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How Uber turbo-charged the Sharing Economy Business Model

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A comparison of Uber to Zipcar shows the large and subtle differences in business model and what you can learn from it for your innovation.

Published in: Leadership & Management
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How Uber turbo-charged the Sharing Economy Business Model

  1. 1. How Uber turbo-charged the sharing economy business model A comparison to Zipcar shows the large and subtle differences that you can learn from
  2. 2. Zipcar Uber On-demand (=pay-per-use) business model Sharing economy based business model
  3. 3. Zipcar Uber Zipcar uses an on-demand business model It owns assets (=cars) that it rents out as demanded by their customers Uber also provides an on-demand service But the more important aspect is that it utilises already existing assets that are owned by others This is a characteristic of the sharing economy and Uber combines this with the benefits of platform businesses Uber does not embody the sprit of the sharing economy Platform companies and sharing economy business can learn from Uber. A comparison with Zipcar (a successful car sharing company) shows the big an subtle differences that anyone can learn from
  4. 4. Photo credit: http://www.freestockphotos.name/ Economic benefits of not owning a car: • Average cost of ownership of a car per year in US: $8,558 ($23 / day) • Cars are utilised only 5% of the time (72 mins / day) • Economic benefit for consumer of $6.8b (in the US) in 2015 from Uber alone Image credit: https://digitalsynopsis.com/wp-content/uploads/2014/06/supercar-wallpapers-bugatti-3.jpg
  5. 5. The value proposition is different but partly overlapping (on short distance, short term usage) Zipcar Uber Using a car from 1 hour (minimum) up to 1 day Get picked up and dropped off Value propositions are not the same but similar
  6. 6. Zipcar avoids having to check the car after each ride and pushes some other costs onto the user (avoiding operational costs that a classic car rental incurs) Zipcar
  7. 7. Uber Zipcar Keeping clean + fuelling up Driver User Fuel costs Driver Zipcar Parking (at car’s home base) Driver Zipcar Maintenance costs Driver Zipcar Depreciation Driver Zipcar Purchase costs + cost of capital Driver Zipcar Core transaction costs (server, app) Uber Zipcar But Uber pushes all operational, maintenance, depreciation & capital costs to the driver Don't miss the forrest for the trees: Uber’s massive growth would never be possible without this
  8. 8. Zipcars located in Lower Manhattan where I have to pick them up myself Uber cars near my pick- up location (w/ real-time updates) come to me Distribution model
  9. 9. Safety, insurance, liability Ensure safety Provide appropriate insurance Uber
  10. 10. Use technology to further improve safety Uber
  11. 11. https://newsroom.uber.com/feedback-is-a-2-way-street/ Real-time feedback about drivers means Uber can correct for issues big and small – while ensuring that only the best drivers stay on the road. We take this feedback seriously – depending on the circumstances, rider feedback may lead to deactivating a partner from the system or serve as validation that the driver is providing great service. An Uber trip should be a good experience for drivers too – drivers shouldn’t have to deal with aggressive, violent, or disrespectful riders. If a rider exhibits disrespectful, threatening, or unsafe behavior, they, too, may no longer be able to use the service. Have partner drivers been deactivated for consistently poor ratings? You bet. Have riders been given a temporary cooling off period or barred from using the app for inappropriate or unsafe behavior? Yes. The system works to make sure the most respectful riders and drivers are using Uber. For example, in San Francisco only 1% of trips have a low rating of 1 or 2 given to a rider or a driver. Also check out: https://www.uber.com/en-AU/legal/community-guidelines/us-en/ P2P platforms: manage “human interaction risks”
  12. 12. Uber strives to add value to the community (possibly to improve their image) Uber
  13. 13. People trust brands they know Sharing economy companies can use their capex and revenues to build a brand and acquire customers at turbo pace http://www.nielsen.com/au/en/insights/reports/2015/global-trust-in-advertising-2015.html Build and buy trust
  14. 14. Transaction cost = $0 (well, not quite but much leaner than classic car rental) Zipcar
  15. 15. Offer convenience Remove barriers: register to first ride ~10 mins Zipcar Uber
  16. 16. Measure customer experience and improve Puts traditional taxis experience-wise on the backseat Uber
  17. 17. Sharing economy ideals do not really align with hyper-growth and profit-seeking. As sharing economy business, understand your impacts on: - Incumbent firms & workforces - Environment - Community - Public opinion - Laws Source: Bloomberg
  18. 18. 1. Economic benefits 2. Asset ownership model 3. Demand-vs-supply management (e.g. surge pricing, market place) 4. Intermediated audiences (peer-to-peer, business-to-business, business-to-crowd) 5. Self-regulating elements (driver/rider rating) 6. Predominantly mission or profit driven (alignment with user benefits) 7. Governance model (corporate or a collaboratively governed) 8. Asset management model (operational, maintenance costs) 9. Product/service distribution model 10. Transaction costs 11. Customer experience & quality management approach 12. Localisation 13. Footprint/impact on existing businesses, workforces, environmental impacts, legal risks  14. Growth, funding and critical mass Important elements of sharing economy based business models
  19. 19. On-demand business model Sharing economy based business model Zipcar has a fleet of 12,000 cars (despite being around a good 10 years longer than Uber) Uber commands a fleet of 1,500,000 cars Majority of capital to be invested in fleet acquisition Opex goes into operating & maintaining fleet, depreciation, … Investment in fleet = $0 (except some self-driving test vehicles) Much lower operational costs Underpins the potential of sharing economy based business models, but … More capital available to invest in turbo growth
  20. 20. • Many of the early sharing economy based businesses (2009-) have failed for various reasons … • They didn't get some part of the business model right, e.g. sufficient benefits for the user, trust, value proposition, customer experience, the platform … • or it was not good enough without smartphones and dedicated apps to get to a critical mass … • Like the dot-com boom-bust cycle, many of first wave sharing economy based businesses have failed, but there are massive opportunities waiting for those to get it right Conclusion

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