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BOOK REVIEW: Behind the Uber success story

Wild Ride: Inside Uber’s Quest for World Domination, by Adam Lashinsky

THIS is an important book for all entrepreneurs, investors and those interested in the evolution of the business of applied technology - not to mention anyone interested in the inside story of Uber’s rise and quest for world domination.

Adam Lashinsky is assistant managing editor of Fortune magazine and a New York Times best-selling author. His skill is evident in this well-researched, well-paced and insightful book.

The reason I rate this book so highly is because it provides valuable insights and clarity for both entrepreneurs and investors in start-ups. This is the story of one of the most successful companies in the world: Uber employs 12 000 people and turns over $6.5bn.

The book debunks many myths and misunderstandings about start-ups.

In the last two months, I have witnessed a shareholder in a start-up accuse management of “not doing their homework” because their initial strategy for their start-up failed, and they were thrashing about for a new one. I have witnessed investors analysing a start-up using the same tools they would use for a listed company.   

The founders of Uber surely had a clear strategy when they started out, which they followed to great success. Their investors surely applied tried and proven analytical tools to assess their investment. Both presumptions are profoundly wrong.

The Uber myth was that the early investors and founders, Travis Kalanick and Garrett Camp, were in Paris trying to get a taxi with no success. There it became clear to them that a taxi-hailing app on their phones would be a welcome and winning relief for this frustration that many must be experiencing.

And Uber was born.

Let’s start with the name Uber. It was chosen by Camp, who registered the site Ubertaxi.com, because it is German and means ‘above’ – a cut above. This was appropriate because his initial idea was to own a fleet of limousines and employ drivers who could be hailed by an app. Using a German name, Camp thought, would conjure up images of class and elite German quality.

It took years for the idea that we now know as Uber (not the company) to solidify into anything resembling a ride-hailing app, servicing two “customers” – independent drivers of their own vehicles, and passengers needing transportation.

Wobbling forward to success

This supposed ‘lightbulb moment’, this ‘flash of clarity’ took a long time to turn on, as do all quality innovations and creations. Far from being a flash of clarity, the initial founders and those who joined them wobbled their way forward to success, and are still doing so.  

Did they have a strategic plan solid enough to be followed? Not even close. Far from their limousines is their most successful product, UberX, a no-frills compact car, driven by independent drivers. And Uber is constantly trying, succeeding and sometimes failing. UberEats is an example of one of the successes – the delivery of takeaway food for people.

Uber’s foray into China was an expensive disaster costing the company billions of dollars. They tried to enter what is fast becoming the world’s most valuable taxi market. Uber has retreated after a bad bruising by their Chinese equivalents, Didi and Kuaidi.

This fight even involved Didi investing in Uber’s competitor in the US, Lyft, which made Uber less able to continue the fight in China. Didi also received a billion-dollar investment from Apple. Eventually Uber sold its Chinese operations to Didi in return for a 17.7% stake in that company. 

Uber has been profoundly disruptive to the centuries-old taxi industry - from horse-drawn to fossil-fuelled. The taxi industry has always been based on two pillars: a limited supply of vehicles and high prices.

The scarcity of vehicles makes getting a ride something that is rarely available when you need it, and requires some forward planning. This is because the taxis are owned by the taxi companies and each one is an expensive asset. Additionally, employing taxi drivers is expensive and the legislation governing transporting passengers is complex.

The Uber disruption comes from destroying the pillars of the old taxi industry. Uber owns no vehicles. Their app enables eligible people to use their own vehicles, offer rides at discounted prices, and skirt (or violate?) legislation. With so many cars about, the Uber app enables the driver closest to your location to respond to your request for a ride. When there is higher demand from passengers, prices rise, encouraging more drivers to get into their cars and cash in on the higher priced fares.

Anger and frustration at 'lawless' rivals

Not only is hailing a ride with an Uber quicker than conventional taxis, but their fares are cheaper. This has raised the ire of conventional taxis, which in South Africa has led to deadly assaults on Uber drivers. Around the world the response by the conventional taxi industry has been the same, anger and frustration at a “lawless” rival, who is not compliant with the same regulations as those imposed on conventional taxis.

Anyone with a car in good condition and a clean police record can become an Uber driver within days of making the decision. Thanks to the various GPS systems, knowledge of the roadways is no longer a requirement. Drivers are rated by passengers so they are encouraged to drive well, and be courteous and friendly. So are passengers, so that drivers can avoid the abusive ones.

Uber drivers can work as much or as little as they wish, and those who are experienced and determined can usually earn adequately. In some countries, many drivers are part-timers who are supplementing their incomes using an asset they already possess.

How long can Uber last against the tide of the conventional taxi industry? Most probably longer than the conventional taxi industry can withstand their onslaught. Uber is a clever idea whose time has come, as is seen from other industries where people aggregate to exploit their assets, such as private-accommodation platform Airbnb.

But unlike Airbnb, Uber is facing a huge and disruptive change of its own – the driverless car. The technology to enable driverless vehicles is already in use - partially in some industries and fully in others. We have driverless trucks licensed to travel on highways in certain American states, and cars with ever greater self-driving capacity.

With Uber earning its income from the use of their app by drivers, this business model will have to change when driverless cars become more commonplace. Uber is acutely aware of this and is investing heavily in driverless technology. A new business model will have to be developed to respond.

Online banking is a pure IT play we have become used to. More fascinating will be the combination of ‘digital and atoms’, as the combination of the Uber app and the vehicle demonstrates.

Readability:   Light --+-- Serious
Insights:        High --+-- Low
Practical:        High ----+ Low

* Ian Mann of Gateways consults internationally on leadership and strategy and is the author of Executive Update. Views expressed are his own.


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