Walled Gardens in Urban jungles
Urban Commute Edition
Hey,
The title of this post couldn’t get any quirkier but in my opinion this one sentence explains the seemingly rational thing our beloved aggregators are doing in the commuting space. Read on to know more…
When Ola and Uber entered the urban commuting space, they promised efficient, algorithmic and accessible public transportation for everyone. Our Utopian walled gardens, I suppose. We will look at the two approaches that these two are following.
Horizontal Spread: Uber’s Play
We have the global player, Uber doing the most logical thing as they expand to be the next Amazon of transportation. Not the way I would phrase it but Dhara ( Dara Khosrowshahi ) of Uber likes to preach this analogy to everyone and anyone who will listen to him. Dhara is the adult in the room, we covered the founder of Uber, Travis in our previous posts. You should read it first if you haven’t already to understand what I mean by Dhara being the adult.
Dhara is more logical, sensible and rational in the way he is running the day to day operations. He has led the company to its target of IPO and now the stock price is sitting idle having reached 35% below the IPO price as of today’s writing.
To stir things up a little and come true on his very own preachings, UBER launched a new update to their app. This update makes Uber ‘The Operating system of Everyday life’ .
With this, Uber has decided to not just help you find a cab but also wants to help you take public bus, metro and even e-bikes for your daily commute needs. It looks like a natural extension for any MBA strategy class case study. But, the irony over here is that this is the same Uber that fought tooth and nail with municipal governments to launch its service and pitted itself as the new public transport for the public.
Then, why is it doing it now?
Uber is not the first to do this in USA or the developed world. We have apps like City Mapper & Transit who have been at it for a long time now.
Like we covered in the case of food delivery business, at the end of the day for companies that are loss making by default, growth is the only metric that keeps them from spiralling into the ground. You must be thinking why only growth, because it tries to replace the uncertainty the company is staring at by projecting a future of promise with a number.
Surroundings for re-factoring
Uber is not alone. Lyft, its US competitor did the same thing a week prior to UBER launching its own app. Lyft is also providing access to the public transportation options along with the e-scooters and bikes options.
And here is Uber’s version of the same thing :
Take a closer look and tell me, do you see any difference except the colour and branding assets between these two apps.
So, people working in UBER and Lyft ended up with the same conclusion at the same time because the market of ride hailing cabs has reached saturation.
Also, there are has been a narrative loss about the problem they are solving when the drivers driving for these companies are trying to be recognised as employees. This only makes the unit economics much harder and inadvertently increases the price for the customer, you.
Aggregators: Jobs Oriented
Here is where the aggregator tag comes into play. The main motive of the aggregator is to consolidate the demand. They are consolidating all this demand for a specific job ( problem ) for their customers. In the case of Uber and Lyft it is urban commuting. Hence, the need to provide these services on their apps because they don’t care how the ride is completed by the customer as long as they get the ride completed for you. What they want is that the customer is using their app at any cost for the commuting.
By bringing public transport on their app, they are expecting to get a new cohort of customers that they can try to up-sell their core cab service from time to time. What better way to do this than having all the urban commuting services right in their app itself.
All of this ties back to what Dhara, CEO of UBER meant when he said that they want to be the amazon of transportation. It’s a completely different topic what he meant by transportation. So far as I can see, he is talking about just commuting in Urban cities.
Vertical Integration: Ola’s Play
Uber was not into public commuting services when Travis (Founder) was at the helm. They wanted to integrate the supply by using driverless cars. Which came to an abrupt halt when they found out the company they bought to speed up their driverless car project was sued by google with charges of IP (Intellectual property) theft. The case got settled out of court but the founder of OTTO, Lewandowski is currently being charged for his crimes separately. This driverless car department has become a pipe dream for Uber since the lawsuit. So, when Dhara came on board, he quickly separated both the entities to have the driverless car department working independently on development where as Uber as a company could focus on its core commuting business.
This is the same strategy that Ola, Indian competitor for Uber, is currently doing. Instead of selling the pipe dream of driverless vehicles, Ola went with Electric Vehicles for its market. They are working with OEMs to have electric cars manufactured and be driven around by the drivers. They are also building the surrounding infrastructure required for EVs ( Electronic Vehicles) like battery replacement parks, charging stations and service centres. But all of this is done in a separate entity, Ola Electric which in itself has raised $300 Million and is currently valued at $960 Million
Ola is focused on getting the unit economic work for its ride hailing business by shifting to EVs. It is rightly aligned with its current situation and geographic surroundings as well. India doesn’t have strong municipalities like in developed nation cities. There are no live datasets that the public transport companies willingly share with private companies operating in the commuting space. Not when all of them are themselves loss making entities and are severely cash strapped. Metros are covering only small sprawls of the city.
All this chaos leaves Ola with the only option of getting the underlying carriage ( cars ) that moves people in Ola to be replaced with EVs.
Ecosystem and Location determine the Play
Both Ola and Uber have the same playbook. Tap into every company that is working in commuting space and be prepared to shift depending on the chaos that the city ensues. At the moment Uber is focused on spreading its offering to lock-in the customers into its app ( Horizontal ) and OLA is more focused on vertically integrating its experience by introducing a EV fleet of vehicles. They are doing the rational thing basing on the market they are playing into. Though, in the end there are looking to keep the customers engaged and adhered to their respective apps.
The Winner : Common sense & affordability
The foregone conclusion that you can take from all these shifts, launches and pivots is that a commuter in a city needs freedom, agency, choice and affordable options for their commuting needs. Truth to be told no one service can satisfy the needs of every commuter in a city.
Instead of gutting for public transport by subsidising the costs of cab hailing across the world, had these companies co-opted them right from the start, we would have been looking at a solution of augmented public transport for the urban cities that had the dynamics to adopt to any city depending on its needs.
In return of promised walled gardens we got a number of wild fires to put out thanks to these companies in our urban jungles.
Regards,
Vivek
The Duologue is an effort by Vivek and Bheem to have a dialogue about varying topics.
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