Uber 's culture won't change while Travis Kalanick is still there

Dara Khosrowshahi may find his predecessor a troublesome back-seat driver, says John Colley.

by John Colley
Last Updated: 06 Sep 2017

Clearly investors are already pressuring Uber's new CEO Dara Khosrowshahi for an early IPO. They know that the longer the wait the greater will be the need to satisfy forecasts and deliver profits to justify the IPO price tag.

Potential has to become reality at some point and forecasts replaced by actual performance as the basis for valuation. But to get to that stage Khosrowshahi will also have to convince potential investors that the culture at Uber has changed.

And that is going to be nigh-on impossible with the man who has built that culture still having a big influence over the company.

Travis Kalanick's personality - high energy, driven, and with little regard for established rules - is what has got Uber to where it is today, a company valued at around $68bn but suffocating in bad publicity. Uber has become accident prone and developed a reputation for a macho and sexist culture which ignores rules, rights and even laws.

Litigation is arriving from all sides with Google's Waymo top of the list, over Uber's alleged theft of driverless car technology. Then there are the claims for driver employment rights, claims against drivers for alleged sex attacks (48 in London alone last year) and plenty more.

The real problem is that business cultures are hard to change.Consultancies sell expensive culture change programmes, but these usually do little more than scratch the surface. Cultures are so deeply embedded that there has to be a major change in both the top team and senior management to bring real change and that takes time. 

And while Kalanick is still on the board with a controlling voting position it seems unlikely that the culture will change, in which case Uber is likely to remain accident prone. A split and ill-disciplined board will not help Khosrowshahi. We know that holders of around 40% of the equity want rid of Kalanick, who they view as a divisive figure, but others seem to support him. This is unlikely to be fixed soon as Kalanick will not want to give up his baby without being pushed by investors. 

It means changing the culture is likely to be beyond Khosrowshahi or anyone else in the short-term, so expect plenty of positive PR claiming a major culture change - if you can't change the culture at least change the PR. However, continuing to be an accident prone business will cast doubt on any new image, which may well deter any potential investors and the prospect of an IPO soon.

While Khosrowshahi may struggle to speedily fix the culture, he can terminate some of the projects which have little prospect of succeeding. He could start by pulling out of some of the 70 countries and 500 plus cities where Uber has a poor position before destroying more value.

Uber are out of Russia and China which alone devoured $2bn, and others will need to follow. Many cities have been deregulated for a long time and have competitive taxi industries with low margins and competitors with comparable apps. Uber will never make much money there. 

Developing driverless car technology would be much better done in partnership with one of the major automobile companies who are investing heavily and are likely to have more expertise in this area. A partnership would reduce the risk, level of investment and exploit the expertise of others. Uber is a taxi business and probably knows rather less about the automobile industry they are entering.

The main problem is that potential partners will view the Waymo litigation as being toxic and something which could potentially last for years before any sort of resolution. There is also a belief among some that Waymo is well ahead of Uber. 

Overall Khosrowshahi has a culture to fix, poor investments to terminate, major losses to staunch, a split board, and the driven and ambitious Kalanick to contend with - plus a very long list of litigation to defend.

Investors will want to see significant progress on all these counts before backing an IPO. 

John Colley is professor of practice at Warwick Business School and former MD of British Gypsum.

Image credit: Adam Tinworth/Flickr

Tags:

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today