geographies, and hence, improved their revenues while reducing expenses. The tool was a hit at Hello Tractor!
During the development of the tool, Arora and his collaborators learned of distinct set of challenges faced by Hello Tractor. Poor internet connectivity, limited digital literacy, and low familiarity with or trust in app-based services are major barriers to platform adoption. Upon further investigation, the research team observed a similar pattern in the challenges faced by several other platforms operating in these low-income regions and rural areas. More interestingly, they observed a commonality in how the platforms overcome these hurdles. In particular, the platforms rely on human intermediaries—often referred to as booking agents—to reach customers, assist with service requests, and facilitate service fulfillment.
Eureka! The research team realized that this a key and significant difference in the operations of Uber for Tractors and Uber for Ridesharing. Looking at the two business models purely in terms of economics, the researchers noted that while ridesharing platforms have to balance price charged to riders (customers) and wages paid to drivers (service providers) when determining their own profit, sharing platforms that rely on booking agents have an added need to balance wages paid to booking agents who actually bring in the demand from customers. Since booking agents can eat away from the profit earned by the platform, is it always beneficial for such platforms to rely on booking agents?
This question guided the research efforts of Arora’s research team. Using management science toolkit, including optimization and game theory, they constructed a mathematical model to capture interactions between the platform, service providers, booking agents, and customers. They relied on conversations with leaders at Hello Tractor, including its founder and CEO, Jehiel Oliver, to validate the practical applicability of their model. Convinced that their model captures the ground realities in a meaningful manner, they utilized it to understand whether the use of booking agents generates value for all stakeholders on these platforms.
Their analysis showed that the answer depends on how many service providers are registered to fulfill service requests on the platforms, and how difficult or easy it is for the booking agents to gather demand from multiple customers. Surprisingly, the presence of booking agents can hurt the customers if it is less costly for such agents to collect demand—this is because the platform can raise price for customers without losing a lot of demand overall. The researchers recommend that governments should consider obtaining price commitments from platforms before implementing societal interventions to make demand collection easier.
Their research work also offers guidance on how and when the platforms with booking agents should manage pricing and wage decisions quite differently as compared to platforms without booking agents. Using real-world data from farm equipment sharing context in Nigeria, they show that a Hello Tractor-like platform should be cautious about applying conventional wisdom from an Uber-like platform, even though it may be referred to as “Uber for Tractors.”
For additional details, see Arora’s paper that has been accepted for publication in the Manufacturing & Service Operations Management journal, which is a top-tier research outlet targeted by management science scholars.