UBER: OPERATI ONALSTRATEY
Uber :A Par agonofOper at i onal I nnovat i on I nt heUni t edSt at esal one,t het ax it r ans por t at i oni ndus t r yhasa mar k e to fo v er$11 b i l l i on.Ri des har ec ompan y Ub er ,wi t hi t s pr es enc ei n43c ount r i es ,want st hel i on’ ss har e.Uberi sl ev er agi ng c ut t i ngedget ec hnol ogi esf ori t soper at i onsandbi l l i ng,aswel las dynami mi cal l y mat chi ng suppl y wi t h demand. Above al l ,i ti s per s uadi ng pol i c y mak ma er s and r i der sf ora bi g di s r upt i on,des pi t e heav yoppos i t i onal lac r os st hegl obe.Vanc ouv er ,Canada,i st he onl yc i t yi nt hewor l dwher eUberhadt oabandoni t soper at i ons . T r adi t i onalt ax i sar e“ hai landgo, ”whi c hmeanspeopl ec ans t opa t ax iont hes t r eetandhi r ei tf ort hei rs hor tt r av el .Mos tc i t i esr equi r e al i c ens eorper mi tt ooper at eat ax iwi t hi npr edefi nedc i t yl i mi t s ;i n manyNor t hAmer i c anc i t i es ,t hi sper mi ti sal s oc al l edamedal l i on. Fore x ampl e,NewYor kCi t yhasi s s ued13, 437medal l i ons ,t her i ght t or unay el l ow t ax i .Uberdr i v er sdonotneedt hes emedal l i onsor per mi t s . Everwonderwhyi ti ssohar dt ogetacabwheni tpour sandyou ne edonet hemos t ?A s t udyl edb yt heSi ngapor eMI TAl l i a nc ef or Resear ch and Tec hnol ogy ( SMART)has an answer .Resear c her
Ol i v erSennanal y z eds at el l i t edat aonweat herc ondi t i onsov era t womont hper i od,a ndheobt ai ned830mi l l i onGPS r ec or dsof80 mi l l i ont ax it r i ps .Thedat as howst hati twasnott hehi ghdemandf or t ax i st hatr es ul t edi naper cei v eds hor t ageonr ai nyday s;i ns t ead,i t appear ed t hatmanycabbi essi mpl ydi d notpi ckup passenger s, f ear i ngac c i dent sont hewetr oads .Wi t hUber ,wheny ouputi ny our r eques tf orar i de,y ouk nowf ors ur ewhet hery ouwi l l getoneornot . Rai ny days ar e nota pr obl em wi t h Uberas i tcan t emp mpor ar i l y i nc r eas es uppl ybyent i c i ngmor edr i v er swi t h“ s ur gepr i ci ng. ” San Fr anc i s c obas ed Uberc onnec t spas s eng er swi t h dr i v e r sv i a mobi l eapps ,andi tc ur r ent l yoper at esi n43c ount r i es .Thefi vey ear ol dc ompanyc ar r i esav al uat i onofov er$18bi l l i on,whi c hmak esi t wor t hmor et hanr ent a lc argi ant sHer t zandAv i sc o mbi mb ned.Hec k , onpaper ,i ti smor ev al uabl et hanEx pedi a,Hy at t ,Tr i pAdv i s or ,Bes t Buy ,Sonyand manymo mor e bi g name mes !Uberdoesnotc ar r yany t angi bl ei nv ent or y ,and i ti sal s oi nt he pr oc es s ofex pandi ng i t s bus i nes st ol ogi s t i c s( i . e. ,t r anspor t i ng c ar go orf r ei ghtt hr ough a n de pe nd en tdr ne t wor k ofi i v er s ) .Ubert eams i ngeni ous l y moni t or
s oc i almedi at o ge tf eedbac kf r om t hei rc u s t omer si nr ealt i me, al l owi ng t hem t o make dynami c suppl y adj ust ment s as needed. Thei rc ompl exbus i nes si nt el l i genc es y st emscanl ear nwher er i der s come mef r om andgot oandhowt hesepat t er nschange,dependi ngon t heda yofweek ,s eas on,weat her ,ands por t i nge v ent sorbus i nes s c onf er enc es . I have t aken Uber r i des acr oss cont i nent s—i —i n Seat t l e, San Fr anci sc o,London,Bar cel ona and many pl aces i n bet ween.My f r i ends, sec ondy ear Whar t on Ex ecut i v e MBA st udent s Er i ca
andSudhanshu Junej l lt el ly ou t hatIam s o St ephens a,wi obs es sedwi t ht hedi s r upt i ont hatIt al kt odr i v er si nor dert ok now medal l i on pr i c esac r os sc i t i es ,and Iwat c h how t hos e pr i c esgo do wnwi t ht heent r yofUberi nan yne w mar k e t .Per hapsmyabi l i t y t ospeakt hr ee l anguagesfluent l yhashel pedmet oconnectwi t h dr i v er sac r os sc ount r i esandc ul t ur es .Anac quai nt anc eofmi nei n Vancouverownsoverfivemedal l i onspr i cedar ound$800, 000each, an dIal wa y sr ec ommendt hatheoffloadatl eas thal foft he m bef o r e Ub ers uc c eedsi nr epene t r a t i ng t heVanc ouv e rmar k e t .Sad l y ,he ha sno tac t edonmyadv i c ey e t . Uberhasbeenheav i l yc r i t i c i z edf oraggr es s i v el yl obby i ng,f ol l owi ng unf ai rl aborpr ac t i ces ,j eopar di z i ngt hes ec ur i t yofpas senger sand dr i v er s ,andpl ay i ngwi t hl ocall awsbyr equi r i ngnoper mi t s .Unl i k e t r adi t i onalt ax id r i v er s ,Uberoper at or s do notha v et ofi l ef or l i c ens es ,adher et ofi x e dr at es t andar dsorc ompl ywi t hman yot her s t r i ngentr egul at i onst hatt r adi t i onalt ax idr i v er smus tf ol l ow.Uber ac c ompl i s hest hi sb yengagi ngl obb yi s t sandl oc all a wmak er s ,as wel laspr oac t i v el yi nv ol v i ngt hei rc us t omer si npl et hor aofpet i t i ons . Uber r et ai ns t he ser vi ces of t he Fr ankl i n Squar e Gr oup, a Washi ngt on,D. C. based t echnol ogy l obbyi ng fir m,t o hel p sway publ i copi ni on i nt he c ompan y’ sf av or .Da v i d Pl ouff e,t he f or mer campai gnmanagerandWhi t eHouseadvi sert oPr esi dentBar ack Obama,has j oi ned Uberas seni orvi ce pr esi dentofpol i cyand s t r at egyt os t r engt hent hi sar eaev enf ur t her . “ Weneededsomeonewhounder st oodpol i t i csbutwhoal sohadt he s t r at egi chor s epowert or ei n v entho w ac ampa i gns houl dber un—a
c ampai gnf oragl obalc ompan yoper at i ngi nc i t i esf r om Bos t onand Bei j i ngt oLondonandLagos , ”s ai dT r a v i sKal ani c k ,UberCEO. Ont he consumerf r ont ,Uberusesi t shor sepowert oengage t he c us t omer si nc hangi ngl oc all a wsandpol i c i es .Her ei sanemai lI r ec ei v edf r om UberonAugus t19r eques t i ngmet os i gnape t i t i on agai nst bi l lAB 2293 i n Cal i f or ni a and showi ng my l ove f or #CAl ov es Uber .Fort her ec or d,Il i v ei nt hes t at eofWas hi ngt on. Thi s summer ,t axi dr i ver s acr oss Eur ope vent ed i n pr ot est s, bl ock i ngt r affici ns omeoft heCont i nent ’ sl ar ges tc i t i est opr ot es tt he unf ai radv ant ageshel dbyr i des har es er v i c est hatar enots ubj ec t ed t ot hes amef eesandr egul at i onsast het r adi t i onalt ax ii ndus t r y .I wi t nessed manyappeal sand post er s acr oss t he ci t yofLondon dur i ngav i s i ti nSept ember .I nmyownbac ky ar d,Seat t l e,t heCi t y Counc i lor i gi nal l yv ot edt oc apt henumberofdr i v er sac t i v eatany gi v en t i meon eachr i deshar esy st em t o150,whi chmeansUber woul dbeal l owed150dr i v er satonet i me,dur i ngt heda yorni ght . ( Thes amegoesf ori t scl os ec ompet i t or sL yf t ,Si dec aroranyot her s i mi l art r ans por t at i onnet wor kc ompanyt hatdec i dest os etupi t s oper at i onsi nt her ai nyc i t y . ) I nr es pons e,t her i des har i ngc ompani esl aunc hedamas s i v epubl i c r el at i onsc ampai gnandl obby i ngeffor tl i nk edt oSeat t l e’ sr eput at i on as a cent er f or t echnol ogy i nnovat i on, and t hey event ual l y s uc ceededi nl i f t i ngt hec apf or150r i des . Uberhasal s o been c r i t i c i z ed f or“ s ur ge pr i c i ng, ”whi c hs uppor t s dy nami cpr i c i ngandex pl oi t st hel ows uppl ys i t uat i onsbyc har gi ng hi gher pr i c es . Thi s ar ea i s a dr eam c ome t r ue f or any
mi cr oeconomi cspr of essor ,who hasbeen t eachi ng demandands uppl yc ur v esf ory ear sbutnev ergott owi t nes st her i s i ngdy nami c pr i c esi nt het r adi t i onal t ax i i ndus t r y . Bo t t oml i ne:Th er ear epr osandc onsofan yne w di s r up t i on,and Uberi sno exc ept i on.On one hand,i tsol vesmanypr obl emsof t r adi t i onalt ax ibyl ev er agi ngs t at eof t hear tt ec hnol ogyandbr i ngs effic i enc i est oanageol ds y s t em;ont heot herhand,i ti sbei nga l i t t l es oc i al l yi r r es ponsi bl ebydet ac hi ngi t s el ff r om t hec ont r ac t i ng dr i v er sandpl ayi ngr ut hl es sl ywi t hi t sc l os ec ompet i t or s .Ther ei s al s oagenui nef earofmov i ngf r om mul t i pl e“ l oc almonopol i es ”t oa uni fi eds i ngl emonopol yorduopol yoper at i ngatagl obal l ev el . Th er ei snoden y i ngt hatUberhasd i s r upt edanoper at i onalmodel t hatwas har dt oc r ac k ,a nd des pi t e al lofi t s pr obl ems ,i th as bec ome a pos t erc hi l d ofmoder n oper at i onali nno v at i on.Uber ’ s s t r on g br andi ng and e x pl oi t at i on o f mobi l et ec hnol ogi es ha v e pr ov i dedac l eans ol ut i ont omes syt r ans por t at i onpr obl ems ,andt he c ompan y’ sgl obale xpans i oni ns uc has hor tt i mes pani si nc r edi bl e. Ther ei snos t opi ns i ghtf orUber .Lov ei torhat ei t ,t hi sc ompanyi s her et os t ay !
(This is another post on operational strategy)
How Uber Works: Insights into Business & Revenue Moel
Uber is an on!e"an transportation servi#e whi#h has brought a revolution in the ta$i inustry all a#ross the worl% The business "oel o Uber has "ae it possible or people to si"ply tap their s"artphone an have a #ab arrive at their lo#ation in the "ini"u" possible ti"e% Uber is one o those ew te#h #o"panies in the worl that has been value over ' Billion% Uber has alreay re#eive an e*uity uning o '+%, Billion an is present in - #ountries% These a#ts surely shows the trust o investors in Uber.s business "oel an "ake it easy or us to i"agine how "u#h revenue will Uber be "aking on#e it attains li*uiity% In this post/ I have highlighte so"e unknown a#ts an 0gures about Uber along with a etaile e$planation about the "oel by whi#h Uber earns "oney an oes business% Uber.s #usto"er seg"ents/ value propositions/ key proble"s/ solutions/ #ost stru#ture an revenue "oel have also been is#usse% 1or buing entrepreneurs/ I have #atere to the rise o 2uber or $. startups an what you shoul be looking or in this spa#e% Rea on3
Uber Founders, Funding received and Timeline: Founders: Travis 4alani#k an 5arrett 6a"p%
Company Headquarters: 7an 1ran#is#o/ 6aliornia/ Unite 7tates% Funding received by Uber: '+%, Billion% (as o 7epte"ber ,8)% Company Valuation: 9ver '8 Billion% Number of Users: More than + Million (as o ,8 en)% Number of registered drivers: 8/-/ (as o ;an ,8)% Number of new driver signups: / every "onth% !verage number of daily Uber Trips : 8 Million (as o ;an ,8)%
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T"e successful timeline of Uber:
Uber#s $evenue %eneration &odel: I you have ever travelle in a ta$i/ you "ight have pai the river in #ash at the en o your >ourney% The #ash #olle#te by ea#h >ourney is the only sour#e o revenue or a traitional #ab #o"pany% Uber is no i?erent% @either oes Uber have a i?erent revenue "oel than the one "entione above nor it has any other sour#e o revenue as o now% But >ust i"agine 8 "illion ries a ay% It will help you #al#ulate those big nu"bers that Uber earns% Aet.s ig a little eeper to unerstan Uber.s sour#e o in#o"e% What has "ae Uber so su##essul is the a#t that the revenue "oel o Uber is as uni*ue as their business "oel% It #an be e$plaine as:
'( )i*erent cab models to cater to everyone : Uber has not li"ite itsel to a parti#ular seg"ent o #ars or to a parti#ular seg"ent o people% There is Uber / Uber Bla#k or those who love to travel in a bla#k #ar/ Uber Ta$i or those looking or #ost! eC#ient solutions an Uber 7UD or those who want lu$ury%
+( urge -ricing Tec"nology : Dariation in #ab ares a##oring to situation is an i"portant aspe#t o Uber.s business "oel% Whenever the e"an in#reases/ per "ile pri#es are auto"ati#ally in#rease% The new pri#e epens on the nu"ber o available rivers an the nu"ber o re*uests "ae by people who want to travel% Uber has applie or a pri#e surge te#hnology patent in the U7%
.( /t"er Uber rides: Uber has #o"e a long way ro" #abs% It now o?ers boats/ heli#opters as well as so"e other transportation "eans on e"an% Uber re#ently laun#he a "otor#y#le!pi#kup servi#e in
alient Features of Uber •
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F user #an tap his s"artphone an #all a #ab at his lo#ation% The river has the option to a##ept or re>e#t a rie% I river a##epts the rie/ river etails are sent to the #usto"er along with GTF% The #usto"er #an tra#k the river as he arrives to his lo#ation% The river #an also tra#k the e$a#t lo#ation o the #usto"er an rea#h his e$a#t lo#ation% The pay"ent pro#eure is hanle by Uber% In so"e #ountries like Inia/ Uber has even starte a##epting #ash pay"ents whi#h are pai ire#tly to the river% Uber business "oel ha a rating syste" in pla#e or rivers right ro" beginning/ where a #usto"er #an rate the river ater his rie%
Value -ropositions Customers: • •
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@o nee to wait or a ta$i or long ti"es% 1ree ries on #ertain o##asions an is#ounts ro" ti"e to ti"e%
)rivers: • •
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Fitional sour#e o in#o"e% 1le$ible working s#heules% 6an work part ti"e or si"ply whenever they like% Gasy pay"ent pro#eure% Those who love to rive #an earn "oney while pursuing their hobby% Uber pays rivers to be online/ even i they on.t get any re*uest%
Customer egments 6usto"ers or Uber are those who: • •
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Jo not own a #ar% Jo not want to rive the"selves to a party or un#tion% Aike to travel in style an want to be treate as a DI<% Want a #ost!eC#ient #ab at their oorstep% Uber has su#h a vast #usto"er seg"ent that it has got so"ething on o?er or everyone% 1ro" Uber Ta$is to Uber Bla#k an ro" Uber to Uber 7UD/ the #o"pany has got a vast range or its #usto"ers to "ake a #hoi#e% Uber serves proessionals as they hire an Uber #ab to an ro work% 1or this Uber i ew tie!ups with #orporates in the beginning an oes so when it laun#hes in a new #ity in a new #ountry% Fpart ro" proessionals/ Uber tries to tou#h hearts o people by o?ering spe#ial servi#es like:
Uber for 0ids: F spe#ial servi#e ro" Uber ei#ate or parents who want their kis to rea#h ho"e ro" s#hool in an Uber #ab% Uber for enior Citi1ens : Fnother spe#ial servi#e ro" Uber where it targets senior #itiKens% Fs per the statisti#s/ 7enior #itiKens "ake or upto L to o total ries in "any #ities% This "ae Uber have so"e spe#ial eatures or seniors an hen#e attra#t "ore senior #itiKens on the plator"% 6he#k out this post ro" ortune: Why senior #itiKens are No#king to Uber%
Fll this "ight raise another *uestion in your "in% The *uestion about how oes Uber 0n the" or how oes it "arket out to its target auien#eO We e$tene our resear#h beyon Uber business "oel an #a"e up with an entire growth "oel o Uber%
%rowt" &odel: customers
How
Uber
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In less than - years/ Uber has "anage to be#o"e the best e$a"ple o a #ity!by!#ity "obile servi#e #o"pany roll!out% Many generi# pointers that I talke about in this Blog
Aot o "oney to in#entiviKe both rivers an #usto"ers% ,% Ro#k soli pro#esses or playbooks that have evolve through e$perien#e laun#hing Uber in L88 #ities till ate% L% Flreay known bran that gets early #urious aopters% Gverything starts with a s"all #ity laun#h tea"% Gvery #ity has a general "anager who heas the #usto"er a#*uisition as well as river a#*uisition% The 0rst #abs to #o"e on boar are generally
proessional rivers who are alreay asso#iate with lo#al ta$i #o"panies an have their own #ars% 1irst #usto"ers #o"e ro" various lo#al avertising #hannels like 1M raio/ newspapers/ online avertising et#% Uber is su#h a large na"e that people are alreay waiting or the #ab #o"pany to start servi#es in their #ity%
Uber 3usiness &odel Canvas
4 step model about "ow Uber wor5s •
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tep ' 6$equest a cab7: The 0rst step in the business "oel o uber is about #reating a e"an% e#t the rie% In #ase he re>e#ts/ noti0#ation is sent to another river in that area% tep . 6$ide7: 6usto"er #an tra#k the #ab when it is arriving an the GTF is also shown to the #usto"er% The "eter starts as soon as the #usto"er sits in the #ab whi#h #an be tra#ke through the #usto"er sie app as well% 1rienly rivers "ake sure that the rie is #o"ortable or the passenger% tep 4 6-ayment 8 $ating7: 9n#e the rie is over/ #usto"er gets an option to rate the river% Rating syste" is an i"portant part o Uber.s business "oel as it lets a person know about the river beore booking a rie an helps hi" trust the river%
How and 9"y successful:
Uber
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Uber.s business an revenue "oel >ust #an.t be state as #o"plete i this wiely aske *uestion about Uber.s su##essul >ourney is not answere%
There were #ertain a#tors that le to Uber.s su##ess% Here.s a brie >ourney that Uber went through when it laun#he% 7i"ilar >ourney #an be ollowe by any startup whi#h ai"s to "ake it as big as uber%
T"e problem wit" local Tais Garlier/ people ha to stan on the street sie an wave their han in orer to signal a ta$i to stop% The wait ti"e/ the in#onvenien#e an high rates were a proble" or everyone% Puite a ew ta$is were available an rivers Q ta$i #o"panies use to #harge whatever they thought was right% There was no #ontrol on pri#es an people were let with no other option% Fpart ro" this/ the situation was worse uring the peak hours as it was *uite har to 0n an e"pty #ab%
T"e launc" of Uber Uber re#ognise the ongoing proble" in regar to booking a ta$i an gave a te#hnologi#al solution through a "obile app% The solution to book a #ab by tapping a s"artphone brought a revolution in the ta$i inustry% Uber app was oC#ially laun#he in ,8 an soon be#a"e popular ue to the value it provie to people%
T"e early adopters It is *uite iC#ult to "arket a newly laun#he prou#t or servi#e in any geographi#al area% What gave uber the ege is that it laun#he in 7an 1ran#is#o/ a #ity whi#h is ho"e to te#h savvy people% The 0rst rivers on the plator" #a"e through #ol #alling% Many o the" were proessional rivers with other #ab #o"panies or were sel e"ploye as a ta$i river% To get their 0rst #usto"ers/ Uber took to so#ial "eia an other "ass "arketing "eans% It o?ere is#ounts/ ree ries an rates that were too less as #o"pare to other #ab servi#es in the #ity% The 0rst #usto"ers or Uber were those who enthusiasti#ally wante to try the new servi#e% Uber o?ere ries ro" #lub venues to user.s oorstep so the party people were a"aKe% It o?ere ries to the #orporate se#tor who worke in oC#es helping the" to save ti"e%
9ord of &out" advertising Whosoever took a rie in Uber was bae by the 0rst han e$perien#e% This "ae the early users to be#o"e regular #usto"ers an they also helpe sprea the na"e by wor o "outh avertising% This wor o "outh avertising was one o the "a>or riving or#e
&ain %rowt" opportunities tapped by Uber 8% ,% L% %
-roblems Uber still faces ;awsuits: Uber has pening lawsuits in #ourts o @ew ork an 7an 1ran#is#o% F##oring to Uber/ all rivers working or it are its partners while the #ourt says that they are e"ployees% Uber is not the only #o"pany a#ing su#h a proble" but in a#t al"ost all #o"panies who hire 8SS workor#e are uner the s#anner% C"ic5en 8
7o"e #ases where Uber rivers have outrage the "oesty o e"ale passengers have #o"e to the li"elight% This is a big #hallenge or Uber% Flthough the #o"pany takes all steps su#h as poli#e veri0#ation o rivers an their IJ etails but still su#h #ases #annot be rule out #o"pletely%
Ta5eaways &odel •
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5o or less ownership "oel% Uber oes not own any #ab but still provies over 8 "illion ries a ay through its partner network% 6hoose an inustry% Think about the "ost #o""on proble" it has% 1in a solution an isrupt the e$isting "oel through te#hnologi#al inrastru#ture% That is what Uber i in the #ab inustry% Treat your initial users as kings% They are really i"portant or the growth o your business% G$pan step by step% Jo not a everything in your business "oel in the 0rst go% Uber starte with #abs but now even has boats/ heli#opters/ bikes an other "eans% 9pportunity won.t #o"e to you% ou have to look or the"% Uber #reate an opportunity by o?ering is#ounte ries or parti#ular events Q party venues an hen#e got its 0rst #usto"ers% Treat your workor#e an i"portant part o your business% Uber #alls its rivers as partners an gives the" a e#ent + o the total are%
There.s no oubt in the a#t that Uber has brought a revolution not >ust as a ta$i #o"pany but as a business "oel where businesses rea#h out to serve #usto"ers at their lo#ation% F lot o startups have alreay #opie the e$a#t business "oel o Uber an "any others have "ae s"all iterations to laun#h startups in various inustry verti#als%
