Uber: The Road to Global Dominance

According our class Twitter poll, 94 percent of us (17 out of 18 total respondents) had used Uber within the past week! For many of us, it’s hard to justify owning a car when Uber serves as a much cheaper and more convenient alternative. In this post, I’ll provide an overview of Uber, follow-up on ideas from my presentation, and discuss topics relating to Uber that I haven’t yet mentioned.

One snowy evening in Paris…

In 2008, Travis Kalanick and Garret Camp were traveling in Paris for the LeWeb technology conference. A blizzard struck and the two entrepreneurs struggled to navigate the snow-covered Parisian streets.

Uber_Founders

Kalanick and Camp in Paris

What better time to start thinking about solutions to life’s problems? The issue at hand was that Kalanick and Camp were stuck in a foreign country in the middle of a blizzard and couldn’t get a ride. They felt that others shared their ride hailing struggles, so they came up with an idea: get a ride with the tap of a button.

In 2009, Kalanick and Camp founded UberCab. The service was a quick solution that transformed a mobile phone into a personal dispatcher. UberCab launched in San Francisco as an on-demand black car service with the motto “Everyone’s Private Driver. Kalanick’s image of Uber was an invitation-only “baller” service that enabled well-to-do single men (like himself) to travel around town in high style.

Shortly after launching, UberCab was targeted by industry regulators. Kalanick and Camp were issued a cease-and-desist order from the city of San Francisco. The co-founders denied the city’s jurisdiction over the company on the basis that it was a technology and logistics company rather than a transportation company. Soon after, the company dropped “Cab” from its name to affirm its stance as a technology platform. To this day, Uber faces regulatory and legal battles over the right to operate.

Changing the Landscape

Unlike companies offering traditional transportation services, Uber does not own fleets of cars for dispatch, incurs no vehicle maintenance costs, and “partners” with drivers instead of hiring employees. Its on-demand app has not only changed the way consumers purchase products and services, but has also changed they way people work. Uber created an on-demand workforce providing drivers with the freedom to work or stay home as they choose. For these independent contractors, the ability to “be their own boss” is worth forfeiting compensation benefits.

The “Uber effect” has had a significant economic impact in metropolitan areas. The taxi industry, which once captured the largest share of the transportation industry, lost a significant share of its stake. The market value of a New York taxi medallion quickly dropped from well over $1 million to just $250,000. Lately, an increasing number of people are ditching their cars and choosing ride sharing services, such as Uber, as their primary mode of transportation. Uber’s increased efficiency and optimization has resulted in more cash in drivers’ pockets, thereby strengthening local economies.

Global Expansion 

Uber offers a wide variety of services throughout the world to achieve its mission of
“making transportation as reliable as running water for anyone, anywhere.
Map

These are some key points about Uber’s operations:

  • Services available in over 632 cities world-wide
  • Connects over 40 million riders and 2 million drivers
  • Over 5 billion trips completed throughout the world
  • Over 10 million trips completed daily
  • Major competitors are Lyft, Grab in Southeast Asia, Ola in India, Didi in China

To maintain its competitive advantage, Uber heavily subsidizes rides, works to expand its network of drivers and riders, and offers an extensive array of services for all types of consumers. Here are Uber’s current offerings (varies by location):

Services

In the Driver’s Seat

Uber (currently) relies on its network of drivers to transport riders and deliver goods. The company has had a tenuous relationship with drivers and a history of overlooking drivers’ concerns. Uber takes a 25 to 30 percent stake per ride and Uber drivers pay for transportation and maintenance costs. Under Uber’s new CEO, Dara Khosrowshahi, Uber has demonstrated a commitment to improving driver relations. Uber recently introduced an optional tipping feature and has expanded its perks to include fuel and maintenance discounts, car rental options, and liability insurance while drivers are using the Uber app.

In a company report, Uber found that most of its drivers are middle-aged, white, and male. About 48 percent of Uber’s drivers are college educated or have an advanced degree. Most drivers partner with Uber to supplement their income, with roughly 80 percent of drivers putting in under 35 hours a week.

Stats

Uber’s Sophisticated Software

The Uber app employs an algorithmic matching and management system to calculate rates and establish connections with Uber drivers. The algorithm designates parts of town into distinct pricing zones while taking into account the weather conditions, demand for rides, and the number of drivers on the streets. Surge prices are recalculated about every five minutes, rebalancing the supply of drivers and demand for rides. So, if you ever find yourself paying way too much for a ride, try giving the app 5 minutes to recalibrate!

Uber’s use of algorithms to oversee drivers complicates its role as a neutral intermediary. Uber checks in with drivers by sending automated messages and notifications during busy periods, nudging them to hit the streets. Uber’s software acts as a “virtual manager” by setting performance targets for drivers. These algorithmic management tools challenge the notion of Uber drivers as “fully independent contractors,” considering that the tools largely influence drivers’ behavior.

Related image

User’s algorithmic management system acts as a “virtual manager.”

Uber’s Acquisitions: An insight into Uber’s next moves

Uber’s four company acquisitions provide insight into Uber’s current focuses and initiatives. Among these include enhancing logistics, self-driving technologies, and the future of food delivery.

deCarta (2015)- Mapping company specializing in geospatial software. With deCarta, Uber can develop its own mapping capabilities to decrease its reliance on Google Maps.

Geometric Intelligence (2016) – Machine learning company. With Geometric Intelligence, Uber can refine its algorithms to be more accurate and user-specific.

Uber_self.png

Otto (2016) – Autonomous vehicle company. Uber leverages Otto’s technology for Uber’s autonomous vehicle initiatives.

Swipe Labs (2017) – Photo sharing/social products company. Uber may incorporate Swipe Labs’ social products to improve mobile communication on the Uber app and expand into the content marketplace area.

Visiting our very own TechTrek class… BC Alum Pat Twomey!

Pat is a BC alum (CSOM ’08) and a graduate of Harvard Business School (MBA ’13) working in Growth Analytics at Uber. Pat has been with Uber since 2012 and has held various roles at the firm. He started working at Uber San Francisco as a Pricing Manager, became the Head of Growth Analytics, and then took on the role of Data Science Manager. Pat is currently a Senior Data Science and Analytics Manager for Uber in Boston. We are extremely fortunate to have Pat share about his work and experiences at Uber with us!

Uber_logo

Uber Recap

From my presentation, I hope you took away these key ideas:

  • Uber is a digital platform which leverages data collected from the Uber app.
  • Uber has experienced enormous growth during its <10-year lifespan.
  • Uber’s rapid growth came at the cost of internal development, resulting in a toxic corporate culture.
  • Uber is preparing for an IPO in 2019 under its new CEO, Dara Khosrowshahi.
  • Moving forward, Uber aims to improve its corporate culture and is focused on making transportation and delivery more reliable and accessible.

 

12 thoughts on “Uber: The Road to Global Dominance

  1. Very thorough post and a great complement to your presentation! I can’t believe how dependent our class is on Uber. Personally, I have now become trained to automatically think of Uber or Lyft if I want to go somewhere. This massive culture shift has fueled the growth of ride-hailing in recent years, and will continue to do so as our generation further embraces the concept. Today, I am comfortable getting into a car with a stranger I met through an app — I can’t even imagine doing that a few years ago! I also appreciated the analysis of driver demographics using the helpful infographic! I’m looking forward to meeting Pat!

    Liked by 1 person

  2. Superb synopsis of a simple idea but a sophisticated service. Given how much Uber has changed in their leadership and their company’s culture, I’m excited to see what we’re getting into tomorrow. And of course, I’m stoked for the visit to the office.

    Liked by 1 person

  3. Love this post, Uber is such an interesting case. I wonder how if they really have such bad terms with their drivers like is often reported, how they are able to gain so many new drivers to keep up with demand. To see just how far they have come in such a short amount of time is amazing. From being a “baller” idea to having a driverless car that disrupts the entire transportation network.

    I can’t wait to ask Uber about how it plans to move these technologies into the mainstream and how it sees its role as an emerging tech giant, especially with a potential IPO upcoming.

    Liked by 1 person

  4. Loved reading this post, Amy! Uber is a fascinating company to learn about, and I have hope that Khosrowshahi will change the culture for the better! My main problem with Uber, similar to John, is the way that they treat their drivers. I am a huge advocate for employee rights, and I really would challenge the fact that the company considers their drivers “independent contractors”. They should be identified as either part-time or full-time employees in my mind, and at the least they deserve to be compensated for gas and other related driving costs. I’m curious to see what Pat does at Uber, growth analytics sounds like an intriguing role! Great job!

    Liked by 1 person

  5. Although I am disappointed we will not be able to visit Uber in San Francisco, having Pat come speak to our class will be a great experience. While he will not be able to give away Uber’s trade secrets, I am curious to hear in more depth about how data is used to formulate prices and match drivers with riders.

    Also, for a company still struggling with its reputation, it’s surprising they don’t advertise their Uber Assist or Uber WAV services. Subsidizing these rides and / or partnering with a local nonprofit seems like an easy CSR initiative that Uber could and should capitalize on.

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  6. Great post Amy, it is fascinating to see how fast Uber is changing not only the demographics car owners, but also affecting everyday life. I can’t imagine how I lived without Uber or Lyft just over a few years ago.

    I can’t agree more with John and Dan about how Uber treats their drivers. It just seems like by saying “independent contractors,” they’re trying to get away from so many responsibilities and liabilities, and this is problematic. Hope to see some changes regarding that issue!

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  7. I really like the statistics and infographics, Amy! I believe their new CEO is taking the right steps in changing the image of the company and turning it into the gold standard for ridesharing services. All of these ridesharing CEO’s seem to think that all car rides in the future will be from a service like Uber or Lyft, but I just do not see that happening if there are not too many incentives to be a driver on the platform. It is a shame that we won’t be able to visit Uber out in California, but this is such an awesome company so it will be a privilege to meet Pat at BC.

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  8. One thing that stood out to me about your post was the “Other” portion of your table of Uber services. I did not realize they offered Uber Assist and Uber WAV. I wonder how the availability of these services compares with their UberX and Uber Pool, the ones that I am most familiar with. Under Dara Khosrowshahi, I’m interested to see if Uber will transition to more of these inclusive services, all the while developing a more positive working environment instead of holding this negative stigma for company values.

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  9. Great post, Amy! I really appreciate the chart you included that lists all of Uber’s different service offerings. I’ve lost track of all their offerings since they’ve been coming out with so many new services. Uber is so well-established in the U.S. and clearly expanding; I wonder how they plan to compete with the local Uber-copycats across the globe (referencing @jjliang91‘s blog post about emerging markets), or whether those copycats even pose as serious competition.

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    • Interesting question! To my knowledge, Uber’s strategy for competing overseas is largely focused on subsidizing rides, which lowers fare prices, and growing its network of drivers. Uber is also focused on constantly innovating and experimenting with unique ride offerings, which many rivals can’t offer– due to cash or scale limitations. Uber was significantly challenged in China by “copycat” Didi, and eventually surrendered for 17% equity in the company. It will be interesting to see how autonomous vehicles play into Uber’s strategy in both domestic and foreign markets!

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  10. Uber has been AGGRESSIVE with their driverless car program. It’s caused a lot of friction with the SF city authorities. If their new CEO Dara is able to partner with local governments a little bit more effectively, there’s a chance that Uber can really use that SoftBank investment to their advantage and spin up their program a lot quicker than Travis’ projected 2035 timeline.

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