How Innovation is Changing & Challenging an Industry
Perhaps it is the inevitable convergence of two growing trends. The first is a world where smartphone apps provide social networking, along with everything from movies and video games, to GPS directions for a neighborhood restaurant. The other trend? Younger generations that don’t see an automobile as an expression of individualism or freedom, but an optional tool for which they wish they had an alternative.
These two disruptive shifts, along with a worldwide tech culture that is constantly looking for ways to do it better and faster, are changing the way the world catches a cab or rents a car. Both of which are shaking the foundations of a global industry.
This trend is so pervasive and appealing that Zipcar, an app-based car rental company that as of July 2013 had more than 810,000 members with access to nearly 10,000 vehicles throughout the United States, Canada, the United Kingdom, Spain, France and Australia, was sold to Avis Budget Group for about $500 million in cash.
Locally, Mears, the market’s most dominant taxi and transportation company, recently released its own app that enables customers to book a reservation, “in as few as three taps.” In addition, it provides a confirmation number for the reservation and enables the one making the reservation to monitor the progress of the vehicle on a map, as well as give feedback about the quality of service.
Notable & Notorious
Of course the most notable and sometimes notorious of these new transportation options is Uber. According to Travis Kalanick, its co-founder and CEO, the company was conceived in late 2008 while he was hanging out in Paris for a week with Garrett Camp attending LeWeb, an annual European tech conference.
Camp had recently sold StumbleUpon (a discovery engine) to Ebay, and both were more desperate for the next big thing than they were for cash. They discussed ideas and as Kalanick tells it, “Garrett’s big idea was cracking the taxi problem in San Francisco — getting stranded on the streets of San Francisco is familiar territory for any San Franciscan.”
Their San Francisco launch day was at the end of May 2010. Not even five years later, Uber is valued at $18.2 billion by investors. Along the way, Kalanick, not yet 40, has found no shortage of foes.
He has focused attacks—in speeches, videos, and on Twitter—especially on the taxi industry, but also toward city and local regulators across the country (and now the world), not to mention his rivals in the industry and sometimes even his own customers when they dare to challenge his company’s practices.
Some say it is more bluster than it is substance. Though one thing is for sure: Kalanick seems to wear the description as a badge of honor.
To Kalanick, it is proof of his zeal and dedication to his mission: to drastically disrupt what he sees as a broken transportation system. “Look, I’m a passionate entrepreneur. I’m like fire and brimstone sometimes. And so there are times when I’ll get too into the weeds and too into the debate, because I’m so passionate about it,” he said.
What’s It All About?
Basically Uber, as with other ridesharing programs like Lyft or Sidecar (which is being backed by Sir Richard Branson of Virgin Group), connects drivers with cars to passengers that need rides through a mobile app. Drivers and passengers usually rate each other on a scale after each ride and the ratings establish the reputations of both drivers and passengers within the network.
Hailing a ride, seeing the ETA of when the ride will pick you up and the distance and time of arrival at your destination, along with payment, is all accomplished through a mobile device. So what’s not to like? Actually a number of things.
The two San Francisco-based companies, Lyft and Uber, that began operating in Orlando over the summer, offer rides for a fee that’s generally about 30 percent less than a traditional taxi. The city’s tightly regulated taxi and limousine industry called on the city to force the newcomers to adhere to the same rules they have to follow, which is not unreasonable. Imagine UF being able to write their own football recruiting policies, whereas UCF and FSU had to follow NCAA protocols to the letter.
In response to public demand, the City of Orlando relaxed some of its rules, but Mayor Buddy Dyer indicated that there was one area they wouldn’t give ground on. “We’re not compromising in the area of safety measures that will protect the traveling public,” Dyer said.
Uber is facing a new lawsuit from district attorneys in Los Angeles County and its own home base of San Francisco for problems that include misleading passengers about the quality of its background checks. Not long ago, India’s capital of New Delhi banned Uber after a driver was accused of raping a passenger.
It Isn’t Going Away
Uber friends cry foul, as though the company and others like it are being targeted with the kind of tactics that put Preston Tucker’s innovative automobile company out of business in the late 1940s. As one Forbes’ writer put it, “Instead of responding to a new kind of virtual competitor with better products and services, the highly-regulated taxi and limousine companies in every city Uber has entered have instead gone the route of trying to ban Uber’s existence. They’ve called on state and local regulators to declare the service in violation of decades-old laws outlawing unlicensed ride services.
Mayor Dyer was quoted as saying in response to those who celebrate the innovation, “We hear you. We also want to have Uber and Lyft and other companies of their type in Orlando. Orlando is leading the way as one of only about a dozen cities that have put forward a legal framework for Uber and Lyft.”
Though the city rescinded its earlier plan to force Uber and Lyft to charge $3 per mile, the plan the City Council approved 7-0 still imposes rate control. The ridesharing companies — which typically adjust rates up and down based on demand — would have to charge the taxi rate of $2.40 a mile as a minimum, but could charge more. The city also lowered its $500 vehicle permit fee — which was seen by some as a steep barrier to entry for some drivers — to $250. That annual fee is also being reduced for the city’s existing taxis and limousines.
Regulation is often seen as an impediment to free enterprise and the argument holds until there is a breakdown, like that which occurred with the banking crisis or with an insider trading scandal. In the same way, fueling the anti-Uber cause is the tragic case of a 6-year-old girl in San Francisco who was struck and killed by an Uber driver. However, licensed taxis are involved in traffic accidents as well, but the company is liable, unlike Uber which claims it is a technology, not a transportation company.
One thing is for certain, technology-driven transportation innovations are here to stay.