Uber is starting to look as hungry for growth as Amazon - Denise Kingsmill

The on-demand cab app's ambition is impressive, says Denise Kingsmill.

by Denise Kingsmill
Last Updated: 22 Dec 2014

Uber, the on-demand car service, is the app that London's cherished black-cab drivers love to hate. In recent times I have heard little else but vituperative fury about it when I've taken a taxi.

The widely publicised cabbies' strike in central London a couple of months ago was an expression of their Luddite-like antagonism to Silicon Valley's latest tech export. However, the public reaction to their protest was unexpected, as Uber's subscriber numbers shot up by 850%, highlighting, among other things, the creative use of news media as a channel to new customers. The cabbies' objections reflected a static and old-world attitude. Although enthusiastically accepting the advantages derived from Hailo, they are definitely less than happy to embrace the future when it comes to a disruptive, ruthless competitor such as Uber.

Cab drivers in Italy, France and Spain have registered similar complaints, causing grid-locked chaos in defence of their monopolies. In Germany, where the company is fighting an attempted nationwide ban, the local taxi associations claim unfair competition and cite safety concerns because Uber's drivers aren't certified. Last month a Frankfurt taxi firm won an injunction against a Uber driver who was fined EUR1,000 and risks jail if he continues to offer his services. However, Uber has confronted regulatory scrutiny and court injunctions from early on and has regularly faced down these challenges as it has expanded rapidly into roughly 150 cities globally.

The company is recruiting drivers at a prodigious rate, with £1,000 bonuses and other perks. Even some black-cab drivers are being tempted across to Uber. In the US, the competition to attract and retain drivers has become ferocious as companies such as Lyft and Sidecar, attracted by high returns in a market characterised by low barriers to entry, join the fray. Uber has recently started offering low interest rates to drivers to enable them to buy their own cars, locking them in for the duration of the loan. While drivers appreciate the higher pay rates and the flexibility of working for Uber, some are beginning to worry that an unregulated market could ultimately leave them vulnerable to lower pay in the inevitable price war as competition kicks in.

It is not just the regulated cab companies of the major cities that should be worried by the rise and rise of Uber. In July this year the firm offered to deliver ice-cream on demand in 144 cities, in 38 countries, on six continents. By leveraging its existing business model, raising brand awareness and crossing into the business of home delivery, Uber has made clear its future strategy. If it could successfully and profitably deliver a highly perishable product like ice-cream across the globe then it could deliver anything anywhere.

The company has recently changed its tagline from 'Everyone's private driver' to the all-encompassing 'where lifestyle meets logistics'. This is a company with ambitions, big ambitions. Not satisfied with being a mere car service company, however innovative, it wants to be the cheapest and most convenient way to deliver people and stuff around the rapidly growing cities of the world.

The classic Harvard Business School question posed to would-be entrepreneurs is: 'What business are you really in?' Uber has answered this clearly, and sees itself as the ultimate logistics and delivery company of the future. It already has the infrastructure to dominate, including a global customer base, a powerful and secure online platform and an engaged workforce, as well as a very determined management team. It is growing fast, most recently opening in India, the Middle East and China. The projected valuations are around the $100bn mark. Not bad for a minicab company. One can only imagine how Addison Lee founder John Griffin must be gnashing his teeth.

Comparisons have been drawn with Amazon, which has expanded from being an online bookseller to an all-purpose retailer, a publishing business, a streaming TV service and much more. Uber too will diversify, probably in directions not yet envisaged ... drones delivering goods to you wherever and whenever? And like Amazon, Uber has the major advantage over so many internet service providers of not being dependent on advertising for its revenues.

In the meantime, more and more people are becoming reliant on Uber as the company continues to innovate its car services. In San Francisco it has now launched uberPOOL, which will put you together with someone travelling along a similar route. It already claims to be 45% cheaper than a taxi. Join the uberPOOL and that figure is nearer 70%. The company understands its customers and meets their needs. Cash does not change hands; there is no hassle about tips, the app enables the customer to choose the quality of the vehicle and to monitor its progress and even to rate the driver.

Even if it does not realise its plans for world domination of the logistics business and settles for being the leading global taxi service, Uber will still be a very impressive company.

Baroness Kingsmill is a non-executive director of various British, European and US boards. She can be contacted on editorial@managementtoday.com. Follow her on Twitter: @denisekingsmill.

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