Digital Innovation and Transformation through Uber
Picture showing Uber app Image: Dara Kerr. uber app
Prior to the entrance of Uber into the public transportation sector, taxis majorly dominated the industry and monopolized the market by charging expensive rates although their services were considered deficient. However, since the entry of Uber into public transportation in the year 2009, the company has disrupted the monopoly that taxi drivers enjoyed in various cities, especially around airports. The first section of this essay seeks to provide a comprehensive overview of Uber’s operations while the second part will explore the company’s historical development. The third and fourth sections will provide an overview of the company’s ecosystem and internet ecology.
Contrary to traditional public transportation, Uber is not a taxi service but rather a car for hire service that utilizes smartphone technology innovation to connect travelers to drivers. Since its inception into the public transport sector, Uber has become the most preferred alternatives to previous taxis and is now available in more than 80 countries over the world and in more than 700 cities (Uber Newsroom). Uber’s smartphone application that is available for download in Google or Apple applications stores is responsible for managing the entire ride inclusive of the payment process. One needs to register an account via the application in order to utilize the service. When one needs a ride, he or she needs to log into the account and select the preferred destination. A driver who is willing to take the ride accepts the client’s request and uses a map to drive to the customer’s location. After the ride is over, the customer can pay using cash, a credit card, or a debit card (Chokkattu, & Crook, 2014). For the operational costs of the application, Uber management takes a small percentage off each ride.
The History of Uber
According to the Uber newsroom website, the idea of starting Uber was first developed after two individuals namely, Travis Kalanick and Garrett Camp failed to get cab services on a cold winter evening in Paris, France (Uber Newsroom). The two were then intrigued by the idea that a person could get a ride by simply pressing a button on their phone. It was in 2009 that the two entrepreneurs launched a smartphone app in San Francisco that allowed people to hail a taxi by simply tapping a button on their digital mobile devices. In 2012, the company rolled out a service known as UberX that allowed people to work at their convenience for Uber by earning while driving their personal cars (Chokkattu, & Crook, 2014).
Image showing the combination of Uber transportation and food delivery services. Photo courtesy of Bizcarson Twitter
Since this time, the company has developed other transportation services including carpooling services, and helicopter rides. Interestingly, the company also had a product offering known as UberEats, in which clients can order food from restaurants online and have the food delivered to their doorstep through Uber transportation services. Today, Uber enjoys annual revenues of more than $11 billion and has more than 19,000 employees (Uber Newsroom). The company has a customer base estimated at 75 million clients and three million drivers in about 83 countries. Since its entry into public transportation, Uber is considered to be a game-changer. Markedly, the company is planning to change the entire landscape of public transportation through the introduction of self-driving cars, a concept that is already under test in select locations worldwide.
Here is a video about the ecosystem of Uber, the Uber ecosystem was designed to profit at the expense of the drivers who provide the transportation service needed. The technology of the app is marvelous, but even that, Uber stole the technology and unjustly enriched from it without compensating the inventor.
Below is a diagram of Uber’s ecosystem.
Uber’s ecosystem is considered to be among the most exponential in the world particularly because the company not only solves problems for a single group of individuals but for many people. The most important facets of Uber’s ecosystem are revenue generation and customer satisfaction. In order to understand the business model employed by Uber, it is important to understand the unique attributes it contains. First, Uber makes a provision of different cab models with the ultimate aim of ensuring that the company addresses the transportation needs of all people (Cramer, & Krueger, 2016). There is Uber X, Uber Taxi, Uber Black, and Uber SUV all attract different price ranges based on the levels of luxury needed by a client of the need for cost-effective solutions (Bashir, Yousaf, & Verma, 2016).
Image showing different car models availed by Uber Courtesy of Samar Singla
Another unique aspect of Uber’s ecosystem is surge pricing technology. The Uber application is designed in such a way that cab fares vary based on different situations. For instance, when the demand increases, the average price per mile is also increased. New prices are dependent on the number of drivers within a particular radar and the number of requests made by clients who wish to travel (Anwar, 2018). Prices also go down when the demand is low or there is no traffic along desired traffic routes. This strategy helps maintain both drivers and clients based on the surge pricing technology. The success of Uber’s ecosystem is also supported by the availability of value propositions for the company’s stakeholders (Vargas-Hernández, 2020). For instance, customers are assured that they do not have to wait for a ride for long periods of time. The company also offers discounts or free rides for customers from time to time and even offers price subsidies below the normal taxi charges. Finally, customers can travel in style due to the availability of a wide array of Uber car models. For the drivers, they are able to earn an extra source of income with their personal cars. The service also offers flexibility for working schedules, in which case a driver has the option of accepting or canceling a ride (Lee, Chan, Balaji, & Chong, 2018).
Image showing Uber ecosystem Courtesy of Samar Singla
Uber’s Internet Ecology
Internet ecology refers to the systematic organization of different platforms to interact with each other through the provision of complementary services, in such a way boosting business for each other (Stone, 2017). Uber is positioned at the center of a sharing economy that is dominated by various groups including partners, competitors, owners, suppliers, regulators, users, and competitors. The mentioned groups are discussed in the following section. Competitors of Uber comprise other companies that offer transport services through online means. Among the main competitors of Uber include Lyft, Didi, Careem, and Taxify. Nonetheless, it is worth noting that Uber outdoes its competition with regards to the revenues acquired mainly due to the fact that it is the most renowned ride-hailing application in the world and also has a large customer base compared to other competitors (Tran, Van Nguyen, Tran, & Pham, 2017). Contrary to the rivals, Uber has also partnered with some entities to enjoy the mutual benefits of the boosting of operations. For instance, the company has partnered with financial institutions such as MasterCard, Visa, and PayPal that enhance the payment system utilized by the company (Di Amato, 2016). Partnering with these companies proves to be of benefit to Uber because customers do not have to undergo the hassle of acquiring cash in order to pay for their rides. Uber has also partnered with various restaurants under the Uber Eats platform in which case a customer can order food online after which an Uber Eats driver delivers it to the client.
How Uber has transformed the use of the internet
The users of the Uber application platform can be divided into two sections namely the drivers, and the customers. Customers use the application to request transportation services while the drivers acquire customer requests through the drivers’ platform. Uber management is the middle man in all transactions between the driver and the client because it decides the amount of payment for each trip while also making predictions such as the exact time of arrival on behalf of the driver (Di Amato, 2016). While Uber has registered overwhelming success in the past decade of its operations, there are groups of regulators who see it to make business harder for the company. These include municipal and state governments who pass policies such as tax increments for the company or establish rules such as how much Uber drivers should get paid (Cannon, & Summers, 2014). Furthermore, community groups such as restaurant owners in cities such as New York have tried hard to fight UberEats with claims that the service would have negative impacts on their businesses. Finally, Uber has a group of suppliers that work towards ensuring the services provided by the company are not disrupted. For instance, Uber has partnered with internet service providers and internet infrastructure providers such as Google to enhance their tracking services. A diagram of Uber’s Internet Ecology is provided in the appendix section.
Overall, Uber has played an integral role in internet transformation by altering how we live. It has provided cheaper transportation by allowing users to take advantage of the internet to seek competitive rates from drivers. Uber has also increased transportation safety, as drivers are bound by specific rules, and users can rate them on a scale of 1 to 5 if they do not abide. Ultimately, Uber’s high penetration rate has made cheap, safe transport available during all hours of the day and night.
Anwar, S. T. (2018). Growing global in the sharing economy: Lessons from Uber and Airbnb. Global Business and Organizational Excellence, 37(6), 59-68.
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.
Cannon, S., & Summers, L. H. (2014). How Uber and the sharing economy can win over regulators. Harvard business review, 13(10), 24-28.
Chokkattu, J., & Crook, J. (2014). A brief history of Uber. TechCrunch. Repr.Cramer, J., & Krueger, A. B. (2016). Disruptive change in the taxi business: The case of Uber. American Economic Review, 106(5), 177-82.
Di Amato, A. (2016). Uber and the sharing economy. Italian LJ, 2, 177.
Lee, Z. W., Chan, T. K., Balaji, M. S., & Chong, A. Y. L. (2018). Why people participate in the sharing economy: an empirical investigation of Uber. Internet Research.
Stone, B. (2017). The upstarts: How Uber, Airbnb and the killer companies of the new Silicon Valley are changing the world. Random House.
Tran, H. M., Van Nguyen, S., Tran, T. T., & Pham, L. Q. S. (2017). A Study of Uber-based Applications. In Proceedings of the Eighth International Symposium on Information and Communication Technology (pp. 447-452).
Uber Newsroom. (n.d). The history of Uber. Retrieved from https://www.uber.com/en-CA/newsroom/history/
Vargas-Hernández, J. G. (2020). Uber’s Strategy as a Competitive Business Model of Sharing Economy. In Sharing Economy and the Impact of Collaborative Consumption (pp. 97-115). IGI Global.