It seems to be one of the fastest growing Internet companies in history.
Obviously, they do the fundamentals well. Good brand. Good experience. Good word of mouth. Good PR. Etc. Etc.
But after my interview with Ryan Graves, the head of Global Operations at Uber (https://www.growthhacker.tv/ryan-graves), it became clear that they are operationally advanced and this is a huge part of their success. I'll explain.
Uber isn't just a single startup, it's essentially dozens of startups rolled into one because every time they enter a new city they have to establish themselves from essentially nothing (except whatever brand equity has reached the city ahead of them). This means finding/training drivers, marketing to consumers, and building out local staff to manage operations for that city.
This is where Ryan Graves comes in. He has a protocol of everything that must be done, and in what order, and by who, to ensure the best chance of success in a new city.
So how has Uber grown so fast? Essentially, they figured out how to grow in one locale and were relentless about refining their launch process to recreate that initial success over and over in new cities. No plan works for every city, and they've had to adapt in many situations, but it is still a driving factor for their success.
Uber grew quickly because of a savvy marketing ploy- appeal to people to get what they perceive as quick and easy money. Uber is essentially a variation on the "make 1000 dollars a day working from home" marketing ploy.
They shift all the risk to their "partners" and skirt regulations and requirements because "Uber" is just a dispatch service ( their contention).
They have grown so rapidly because tech dependent millennials use their phones for everything and as far as the consumer is concerned, it is "cool" and "easy".
I am waiting. The lawsuits are just starting to roll in. Most Uber "partners" have yet to deal with the 1099 tax hassle. Lawyers always go for "deep pockets" so lawyers are already trying to find ways to hold Uber accountable for the actions of its "partners". "Partners" are already suing because under the laws of many states they are employees and are entitled to employee benefits from Uber.
Uber has hit it's zenith, municipalities are already starting to adapt their regulations to have Uber,Lyft, and all "sharing" type Aps included.
Uber has made their boatload of cash. When it starts to look like they will lose the lawsuits or become subject to industry rules and regulations, I look for them to fold up their tent and go.
That's the name of the game. Make your money fast and get out when it looks like the tide is turning, then go on to something else.
Like most great consumer technology companies: through a maniacal focus on delivering the best end-user experience, and relentless operational execution.
It is not one of the fastest-growing internet companies in history. It is however, as Bronson points out, the best execution of a city-by-city, mobile service company roll-out. I believe that any localized service provider requires a significant "on-the-ground" presence to succeed and as Bronson articulates, Uber has developed an operational "playbook" that through continuous iteration, has produced great results.
Uber has spent extensively to do this, and has the best execution, but has also had failures where their playbook just hasn't worked, and cities have been abandoned or "postponed."
Uber's total customer acquisition cost is very high, but they have also sold investors on the belief that there is a tremendous lifetime value per customer (I believe this to be true), so they can spend high up-front. But their actual month-over-month growth of net new customers in most cities is not tremendous, nor does it have to be.
It should also be noted that Uber has almost become a verb around mobile-based "one click" service offerings. Companies pitch on the basis of "Uber for x", people (especially in SF) talk about wanting an "Uber for y", so there is tremendous value in the brand they've managed to create.
I think what it's taken for Uber to succeed should be considered a "cautionary tale" for many startups looking to replicate their playbook. The type of talent required and the capital required for a national, or even multi-city service is incredibly daunting. That said, done right, it's one of the most valuable assets.
One of the reasons it took off so fast in San Francisco is because of an incredibly change-resistant, blockheaded bunch of taxi-cab companies that fought every increase in the number of taxi licenses in the city for decades, even after demand far outstripped the taxi companies' ability to deliver. The cab companies also got incredibly lazy and bad at customer service. There was so much more demand than supply that a taxi driver did not need to excel or even be basically competent to stay busy and get plenty of passengers. After years of taking cabs that reeked of cigarettes (and other things), having cabbies talk on the phone, text, and otherwise not pay attention to what they're doing, or who relied on their GPS devices more than their knowledge of the city's streets, customers were delighted to have an alternative. And when the cab companies just crossed their arms and stamped their feet and refused to evolve, they were rolled over by the social media/technology wave. I don't know how it rolled out in other cities, but in San Francisco, Uber's rise was greatly enhanced by the utterly dinosaur-like behavior of the taxi companies.
Uber has grown so fast because it attracted a great deal of capital to fund its business model. It was able to attract capital because it skirts/ignores traditional safety and financial regulations on the one hand and takes advantage of desperate and unemployed people willing to put their capital to work for free (ie their cars) on the other. The combination of rule breaking and exploitation appeals to the libertarian and capitalist leanings of VCs.
They tapped into existing infrastructure. Sure, they do have excellent marketing and PR (sometimes), but you can only grow as fast as you can scale. Uber could scale seamlessly as their drivers and vehicles were already in place. Anyone with a fairly new vehicle and a clean history is 'employable' by Uber.
The tech and operations are HOW they scaled. But the demand and service quality are WHY they scaled.
100 years ago, anyone with a car could drive you across town for a fee. It was a dangerous job and, left unregulated, became difficult to provide safety, ensure supply/demand matching, etc. So cities stepped in and regulated. Taxi commissions became entrenched, powerful and politically mafia-esque. They focused on core areas where they could get the most business with certainty: airports and hotels. You could only drive if you had a city-issued medallion and cities set caps on the number they issued. Those who had medallions fought cities to prevent new medallions from being issued to reduce supply and increase demand.
Supply & demand grew increasingly imbalanced. And, as more young professionals entered cities with fewer parking spaces for cars, demand grew rapidly- but taxis did not serve this market as they focused on hotels and airports.
Uber entered via black cabs and then P2P. Neither of which required medallions, thus circumventing the taxi supply/demand constraint. Technology enabled them to overcome the trust and safety issues of previous jitney services, increase speed and reliability, and enabled them to scale to a new market: urbanites.
Growing parking constraints from increasing urbanization, increasing ubiquity of smartphones/apps, changing (younger, professional) demographics of cities, and deteriorization of both taxi and transit service quality have all supported the growth and demand for their service.
Note that their growth has not been universal across all markets. Even though they are in 300 cities, most of their demand comes from a handful of cities sharing certain similar characteristics for certain types of trips at certain times.
I believe the main reason Uber and AirBnB both grew extremely fast is that they adopted a new (is it really though ?) approach to startups: fake legality until you make it legal.
The idea is to pick an illegal activity in a somewhat grey area and to start making money without bothering about legal until you're big enough to lobby your way out of it, either by way of "job creation", PR or just money.
The main reason most people did not try to build Uber or AirBnB before is because they stopped at the analysis step with the conclusion that it would be illegal, against regulations and thus an unwinnable battle.
Uber delivers an awesome affordable service by a) offering a taxi service, b) circumventing all taxi laws, regulations, ecosystem and related costs and c) enabling their drivers to not declare their revenue.
By cutting a few middle men, spending $0 on regulatory compliance and having a few "a little money on the side" drivers, you end up with better prices, happier drivers and none of the sluggishness of bureaucratic processes that prevents simple reviews from ruining a driver's career instantly.
At this point in time, a lot of the services offered through Uber are at least partially illegal.
Simply put: a strong business model, where consumers can't but be seduced by their offer. They solve multiple issues while getting the gob done (move you from A to B) and they make it easy for you to switch from your previous solution to theirs. At the same time, they also solve the issue of drivers who want to have an additional income.
If you are interested in finding up more about strong business models (vs. weak ones which command what I call "booty call clients"), check out serenademaio.com
The #1 reason Uber has grown is because they redefined the industry and created a new market category which labeled them the category king. A category king redefines the way we live, do business, and operate. Combined with solving a unique problem and conditioning the market to receive that problem, they have been able to grow and scale quickly.
Remember, Uber operated for about 2-3 years in California before they became main stream. They have no cars yet they are the largest car service. It gave people a job and the freedom to do it when they want and how long they want. On all fronts, they redefined the way we live our life and that's what makes them the Category King. No matter what Lyft does, they will never overtake Uber because they weren't first and they didn't redesign an industry to create their own category.
Uber success story was the most amazing of success stories in the corporate word. Uber Technologies, Inc., commonly known as Uber, offers vehicles for hire, food delivery (Uber Eats), package delivery, couriers, freight transportation, and, through a partnership with Lime, electric bicycle and motorized scooter rental. The company is based in San Francisco and has operations in over 900 metropolitan areas worldwide.
I have been to UberEATS couple of times in India and I felt that the food was good. UberEATS views India as a game changer for its business, with the food delivery unit of the world’s largest ride-hailing company expecting the country to drive its global growth and outpace other markets in attracting investment. Since Uber launched its food-delivery business in India a year and half ago, its growth here has been “incredible”, Droege said. It has grown seven-fold in order volume in the past six months in India where it adds over 4,500 delivery partners each week, he said. Globally, it has 400,000 active delivery partners. UberEATS contributed about 13 per cent of Uber’s overall gross bookings in the first quarter of 2018 from 10 per cent during the same period last year in 2017. With Uber heading towards a $120 billion public offering next year, bankers and investors peg UberEATS as a key contributor to the firm’s overall valuation and a model for its future growth. UberEATS alone is pegged to be valued at over $20 billion, according to global media reports.
The secret of how a cab hiring company went on to become a major player into chain of restaurant began slowly. No tech giant simply sprouted into a giant overnight, there had to be a period of growth, a time when the owners must take a step back and redefine the purpose of starting their company in the first place. They do this by creating an identity, a brand that both them and the employees can be identified with. Travis Kalanick’s first attempt at building a business was a forum for downloading illegal files easily and quickly. The current competition at the only catered to downloading music, and as such, gave Travis Kalanick’s own business some advantage over the market. But when demand for his services grew and he needed funding, Travis Kalanick turned to venture capitalists who in turned to venture capitalists who in turn muscled him into selling half of his company for a measly $4m. This way only the beginning for a bad run as the firm was hit by lawsuits up to the tune of $250b for copyright infringement and Travis Kalanick’s investors left him to carry the burden alone.
Travis Kalanick would go on to create another business venture, Red Swoosh, which would be responsible for peer-to-peer media file sharing-but this time, legally. It did not have too much success but thanks to his growing experience, Kalanick was able to sell it to a major competitor, Akamai, for $20m. This would turn out to be a nudge in the right direction as the influx of mobile computing and convenience in the software market was high. Companies like Microsoft, Apple, and Amazon all had a foot in the door and were not baking down.
There was a budding entrepreneur also in view, one who had created a start-up that paired online users with random sites and interests daily. His place and dominance seemed to be endless but as the era of mobile computing started, so did his reign begin to dwindle. No one needed desktop-based sites anymore, the future was in apps. This entrepreneur, Garret Camp, after selling his company to eBay, finally got the idea to start a service that grants customers the convenience of transportation at the touch of a screen. This in part was because the taxi system in his city, San Francisco, was deplorable and he was annoyed about it. He would in turn share this idea with Travis who was also looking for next big thing to invest in. The idea was to give users access to cabs at their own convenience and the ability to track their rides with GPS as well. That way they wouldn’t be left in the dark on when their cabs would arrive. UberCab was born from the desire to give people easier taxi services, and for it to be a success, the kind of experience, grit and tenacity to lead the business was none other than Travis Kalanick. Although the choice of leadership for Uber Cabs in its early stages was Kalanick, he did not want a central role and he shipped it out to Ryan Graves, who was, at the time, the best option due to his charms and looks. But the problem was that he was lacking in managerial expertise and the sharp wit required to impress and convince investors which was bad for business.
To succeed as an entrepreneur in the world today and avoid being outmuscled, one must have all the qualities needed, charm, with and confidence. This tactic helped spread the message far and wide and soon enough, UberCab had a following of committed customers. Travis Kalanick although needed help solidifying its place outside San Francisco, needed a worthy general in the form of Austin Geidt who devised an ingenious strategy to increase driver and rider involvement; free iPhones for drivers and discounted trips for riders and much more. This was incentive enough for more and more companies to get involved in UberCab Wave. But expansion was not the only challenge; apparently, they had been breaking transport laws and were in danger of going out of business. Kalanick again found a way to wriggle out of a potential lawsuit, the old name, Uber Cab would now become Uber. As it goes, some start-ups much like Uber can be self-funded and might need the funding of venture capitalists. The former founders get to bear the loss or gains the companies bring in whilst the latter has risk but less profits for the founders.
For Uber, they needed a lot of funding quickly if they were going to grow and infiltrate the streets of every city. Travis Kalanick managed to strong-arm several investors to get huge funds in investments in exchange for little influence in his firm. The common move was for these investors to exchange a huge investment for controlling stocks, but Kalanick made sure he retained as much control as possible, offering only observer seats to the likes of Google Ventures and TPG. This ensured Travis Kalanick got more than enough money for his expansion and was still in charge of what to do with the money. He achieved power amongst the shareholders by enlisting the support of the ones with large shares like his cofounders. Travis Kalanick was truly a boardroom giant and a tech general with the way he took on the big guns and came out on the top. The future of transportation seemed to shift to automated self-driving cars. It was a fast-rising trend and major players in the game were already making major moves, Google was one, after the failed attempt at getting a large chunk of control at Uber by Google Ventures CEO, he played one more card in his deck; a self-driven Uber. This idea intrigued Kalanick immensely because he loved the idea of efficiency and hassle-free transportation, it was directly within the dream he had for Uber. Being the ruthless leader, he was, Kalanick was ready to compete with little adherence to moral code. Travis Kalanick muscled rival taxi services with all of his might, one of such rivals was Lyft, who were in the business of providing a similar service to Uber. Although they were considered a rival, it was a compliment to them, they were dwarfed by Uber’s resources, customer base and tactical genius. They were although a cheaper alternative and as such, they rightly earned the title of competitor and a target on their back as well. Uber will try to buy out a struggling Lyft, but proceedings would eventually fall apart and subsequently, the firm would fold up. But enemies within were not Travis Kalanick’s only concern, as the company grew in U.S., there was a desire to conquer across the Atlantic, all the way to sacred trophy location, China. It was a legend that American firms do not do well there, and Kalanick was determined to break the jinx. Travis Kalanick spread his tentacles to far away Asia and introduced taxi drivers to this new-fangled app taking the western world by storm. Per Travis Kalanick’s usual was general style, he damned whatever existing taxis setup was there on ground or whatever rivals existed, he simply did not care.
This was met with stern opposition and many established businesses sought to outmanoeuvre Uber out of business, in China, neighbouring Asian countries and also in U.S. In Travis Kalanick’s usual fashion, the fundraising guru was able to source funds from investors to float his war against stern and fully funded opposition. At the same time, the demand for driverless cars started to increase and Uber was yet to get on the track. Most importantly, Google had not fully kickstarted their automated car division yet. This was all that separated Uber from the future it longed for.
Travis Kalanick’s grit and desire to win may have been good for the business but his personality rubbed the press the wrong way. They kept rolling out bad headlines about him, which meant bad press for Uber. Travis Kalanick had to manage his public image, increase public appeal, and keep Uber safe from attacks from enemies on every front. Travis Kalanick ran the business with little regard for staff welfare or their concerns, and such made it easy for a lot of oversight as regards the conducts between colleagues and between managers and subordinates. This would lead to an eventual meltdown within the ranks.
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath