For the past eight years, Uber’s chief executive officer and co-founder Travis Kalanick played the role of disruptive entrepreneur with wild abandon—and to great effect. The company has revolutionized ground transportation in many of the world’s cities, often ignoring existing regulations, the concerns of entrenched taxi companies and many of its own drivers, and commonly accepted levels of decency in the workplace.
Now Kalanick has been ousted, and his successor will be forced to stick to a much more predictable script. Uber’s next CEO will have his or her hands full with important blocking and tackling, such as repairing relations with drivers, filling key executive positions, and leading a wholesale makeover of the company’s hard-edged culture.
“Travis has forced the board’s hand,” says long-time technology consultant and author Geoffrey Moore. “For now, the only thing they can do now is become a kinder, safer, more predictable Uber.”
That’s fine for the current shareholders, mostly Silicon Valley venture capitalists, who pushed out Kalanick. But Uber has plenty of disrupting to do if the company is going to be a great stock for public investors, says Arun Sundararajan, a professor at NYU’s Stern School Business and author of The Sharing Economy.
If the privately-held company were to go public in the future at anything approaching its current valuation of around $60 billion, taking a bite out of the $40 billion a year global taxi business would be table stakes. To provide much upside, Uber would need to achieve Kalanick’s real goal: to create a service so ubiquitous and convenient that consumers would not bother buying their own cars. By tapping into the $10 trillion that people spend on new and used cars each year, Uber could become more valuable than Google or Facebook, which have become two of the world’s ten most valuable companies by disrupting the much smaller, $500 billion-a-year advertising business.
“Yes, Uber’s priorities need to shift in the short term to address threats to its human-driven car business,” says Sundararajan. “But they also need to keep their eye on the big prize. It’s not hard to imagine Uber becoming the world’s first trillion-dollar company, if Apple doesn’t get there first.”
Trouble is, creating this post-ownership ground transportation economy can only happen with self-driving cars. Uber lost more than $700 million last year, in large part because of the payments it makes to drivers. If the company’s business model is challenged while serving almost exclusively urban markets where there’s plenty of demand, Sundararajan doesn’t see how the company could afford to maintain an anytime, anywhere fleet of cars for consumers in rural and other under-served areas.
“To get the scale they’ll need to satisfy public investors, they’ll need to expand beyond the cities. But that can only happen after we get to totally autonomous cars.” Needless to say, that’s a long way off, he says. (see “What You Need to Know Before Getting in a Self-Driving Car”)
For now, playing it safe is undoubtedly the smart move. By improving its brand and improving relations with drivers, Uber can reverse recent declines in its share of the ride-hailing market, and generate tens of billions in annual revenue by taking share from the $40 billion global taxi industry.
The company is already starting down this path, as part of a 180 Days of Change initiative that resulted from the sweeping internal investigation that led to the short-lived leave of absence that preceded Kalanick’s ouster. The company has won praise for announcing that Uber riders will soon be able to give tips to drivers. But there’s much farther to go.
For example, Uber is currently banned from doing business in Argentina, and faces other legal challenges in Brazil and Columbia. Meanwhile, local rivals such as Brazil’s 99 have raced to fill the void. On Monday, the Japanese investment company Softbank announced a $100 million investment in 99. Softbank is also a major shareholder of Didi Chuxing, Uber’s largest global competitor, which earlier this year made its own investment in 99. (see “A Chinese Rival Beats Uber at Its Own Game”)
Toning down the rhetoric and adopting a more pragmatic mindset could help the company work through its many regulatory challenges. It could also lead to productive partnerships that could lower the company’s cash burn, and overall risk. It may be too late for Uber to join forces with Waymo, which recently inked a partnership with ride-hailing rival Lyft, but there are scores of other companies working on various aspects of commercializing self-driving technology—an effort that has so far been fraught. (see “Uber’s Woes Show the Difficulty of Commercializing AI”)
“Uber could scale back its bet on autonomous cars, and still give a multi-hundred fold return to its early investors,” says Sundararajan.
Such an outcome might sound fine, given the firestorm of controversy surrounding Uber in recent months. But it might also mean giving up the chance to create a financial success on the scale of a Google or Facebook, much less on the dream of creating a world with fewer cars, less air pollution and more leisure time.
“Yes, the new CEO needs to hire a management team, implement reforms and prepare the company to go public,” says Bradley Tusk, a political consultant and early Uber shareholder. “But that’s table stakes. Uber is Uber because it’s so disruptive. If the new CEO is just checking boxes, it might as well be a law firm.”
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