Uber Technologies (Uber) was founded in 2009 by Travis Kalanick and Garrett Camp. Both grew increasingly tired of not being able to hail a cab easily in whatever location they happened to be in. The lightbulbs lit up when they were at a conference in Paris in 2008. This revelation led them to brainstorm for a better solution to the current problem.
According to an article in Forbes, revenues have risen to 3.93 billion in the first half of 2015. This revenue surge is expected to continue as the Uber brand rises in popularity. However, the company is burning cash at an almost equally high rate.
As the Forbes article shows, most companies would not be able to sustain that kind of cash flow burn. Uber is well capitalized as private, and public investors believe in its future.
At present, Uber is taking the lead with new initiatives and others seem to be playing follow-the-leader. It remains to be seen if they can continue this pattern. The company also faces plenty of challenges both legally and operationally.
How the Company Started
Frustrated with not being able to easily hail a cab, Travis Kalanick, and Garrett Camp were two friends in search of a solution. Instead of becoming just another cab company, they focused on the problem more from a logistics viewpoint.
It had to be something that could be easy for people to use and it had to happen quickly. A mobile app seemed to be the ideal means to connect riders with drivers.
As the founders point out on their website, “we use technology to give people what they want, when they want it.” They are not just referring to rides, either. The company is expanding to include services such as food and package delivery and are constantly on the lookout for other services to incorporate. They are also noted as saying, “When you make transportation as reliable as running water, everyone benefits.”
To say that Uber is well-funded is an understatement. Although the co-founders pitched in for some of the funding, the amount they received from various other funding sources is in the vicinity of $9 Billion. This cash infusion helps shelter them for a good amount of time from the cash burn they are currently experiencing.
Drivers feel as though Uber management has too much control and influence over them. This control has led to a class-action lawsuit claiming that drivers are being treated much the same as employees rather than independent contractors.
As such, they should be required to provide benefits and pay employer-related taxes as well as expenses. To date, courts have sided with the plaintiffs. However, Uber has entered an appeal. The court has accepted this appeal.
Taxi companies are also up-in-arms because Uber drivers are not required to undergo the same kinds of licensing. Uber maintains they are not a taxi company. It seems they may be able to circumvent this issue as they are considered a technology company and not specifically a taxi company. They are simply matching up drivers to riders.
However, if the lawsuit rules that drivers are employees rather than independent contractors, this could complicate the issue of labeling Uber as only a technology company.
Uber’s relationship with its drivers is somewhat tenuous. The rating system can seem unfair as too many four-star ratings will put them below the threshold needed to continue driving for Uber. Rating systems tend to be subjective. Four-star ratings are considered by many to be good ratings.
The service discourages tips for drivers which is a contentious issue. Management maintains that the highest rated drivers will be rewarded with bonuses.
Why it Works
While other companies such as Lyft, Sidecar, ConciergeLivery.com, Favor, etc., have entered the arena, they are all playing catch up with Uber. As Uber already has a foothold in the market, it’s become a commonplace name. Word-of-mouth and a referral program (free rides) are an integral part of its strategy.
There are no set hours for drivers, and that is a great appeal. They have the flexibility to work when they want. It should be noted, however, that the Uber system gives priority to drivers who are more active as an incentive for drivers to do more driving.
Another aspect of the app that is a big hit with riders is the ability to see where the driver is at every point while waiting for the car to arrive. Some people have even attributed this feature as a fun way to pass the time while you wait.
The company is not without its controversy, and that could be a large part of its success. Many feel that all publicity whether it’s good or bad can help a company through recognition of the brand. The more people believe the Uber service to be superior to taxis, the greater its edge.
The fact that Uber is well funded gives it a huge advantage in securing market share. They have the means to innovate and be first-to-market. They are not sitting idly by either. They are constantly coming up with new ways to transport both people and products. This advantage keeps their brand solid.
Uber’s funding affords it the ability to start their service in new cities much quicker than competitors. The management seems to be on track to do just that. The faster they get a stronghold in a city, the easier it will be for them to become commonplace. That is one of Uber’s greatest strengths.
Initially, Uber has used technology websites to get the word out. Again, because they received plenty of funding, both in the early stages and ongoing, they can be the first to offer new services and start up in new cities.
Referrals are a large portion of how Uber spreads the message. Uber gives a certain amount towards a ride for both the potential rider and the referrer.
Drivers are rated which is a great selling feature that Uber can use in its marketing. With standard cabs, riders have no idea who they are going to get or what they will experience with the driver. Complaints to taxi commissions often get lost in the shuffle.
Overall, the company enjoys great leader board popularity. If you check out Yelp.com in most cities for Uber, you will find that the experience is typically positive. Isolated cases do appear now and then. But on average, people are buying into the concept of what Uber has to offer.
Lessons Learned By The Business
- Believe in what you are doing. As Uber has had its share of controversy, if the owners let this get under their skin, it would have killed the company early on. They recognized and solved a problem that many riders can identify with, i.e., that of not being able to get a ride easily by taxis.
- Forge ahead. When you have a plan, stop at nothing to implement it. Roadblocks are a natural part of the equation in business, especially for start-ups. Accept that they exist, but don’t let them keep you from realizing your dream.
- Change is difficult for many to accept. It’s evident the taxi industry hates Uber and companies like it. These new companies are popular with customers, and that invades the taxi industry’s territory. Change is inevitable but is never easy for many to take.
- Take on what’s known as a Champion’s Mindset. According to an interview with the Wall Street Journal (WSJ), Travis Kalanick mentions that “Champion’s Mindset isn’t always about winning. It’s about putting everything you have on the field. Every ounce of passion and energy you have.”
- (From the same WSJ Interview) Overcome adversity. You will get knocked down throughout the course of your business career. You need to pick yourself up and move on.
How Other Businesses Can Learn from This
One huge lesson other businesses can learn from Uber is to establish the brand early on. Get people talking about the brand and its products. Create buzz whenever possible.
Also, it’s important for businesses to have products that solve problems for people. This is the surest way to get people to buy into your brand.