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Summary:

Competing directly with Uber is really hard. Maybe others that want to overthrow the traditional taxi system should try a few new tactics.

UberX

I am one of those people who doesn’t own a car. I never have. I don’t even have a driver’s license and it was nearly 25 years ago when I last rode a scooter. I walk, take the subway and, when it was needed I used to take a cab everywhere. In fact, I was good friends with the cab dispatcher of my preferred cab company in San Francisco. It was an imperfect world, but then Uber came along.

At first Uber was like someone you meet at a party, talk to for a little bit, exchange phone numbers and forget about. I tried Uber in its infancy and then went back to my old life. I live three blocks from work and with the epicenter of consumer and web tech moving to San Francisco, everything was within walking distance. For Palo Alto, there was Caltrain.

The only time the system broke down was when I went for my cardiac therapy on the other side of town. The cardiac therapy left me super exhausted and as a result it was hard to run around trying to find a cab. So I ended up calling for an Uber. While it was expensive, I got home fast and basically was able to unwind faster. It was a small luxury; the cars were nice and the drivers (while few) were polite and knowledgeable. And it was so New York (my proverbial home that I can’t seem to leave behind). The experience was excellent.

Town car ride-hailing Uber

It was a service that proved its utility by doing one thing for me: it helped me arbitrage time. It compressed the wasted time to the bare minimum and helped increase my personal productivity. It was easy to justify spending money on this service. Like that first meeting at a party, it turned into casual run-ins at a hipster cafe and over time, we ended up becoming friends.

A few weeks ago, Uber introduced some radical price cuts on UberX — its car-riding service that is supposed to be a step above cabs in terms of quality, but a step down from the premium (and original) Uber service. The prices are low enough that it has become cheaper than taking cabs. There are so many UberX cars on the roads in San Francisco that I have stopped calling my cab company, moved away from the premium service and frankly am happy about the cost savings.

While I miss talking to my cab company dispatcher, who has since moved on to another job, Uber has become an indispensable part of my daily transportation needs and has now replaced cabs for me. The underlying efficiency of Uber replaced that human connection.

I feel conflicted about it, but I think this is the future of our society that will be enabled by anywhere computing.

The secret doors in the mountain

But this efficiency over the human touch is also an opportunity for Uber’s rivals — including those who are complaining about the company’s hardball tactics. Today there was word that Uber went over the line and tried to poach Gett drivers, an act that generated a formal apology. In San Francisco Uber is waging the equivalent of a ground war on Lyft, which is now out looking for its own pot of gold to fight back.

Many of these rivals are going to find their noses bloodied — that’s the no-holds barred, bare-knuckle fighter attitude co-founder and CEO Travis Kalnick brings to the table. Having seen the company grow at near supersonic speed, you know that it is virtually impossible to out maneuver Travis, who is ruthless in his pursuit of first place.

Travis Kalanik

That said, there are a few ways rivals can compete with Uber instead of crying over hardball business tactics. A few months ago, Bret Taylor (former CTO of Facebook, current CEO of Quip) pointed out that mobile notifications give apps the ability to nudge people into action — all you have to do is think smartly about using this channel for behavior modification. Using smart marketing tactics, Uber rivals can try and get on my device: I have Sidecar, Flywheel and Instacab on my phone and have intentionally opted out of Lyft.

If these services can figure out a way to nudge me into using them when there is surge pricing on Uber, then slowly I will start to see a modification of my usage behavior. I am sure these companies are thinking about these technical solutions and they’re if not, they should be. But that won’t be enough: If you have to compete (but not beat) Uber, there is another small chink in Uber’s armor.

Fighting back

Uber is going for scale — a landgrab if you may — and as a result it is paying a lot less attention to the quality of drivers it is trying to bring on board. The more drivers it has, the faster Uber can take you to your destination. Just as Google used supersonic web-speed to serve up search results and made us addicts of their service, Uber is looking to use scale — more cars and more drivers — to reduce time to dispatch and time to destination. It is a smart and winning strategy, except it comes at a cost.

While Google can tweak its algorithms to control quality, Uber has no such option. As Uber has scaled, it has brought on a lot of untried drivers: folks who might have cleaner cars, but who struggle with even basic tasks such as knowing what routes to take without the help of a GPS, so you end up giving them directions. There are other qualitative issues, often pertaining to driving skills. Many would say that you get what you pay for, but these issues are not unique to UberX and have spread to the higher-end service as well.

For Uber rivals, this is another substantial opening. Price cuts and pink mustaches are only going to get you so far against a company that has scaled so quickly and has hundreds of millions of venture dollars at its disposal. By having tighter controls around quality of cars and driver qualifications those rivals can start to offer a qualitatively better experience, and start to carve out a niche for themselves.

Just as people go to Nordstrom for a better service experience versus say Macy’s or Bloomingdales, the rivals can make themselves known for quality. Maybe it is time for rivals to develop different strategies and stop trying to out-Uber Uber.

  1. Thad McMullen Friday, January 24, 2014

    These car services are a God send; it’s about time for better than taxi cab services for a reasonable price!

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  2. Why did you opt out of lyft?

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  3. Hannah Andrews Friday, January 24, 2014

    Lyft is so much better. I use it all the time, especially on the weekend :)

    If y’all want a $20 credit, download Lyft and enter promo code: COLLEGE20 in the payment section.

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  4. Mitali Pattnaik Monday, January 27, 2014

    I agree with your point: going head-to-head with Uber with far fewer resources is simply stupid and I see so many car share startups doing just that. Along with the focus of quality over scale, some other tactics for competitors:
    – fight on your own turf. not every single company has to launch in San Francisco, especially not every transportation company. taxis and transport in general have unique geo-specific traits so pick a different market that you can nail before Uber does like BlaBlaCar has done in parts of Europe
    – pick a different customer. corporations, hotels, etc employ lots of taxi and limo services. try building car share products for them instead of only the consumer segment. some folks like local motion are doing this but its definitely underexplored
    – test other business models. why not a subscription service with mileage limits similar to how longterm rentals work? for someone like you (Om) who uses these services as their main form of transportation this may make more sense. and you get to lock in your customers.
    I’m sure there are plenty more but these are some I have been thinking about and advising folks to try – glad that you highlighted this issue.

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    1. Mitali

      I have been thinking about the lock-in: and I think from my standpoint faster access for “whales” aka regular users is a good way to create sticky and loyal customers.

      I have had the chance to use other services but Uber works because I don’t have the friction of signing up for another account/ That is a good option too. I am thinking maybe some of these regional services could form a “WiFi styled” pooled network, which allows folks to roam from one city to another.

      Clearly, liquidity is key.

      Thanks for the comment.

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  5. @Mitali.. Subscription service is an incredible idea. If I can get a discounted rate to complete X miles a month from another service, I would jump ship from Uber.

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  6. The only problem is that this apps. are nothing but illegal gypsy cabs. What a shame…

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