The picture showing Uber app
Uber became the leader of the technology innovation market by using the internet platform and sharing economy. It builds a new business model on the internet and changes the global taxi industry. The essay will focus on the innovation points of Uber and critical analyses about its transformative effects on the taxi industry and internet ecology.
The first part of this essay introduces the operation of Uber, and the next part tracks the historical development and targeted regulation of Uber. The third and last part will be studying the company’s business model and the transformative effects that Uber’s technical innovations bring out, including the effects on internet ecology.
What is Uber?
Travis Kalanick, the creator of Uber, indicates that Uber is a tech company. It does not own any cars for transporting customers, and they do not employ any of the drivers driving cars, but instead, Uber serves as liaisons between the drivers and the customers. Every driver is like an independent contractor for the company. (Bashir, M., Yousaf, A., & Verma, R. 2016, p51) This kind of operating mode belongs to the sharing economy according to the article: “The sharing economy generates abundance by enabling access to underutilized assets and by lowering transaction costs, thus facilitating exchanges via a platform logic which in turn enables unprecedented scalability” (Acquier et al., 2017). It demonstrates the operating principle of Uber company; it connects the demand of those who want to have an inexpensive taxi with the driver who has an idle vehicle together to form the most benefit and lowest cost.
Video analysis the economics of Uber
Source: Poly Matter, YouTube
The historical development of Uber
As Dan mentioned in the article of Investopia, Uber’s story began in a tech conference named LeWeb in 2008 Paris. Two of the founders, Travis Kalanick and Garrett Camp, first met and the rumour said the idea of Uber was born on a winter night during a conference when they were unable to hail a taxi. This situation brought them the idea to create an App for a timeshare limo service which can quickly be ordered. In the summer of 2009, Camp persuaded Kalanick to join the Uber cab project which officially launched in May 2010. From the news of Reters: “Uber raises $3.5 billion from Saudi Arabia’s sovereign wealth fund” (Hether,2016) It shows the rapid growth of Uber, drawing attention from many investors. Uber has already extended its line of business to foreign countries.
The picture showing the founders of Uber
However, the development would not always be simple. Uber immediately had regulatory problems, and the regulator of each country has different rules. They do not trust the innovative behaviour of Uber, which lead to targeted regulation of Uber such as “Pennsylvania’s Public Utility Commission issued a cease-and-desist order on Lyft and Uber operations. The companies face fines of $1,000 per day, and 23 drivers face civil and criminal charges.” (Cannon, S., & Summers, L. H. 2014, p1) Similar punishments that aim at Uber arose in many places in the world. Since Uber was not regulated in terms of pricing, the traditional taxi industry lost a huge number of customers by the constant price that is controlled by the government. (Wallsten, S. 2015, p5) It led to the hostility of the traditional taxi industry. They report Uber’s operation model and low-price competition to regulators, and some of the regulators ban Uber in their area to protect the stability of the traditional taxi industry. These regulations cannot entirely stop Uber’s development.
The tech innovations points behind revolutionary business model.
As Chesbrough said in the article, the Business Model needs to have its value proposition and define the value chain’s structure. (2010) For Uber, the tech innovation points are the main reason to create value on the Business Model in the Sharing economy. Firstly, Uber use one of the main concepts in the Sharing economy: “Converting goods into services and converting underleveraged service assets into more valuable ones.” (Smith, J. 2016, p385) substitute Uber company into the theory, it demonstrates the Uber is a service provider, it connects idle car and driver to become useful for the customers. Uber can benefit from the brokerage, but it needs to offer innovative technology to support the service.
Picture showing Uber add security assurance base on COVID-19
Image: Uber, All rights reserved
From Bashir in the article, Uber has the technique of check the driver’s background before they put their car on the Uber App. Uber also cooperate with Google map, customer can know how far of the car is and set a meeting place. Inside the App, it makes it easier for the conversation between driver and customer, the driver can text or ring up the customer to make sure the time and place he/she should arrive. Those innovations in Uber App can offer the most security assurance for customers and a convenient communication style for customers. Moreover, the algorithm of send orders in Uber is an essential part of Uber’s innovation technology. Take the example of the popular choice UberPOOL as an example, from the research of Möhlmann, M., & Zalmanson, L UberPOOL is a ride-sharing option for strangers who have a different destination but similar direction. Uber claims that they use an effective algorithm to match the passengers, formulate the most efficient and cheapest route for passengers. The effective algorithm of Uber supports the low-price form of Uber, it shows the management idea of Uber is to use Sharing Economy to increase efficiency, high efficiency naturally brings the price to fall. It helps everyone to feel the convenience of Sharing ecology.Compare to the traditional taxi Business Model, the Uber app is more suitable for the internet era, it opens up an online car-hailing model, passengers would not worry about can they taking a taxi by standing beside the road and keep wave hands.
Uber‘s Internet ecology
An internet ecology is usually made by many different objects that cooperate to form an ecology that supports each other. Uber company’s main product is the service for car-hailing, but with the development of Uber, it adds other services base on car-hailing, such as Uber eats. The company is the main competitor of a traditional taxi.
The major competitors for Uber are Lyft, DiDi, OLA Cabs, those 3 companies offer the same service as Uber: hailing car service, DiDi and OLA Cabs have the advantage of understanding their own country, China and India, it is hard for Uber to compete with them in their own country. From the news of Didi buys Uber China in a bid for profit, will keep Uber brand (Jon,2016) shows Uber already lose the competition with DiDi in China market.
The supplier of Uber is the drivers, every driver drives their own car for Uber, that corresponds to “Uber articulates that all the drivers are like independent contractors for the company.” (Bashir, M., Yousaf, A., & Verma, R. 2016). The operation model of Uber is using the private car of each driver, each driver is independent and have rights to reject the order they did not want to, the freedom Uber can offer to drivers is attractive.
Wyman mentioned that U.S regulator should made new rule for the emerge of Uber (2017) It shows the regulation for Uber is a problem for regulators. The difference between each country make Uber need to change themselves to enter the market, government usually will consider the impact on traditional taxi industry and give restrict or penalty to Uber.
The diagram of Uber’s Internet ecology
Uber internet innovation bring revolutionary effects (social relation, taxi industry)
As Horpedahl mentioned that Uber uses a smart phono app to help customer to bypass traditional taxi (2015). It demonstrates the invention of Uber is revolutionary by using the internet and app technique. Before Uber, people only have the traditional taxi choice, which is inconvenient, and the pricing is unable. But Uber use app technique to show their advantages on low price, service and technology, this kind of new Business Model made Uber became a new internet platform to offer taxi service for customers. The new business model of Uber changes the taxi industry to become a technological competition in global, an increasing number of the car-hailing app developed after Uber’s success, such as Didi in China, Ola in India. Uber also improved the social problem of unemployment, from the news “Uber says 158,000 drivers will lose work if they’re reclassified as employees” It shows contribute the uber on unemployment, many drivers rely on jobs that provided by Uber.
Uber internet innovations do bring out the transformative effects on people relate socially in daily life. One of the innovation techniques is the online automatic price adjustment system in their software platform. (Teece, D. J. 2018). The system is used for Uber to decide the time to decrease or increase the price to stimulate passenger’s consuming desires, it has a pricing balance point in the business model of Uber. By observing the demand and supply of Uber and the company can use an algorithm to reach the best benefit. For Uber user, they can respond to changes in supply and demand in the market by understanding the real-time price.
The picture showing the reputation system of Uber
Image: Peter Love, All reserved
Another innovation technique is “a reputation system in which users rate the drivers’ behavior” (Möhlmann, M., & Zalmanson, L. 2017) The system supports every passenger to give comments and score for each driver. The reputation system was often used in the companies of sharing economy, it demonstrates the quality of trust is vital in Sharing economy. This system offers the passengers a sense of security and avoid the driver who has poor quality. It also helps to form a friendly communication and a pleasant time for both driver and passengers in the car, which can improve an embarrassed atmosphere when you take ride with stranger.
Picture showing the Contrast of Uber and Traditional Taxi
From the contrast form, it demonstrates the advantages and innovations technology of Uber, is hard for Traditional Taxi to survival when they compete with Uber, low pricing marketing technique is effective. It causes the sharp loss for traditional taxi industry. From Fitzsimmons, the development of Uber give rise to full-blown crisis for traditional taxi industry and drivers, it led a mass of loss of foreclosure and even cause driver’s suicide. (2018) The impact of Uber brings sharp loss for traditional taxi and driver; it demonstrates the innovation of Uber have destructive effects on taxi industry.
In general, the internet platform that Uber invented bring revolutionary effects on social relation and taxi industry. Uber users and drivers can have a better communication environment base on the innovations of Uber app, and real-time pricing system help both the driver and passenger understand how to respond the supply and demand of Uber. But Uber is a destructive innovation that cause traditional taxi industry have sharp loss, traditional taxi industry is the victim of the competition between the companies like Uber.
Bashir, M., Yousaf, A., & Verma, R. (2016). Disruptive business model innovation: How a tech firm is changing the traditional taxi service industry. Indian Journal of Marketing, 46(4), 49-59.
Acquier, A., Daudigeos, T., & Pinkse, J. (2017). Promises and paradoxes of the sharing economy: An organizing framework. Technological Forecasting and Social Change, 125, 1-10.
Cannon, S., & Summers, L. H. (2014). How Uber and the sharing economy can win over regulators. Harvard business review, 13(10), 24-28.
Wallsten, S. (2015). The competitive effects of the sharing economy: how is Uber changing taxis. Technology Policy Institute, 22, 1-21.
Chesbrough, H. (2010). Business model innovation: opportunities and barriers. Long range planning, 43(2-3), 354-363.
Smith, J. (2016). The Uber-All Economy of the Future. The Independent Review, 20(3), 383-390. Retrieved November 17, 2020, from http://www.jstor.org/stable/24562159
Möhlmann, M., & Zalmanson, L. (2017). Hands on the wheel: Navigating algorithmic management and Uber drivers’. 38th ICIS Proceedings.
Wyman, K. M. (2017). Taxi regulation in the age of Uber. NYUJ Legis. & Pub. Pol’y, 20, 1.
Horpedahl, J. (2015). Ideology Über Alles? Economics bloggers on Uber, Lyft, and other transportation network companies. Econ Journal Watch, 12(3).
Teece, D. J. (2018). Business models and dynamic capabilities. Long range planning, 51(1), 40-49.
Fitzsimmons, E. G. (2018). Why are taxi drivers in New York killing themselves? The New York Times, Retrieved from:
Multimedia Reference List:
Heather, Somerville (2016, June 2) Uber raises $3.5 billion from Saudi Arabia’s sovereign wealth fund. Retrieved from:
Jon Russell, Ingrid Lunden (2016, August 1) Confirmed: Didi buys Uber China in a bid for profit, will keep Uber brand Retrieved from:
Dara, Kerr (2020, May 28) Uber says 158,000 drivers will lose work if they’re reclassified as employees. Retrieved from:
Dan Blystone (2019, Jun 25) The Story of Uber. Retried from:
Kate Rooney (2019, Mar 15) Uber’s eye-popping $120 billion valuation would make it worth more than Nvidia, 3M and PayPal. Retrieved from:
Kirsten Korosec (2020, May 14) Here’s how your Uber ride will change, starting May 18
Peter Love (2018, May 25) How good is a 4.90 driver rating on Uber? What % of all drivers have a rating of 4.90 or higher? Retrieved from:
Poly Matter(2018,July 13) Retrieved from: https://www.youtube.com/watch?v=jzFTwBkIC5o