This article is taken from an exclusive WIRED series, '41 Lessons from Uber's Success', featuring Tim Harford, Rachel Botsman, Nir Eyal, Clayton M Christensen, Josh Elman, Carlo Ratti and Richard Branson. You can find the other articles here.
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People want to be transported quickly, conveniently and always cost-effectively. Build a vision around what people would want if it could be built. Don't build what people think they want now.
If your business is all about operations, then bring in a big hitter. If you want to grow fast, you're not going to figure out ops on the job. So look for someone with a serious track record. The biggest hire Uber has made was the former COO of Booking.com, Kees Koolen. He scaled booking.com to an $8 billion (£5.4 billion) business, and guided Uber towards becoming a billion-dollar one. Experience always pays.
Uber operates on multiple levels in every city into which it expands, often partnering with existing operators. This means Uber doesn't need to be as regulated as its supply partners.
First movers with velocity and profit can scale quickly and prove impossible to dislodge. But you need to be careful not to push your suppliers too far, as they can turn on you. Uber knows that its principal growth is via the low-cost UberX and UberPOP products. That means lower fares -- of which a larger proportion goes to drivers compared to premium products. There is a bottom to that curve you can't surpass.
Uber figured out early on that what works in one city won't necessarily work in another. In New York City it couldn't compete with yellow cabs -- but it could provide a much better "on-demand" service for black cars. In Los Angeles there were hardly any cabs, so an easy-to-book car service took off. In London it couldn't compete with expensive black cabs, so it pushed UberX, the cheaper, convenient alternative.
Uber defended a 20 per cent profit margin early on for most of its services. Its higher end UberLUX and UberRUSH services were 30 per cent. This created a platform to grow, upon which it could launch much lower-margin services, such as UberX, which is around five per cent. That way, it created a business that's wildly exciting from a numbers perspective.
Taxis are welcoming in only a few cities around the world. In most places they are far from comfy and pleasant. Uber cars are designed to be nice and clean. Some have water and newspapers. Customers have come to expect it. This is the improvement Uber could offer over the entrenched competition. Why wouldn't I want to ride in a decent car?
Uber sends just one person to run a city, working with local partners to get supply quickly. Uber provides the phones (incoming orders and navigation for drivers), so it can quickly create a supply footprint to test the service. After that, marketing supports customer acquisition, driving growth and profit.
Uber's "surge" pricing was a master stroke, despite its bad press. Not only does this feature allow it to better allocate drivers with customers during high-demand periods but, more importantly, it provides disproportionate incentives for suppliers to join the network for the under-served times that incumbents can't adequately cover, like Friday and Saturday nights.
Uber has only rolled out one major design change to its passenger app. The lesson: don't change your product unless you have to. Make it faster, better, more robust, but don't do design for design's sake. On the driver side, its biggest change was to introduce turn-by-turn navigation into the app, which was only possible because of its partnership with Google. This was something Hailo couldn't do.
This article was originally published by WIRED UK
