Uber’s Disruption Equation
Remember the “good” old days? I do. If the weather was bad in a big city and you were late for your next meeting, you’d better start walking… because there would be no empty taxicabs.
This was the result of a regulated market. Under the guise of protecting consumers, the supply of cabs was limited.
Uber largely solved this problem, by creating an entirely different system for providing a much-needed service. Let’s break down into very simple terms what they did:
1. They made the supply chain transparent: In the old days, you might have ordered a taxi from home, and then sat and waited. You didn’t know which driver was coming, or how far away he was. What Uber really did was make this all transparent. You can see how far away your driver is. You can see his reviews. If it’s a busy period, you can see how much of a premium you would pay for a ride right now.
2. They vastly improved the customer experience: Why did Uber target the taxi business? It served a massive audience of disgruntled customers. With a few exceptions, no one liked taking a taxi, but also no consumer had any power — or sufficient motivation — to change the system. You couldn’t just switch to a better cab company, because in most cities there wasn’t a “better” company.
This is a prime sign of an industry ripe for disruption: horrific customer experience that industry players simply ignore.
Can you think of other industries in which the supply chain operates largely in the dark, and customers are disgruntled? I can — that describes many, if not most of them.
To date, I’ve invested in three startups that are seeking to disrupt the status quo in a similar manner:
Loadme is a Middle East freight company that matches trucks with shipments. It helps truckers maximize their loads while providing shippers with highly competitive rates. In this region, this industry has long operated in a top-down manner, with both customers and drivers having a hard time understanding how to improve their circumstances. Now, a driver with extra room in his truck can bid for an additional shipment. Likewise, a customer can find better shipping options.
Paack, based in Spain, essentially functions as a plugin to retail websites; it offers a far faster delivery option for customers who are in a rush. In eight cities, they now offer two-hour delivery of items ordered from leading retailers. Fulfillment of this service requires all players to adopt a more efficient operating method. Not only does the system have to match a messenger with a delivery, but also the retailer must package and release the delivery fast enough to make the two-hour deadline.
Packr, based in India, offers both packaging and delivery services of documents and parcels. You can ship almost anything, from a sofa to your dinner.
Don’t be lulled into complacency because the examples I used here are all transportation related. As the disruptive power of this simple equation becomes more apparent, it will be applied against many overly rigid industries:
