Success Plan :Why Uber is Booming ahead of others

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A pair of serial entrepreneurs, Travis Kalanick and Garrett Camp, struck gold in 2009, <br> <br>when they developed a smartphone app that could summon a private taxi with the <br> <br>press of a button.

Uber launched in their home city of San Francisco the following

year, shuttling affluent young professionals around the booming tech metropolis in

black Lincoln Town Cars with white-glove service. Passengers loved the convenience;

drivers found an extra source of income and Uber built a business by pocketing 20%

of each ride.

With its model proven, Uber plotted a rapid global expansion, bringing the service to

more than 270 cities around the world in five years. The company’s success has

sprouted imitators like Lyft and Sidecar as well as opposition from the incumbent taxi

industry and regulators who have raised concerns about safety. The service has been

banned in Nevada and Portland, Oregon and outside the U.S. in parts of India, China

and Thailand. Mr. Kalanick, Uber’s outspoken chief executive, has courted controversy

with questionable comments and ruthless competitive tactics. Investors, however,

have grown ever more enamored with the company, sending its valuation to more

than $41 billion in a round of funding last December that made Uber one of the

world’s most valuable private startups.

With a war chest of billions, a vast network of lawyers and lobbyists and a veteran

political operative named David Plouffe, Uber is now working to ease passage of laws

that will bring its service into compliance with municipal codes. It’s responding to

concerns raised by U.S. Sen. Al Franken last year that the company does not do

enough to protect the private transportation data of its users. Mr. Kalanick has also

hinted at a more ambitious next act for the company: transforming from a

transportation provider for people into a logistics provider moving all manner of

goods and services from point A to point B.

The need for Uber

If on the outside chance you’re not familiar with Uber, the basics are as follows:

In the past, when you needed to get somewhere, hailing a cab was a nightmare. You

either stood outside—wind, rain, sleet, snow, or shine—waving your hand in the air

until you could hail a cab, or you called a taxi dispatch (if you had their number) and

had to wait 20 minutes until a car arrived. Once you arrived at your destination, you

fumbled to count out the right amount of cash plus a tip, negotiate with the driver who

never had the right change, or who “forgot” to start their meter, or whose credit card

machine was “broken”.

All told, very few people viewed finding and using taxi service as something

enjoyable—it was simply something that they dealt with due to the lack of an

alternative. Before Uber you were beholden to an entrenched, monopolistic entity,

whose sloppy execution and lack of regard for the customer experience was evident at

every touch point. This poor experience and a perceived lack of ability to change

anything about it created pent up frustration and demand from consumers who were

eager to find anything better. Uber tapped into that frustration and demand

exceptionally well.

Uber is completely changing the way getting private transportation is done in several

key ways. First, their smartphone app is integrated with Google maps so that you can

see how far away the nearest cars are, set a meeting point on the screen, and hail a

car to meet you there. You can even see your driver’s information (including ratings) as

you watch the car get closer to your location. Uber drivers call or text to confirm that

they’re on the way, giving you peace of mind that your order was received. Once your

car arrives (usually within a few minutes), the driver greets you by name and you hop

  1. The cars are black cars and SUVs. Uber X, a lower cost version of the service, is

made up of a fleet of well maintained sedans.

Once you arrive at your destination, the app charges your card, and you’re free to go

on about your day. There’s no need to deal with cash, change, tips, or receipts. You

just hop out. Uber has removed the friction from the typical taxi cab transaction, and

made it highly enjoyable in the process. Bill Gurley sees Uber’s key to growth as a

simple one: Uber offers a great product. He explains, “The product is so good, there is

no one spending hundreds of thousands of dollars on marketing.” While this is

certainly the case, it isn’t the only factor driving growth at Uber. First, let’s go back to

the beginning and look at some of Uber’s early tipping points.

Early traction

Though the company was founded in 2009, Uber didn’t officially launch until June

  1. In January 2011, just six months later, they had had between 3,000 and 6,000

users and had already done between 10,000 and 20,000 rides. So what got them

there?

Completely solves problems for riders

First and foremost (as Gurley points out, and as with Square), Uber provides a solution

to a real problem that impacts millions of people. In all sense of the word they have

disrupted the monopoly of taxi cab transportation that exists in many cities and

reinvented the experience from top to bottom. Among the many problems Uber is

tackling are: poor cab infrastructure in some cities, poor service and

fulfillment–including dirty cabs, poor customer experience, late cars, drivers unwilling

to accept credit cards, and more. Uber set out to reimagine the entire experience to

make it seamless and enjoyable across the board. They didn’t fix one aspect of the

system (e.g. mobile payments for the existing taxi infrastructure), they tackled the

whole experience from mobile hailing, seamless payments, better cars, to no tips and

driver ratings.

By avoiding the trap of smaller thinking, and iterating on one element of the taxi

experience (say, by making credit card payments more accessible in the car) they were

able to create a wow experience that has totally redefined what it means to use a car

service, sparking an avalanche of word of mouth and press.

Word of mouth from satisfied customers

Much of Uber’s success can be attributed, as mentioned above, to the fact that it is

totally mind blowing compared to the frustrating and broken taxi experience. Max

Crowley of Uber Chicago explains: “We've found that our growth is driven substantially

by word of mouth. When someone sees the ease of use, the fact that they press a

button on their phone and in under 5 minutes a car appears, they inevitably become a

brand advocate.” According to Kalanick, Uber relies almost exclusively on word of

mouth, spending virtually nothing on marketing. He explains, “I’m talking old school

word of mouth, you know at the water cooler in the office, at a restaurant when you’re

paying the bill, at a party with friends – ‘Who’s Ubering home?’ 95% of all our riders

have heard about Uber from other Uber riders.” In fact, for every 7 Uber rides, word of

mouth generates a new Uber user.

Uber has even gotten attention from the likes of comedian Dave Chappelle, actor

Edward Norton, venture capitalist Marc Andreessen—who calls it a “killer

experience,”—and AirBnB CEO Brian Chesky—who claims that “Uber makes it very

easy to not own a car.” This word of mouth is as much today’s growth engine as it was

in early days. Uber doesn’t need to do traditional marketing to drive users, they simply

find ways to fan the flame of that first trial to reach new people and grow their user

base.

Leveraging mobile technology

Mobile technology has been a source of disruption in many industries. Prior to the

launch of Uber, the taxi industry operated without major threats for decades. Uber

leveraged mobile technology to disrupt the long-established taxi industry by offering

an alternative that excels in providing convenience for passengers. Since its launch,

Uber has continued to enhance the functionality of its mobile application,

incorporating the latest in mobile technology to further improve the experience for its

users. Using the power of mobile, Uber has been able to offer consumers several

distinct advantages, including:

  1. Quick and reliable ride booking – GPS and mapping technology
  2. Transaction convenience and simplicity – Mobile Payments
  3. Driver Feedback Enables Improved Experience

After downloading the application and setting up an account, users can easily book a

ride through the mobile application with a couple of taps. GPS makes the Uber

application location aware, which eliminates the need for passengers to manually type

in or communicate their current location. Before and after booking a ride, users can

view the location of Uber drivers in the area. Sophisticated algorithms, GPS, and

mapping technology allow Uber to quickly match passengers with a nearby driver and

provide real-time estimates for pickup times.

The mobile application was also used to simplify the transaction process. Users attach

a credit card to their account as part of the sign-up process, which eliminates the

transfer of cash. The transaction is further streamlined by a pricing structure that

builds the fare and tip into a single price point. In April 2012, Uber further streamlined

the transaction related process by incorporating Card.io technology to simplify

sign-up. Card.io allows the Uber application to read credit cards by placing them in

front of the phone’s camera, instead of having users manually type in their credit card

information.

In recognition of the threat posed by second movers into the market, Uber has been

aggressive with its growth both domestically and internationally. Since launching in

2010, Uber has expanded its reach to include cities in 26 different countries. Uber’s

expansion has been met both with excitement and major blocks resulting from

lawsuits, technological limitations and government regulation.

Expanding internationally has involved a series of changes to the mobile application

and business model in order to localize it to the market and culture. Most obviously,

Uber has had to make changes to accommodate different languages, currencies, and

distance measures (e.g. miles vs. kilometers). International expansion requires must

more than this however. Travis Kalanick wrote about Uber’s international expansion

in a blog posting: “As we started expanding, it became clear that individual cities were

the unique factor in our launches. Each city is unique in its transportation pain points,

its density, its transportation alternatives, regulation, even its transportation culture.”

(Kalanick, We’re Going Global With Big Funding).

When Uber launched, one of its appeals involved the cash free transaction, which

required users to setup a credit card on their account. In some countries however,

such as Germany, credit-card adoption is much lower than it is in the United States. In

response to this, Uber announced a deal in November 2013 with PayPal, the online

payment service. The deal will allow Uber to offer an alternative payment option to

users in select countries (Kucera), thereby continuing to broaden its base of potential

users and enhancing its ability to expand internationally.

Challenges

Uber has also faced a number of legal actions against them not only from external

figures, but also from within the industry. Other cab companies that exist in cities

don’t want Uber to enter saying their wages create an unfair advantage for them and

steal the existing workforce. Internally cab drivers say they are cheated out of taxes

which Uber claims are already included in the fare. Uber’s solution to this concern also

is based on technology. Uber considers itself a technology platform, not a taxi

company. Uber only provides the branding and platform for independent people

create a small business using the technology. This absolves Uber of requiring them to

pay anything as each individual cab driver sets their own wages. Currently, Uber is

classified as a taxi company not a technology platform, a ruling which Uber has

appealed. Uber’s branding and utilization of mobile technology has made its solution

to transportation headaches more than successful. It has created a platform that has

generated envy that displays itself in copycat competition and worried taxi companies

trying to create regulation to shut them down

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