Uber in 2020 hindsight — renewed mission statement and renewed business model
My attempt to redefine Uber mission and success through an analysis of its business model.
A new Uber’s mission statement:
“Our mission is to bring fast and accurate convenience to everyone one ride-share at a time. Ubers strives to develop better and cheaper technology to transportation and delivery to all customers in the digital age. We are committed to provide safe, affordable, innovative solutions to our drivers, our riders, our business partners.”
Here is my explanation of why my proposal is a good statement. Firstly, the statement emphasizes Uber’s social value, which is to provide expedient convenience to its customers via the experience of ride sharing. It shows that the company’s mission is beyond making money, it is to serve a purpose. Secondly, the statement focuses on the need to create a safe, affordable, and digital solution for transportation and delivery services. It shows that Uber is focused on addressing this problem through its application, and it can be flexible and adaptable. Thirdly, Uber has continuously improved its app, in the face of competitors, regulators and emerging markets. The new CEO at Uber, since 2017, Dara Khorowshani was hired after scandal of sexist and hostile workplace culture. He is expected to address the company’s culture and usher Uber into a profitable era. Since then, Uber has launched its IPO, seen the growth of its most profitable business UberEats, especially in 2020 with $1.21 billion in revenue in second quarter (Quartz, 2020). Finally, the statement is precise and prefaced with a memorable slogan that is to provide high-quality convenience to its customer.
Uber’s V.A.R.S framework analysis:
Value Proposition:
Uber, through its Uber Rides and Uber Eats platforms, offers many benefits for customers, but perhaps the two most important ones are: Uber’s efficient matching system between drivers and riders that directs driver to high-demand area, and minimize customer wait time (Uber Ride), and the convenience of being able to review and order a wide variety of food from home (Uber Eats). Thus, Uber’s value proposition is to add value to both demand (customers) and supply (restaurants/drivers) by connecting them via its Uber App. Furthermore, Uber can reduce cost to taxi-cab operation for drivers who prefer flexible schedule, ability to prescreen customer and good income due to less wait time, and price-surging in high-demand time and area. Uber can reduce marketing cost by making the restaurants more visible through its suggestion system.
Activities, Resources, Capabilities:
Because the Uber revenue model is based on matching two-sided markets, the company developed a complex evolving matching algorithm to screen drivers, to acquire new customers and to create a rating system between drivers and riders (Somaya Uber case, 2020). This capability is known as the Uber App, which has been modified to accommodate both Uber Rides and Uber Eats businesses. With growing concerns from gig-economy drivers, backlash from taxi industry and recent regulations, Uber looked to expand its activities and resources by investing more than $1 billion in autonomous vehicles. In December 2020, it finally sold off its autonomous division to Aurora, an emerging Pittsburgh-based self-driving-tech developer. Uber’s CEO will continue to be on Aurora board, and Uber will invest $400 million in Aurora, which signals Uber’s continuing vested interest in self-driving (Wired, 2020)
In addition to ride-hailing, Uber recognized the exponential growth of food delivery and grocery delivery service. Due to COVID-19 pandemic, Uber Eats is projected to be more profitable than Uber Rides in 2020, with the ride-sharing business declined 75% in second quarter compared to 2019 (Quartz, 2020). As of July 2020, Uber has plan to launch US grocery delivery via the same Uber app, after soft launches in Miami and Dallas with Cornershop, a delivery start-up in which Uber has a majority stake (Grocery Dive, 2020).
Revenue Model:
In the past Uber leveraged a two-sided marketplace revenue model to become a one-stop shop for all urban transportation needs. Uber has since expanded its multi-sided ecosystem to include food delivery. Uber acquired one of its main competitor in food delivery, Postmates for $2.65 billion (NPR, 2020). By 2020, it has a 65% market share in the USA for passenger transport (Uber, 2020) and a 37% market share for food delivery when combined with Postmates.
Scope of enterprise:
Uber serves both sides of the taxicab industry, the drivers and the customers. Since its inception, it has become synonymous to its innovative transport app — Uber, which can serve anybody who owns a smart phone. In terms of horizontal scope, it has focused on perfecting its main algorithm to fit the needs to expand from ride-hailing to food delivery, and grocery delivery. While it tempted to pivot into self-driving with its autonomous division, that plan has been scrapped since Aurora’s deal in late 2020. Lastly, Uber’s vertical scope has been to be the best at its technology. The company continued to fight California regulation to keep the drivers as independent contractors. Uber thrives on this business model in which it reduces costs by not employing its 5 million drivers. Uber currently charges a 25% fee to its drivers, 30% delivery fee or 15% pickup fee to its Uber Eats restaurants. The Uber ecosystems of drivers, restaurants and riders is expanding worldwide and Uber is hoping to become profitable in the near future.
Resources:
https://qz.com/1889602/uber-q2-2020-earnings-eats-is-now-bigger-than-rides/
https://www.wired.com/story/uber-gives-up-self-driving-dream/
https://www.grocerydive.com/news/uber-will-launch-us-grocery-delivery-this-month/
https://s23.q4cdn.com/407969754/files/doc_financials/2019/sr/InvestorPresentation_2020_Feb13.pdf
https://www.foodandwine.com/fwpro/delivery-apps-restaurants-coronavirus-commission
