Disrupting Disruption
The Uber Model
I intend to think about disruptive business ideas and share it with all of you
This month we try to disrupt the Uber Model
By Dr. Kaustubh Dhargalkar
A few weeks back, I was reading an article on ‘Disruptive Business Models’. The author had prescribed a complex framework for visualizing/creating disruptive business models. That got me thinking as to why does management literature have to be complex? And well, finally it all ends up into a 2×2 matrix, which sounds like common sense anyway ☺
Can we not adopt a simple ‘First Principles’ approach? That would be so much more intuitive and hence easy to follow.
So, I decided to apply the ‘First Principles’ approach to disrupt one of the most disruptive business models of the past decade, UBER’s aggregation model. “Identifying non-value-adding assets (NVAs) in the ecosystem, aggregating them on a platform, helping their owners monetise these NVAs and in the process, make money by charging a commission”.
Hence, UBER is the first victim (if I may say so) of my DISRUPTION exercise, this morning.
“This model has become so popular that the word UBERIZATION has had an official entry into the Oxford dictionary.”
UBER was founded in 2009, launched beta in 2010 and officially in 2011, in San Francisco. They came to India in 2013. Most of us have been hailing an UBER since then. I have this habit of chatting up with their driver partners, as many of you too would have. Do you remember the conversations back then? The driver partners used to be mighty happy. They were showered with liberal incentives to be at their wheels. As the months went by, more and more of them listed their vehicles on the UBER platform. UBER continued creating even more attractive incentive schemes. Privately employed drivers bought their own vehicles and listed them onto the UBER platform. Some well-paid professionals bought a fleet of cars, employed drivers and listed their vehicles on the UBER platform. Till 2015-16, this win-win situation continued, attracting more such folks. Post 2016, UBER (once it had acquired a large customer base & driver partners onto its platform) began tightening its operations, incentives were rolled back, the number of cabs on their platform far surpassed the demand many times in the day. Business, for the driver partners, reduced. Naturally, all of this led to growing dissatisfaction among the driver partners.
By 2017/18, most of the partners, who had bought vehicles and signed up on the UBER platform were regretting their decisions.
“I shouldn’t have quit my job as a private driver back then.”
“UBER takes away close to 30% of the total fare, as commission and taxes”.
“UBER charges surge pricing to passengers but pays us much lesser.” “
These have been common refrains heard across UBER rides that we have been taking since 2017.
Those are strong pain points. And that’s a good starting point for disrupting the business model.
The ‘First Principles’ approach.
Let’s understand the dynamics of UBER’ business model, using the ‘First Principles’ approach. There are two sets of customers that UBER has to keep satisfied for its business to be successful:
- The passengers, i.e. you and me
- The driver partners
Evidently, the second set of customers are disgruntled with the company’s high-handed treatment
How to Disrupt?
Principle #1: Focus on the disgruntled customers
In this case, the disgruntled set are the driver partners. How can we capture their imagination? By creating a win-win proposition.
Principle #2: Analyse the current situation
The driver partner is paid according to the number of kilometers she/he ferries passengers for. This can be loosely translated as a “Get paid as much as your effort” kind of a model. Seems a fair one. But the amount of commission that UBER keeps for itself is the main peeve that the driver partners have. So, the natural question that comes to my mind is, “Can we reduce the commission?”
Principle #3: Think extremes even when you have a conventional alternative
Instead of just reducing the commission, can we totally eliminate it?
The Disruptive Idea
What if, we created a similar platform where the driver partners were charged only a monthly subscription fee to get listed, other features (on the platform) remaining the same, i.e., passengers can search for cabs the same way they do today?
After having paid a monthly subscription, whether the driver partner does 20 rides or 200 rides, in the month, using our platform is none of our concern.
Would the driver partners not flock to our platform? Just imagine!
P.S. Of course, the fare would be regulated by us, to prevent passenger disgruntlement.