In today’s modern business world, change is happening faster than ever. If we are not prepared for the next future, we may find ourselves left behind before we know it. Take uberisation, for example. Just a decade ago, the term did not exist. But today, to many the word evokes innovation, while to others it means the highest threat to business.
So, let’s talk about it. What is uberisation? How a business model adopted by a start-up, Uber, is now defining the future – not just in transportation, but in every part of life? Here are the answers.
Uberisation Defined – What Is It?
Uberisation is a term used to refer to the way telecommunications and advanced computing can speed up the delivery of services and operations, providing a more economical and efficient experience for users.
The term is derived from Uber, the name of the company responsible for ushering in today’s era of ride-sharing services. Uber is a german word that means “over”.
There’s only one way to better understand what uberisation is about. It is to take a deep dive into Uber’s industry and story.
The Traditional Taxi Business Model
Entering the “traditional” cab business incurs high upfront costs for the drivers. First, they have to obtain a licence from their city. Second, they need a car, which comes with insurance coverage that costs higher than for a personal vehicle. Third, they need to install a taxi meter, a top light sign for their car, and depending on the city, they may even have to paint it in the official city cab color. Finally, taxi drivers need to join a cab company that centralizes client calls and does the dispatching on its own terms. Moreover, the company imposes a schedule to the drivers and sometimes limits their activities to a specific area of the city.
Note that even if a driver chooses to join a cab company that provides the cars, that membership comes at a considerable cost. So at the end, the load on the traditional taximan is high.
How Did Uber Change the Business Paradigm?
Uber is the primary company referred to when discussing uberisation, and for good reason. When Garrett Camp and Travis Kalanick founded Uber in 2009, they had one idea in mind: reducing the cost of direct transportation.
So, they made it possible for any one with a driving license to offer taxi rides with their own car, without the usual upfront costs. No city license, no taxi meter, no top light. The icing on the cake is, the company started to deliver transport services without investing a single penny in building a fleet of cars. The investment went to building the Uber app mostly, which is not on the same scale of costs.
Uber innovated and disrupted the taxi service world in a few key ways:
- A better user experience – The first thing that Uber offered was a better user experience. Unlike calling a taxi to a specific address, the Uber app uses GPS and advanced networking technology to automatically call a car to your location. This is an incredible innovation – and allows for a frictionless user experience. Simply open the app, tap your location and destination, and get ready for your ride. It’s just that easy.
- Lower costs – By cutting out middlemen like taxi companies and transit corporations, Uber offers lower costs for riders, compared to traditional riding services. This is possible because of a few other factors, as well, such as a wide pool of labor (drivers), and venture capital investment that can help defray the costs of each individual ride – providing Uber with a competitive edge.
- On-demand service – Uber allows users to call for a ride on their terms, on their schedule – whenever and wherever they are. And, in the same vein, drivers for Uber are allowed to work on their own terms, and only when they wish to, providing them with increased flexibility.
Consequently, Uber offers a better user experience, on-demand, at a lower cost than the competition. They do so by using advanced computing and networking technologies. It’s no wonder that the Uber business model has become so widely imitated and expanded to so many other parts of life.
Why Is Uberisation a Threat to Companies Using “Traditional” Business Models?
Today, Uber is not only a profitable company, but also a global leader in ridesharing, taxi cab, food delivery, bicycle-sharing, and transportation services. Just in 2016, the company generated US$6.5 billion. It is now investing in top technology projects such as self-driving cars.
Other industries have tapped into uberisation since. Software platforms like Airbnb allow for rentals on-demand in cities worldwide. Websites and apps like GrubHub, SkipTheDishes, and UberEats have changed how food is delivered, and bike/scooter sharing startups like Bird and Lime are using an Uber-like model to solve issues related to “last-mile” transit.
So, Uberisation is seen as a threat to many companies. The primary reason to this is they are simply not prepared at all to adopt uberisation or to counter competition that uses the business model.
This is exactly what happened with traditional taxi services, in the wake of Uber’s expansion, and the rise of other ride-sharing companies like Lyft. Today, many taxi services offer app-based transportation. But they adopted this technology slowly. Consequently, they were not able to outcompete Uber and similar apps. Today, Uber and Lyft are crushing the traditional taxi industry, and are even affecting the rental car business. Note that it’s only been about half a decade since Uber hit the market for the first time.
Uberisation is scary because it has the potential to shake up even the most well-established service markets – and topple them completely in a matter of years, or even months.
Embracing Uberisation – Our Top Tips for Preparing for the Future of Business
Don’t panic. You may be worried that your industry will undergo uberisation. But actually, uberisation is an opportunity, not a threat – as long as you’re prepared for it.
Our best tips to stay ahead are the following:
Keep Up on Technological Trends and Be an Early Adopter
Uber was an early adopter of smartphone technology like GPS tracking. This is the secret behing Uber’s success and taxi services’ failure. The company used this feature to their advantage.
Because of this, one of the best steps you can take to prepare for uberisation is to stay on the cutting-edge of your own industry – whether it’s software development, IT services, or any other industry. Knowing the current trends and technology will allow you to adapt your business model – and avoid falling behind.
Ensure Your Customers Have a Great Experience Using Your Service
The cost and convenience of Uber made it a natural choice for users, over traditional taxis and cabs. It could be argued that, if taxis offered an experience that was equal to Uber or Lyft, they would be much more successful. But they didn’t – and now have fallen behind.
If your users enjoy using your product and have a good experience with it, they’re unlikely to abandon your company just because a new startup has a flashier product. So, focus on a great user experience and keep your customers happy.
Keep Costs Down When Possible
This is not always possible, of course, but it’s still good to mention. Using modern technology such as edge- and cloud-based applications (IaaS, SaaS, PaaS) for example, could help bring your costs down. If you pass these savings onto your customers, they’ll be much more likely to stay with your company.
If it takes you years to adapt your business to the market, you need to fix the issue. This might be happening because your IT department does not have the right processes to quickly respond to the demand. The underneath reason is usually an aging, closed infrastructure that does not offer scalability and is difficult to upgrade.
Think about it. By getting the right IT infrastructure, you can guarantee your business sustainability.
Prepare for Uberisation – And Keep Your Company Ahead of the Pack
It’s unlikely that every industry will adopt an “uberised” business model in the future. However, we can still learn a lot from the astonishing rise of Uber and other ride-sharing and “sharing economy” apps.
The rise of these apps has taught us that user experience, low costs, and innovation are paramount. We’ve learned that companies that fail to take this into account are in danger of being crushed by startups who do.
To keep your company ahead of the curve and safe from the competition, start with following our tips. Learn more about selecting your SaaS provider here or getting the best return on investment with your software solution here.