Uber’s Business Model Reframes Cheaper, Better, Faster.

 

Uber redefines transportation by tapping new business models.
This age-old pyramid diagram above is the basis for many business models. Companies typically choose only one or two of the following qualities: Cheap, Fast, or Quality. To apply this model to the Collaborative Economy, let’s analyze how Uber’s products are fitting into the value propositions across various segments of the triangle. Uber continues to roll out new products, to take on new business opportunities and to combat opposition. To date, Uber is locked in a bloody war with the city of Paris, managing marauding taxi protesters, city regulations that require an Uber to wait 15 minutes before picking up a passenger and increasing bureaucracy at every turn. To combat the latest set of obstacles, Uber has just launched UberPOP, a low-cost, ride-as-a-service, offering smaller cars and cheaper rides than their other products or their traditional taxi competitors.

Uber’s business model is low inventory, high transaction, and high margin.
Uber’s business model is quite simple. They’re a web app, an advanced computer program and a marketing and PR machine. Founder and CEO, Travis Kalanick, said at the recent LeWeb Paris (where I launched Crowd Companies, a brand council for this movement) that Uber is at the intersection of lifestyle and logistics. So why is their business model receiving over $300 million in funding, with a majority of it coming from Google Ventures? Uber is a simple, two-sided marketplace of buyers and sellers. They own no inventory, warehouses, distribution centers or other ancillary overhead required for most traditional business models to operate. Uber hasn’t gone without challenges. Critics point out that Uber is disrupting taxi business models, city taxes and traffic. Even Uber workers had a relatively quiet protest over lost wages, followed by, of course, controversial surge pricing.

The above graphic breaks down Uber’s more popular products, including:

  • Uber Town Car. They’re best known for this mode, which birthed the company. Drivers must maintain a 4.6 star rating out of 5.0.
  • Uber X. Regular cars owned by regular people who drive. Some are former taxi drivers. Cars must be no more than a few years old and clean. Drivers are also rated.
  • UberPOP. Recently launched in Paris, this offers smaller, lower-priced cars, which look nearly like ride-sharing business models.
  • Uber SUV. This larger version offers more room to take a group of folks around town or to a destination.
  • Uber Helicopter. Last summer, wealthy Manhattans who loathe hours in traffic could take a town car to a helipad and be whisked away to the Hamptons in minutes.

Seven lessons from Uber’s business strategy.
What can large corporations learn from Uber’s successful business model?

  1. Don’t be afraid to disrupt someone else’s business flow. Uber’s CEO shared on stage that he prints and tapes “cease and desist” letters on his office walls.
  2. Owning inventory is a liability, because being the middle marketplace is lower risk and higher margin.
  3. Tap the internet of everything, by applying sensors via mobile devices to find idle resources in a local area.
  4. Map those idle resources to buyers, using prepaid mobile apps.
  5. Deliver, and take at least a 15% commission from the transaction.
  6. Surge pricing is free market economics, the purest form of unregulated capitalism.
  7. Embrace bad PR as a marketing windfall. Bad press is still better than no press.

What else is Uber up to? This week, for Valentine’s day, you can order skywriting (nothing says I love you like 1200 point font), special deals for Vegas, including a stay at the Cosmo hotelice cream on demandSuper Bowl celebrations on your street with PepsiChristmas trees via Home Depot, and of course, kittens on demand. Purr.