Managing Creativity and Innovation

2490131_MGT5213_IoAT&Uber
1
Managing Creativity and
Innovation (MGT5213)
2019-2020
Automotive IOT and Uber

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Introduction
Innovation is interpreted as the generation, acceptance and implementation of new ideas,
services, products and processes which could be a key mechanism for reaching goals and
sustainable development (Voegtlin and Scherer, 2015). Through this essay, Automotive IoT and
Uber are analysed as two trends in innovation by explaining their development over the past
years. Furthermore, an illustration of their impact on organisations and individuals is given as
well.
Automotive IoT
The term “IoT” was referring to identifiable interoperable connected objects with radio-
frequency identification (RFID) technology, subsequently, it became related to more
technologies like sensors, GPS devices and mobile devices (Ashton, 2009). Thereafter, Van
Kranenburg et al. (2008) define the IoT as a network infrastructure with self-configuring
capabilities based on a communication system where physical and virtual Things are given a
value. Porter and Heppelmann (2015) explain that the combination of monitoring data by
wireless connection and the optimisation algorithms create opportunities for optimisation and
autonomy. According to Uden and He (2017), the number of IoT devices is going unexpectedly
(Figure. 1) and the IoT market will reach $50bn by 2020. They clarify that the reason for this rapid
adoption stems from the cheap cost of actuators and sensors with an increasing ability to connect
them, maybe wirelessly, and their capability in generating a huge amount of data.

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The global automotive industry is undergoing rapid, multi-faceted change, brought about by
the introduction of connectivity and the move towards autonomy due to the fast growth in the
IoT (Delgrossi, 2013). From autonomous cars to electric vehicles, the automotive industry is
crossing the threshold of reinvention due to moving towards computing-intensive vehicles with
many communication options (Bryans, 2017). Automotive IoT refers to embed IoT technologies
into automotive systems to produce solutions and applications which can make cars smarter and
more intelligent, safer, efficient and comfortable driving (Sellier, 2018). Taking this concept, the
connected car is a vehicle which enables the exchange of information between it and its
environment using sensors, wireless network and internet. In a deeper explanation, Cohen et al.
(2016) summarize the Automotive IoT into three branches (Figure. 2):
1. vehicle-to-vehicle: when the car is connected to one or more cars;
2. vehicle-to-infrastructure: when appears the connectivity between vehicles and
infrastructure;
3. vehicle-to-devices: when the vehicle is connected to external hardware and devices;

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In the last few years, a lot of technologies have been added to vehicles in order to improve
their performance and make them more safe and comfortable. However, these new technologies
will absolutely affect the automotive industry and push its players to rethink their positions in
the market and create more opportunities to improve their offers (Viereck et al., 2015; Kavis,
2015). Additionally, new car technologies are opening the door to new entrants such as apps
suppliers, specific services and platform providers namely Google, Apple and Blackberry’s QNX,
all are hardly preparing to establish themselves in the market (Simon et al., 2015). Therefore,
traditional car manufacturers and leaders will be compelled to face three main challenges in their
business models: created new digital products and services; competing with rivals including new
entrants; and redesigning their business strategy (Fleisch et al., 2015).
With the basic product, the car, the automotive industry is switching from providing the
product to provide the service (Vargo and Lusch, 2004). In other words, new value propositions
presented in self-driving, parking and lane assistance options based on GPS technologies, data
processing and services related to mobile and sensor technologies which are car diagnostic and
automated emergency calls (Athanasopoulou et al., 2016).
A brief example could be given by the eCall digital technology (Figure. 3). It is an automatic
emergency call system for motor vehicles supported by the IoT, created to save people's lives by
delivering rapid assistance to road traffic incidents, anywhere in the European Union (European
Commission, 2015). According to the European Parliament (2018), the emergency services
response time will be reduced by 50% in rural areas and 40 % in urban areas leading to decrease
fatalities at up to 2,500 saved lives per year. In April 2018, the eCall devices became mandatory
in all new cars sold in the European Union (Gleeson, 2018), what made car manufacturers forced
to deliver this service in their new products, either by producing it or searching for new suppliers.

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Moving on to the self-driving car, the connected and autonomous vehicle (CAV). It is a car that
uses its connection to behave autonomously such as braking, parking and control adoption
(Government Actuary’s Department, 2017). Such a car requires multiple technologies to be in
service: GPS to support navigation; sensors; high quality-cameras; advanced software to analyse
information and translate them into process (Figure. 4); etc… (Pullen, 2015).

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Obviously, the UK Government encouraged this new technology and released its benefits in
saving around £2 billion to the economy by 2030, by reducing accidents related to human error
(Government Actuary’s Department, 2017). Similarly, the National Highway Traffic Safety
Administration (NHTSA) survey argues that 94% of accidents are caused by fatigue and emotional
driving (Figure. 5), thus autonomous cars will help in avoiding drivers influence (Singh, 2015).
Apart from that, the CAV increases the mobility of elders and people with disabilities, with
reducing emissions and using more efficiently of infrastructure (Fagnant and Kockelman, 2015).
Notwithstanding the foregoing, a question is posed on what challenges the CAV will face to
start serving? Athanasopoulou et al. (2016) clarify that automakers should understand
consumers’ desire and their willingness to buy complementary services. Likewise, Simon et al.
(2015) explain the slow comprehension of customers for the new services offered from high
connectivity (Figure. 6), and their reluctance to pay higher to get them. On the other side, the
current infrastructure is designed to the existing transport system, thus autonomous cars will not
work efficiently without a roads’ connection, what creates a significant challenge for
governments and IoT innovators (Government Actuary’s Department, 2017).

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However, in this stage, the car doesn’t remain the main product because it will be considered
valueless without its technological devices and software (Nelson, 2014). Consequently,
traditional carmakers who consider the customers their own, are afraid of losing them in favour
of platform suppliers. What assures their fear is that Google's driverless car project which is
estimated to be launched by 2020 (Figure. 7), has begun by modifying a Toyota Prius before
Google's move to design its prototypes (Halleck, 2015). Thereafter, some manufacturers would
rather share their technologies with each other to make their own platforms instead of opening
the door in front of new entrants (Simon et al., 2015). An example here is given by Toyota who
preferred to work with Ford in creating an open-version of Ford’s Sync AppLink into Toyota cars,
rather than using Apple CarPlay and Google Android Auto (Poeter, 2015).

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Despite the aforementioned benefits, the Internet of Automotive things (IoAT) shows some
weaknesses which cannot be accepted by customers (Figure. 8). A question is commonly asked:

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how to guarantee consumers’ privacy? Who assures that people’s information will not be hacked
and shared with this high-connectivity? Weinberg et al. (2015) explain that providers have to
consider privacy objectives in seeking to gain customers’ trust. As well, Dutton (2014) assures
that cybersecurity solutions for IoAT must be provided to avoid data theft from unauthorised
access. In the CAV’s case, Fagnant and Kockelman inquires of the magnitude of damage caused
by a virus programmed into a car’s software to change its destination and mess up its data, it
could be fatal.
On the other hand, it is important to note here that new entrants may be considered on both
sides as mentioned before. Firstly, an opportunity for new IoT platforms providers to enter a
wealthy market, secondly a threat for traditional automakers in losing their customers and
positions.
Having assessed the evidence, one can conclude that the use of IoT in the automotive field may
be more advantageous if innovators can find solutions for security issues. wherefore, IoT is
drawing the map for the automotive industry, and fully-connected cars will play a crucial role in
building the future (Simon et al., 2015).
UBER
Moving on to Uber technologies popularly known as Uber which is an online taxi business. It is
a process innovation based on the shared-economy concept since it does not own cabs and its
drivers are independent contractors who serve consumers via online applications (Figure. 9) (Ng,
2016). The sharing economy concept is defined by Cohen and Kietzmann (2014) as new
innovative ways to utilise existing resources. This obviously appears in Uber’s business in
matching car owners with spare capabilities with riders who want to move around their areas
(Lampinen et al., 2015). Figure. 10 also explains briefly the working process of Uber.

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Uber started as a simple idea by trying to request an online trip, then began to grow quickly as
a global brand focusing on easing people’s move (Uber, 2019). This idea was born in 2008 when
Travis Kalanick and Garrett Camp couldn't get a taxi on a cold night in Paris after finishing a
conference (Uber, 2019). Nowadays, 14 million Uber trips are completed every day in 80
countries over 600 cities worldwide (Figure. 11) (Iqbal, 2019). Therefore, the full-year income of
Uber reached $50 billion in 2018 before pay-outs to drivers, which resulted in $11.3 billion as
pure revenue with an increase of 45% over 2017 (Zaveri and Bosa, 2019). Today, the global
market value of Uber is around $72 billion with an obvious dominance on the United States
market share in ridesharing (Figure. 12) (Blair, 2019).

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Uber's business model consists of flexible services offering different prices starting by UberX
which is the cheaper service on Uber app, arriving at UberBLACK which is a high-quality service
offered for VIP customers (Mulligan, 2015). Additionally, the pricing model of Uber is quite
different from traditional taxis. When the latter is based on the journey’s distance and time, the
former highly depends on fluctuation in demand with some fixed costs (Chen, 2015).
Correspondingly, Uber tends to surge its price in peak times and stabilize them again once cars
are available heavily on the road (Ng, 2016).
Since its inception, Uber is trying to innovate either by diversifying its offered services and
products using incremental development or creating new ones (Figure. 13). In August 2014, the
UberPool is announced in seeking to target a new range of consumers. It allows riders to share
the cost with others and save up to 40% by using an Uber taxi heading in the same direction, the
app will also inform the consumers on the first names of ridership and who is going to be picked

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up firstly (Ong, 2014). In the same year, Uber launched the UberRush in New York City which is a
courier service to deliver packages using bikes, in order to expand its market and scale up its
revenue (Brustein, 2014).
Thereafter, Uber decided to enter the food market by its UberEATS online app, which is
described as a virtual restaurant (Field and Rudgard, 2018). This app offers several number of
foods provided by some restaurant partnered with Uber, and assures a delivery 10 minutes
earlier than traditional deliverers, with instant delivery between 11:00 a.m. and 2:00 p.m. during
weekdays (Alba, 2016). Albeit its high-success, Reidy (2017) explains that 35 of every order’s cost
is going to Uber, which made restaurants struggle to make a profit, forcing them to scale down
their menus in the application to encourage consumers to come in store.
As an innovative company, Uber is not stopping to innovate and shows the world new ideas
which could be beneficial for humans and the environment. As a consequence, Uber is working
on its own autonomous car developed in partnership with Volvo, in order to use it in its business

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(O’Kane, 2019). Such an idea according to Dudash (2017), can decrease the competition and
increase dramatically the profit since robots can serve endlessly without asking for a salary or a
pay raise. Also Uber is preparing its helicopters to create an aerial ridesharing network, and by
2023 Uber will give riders the shared flight option (Uber, 2019). Subsequently, Melbourne
welcomed the idea and decided to join Los Angeles and Dallas in becoming the first cities to offer
Uber Air flight (Keating and Fallon, 2019).
Despite all benefits offered to customers, a daily question is begged: is Uber a disruptive
innovation? Christensen et al. (2015) describe the disruptive innovation as the one which
displaces an existing market or technology and creates something new, more effective and
worthwhile. It is creative but at the same time destructive. They explain that disruptive
innovations originate in low-end or new-market footholds (Figure. 14). The former exists when
firms ignore less-demanding customers and focus on providing the best products or services to
current customers. Whereas, the latter relies on turning non-customers into customers in the
newly created market (Christensen et al., 2015). They argue that Uber is firmly not a disruptive
innovation since it did not follow any path of these mentioned. Likewise, Schneider and
SpringerLink (2017) persuade Uber’s innocence of this accusation and describe it as incremental
instead of radical or creative destructive. they also clarify that Uber is not interested in destroying
neither a market nor its competitors, because it did not discover the platform’s idea, but used it
broader with more publicity.

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On the other side, Horn (2016) reassures the disruption of Uber related to taxis and cab drivers
and explains the disruptive path in its moves to achieve this success. In the same way, Burns
(2016) convinces the disruption of Uber in changing the transportation industry especially the
taxi hire business by following the archetype method. This method is explained by Schumpeter
(1943) by an innovation that makes change in everything done before when all agents who do
not embrace it will be eliminated by the market. In another perspective, Ng (2016) says that Uber
may be disruptive related to its drivers despite their benefits from working with it. This is because
they are unprotected and bear the risk of accidents and car’s malfunctioning besides having
fluctuated wages.
(Figure. 15) illustrates the SWOT analysis of Uber. In explaining the weaknesses, it is essential
to note that Uber has shown multiple scandals due to its weak privacy system. CEO Dara

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Khosrowshahi revealed a breach in Uber’s system by two hackers who stole personal information
of 57 million worldwide customers and 600 drivers (Shields, 2017). That put Uber ahead of new
legal policies to assure its security and customer safety. As well, Uber fell again to bet on its safety
after repeated its failures in London, so it will stop operating in the capital within a few weeks
(Burridge, 2019). Thereafter, Ola, the Indian firm is going to replace Uber in London and started
asking for drivers to join it, which makes a critical threat for Uber (BBC, 2019). Besides, Uber is
facing legal policies in some cities due to its business process and its impact on other taxi drivers
who complained about a dramatic decrease in their revenue. Paris instituted that Uber cab has
to wait 15 minutes after each pick up disregarding what is the distance between riders and Berlin
court forced Uber’s cars to return to their place after every fair, while Brussel court totally banned
it (Schneider and Edward Edgar pub, 2017)
Evidently, Uber has demonstrated a lot of benefits for customers around the world, due to its
comfortability and cheapness, it has also changed the world of transportation, and made it easier
and simple. However, the query is how long Uber will stay leading the ridesharing company with
the entrance of new competitors and the creation of new models?
Conclusion
To summarize, it is obvious that innovations can emerge together somehow. In this case, Uber
is trying to use the IoAT development in order to make its autonomous car to create the most
beneficial business. However, it is argued that new ideas such as the two mentioned before, have
many advantages as well as some drawbacks. The debate revolves around how societies and
businesses adapt these innovations to mitigate their negative effects and help the human as
much as possible.

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