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“Car for hire”
Business model canvas
Case Uber
Strategy Case Study1
Image: Uber website
© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Taxis, whose business model
has hardly changed since the
invention of the tax meter in
the 1940s, have a lot to worry
about…
2 James A. Bacon, “Bacon: Innovation Uber alles”, The
Washington Times, February 2, 2012
© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Case: Uber
• Case description based on analysis of Uber, but the
rules of the strategy can be applied to mass
participation platforms in general
• Uber is a platform which connects passengers to drivers
of available “for hire” car services. The mobile app
sends an electronic hail for a car based on the person’s
location. This service is convenient and reliable because
it is a guaranteed ride, and all transactions are
automatically billed to the passenger’s on filed credit
card by Uber, not driver.
3© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Uber is not a transportation
provider.
4
https://www.uber.com/cities/san-francisco#
Image: Uber website© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Uber users are spending over
$100 a month on average on
the service — an astonishing
figure compared to the
minuscule purchases most
apps encourage.
5
http://fortune.com/2012/02/02/the-trials-of-uber/
© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Target customers
• End users:
• Upper class
• Business
• Technology
• Urban Middle-class
• Suppliers:
• Drivers
6© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Value proposition
• Value proposition for
both sides:
• End users:
• Secure, trustworthy and
guaranteed ride with
shorter waiting
• Drivers:
• Busier and efficient days
for drivers
7© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Regulators part 1
• Problem:
• “Because Uber was allegedly running and marketing itself
as a cab service but without a permit, the company was
threatened with fines, including $5,000 for every
transaction it made.”
• Solution:
• “The next day, the startup dropped the word “cab” from its
name. So far, that has appeased local regulators.”
8
http://fortune.com/2012/02/02/the-trials-of-uber/
© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Regulators part 2
• Problem:
• Local “taxi” or “cab” business is regulated
• Solution:
• the definition of limousine — “motor vehicle carrying
passengers for hire in the District, designed to carry fewer
than nine (9) passengers, excluding the driver, with three
(3) or more doors, other than a taxicab, coach, or
wheelchair accessible van, and not permitted to accept
street hails from prospective passengers in the street.”
9
http://www.washingtonpost.com/blogs/mike-debonis/post/uber-car-service-runs-afoul-of-dc-taxi-commission/2012/01/11/gIQAxH3UrP_blog.html
© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Regulators part 3
• Problem:
• Qualifications of employed drivers
• Solution:
• “Uber does not employ cars and drivers; it operates a
system that connects riders via smartphone with limousine
companies that have contracts with Uber but are
otherwise independent businesses. Those companies and
their drivers, he said, are required by contract to have all
the requisite licenses, registrations and insurance limo
drivers are required to have.”
10
http://www.washingtonpost.com/blogs/mike-debonis/post/uber-car-service-runs-afoul-of-dc-taxi-commission/2012/01/11/gIQAxH3UrP_blog.html
© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Key Problems
• Security and trust are
challenges in general during
usage of the service
• Pricing have been the
problem and also it is also for
Uber
• Waiting especially when in
hurry.
• Transportation industry is
heavily regulated
11© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Everyone’s private driver
12
http://www.bizjournals.com/sanfrancisco/print-edition/2012/02/03/rider-seeking-taxi-driver.html
© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Two-sided mass participation market
• Uber is a platform
which connects
passengers to
drivers of available
“for hire” car
services.
Become a
driver
(suppliers)
Signup for
Uber
(customers)
http://www.uber.com
13© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Location based electronic hail
• The mobile app
sends an electronic
hail for a car based
on the person’s
location
http://www.uber.com
14© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Notifications
• Arriving driver
• Surge pricing
alarms
http://www.uber.com
15© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Comfortable billing system
• All transactions are
automatically billed
to the passenger’s
on filed credit card
• No transactions
with driver
• Tip included in
price
http://www.uber.com
16© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Must-win battle #1
Technology for two-sided markets
17
1
© Jukka Ala-Mutka / jukkaam.com / @jukkaam
…made by many. It is open,
participatory, and peer-driven.
18
http://www.fastcompany.com/3039042/ubers-new-power-failure
© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Must-win battle #2
Mass participation for suppliers
19
2
© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Service is convenient and
reliable because it is a
guaranteed ride.
20© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Product quality
• Standardization of
the service
https://www.uber.com/cities/san-francisco#
http://www.uber.com21© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Culture of quality
• Metrics for service quality
• Rating of the service from
both sides – driver & rider
http://www.businessinsider.com/uber-drivers-rate-passengers-2013-8?IR=T
https://play.google.com/store/apps/details?id=com.ubercab&hl=en_GB22© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Must-win battle #3
Feed-in loop for drivers & riders
23
3
© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Must-win battle #4
Participation culture & lock-in
24
4
© Jukka Ala-Mutka / jukkaam.com / @jukkaam
The Must-Win Battles
25
1
2
3
4
© Jukka Ala-Mutka / jukkaam.com / @jukkaam
The whole New BMC Model
26© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Methodology of the Analysis
• The structure of the analysis is based on so called Business Model
Canvas and strategy as a visual model
• The Business Model Canvas is a strategic management template for
developing new or documenting existing business models. It is a visual
chart with elements describing a firm's value proposition, infrastructure,
customers, and finances[1].
• It assists firms in aligning their activities by illustrating potential trade-
offs. The Business Model Canvas was initially proposed by Alexander
Osterwalder[2] based on his earlier work on Business Model Ontology.[3]
• See more from Wikipedia Business Model Canvas.
• See creative commons license from
http://www.businessmodelgeneration.com
• Used canvas is further modified, but include all building blocks as
original.
27© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Customer-driven approach to
business modeling
1.2.3.
4.
5.
6.
7.
8.9.
1. Customers
2. Value Proposition
3. Activities
4. Resources
5. Partners
6. Customer
Relationships
7. Channels
8. Revenue Streams
9. Cost Structure
28© Jukka Ala-Mutka / jukkaam.com / @jukkaam
Author
@jukkaam
29
Contact:
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© Jukka Ala-Mutka / jukkaam.com / @jukkaam