Lessons from Uber’s Disruption of the Taxi Industry
I arrived late at the main station and wanted to grab a taxi. I had not enough cash. But this shouldn’t be a problem today, right? Unfortunately, it was. No taxi wanted to accept card payments. Also my local taxi app was not working in this area. Thus, I needed to search for the next ATM. To my surprise, this was also not straight forward: There was no ATM in the near surroundings. After some walk I found one: It was broken. Eventually, I found a working ATM, got some cash and grabbed a taxi.
You may think this story happened in some suburbs, in a less developed country. But I assume, that a city of about 600,000 in the middle of Germany, is neither suburb nor underdeveloped. Although, it may sound like a small city, it is among the Top 10 largest cities of Germany.
The taxi industry has undergone a massive disruption by Uber and Uber-like competitors; with some cities going so far as to ban Uber from entrance into their markets.
In the Uber-Taxi Industry example, I identified a few signs the taxi industry was ripe for disruption.
Although the signs are derived from the concrete taxi example, I am confident that they are universally applicable for most industries.
1. Ignore your customers
You know better than your customers. New products or services are developed within your company without real customer engagement. You say: “We know better than our customers, because we are or have the experts who are doing this business already a long time. We know best what our customers want.”
To my experience, this is so wrong and I observed it already many times in my professional life. Projects with a long run-time produce products or services which are designed based on what the business departments require. In the end, they were dissatisfied with the outcome, or worse, the actual customer was dissatisfied. Why? Because the people for whom the product was for were not engaged properly in the development process. Maybe they were asked initially, but ideas or features were not evaluated with them.
Taxi example: Ignore other payments than cash. Keep ignoring your customers. They will find a better service somewhere else soon: Ever heard of Uber like services?
▶ Companies innovate, customers evaluate
2. Ignore your competitors
There is this new start-up which wants to tackle your business? They cannot make it anyway: They have no reputation, they have no brand, they have no money, they are not fulfilling regulations, etc. Seriously? This is not a big problem today anymore.
Competitors start small. Give customers a good feeling. Grow fast without mercy of burning money. You as the established market lead will soon realize, that they are doing better. But then it may already be too late.
Taxi example: Services like Uber have entered the market quite easily. In countries I travel there are services which are super cheap, e.g., Bolt, and have a huge fleet.
▶ The classical market entrance barriers are lower than never before
3. Ignore emerging technologies
New technology is just a waste of money for you. Buzzwords without meaning. IT is a cost center and has to be reduced to the minimum. Support the business processes, that’s it. Sounds familiar?
What if mobile payment is more than just a buzzword and actually eases the life of people to pay without cash, e.g., Apple Pay, WeChat Pay? What if you could better understand your customers with data analytics to optimize your service? What if you could use AI tools and algorithms to enable new services and products, e.g., Alexa, Siri, Google?
Taxi Example: Mobile payment to accept more than cash. Note: It’s not really emerging, it’s already there.
▶ IT is driving business instead of “just” supporting it
4. Ignore the market
Everyone else is innovating but you think this is just a hype? This will not make it? If the market changes and your are not moving, you may end like Kodak (the ones who stuck to analog photography) or Blockbusters (the one who stuck to DVDs).
Nothing is wrong with analog photography or DVDs, but the new products and services are more accepted by customers. Regardless of the reasons. If you do not accept and follow the trend, your business is not going to survive.
Taxi Example: Apps to order taxis easily and mobile payment to pay. It’s there, customers like it. If you do not offer it, chances increase, that less people will use your service.
▶ The customer, and only the customer, decides if your business survives, not the CxO or any other person in your company
5. Hope for Politics & Regulators
You have no fear, because you have a strong lobby and will put some pressure on politics to save your business. So many people will loose their job, this should be an argument, right? And of course, you can put pressure on regulators to impede market entry.
Taxi Example: Ban Uber from operating, because of missing licences, etc. How long do you think you can prevent companies from entering the market with that strategy? You can only buy time.
▶ It’s not about if, but when competitors enter the market
The more signs from above can be observed, the higher the chances are that there is a disruption going on. It’s never too late to adapt. But keep in mind:
▶ Survival is not mandatory
Disclaimer: The opinions expressed in this private blog post represent my own and not those of my employer. In addition, my thoughts and opinions change from time to time. I consider this a necessary consequence of having an open mind.