While transforming transportation, Uber has offered a model for innovative companies to cause disruption throughout the economy.
The success of Uber, which is now the fastest growing company in the world, (in 2015 it announced a USD$51 billion valuation), is a bit of a mystery at first glance. Uber is a personal transportation company that doesn’t own any cars. The company makes it fortune by connecting those in need of a service, in this case transportation, with those offering a compatible service, by using a peer-to-peer business model. The transaction is digital; you use an app to summon or schedule an Uber-driver, and as soon as your ride arrives, off you go.
The company’s realization about travel is a timely one. The range of today’s world is global, often involving travel over longer distances. Transportation in the modern era frequently requires more than one mode. That Uber recognizes this truth is evident by how often it is used for rides to the train station or airport, a service that particularly attracts younger people.
Millennials are the most multi-modal users of transportation in history, and are embracing mass transit in greater numbers that their elders. They seem to be incorporating various modes into their lifestyles for pragmatic reasons: expense of car ownership, convenience, greater environmental awareness, and health (many choose walking or bikes over cars, for short distances). Up to one in three Millennials don’t plan on ever moving to the suburbs, and want to live in cities—places more easily accessible without car ownership. Mass transit also allows Millennials to work while they ride.
That Uber intends to build on their knowledge of this generational trend is shown by the way it is seeking to make the entire process more convenient, “introducing an integration with the Transit app on Android in nearly 50 cities across the United States.” Uber’s partnership with Transit provides information on departure times in Uber feeds, and a ready link to Transit’s own app.
It is fear of digital disruption—in essence, fear of the unknown, and fear of straying from an established, profitable business model—that stops more companies from readily adopting new digital technologies, and using them in the way that Uber has done. This makes it all the more ironic that the integration of digital technologies is not completely about technology. The use of a single digital technology does not makes companies into digital enterprises. After, all, what does digital transformation involve? Is it the use of data analytics for competitive analysis? Is is storing information in the Cloud? Does it mean making use of social media? University of Pennsylvania professor Tyler Wry suggests that digital transformation shouldn't be attached to a particular technology:
"Technology is changing at such a fast pace that if an organization implements a technology and calls itself digital, it’s missing the point," says Wry. "You need to actually develop the capabilities to guide the organization through not just one change, but ongoing changes over time, as technologies change. And then you can start to have the conversation about this being a digital enterprise."
The Uber disruption suggests that the company is profiting within its industry from an ongoing investment in digital technology. But Uber may not be seeking to stay inside an industry niche. It appears to want to transform industry itself by example. Its success lies in part to the uniqueness of its customer experience, and in part to the nature of its peer-to-peer model of operation. The larger question of the extent to which Uber will ”disrupt” the transportation industry depends on the flexibility and response of those companies seeking to play in that field. A sustained commitment to innovation and market trends will likely allow even more established companies to disrupt their respective industries in the way that Uber has disrupted transportation.
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