Digital Transformation – Uber
Image showing the Uber app. Picture courtesy of Financial Times.
Uber has greatly changed and revolutionized the transport regime by providing users with on-demand ride sharing services through accessible digital platform technology.
However, Uber is not the only company providing this kind of services. We have other companies that are redefining the on-demand urban transportation just like Uber.
With Uber posting a $62.5 billion valuation in late 2015, it’s safe to say that this new service model has proven wildly successful. (rideamigos”shifting the transportation paradigm”n.d)
In this essay, I will analyze Uber’s growth as a company and its transformational impact on the ride sharing culture around the world. I will also explore any challenges that Uber has come across vis-a-vis regulations and developing concerns around security by its stakeholders.
In this section, I will discuss Uber’s launch, growth and how this company that started as a small application became one of the biggest ride sharing serves in the world.
Uber’s founders were Travis Kalanick and Garrett Camp. The two met at a conference in Paris in 2008, and it is rumored that the idea emerged as a result of missing a taxi when late when going home from one of the conferences. The goal was to start a timeshare system at the beginning that could be requested via an application. After the seminar, they parted ways, Camp heading to San Francisco, where he started to work on the idea and acquired the uberCab.com domain. They came up with a drive-sharing application that only required a tap to order a taxi at a relatively low cost (Cook et al., 2019). The conventional way of waiting to hire a taxi to get home or work, which was time-consuming and often dangerous, was replaced by this app model. The clarity and simplicity of requesting a ride gave its soaring credibility a great elevation because one could order for a ride with just a click of a button. When using GPS, the location is decided, and the price is automatically calculated and debited to the account of the customer.
It first experienced challenges in October 2010 when it got a stop and desist directive from the San Francisco Municipal Agency concerning the name Uber cab. Still, they quickly sorted it out by adopting Uber and buying a domain for it. The year 2011 was very significant in the company’s growth because, at the beginning of the year, it had gathered $11million first round led by Benchmark Capital, which enabled it to extend its operations to Boston, New York, and Chicago, among other locations. In 2012, Uber expanded its services by introducing UberX, which presented an affordable and cost-effective crossbreed car as a substitute for the original car. This reduced the rates charged significantly, causing some outcry from other cab drivers whose revenues dropped due to the new UberX launch. Later in August 2014, it established an eatery distribution service, and in 2016 it disposed-off its activities in China to DiDi. It later merged its operations in Asia with Grab in reverse purchase. In May 2019, having gone public via an Initial Public Offering, its shares went down by 11%, culminating in the US’s most significant loss on the first day. A month later, chief operating officer Barney Harford and chief marketing officer Rebecca Messina resigned.
For those requiring a service (ride) and those offering it, Uber serves as a matchmaker. Most prominently, this follows the form of vehicle transport; users register as either drivers or as clients, with Uber serving as the link via which these two groups can then reach each other depending on their locations. In terms of revenue generation, from every trip that occurs, the company takes a fee of about 20 percent to 25 percent; drivers and the cars they operate do not belong to the company as properties and are only working as freelancers. As such, drivers must have their own vehicle (or rent one via an accredited partner) along with their insurance costs within this partnership model, even though customers can tip their driver separately (Vargas-Hernández, 2020).
Uber’s leadership has also been keen to consider other possible uses for its platform, with Uber Eats possibly the most prominent ‘off-shoot’ of the brand of the business. Initially introduced in Chicago, Uber Eats enables users from partnering restaurants to also serve as food delivery drivers. With drivers collecting income from delivery fees, drop-off fees, miles driven, and tips, the network follows nearly the same business model, with Uber still earning a percentage of between 15 percent and 30 percent. One of the essential components of Uber’s growth so far is that it is available in many different places and by targeting all age groups and individuals of different social and economic profiles; all users require is the app and a free, registered account. This simplicity and ease-of-use ensure that there is the advantage of convenience over attempting to schedule a taxi or alternative modes of transport, whether customers use the ridesharing service daily or only for one-off needs. In specific, among youthful, more tech-savvy populations, other benefits over conventional taxi services include an approximate arrival time at your destination and a real-time GPS-linked map of exactly where possible rideshares are positioned. As normally compared to other services, the Uber service charges are low; then again, the principle of surge pricing is used in the period of high demand that can raise the cost to 1.5-8 times higher.