Digital Innovation: Uber
Uber took the taxi business by storm by introducing its innovative travel app and ridesharing service. Unlike traditional taxis, Uber does not use its own cars, it signs up private drivers who are willing to use their private vehicles to drive passengers to their destination hence the ridesharing service (Golovin, 2014). Uber’s innovative app allows customers to submit a travel request which is then sent to the nearest available driver (Rusli, 2014). However, for this service to be successful, the customer and the driver both need to use a smartphone.
Nylen and Holmstrom (2015) developed a framework that applies effectively in analyzing Uber’s current digital innovation. The framework has three dimensions: Product, Environment and Organization. Uber offers travel services to customers and employment to ordinary drivers. With regards to user experience of their product, the travel app has a high usability level since it only requires an individual to have a smartphone. Their current digital innovation involves an articulated value of propositioning which includes cheaper pricing for passengers, online payment directly to the service not the driver and attractive commissions to drivers, i.e. up to 30% cut from each ride (Vetter, 2016; Golovin, 2014). With regards to the environment, Uber was able to identify an opportunity of venturing into the digital environment by gathering information and realizing that all over the world people were increasingly adopting the use of smartphones. Taking advantage of this user behavior has enabled Uber to be readily accepted and used widely by most urban populations. This has greatly resulted in its high success shown by the fact that is available in over sixty six countries and five hundred and seven cities all over the world (Uber, 2016). When it comes to the Organizational aspect of their digital innovation, it has been described not as a taxi company but rather, as an online platform that connects people thereby they are only able to acquire new technological skills internally in order to better their app and offer customers better services.
A major issue with Uber’s current digital innovation is in their organization strategy. Since it is an online platform and not a taxi company, the business cannot facilitate acquisition of new skills externally which is an essential part of reaping benefits of digital innovation (Nylen and Holmstrom, 2015). Uber is not being responsible for recruiting and training the drivers who work for them. Therefore, they cannot train these drivers on any new skills that will aid continuous learning which will enable the company to gain more benefits from their digital innovation. In some cases, this has led to major losses in form of lawsuits and endangering of passenger lives. For instance, a passenger reported that an Uber driver hit him with a hammer on his head (Kerr, 2014). Additionally, use of unlicensed and untrained drivers has led to Uber facing legal issues which has led to their services being banned in all of Germany (Golovin, 2014). Another issue identified in this assessment is their pricing strategy which is described as surging pricing (Clay, 2011). This is a situation whereby prices change depending on the supply and demand of the market. This has led to their prices being relatively high at times of high demand which has led to customers becoming upset. However, this does not negatively impact the quality of service that Uber provides since this type of pricing matches supply and demand efficiently therefore, ensuring that passengers do not wait for more than five minutes regardless of the circumstances.
For this reason, Uber needs to make a few changes to their digital innovation. In this case, they would need to reassess their organizational structure so that they take a more proactive role in the process of recruiting and hiring drivers. They would need to create a short training course for their drivers and issue them with valid licenses. Since the company is online based, these courses can be online based and drivers can download their certificates upon successful completion of the course. Costs incurred by Uber with this strategy will include training costs and cost of acquiring licenses from the government of individual countries. However, this will lead to many benefits. One benefit is that, by licensing and training and ensuring that drivers are fully aware of all taxi-related matters will increase the quality of service and security offered to passengers which will increase their popularity and lead to increased benefits. Licensing drivers will also ensure that no more lawsuits are filed against the company, which may even lead to a lift on the ban that the company has been issued with in some cities thereby minimizing losses and maximizing benefits.
In order to effectively implement this change in their innovation method, Uber will need to employ individuals to offer the training courses. However, implementing this strategy could be problematic since the company can be resistant to this kind of change considering the level of success they are currently enjoying globally (Fichman, 2013). Another obstacle could be that drivers may lack the necessary technological skills needed to take an online course.
Uber’s current digital innovation has worked for them in most of the locations they operate in. however, recently, their services have been met with a lot of criticism from other taxi companies and customers as well leading to their services being banned in some cities and declining in others. These problems are brought about by poor organizational structure of their strategy. Use of inexperienced and licensed drivers has mostly contributed to this issues, going as far as threatening their passenger’s safety. A slight change in this strategy as described in the paper will allow them to counter these criticisms and restore faith in their customers.
Clay, Kelly (October 27, 2011). “Is Uber Really a Good Alternative to Taxis? Available from http://lockergnome.com/2011/10/27/is-uber-really-a-good-alternative-to-taxis/
Fichman, Robert. 2013. Lecture Note: Digital Innovation: Barriers and Tactics
Golovin Sergiy. 2014. The economics of Uber. Available from http://bruegel.org/2014/09/the-economics-of-uber/
Kerr Dane. 2014. How risky is you Uber ride? Maybe more than you think. CNET. Available from https://www.cnet.com/au/news/how-risky-is-your-uber-ride-maybe-more-than-you-think/
Nylen Daniel and Holmstrom. 2015. Digital innovation strategy: A framework for diagnosing and improving digital product and service innovation. Business Horizons. Issue 58, pgs 57-67. Available from http://ac.els-cdn.com/S0007681314001256/1-s2.0-S0007681314001256-main.pdf?_tid=10f25d66-c162-11e6-b8bb-00000aab0f26&acdnat=1481653941_c4c66b417b23118dd9014b18298f69ff
Rusli, Evelyn. 2014. “Uber Dispatches trips”. Wall Street Journal. Available from http://ottawacitizen.com/news/local-news/uber-ride-sharing-program-seeks-ottawa-drivers
Uber. “Where is Uber Currently Available?”. Uber.com. Available from https://www.uber.com/en-KE/cities/
Vetter Sebastian. 2016. Uber, digital and disruption: what’s happening and why does it work? PWC. Available from https://digital.pwc.co.nz/ideas/uber-digital-and-disruption-whats-happening-and-why-does-it-work/