The ride hailing app ,once an unsurmountable juggernaut , poised to redefine the way we travel has been hit with an embarrassing number of scandals and setbacks. How does the company refocus and re-strategise in order to weather the storm?
Uber’s practices and company policies have been receiving a lot of negative press coverage recently, and operational stumbles and a shareholder revolt, culminated in the resignation of its CEO, Nick Kalanick. A spate of public relations disasters including a sexual harassment scandal and footage of Mr. Kalanick, arguing with an Uber driver have placed a spotlight on Uber’s freewheeling corporate culture. This is not the sort of attention the tech company would have welcomed, and the stumbles the company has faced in a number of key markets in addition to an exodus of key staff as a result of its toxic corporate culture, have given momentum to its competitors keen to take advantage of its foibles (Lyft , a competitor, has just concluded a round of $500 million dollars of funding) and tarnished the start up’s reputation . Indeed we are miles away from the company whose meteoric rise to becoming the world’s most valuable unicorn company (tech companies with a valuation of 1 billion or more) took the world by storm.
What went wrong and how does Uber right the ship?
A rare unicorn
Uber began as the brainchild of Garret Camp a tech entrepreneur who had the idea for Uber after a bad experience trying to hire a private taxi on new-year’s eve made him think of ways the cost of private taxis could be decreased. This idea evolved into what is now Uber. Kalanick was one of the first members to join the team first as an advisor and then as CEO of the company.
Uber works by providing a platform through which consumers can use to hail a taxi without having to go through any of the inconveniences of calling a taxi: finding one on short notice, going out to fetch a taxi, the time taken to find a taxi, and then the fear of being taken advantage of, all with the use of an application.
The business model worked and , in helping relieve the pain points associated with hailing a taxi, Uber has revolutionized an industry plagued by inefficiencies, and in the process become a central part of the fabric of many modern societies.
And so far, in many ways, Uber’s sleek software and unique business proposition has been a runaway success.Uber now operates in more than 66 countries and more than 507 cities.Today Uber is thought to be valued at close to $70 billion dollars making it the world’s most valuable unicorn. It is said have had about 128 million users in the first quarter of 2017 alone.
But recently Uber has found its quest for global dominance has encountered a number of hiccups.
Lawsuits and legal challenges
First , have been the lawsuits and legal challenges Uber has faced in its global expansion. In many countries there has been resistance to Uber, caused in part by taxi unions opposed to the introduction of the service because of what they perceive to be unfair competition by the tech company:taxi drivers generally have to undergo courses and pay for licenses and insurance which can cost tens of thousands of euros- something Uber drivers are not required to do. In the US, Uber has faced growing opposition in a number of states including Alaska , Georgia , Illinois.Outside the USA Uber has faced legal action in Italy , France, Netherlands, south Korea amongst others.
It has also faced a lawsuit from Alphabet, the parent company of google, accusing it of having appropriated proprietary technology from Waymo , its self-driving car division.
Add to this, stories that Uber would use a greyball software in order to keep regulatory agents from catching Uber drivers and it is clear Uber’s legal team has had its hands full.
Stiff competition abroad
Then there is the aggressive competition, and the unique challenges developing nations pose to Uber’s expansion. In its rapid expansion it has found itself locking horns with well-funded and aggressive local competitors in a range of important markets. China is perhaps one of the most salient examples. Uber ultimately withdrew from the Chinese market, after many years of intense competition with Didi Chuxing, and billions of dollars invested in the local Chinese market. In 2016 , it sold its Chinese operation to its rival Didi Chuxing, effectively throwing in the towel.
It is reorganizing and refocusing on India where the market of 1.3 billion people holds enormous promise and could one day be the biggest market for cars opening up in 2013. But it has found that it’s slick software and vision of a carless society has crashed into the off-line realities of developing nations such as bad infrastructure, unique consumer habits, poor internet coverage; undeveloped financial mainstays, and local’s unique relationship with technology.
Many drivers in India for instance never used a smartphone; quite a number of drivers are also illiterate. Uber therefore has had to go above and beyond the regular services it offered in the developed nations to adapt to the particularities of the Indian market.
In Africa , Uber has operations in eight countries so far, these are: South Africa , Tanzania, Uganda, Nigeria , Egypt , Ghana and Kenya.
In South africa, changes to employments laws to accommodate ride hailing companies have helped give ride hailing employees the same status as normal workers. Uber has been able to take advantage of its first mover advantage.
In Kenya the picture has been slightly different. In perhaps what may be a better example of what it will face in most Africa, Uber has had to adapt its business model to African realities. Having to adopt cash payments for instance given that very few people have credit cards and payment methods are still underdeveloped. Uber has also had to deal with telecom companies , which in Africa are dominant players in the tech scene , and to a local start up called Little Cab backed by safaricom. The Start-ups association with M-pesa , the popular mobile money payment system , and its ability to tap into millions of subscribers that Safaricom possesses make it a formidable competitor who threatens to overhaul Uber’s first mover’s advantage.
Problematic corporate culture
And then there are problems which draw from Uber itself, and from its toxic corporate culture: the sexual harassment claims, and the misogynistic and free-wheeling culture which are hallmarks of the of the notorious frat boy jerk culture which is endemic to many silicon-valley start-ups. This frat boy jerk culture has been the source of a number of scandals. Most recently, it has transpired that Uber obtained the medical records of a woman raped by an Uber driver in India, and doubted the veracity of the woman’s claims and even suspected that one of their indian competitors had staged the incident to sabotage them. In fairness Uber is not by any means the only company to suffer from consequences jock culture. Recently Dave McClure of 500 Startups had to resigned after it transpired he had made sexual advances to female tech entrepreneurs. But accusations have als been leveled at Chris Sacca of Lowercase Capital and Justin Caldbeck of Binary Capital. Nonetheless, as one of the most successful start-ups in recent times, Uber’s stumbles have served to once more bring to light an issues which remains one of the dark undersides to the Silicon valley success stories which is its lack of diversity.
Problematic Corporate structure
Uber has a decentralized system , where autonomy and risk-takingare prized above all else. Different regional branches are given almost total autonomy and the leeway to make decisions based on their appreciations of conditions of the ground with little in the way of supervision from the San Francisco headquarters. The idea was to make the company more nimble, and better equipped to adapt to challenges. Reckless or borderline lawful actions were tolerated provided they enabled the company to reach its growth targets. And it worked , for a time, as Uber quickly rose in valuation to stratospheric heights. The mantra for Uber had been growth at all costs and internally, good performers who sometimes took excessive risks or misbehaved were protected and promoted as long as they reached growth targets. When one manager, threw a coffee mug at a subordinate in a fit of rage, the incident was played down internally. But now that Uber has graduated from being a rising start-up, to being a well-heeled incumbent , these same corporate values and the corporate culture they have engendered have become liabilities.Though its results have remained solid, it’s revenues excluding cost rose in 2016 to $20 billion , or twice the amount of 2015, there are worries as to how much more Uber can grow given its troubles in key markets and its legal troubles.
Rectifying the shot
In reaction to its corporate culture problems, Uber has responded swiftly. In an internal memo to his staff now made public, Travis Kalanick the then CEO said “What is driving me through all this is a determination that we take what’s happened as an opportunity to heal wounds of the past and set a new standard for justice in the workplace. It is my number one priority that we come through this a better organization, where we live our values and fight for and support those who experience injustice.”
He launched an internal investigation into workplace practices , hiring Eric Holder the former attorney general of the united states under Obama to lead it; Assigned Arianna huffington and key stakeholders to oversee the change process and help repair its image;; And has even been open to amending the 14 corporate values Uber has in order to help make it more humane and ensure that the excesses which have spilt into the media no longer occur. The investigation has already yielded results: more than 20 uber staff have been fired as a result of findings of the investigation many have been put in training and a number have received final warnings.
Additionally before he stepped down, Mr. Kalanick hired a new chief human resources officer to revamp the workplace culture and has been given her free reign to alter the culture and workplace processes of the company. Uber’s new human resource officer has been organizing ‘listening tours’, scheduling meetings with employees who wish to expose their grievances and getting a feel for the problems in the company. Uber has also called on advisors with experience in effecting organizational change to help Uber recalibrate itself.Will these steps be sufficient? Time will tell. But , what is certain is that in order for company-wide , deep rooted organizational change to occur it is important for the top executives to take the charge and to lead the way, without which change will never get a foothold on the organisation and will never truly materialize. Kalanick for all his perceived faults had been prescient in identifying the severity of the problem, and has taken concrete steps to solve the problem: he has admitted there is a problem, he has sought help and he has taken steps which show he is committed to seeing this change through. Now it will be up to the next Uber CEO shepherd it through this difficult time and write a new page in Uber’s history.
With Kalanick gone Uber’s challenges will be clear: to revamping the culture and work processes of a company which, in many ways, and for better or worse had taken on the qualities and defects of its one time ceo. Returning confidence to investors; carrying out a successful initial public offering, and improving the at times tumultuous relationship between Uber and its drivers. If Uber is to become a global powerhouse it will have to successfully overcome the challenges, both internal and external, to its operation. On the internal front that will mean creating a corporate culture which is humane and motivates its workforce ; it will mean setting up appropriate feedback mechanisms to flag inappropriate behavior inside the company, and it will mean setting standards which will ensure it will not run afoul of customers’ expectations or hurt their sensibilities in a society that is increasingly engaged and sensitive to improper behavior on behalf of corporate companies. On the external front it is important that it adapt itself to its markets and recognize their uniqueness and provide solutions tailored to the analog realities found in many less developed markets. Only that way will Uber graduate from unicorn to global powerhouse.