Like most people in the professional services industry I spend a portion of my day riding around London in a taxi visiting clients. Up until recently, I had an account with a respectable minicab company – it was usually on time, I always knew what car to expect and I would generally recognise the driver. I used to hail a black cab to get back to the office but lately the difference in price is astounding.
The taxi market has been changing with dramatic effect. First came Addison Lee, which had a brand identity, one make of car and consistent drivers – a homogenised alternative to the local minicab company built for Londoners travelling on expenses. But, as digital began to dominate our lives, the biggest market disrupters arrived on the scene later: Uber and Hailo, both targeting business and personal customers alike. In a week where everyone was talking about Tesco’s profit warning, it made me wonder: if the black cab industry was a PLC, how many profit warnings would it have issued this year?
Like the red telephone boxes, which have sadly all-but-disappeared, black cabs are still one of the icons of London. The telephone boxes never had a chance to survive in the age of the mobile phone. Black cabs can survive, but they will have to adapt or die. Otherwise they will soon be just a mode of transport for one-off tourist rides.
It is quite conceivable that black cabs cruising the capital’s streets opportunistically could soon be a thing of the past. Instead, the gains in efficiency, price and convenience from networks of drivers and passengers coming together via sophisticated technology and apps will make it a no brainer. When it comes to Uber, the numbers speak for themselves. Last week it raised an astonishing US$1.2bn in its latest funding round, giving the business a valuation of around US$40bn. What’s even more remarkable is that the figure is more than double the US$17bn it was valued at when it last secured investment – just six months ago! Driving that meteoric rise, the company has expanded into new territories at an unprecedented pace. Its worldwide footprint now covers 250 cities across 50 countries.
What intrigues me most about Uber is its bullish faith in the business model and the way it prioritises creating growth and traction in new markets ahead of dealing with regulatory and legal issues. I can’t remember any other company that could be held in such high esteem amongst investors when there is a real risk of governments shutting it down in pretty much every market it operates in. This week alone, authorities in both Spain and Delhi have banned Uber – and yet, as you’ll see in today’s news below, it is about to attract US$600m of investment from Chinese internet giant Baidu.
The model is definitely working, partly because Uber’s focus is so well defined: scalable technology that puts the needs of the customer first. When it throws itself at a new market it quickly becomes indispensable in the consumer’s mind. That provides real bargaining power when politicians have to weigh Uber’s arguments against those of taxi associations and unions who appear to be hanging on to the past. It’s a bold approach that is disruptive in the truest sense – but it does come with significant risk attached. I’m fascinated to see where it will all end.
I’m also interested to see how Uber will fare in new markets where they face stiff competition. Take GrabTaxi, which is headquartered in Singapore and recently secured an injection of US$250m for example. Or Didi Dache, one of China’s biggest taxi apps, which secured US$700m in funding this week. Although Hailo and Uber have squared up with each other around the world, the former company’s focus on licensed taxis over minicabs has produced a tame fight so far. I suspect we’re going to see a bigger battle in some of these newer markets.
Acting quickly and putting customer demand at the heart of your strategy is crucial to be a successful market disruptor. How much more scope is there for apps to change the way we travel? Let me know at firstname.lastname@example.org, and have a lovely weekend.