Exploring Uber’s Digital Business Model
Uber Technologies Inc, commonly known as Uber, is an American ride-hailing company that has taken the technology world by storm. It has revolutionised the taxi and private-hire industry completely through its digital business model, leading to success across the world. This post will explore the elements within their digital business model which contributed to this success.
Utilising the sharing economy
The sharing economy was an area where many start-ups had previously failed, yet Uber has managed to succeed in a big way. This could be put down to the industry that they’re working in, as Kevin Tsui explains, “Some of these sharing-economy models started strong and were very profitable, but over time, many platforms waned as users’ enthusiasm didn’t match their actual use of the service. In the end, some of these businesses had many more people eager to lend their goods than they had people wanting to use them.” (Uhlmann, 2016). Uber was able to successfully use the sharing-economy model to their advantage, helped tremendously by the correct application of technology. As a result of smooth digital user experience, demand was established and kept on both sides of the marketplace, allowing for high uptake (Knight, 2016) and even higher valuations (Wessel, 2014).
Uber’s use (and perhaps exploitation) of the sharing economy did not go unnoticed however, with many governments and drivers unhappy with how they are treated (Grant & Khosla, 2015). There have been a considerable number of court battles across the many countries that Uber operates in, where drivers are fighting to be considered as employees, not independent contractors (“Uber loses appeal over driver rights”, 2018). The move worked very well for Uber from an operational perspective, allowing them to skip past a number of hurdles that would be met through the classification of drivers as employees. The art of breaking down artificial regulatory entry barriers by the use of technology was and still is an activity that participated greatly to Uber’s success (Wallsten, 2015).
Using technology to boost USPs
By building a digital-first company, Uber is able to offer a whole load of USPs that the taxi industry had not seen or been able to implement before, which was critical in its early and sustained success (Forbes, 2008). The riders were the segment which benefited the most, by gaining access to an app that can provide a large amount of information at the touch of a button, a big step compared to the traditionally unknown task of hailing a cab (Wallsten, 2015).
Through the use of the Uber smartphone app, users gained access to a host of features that made them feel as though they’re in control, built with transparency at the heart, in order to gain user’s trust and to keep them coming back (Wallsten, 2015). The use of a data-driven approach enabled users to have real-time accuracy as to the whereabouts of their taxi, instant upfront pricing, crazily precise ETAs and lower waiting times. These qualities meant that ordering a taxi was no longer such a shot in the dark, something users had been used to for decades. The same goes for the drivers too, the technology used by Uber means drivers have to wait less for new riders, combined with better trip allocation and the flexibility to simply turn off the app when they’re finished working (Hall & Krueger, 2017).
As the world continues to move to a cashless system, Uber can be seen as one of the drivers of this in my eyes. A pain point I can relate to deeply when getting taxis in the pre-uber era was not having cash. Living out in the countryside as a teenager, miles away from a cashpoint made this incredibly difficult. Uber’s business model makes full use of the cashless revolution, incorporating Debit/Credit cards, PayPal and Google/Apple/Samsung Pay into the app as methods of payment, increasing the convenience of using the service even further — a USP that I particularly love. An additional bonus of the digital business model is the pricing efficiencies that stem from the supply and demand responses on the platform (Edelman & Geradin, 2015). By utilising clever algorithms, in times of high demand, drivers are motivated to join the platform to carry out more trips. Similarly, riders are persuaded to delay their journey in order to travel at cheaper times. Although occasionally seen as controversial (Simpson, 2014; Newcomer, 2017), surge pricing’s efficiencies far out way the negatives that some consumers experience (Edelman & Geradin, 2015).
In conclusion, Uber has successfully revolutionised the taxi industry as we know it today through its supreme implementation of a digitally enabled business model. Not only that, but it has also paved the way for technology entrepreneurs and businesses alike to continue disrupting industries by utilising technology to provide better services across the world.
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References:
Edelman, B., & Geradin, D. (2015). Efficiencies and Regulatory Shortcuts: How Should We Regulate Companies like Airbnb and Uber?. SSRN Electronic Journal. doi: 10.2139/ssrn.2658603
FORBES, S. (2008). THE EFFECT OF SERVICE QUALITY AND EXPECTATIONS ON CUSTOMER COMPLAINTS. Journal Of Industrial Economics, 56(1), 190–213. doi: 10.1111/j.1467–6451.2008.00338.x
Grant, E., & Khosla, S. (2015). Here’s everywhere Uber is banned around the world. Retrieved 16 February 2020, from https://www.businessinsider.com/heres-everywhere-uber-is-banned-around-the-world-2015-4?r=US&IR=T
Hall, J., & Krueger, A. (2017). An Analysis of the Labor Market for Uber’s Driver-Partners in the United States. ILR Review, 71(3), 705–732. doi: 10.1177/0019793917717222
How Uber Makes — And Loses — Money — CB Insights Research. (2018). Retrieved 17 February 2020, from https://www.cbinsights.com/research/report/how-uber-makes-money/
Knight, S. (2016). How Uber conquered London | Sam Knight. Retrieved 16 February 2020, from https://www.theguardian.com/technology/2016/apr/27/how-uber-conquered-london
Simpson, C. (2014). Uber Busted for Intentionally Surging Prices. Retrieved 16 February 2020, from https://www.theatlantic.com/technology/archive/2014/02/uber-busted-intentionally-surging-prices/358555/
Newcomer, E. (2017). Bloomberg — Are you a robot?. Retrieved 16 February 2020, from https://www.bloomberg.com/news/articles/2017-05-19/uber-s-future-may-rely-on-predicting-how-much-you-re-willing-to-pay
Uber loses appeal over driver rights. (2018). Retrieved 16 February 2020, from https://www.bbc.co.uk/news/business-46617584
Uhlmann, R. (2016). What makes Uber and Airbnb flourish while others fail in ‘sharing economy’?. Retrieved 16 February 2020, from https://newsstand.clemson.edu/what-makes-uber-and-airbnb-flourish-while-others-fail-in-sharing-economy/
Wallsten, S. (2015). The Competitive Effects of the Sharing Economy: How is Uber Changing Taxis? | The Technology Policy Institute. Retrieved 16 February 2020, from https://techpolicyinstitute.org/policy_paper/the-competitive-effects-of-the-sharing-economy-how-is-uber-changing-taxis/
Wessel, M. (2014). Making Sense of Uber’s $40 Billion Valuation. Retrieved 16 February 2020, from https://hbr.org/2014/12/making-sense-of-ubers-40-billion-valuation
