Paul Wallbank – Brilliant Communications

Tag: Uber

  • Disruption comes at a high price

    Disruption comes at a high price

    Not so long ago, lending for taxi medallions was a safe bet. Now it’s pretty risky, as US lender Capital One revealed in a presentation last week.

    Bloomberg reports the lender believes over eighty percent of its taxi loans are at risk of default.

    In New York, medallion values have halved while in San Francisco taxi companies are going out of business. As a result Capital One’s loans that looked good a few years ago are now risky.

    That problem is global. As I wrote two years ago for The Australian, the Aussie taxi industry has been tipped upside down by Uber and a cast of smaller competitors.

    How the taxi companies failed to adapt is interesting. In most cities they were protected by a nest of laws and regulations that were ostensibly to protect passengers and drivers but actually acted to create high barriers that benefited license owners.

    In most cities, certainly in New York and Sydney, taxis were dirty and unreliable – drivers were treated poorly and passengers were taken for granted – which made alternatives attractive even before the cheaper UberX and Lyft services arrived.

    The protection also made the taxi companies slow to adopt new technologies. There was no reason why Australia’s Cabcharge or San Francisco’s Yellow Cab Company couldn’t have developed a smartphone app to order taxis, track progress and improve business expense reporting – that they didn’t speaks volumes about their inefficiency and complacency.

    Being complacent was understandable though as regulators were tame and kept competitors out. Customers had nowhere else to go.

    When customers did get the chance, they voted with their wallets and now its the bank accounts of taxi owners and their lenders who are hurting.

    That Capital One is feeling the effects of that change is telling – when genuine disruption happens there’s a range of businesses, people and stakeholders affected. We should never underestimate that.

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  • Uber’s sharing strategy

    For most of its existence, Uber hasn’t been shy about claiming to be at the forefront of the future of transport which fits into yesterday’s announcement of Uber Movement which promises to provide aggregated and anonymised trip data to give communities and businesses an overview of road usage in their districts.

    Jordan Gilbertson,  one of the company’s Product Managers, and Andrew Salzberg, Head of Transportation Policy, described how Uber intends to make transit time data available.

    Uber trips occur all over cities, so by analyzing a lot of trips over time, we can reliably estimate how long it takes to get from one area to another. Since Uber is available 24/7, we can compare travel conditions across different times of day, days of the week, or months of the year—and how travel times are impacted by big events, road closures or other things happening in a city.

    As the Washington Post reports, transport agencies do already have a lot of data on some aspects of commuter behaviour – particularly public transport usage – and the Uber information fills as ‘missing part of the puzzle’.

    Taxis and buses are also increasing equipped with real time tracking equipment that also gives this data while traffic services like Wayze have been collecting this information for a decade.

    So agencies aren’t short of this data and the concentration of Uber’s customer base in more affluent areas means their information may be skewed away from poorer areas. Recently a Sydney taxi driver mentioned to me how he’d stopped driving for Uber because most of the city’s sprawling Western Suburbs where he tended to drive didn’t use the service.

    Uber’s offer is another piece in their data strategy that sees the company being a data hub for the logistics industry. It also helps if you’ve co-opted governments into your scheme.

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  • Risks in the disruption machine

    Risks in the disruption machine

    At last year’s Dreamforce, Uber founder Travis Kalanick sat down with Marc Benioff to discuss the ride sharing service’s history and its aspirations to reinvent public transit.

    Those aspirations are coming to fruition reports The Verge as local governments across the US sign agreements with Uber to supplement their public transport networks.

    In entering those arrangements local officials are finding a number of problems, not least the service’s obsession with secrecy that falls foul of US public data practices and legislation.

    That clash between the Silicon Valley obsession with hoarding intellectual property and US open government beliefs is one that will become more common as agencies attempt to ‘Uber-ize’ their services.

    However the Uber model isn’t working well in some markets as the fate of Washio shows.

    A month ago Mic Magazine wrote about how Washio was a symptom of the ‘disruption’ being wreaked on communities by the tech industry as high priced services displaced undercapitalised smaller business.

    Washio’s success, like Uber and most of the tech startups following the Silicon Valley greater fool model, required capturing enough of the market to have a dominant position in the marketplace making it hard for new competitors to enter while driving out existing players who can’t afford to make losses indefinitely. This is path followed by Amazon, Microsoft and even IBM.

    However this strategy is risky if there’s not enough capital, which Washio has now found with the service entering bankruptcy this week.

    The sad thing is Washio’s unprofitable and unsustainable business model let them kill other companies whose owners, managers or investors were unable or unwilling to compete with a loss making enterprise.

    For small businesses in particular the effects of a well funded megalith intent on driving them out of business is particularly cruel – as we saw with booksellers and Amazon.

    Local governments need to be particularly aware of the risk of making Uber the only provider of neighbourhood public transport, leaving them the sole player that owns all their data could well prove particularly costly, one only wonders what could happen had a local hospital done a laundry deal with Washio.

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  • Uber’s grand experiment

    Uber’s grand experiment

    Yesterday reports emerged that the icon of the disruptive economy, ride sharing service Uber, lost 1.2 billion dollars in first six months of this year.

    Those losses show disruption doesn’t come cheap, although settling the damaging and costly battle with China’s Didi Chuxing will help the company’s cash burn.

    Despite on track to lose at least two billion dollars this year, the company still has a substantial war chest having raised $8.7 billion dollars in debt and equity raisings over the last eighteen months.

    While impressive, that war chest will only last four year at current rates and, given Uber’s already sky high 60 billion dollar valuation and the increasingly hostile Silicon Valley fund raising environment, it will be a relief to investors that the China battle appears settled.

    There remains though an ongoing weakness in Uber’s business however with the company reportedly spending hundreds of millions a year in subsidies to drivers in key markets. How sustainable their business is remains to be seen.

    In many respects Uber is following the Amazon example of beating down competitors by selling products at deep losses thanks to its access to capital and investors’ tolerance for building marketshare.

    As we’ve seen with Amazon, that tactic has been wonderfully effective both in retail and in providing cloud services. For customers and the economy though, the reduced choices in the marketplace may end up not being in their interests.

    Uber is an interesting experiment in how far the Amazon model can be pushed, for cities and states dealing with a deeply disrupted taxi and city transport network the results of that experiment may be telling.

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  • You’re going to need a bigger app

    You’re going to need a bigger app

    “It has to be disruptive technology,” bleated the consulting firm facilitator at the Future Transport Summit in Sydney earlier this week.

    The hapless, but well paid, consultant — a depressingly frequent feature of Australia’s current ‘ideas boom’ — was protesting when one of the participants at his ‘ideation session’ had raised topics such as integrated timetables and changing commuting habits.

    Mr Consultant’s running orders for his ‘ideation session’ were to focus on ‘digital disruption’ and his employer;s cluelessness illustrates a danger for business leaders and policy makers.

    Selling the snake oil

    Digital disruption is real however it’s not just the only factor facing governments and industries. Demographics, economics, politics and climate change will have greater influences on business and society.

    Uber, the favourite lovechild of those spruiking digital disruption snake oil, is a very good case in point. While the service certainly has disrupted the taxi and motor vehicle industries, these sectors were facing major challenges as governments enacted policies to reduce carbon emissions, voters became tired of cartel like taxi companies and the Western world’s young and wealthy moved back to the cities and away from owning motor vehicles.

    If anything, Uber was the result of GenY entrepreneurs like Travis Kalanick finding existing services didn’t meet their needs rather than the result of technology desperately looking for a problem to solve finding a niche.

    Complex changes

    While the smartphone was critical in Uber’s success in disrupting the global taxi industry, technology was only one facet of a much more complex set of changes.

    The motor industry is a good example of the complexity of change. A hundred years ago it was clear the transport industry was about to be disrupted by the automobile, it was by no means obvious access to affordable personal transport would allow urban sprawl and the suburbanisation of western society.

    Coupled with the motor car and truck, the availabilty of mains electricity meant refrigeration also became accessible which lead to the rise of supermarkets after World War II. This disrupted the local corner store in ways shopkeepers could never have foreseen in the interwar years.

    Shifting demographics

    Now, the opposite is happening as the young and affluent reject long commuting times from distant suburbs and city densities start increasing.

    The social and economic factors that drove Uber are affecting public transport usage patterns and it’s no coincidence that the cities where ride sharing services have most successful, such as Sydney, also have underfunded public transport systems that are struggling to meet their population’s demands.

    Which brings us back to the foolishness of discussing the future of transport only in relation to technology. Smartphones, apps, big data and the internet of things will all be critical parts of future transportation but the social and economic factors will shape how people use the networks.

    Focusing on technology while ignoring the other big influences is a folly that will cost businesses and government dearly. Although one suspects the management consultancies will do well regardless of how well change is managed.

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