UBER Competitor Analysis: Automotive Industry
Uber and the 3 Hacker Laws
UBER & Moore’s Law
Moore’s law is the foundation of everything that is happening in todays’ tech world. It is the observation that the number of transistors in a densely integrated circuit doubles approximately every two years, which ultimately guarantees exponential growth and innovation in computing and therefore a continuous supply of new technology. With the advent of cloud computing, wireless communications, IoT and new discoveries in quantum computing, the potential for infinite growth has become far more evident than a decade ago, when people thought the power of computing was approaching its limit. Now, the door is wide open for companies to explore new opportunities to capture market share in places they have never accessed before. Gordon Moore, the founder and director of research at Fairchild Semiconductor, published Moore’s law in 1965. Its importance to the semiconductor industry is very much felt today, as all decisions about future product releases and research efforts are based on this law. Hackerbay takes a look at industry heavyweight Uber, to identify where Moore’s law and its effects are evident.
Smartphone technology and GPS services underpin Uber’s entire existence.
The exponential growth in the computing power of smartphones combined with advances in GPS services, including signal processing speed, filtering, accuracy and performance that truly eclipses preceding technology, users can reap massive benefits such as route optimisation, precise real-time navigation services anywhere in the world, and a smooth user experience. Moore’s law guarantees leaps in technological innovation which will provide a level of accuracy and performance not achievable before for companies such as Uber. For example, processing power will soar in smartphone chips at the fraction of the existing size, and improvements in component technology such as GNSS antennas propel data processing accuracy. As a result, theses advancements in location based services and smartphones, which as we know facilitate Uber’s existence, will ensure shorter matching time, more appropriate car allocation and overall reliability of service.
The second dramatic effect by Moore’s law on Uber’s expansion comes from advances in graphic processing units (or GPU) technology, such as the new Nvidia Drive PX2 which we discussed in last week’s Competitor Analysis Report. Automotive manufacturers are already taking advantage of complex, deep learning algorithms in order to drastically improve autonomous driving services– with plenty more to come.
In the case of Uber specifically, the more data each car collects via GPU systems, the better the overall experience gets for both drivers and passengers due to advanced HD mapping, autonomous command features, precise real-time navigation and drastically decreased risk.
Combined with the growth and interest in GPU technology in today’s market (from automotive giants such as Tesla), the room for growth is exponential. The benefits from such data-driven systems will at base-level improve the autonomous driving experience, therefore increasing efficiency and reducing costs as a result.
In general, automotive travel will be transformed by technology in unprecedented ways. On the immediate horizon are leaps in electric vehicle development, which applies also to Uber’s ever-transforming service. New technologies and business models are poised to dramatically change the face of mobility at a faster pace than ever before. With the falling prices of batteries, it is expected that EV’s will be highly competitive by the mid-2020s. It is already evident that mobility patterns are changing rapidly, with more and more people preferring ride sharing as opposed to owning vehicles, or taking environmental-friendly means of transport. Of course, it depends on the extent to which technology, ride sharing, regulation and self-driving cars will boost the popularity of such services as Uber. However, it is indisputable that shared mobility services are increasing convenience, improving user experience and lowering the cost of mobility overall. If the cost of transportation in self-driving or shared vehicles falls to the point where it matches the cost of using public transportation, the number of users and revenues for these systems will cause drastic disruption to the infrastructure of the transportation industry, making it difficult to maintain public transportation services even with subsidies.
Take the Chinese ride-hailing company Didi Chuxing, which is already operating in over 400 cities in China and providing 11+ million rides each day. In general, ride sharing services are more than just taxi services– they are capturing market share from other modes of transport, such as public transportation. Investments in ride-hailing companies rose from $200 million in 2011 to over $11 billion in 2015, a glaring representation of market attitude towards these services, and once again a confirmation of Moore’s law in action.
While Moore’s law is plainly evident in the case of Uber- specifically in mobility, GPS and automation– what is more interesting is their potential to reinforce each other. A recent study estimated that, combined with an increase in vehicle utilization because of car sharing (in itself a product of Moore’s law), fully autonomous vehicles could reduce the cost of personal travel by 60% relative to private car ownership. This could lead to huge changes in how our society works and how transportation is managed in general. Also, the car sharing revolution can have a significant impact on the environment. Scholars estimate that electric vehicles will account for at least a third of new vehicle sales by 2030. This, combined with the growth and improvement in car sharing services, will henceforth severely impact the demand for oil and renewables. In general, the improvement in these technologies will further accelerate the penetration of Uber and concurrent car-hailing services.
UBER & Metcalfe’s Law
As we are well aware, Uber used a disruptive business model driven by digital technology to start a ride-sharing revolution. The dramatic advancement in IT over the last decade has generated a new reality in which information and people are constantly connected on a global scale, and therefore mutually influencing one another. This constant, wide-spread connectivity is starting to reshape existing economic structures and driving further technological innovation– and is a direct affirmation of Metcalfe’s law. The reach, power and growth potential of this global, digital network exponentially expands with each new connection made. The expansion is unstoppable and therefore can only bring further innovations.
Metcalfe’s law, or Network Effects, is rapidly changing how we work and live.
As an on-demand taxi service that connects smart-phone users to local drivers in real-time, Uber is the purest and most tangible example of Metcalfe’s law in action.
Network effects have demonstrated their power to drastically disrupt even the most ingrained infrastructures of our society– in this case, transportation-hailing services (the concept of which is centurys old). It is indisputably a revolution happening in plain sight. Consumer preferences are moving towards mobility as a service rather than cars as products, which poses a far greater threat of disruption than just to transportation-hailing services. The enablers of this sharing economy are the advancements in digital connectivity and Metcalfe’s law, which allow this viral peer-to-peer contact 24 hours a day, 7 days a week, 52 weeks a year… forever.
Uber is specifically empowered by these phenomenons as they are now capable of providing high-quality service assurance (with the function of user ratings), as well as a lower cost service at maximum efficiency.
Metcalfe’s Law, or network effects, states that aggregate network value is proportional to the square of network size, implying the individual user’s utility is a linear function of network size. Often cited, but rarely understood, this concept is the main driver of the sharing-economy. Examples aside from Uber include tech giants Airbnb, Amazon and any other massive-data-related company on today’s market. Network effects ensures a beneficial outcome for every user involved, because whilst participating in the mass generation of user data, they can only stand to benefit from the higher quality developments that are based on their usage. In the case of Uber, the more people use the service, the more knowledge the company accumulates and so the better the service gets in terms of efficiency, reliability and cost. With advances in location-based software, compression algorithms and deep learning, Uber is perpetually reaping the benefits of more accurate user data due to the volume of network participants, which therefore enables them to tailor every ride to the requirements of any individual user.
This has never been seen in the transportation industry. By taking advantage of Metcalfe’s law and Moore’s law combined, Uber manages to provide lower costs, better pickup times and a more precise service than any competitor on the market.
Lyft, Ubers’ largest competitor, seems to promote a mission and vision of community and friendliness, which carries over into how the drivers are expected to interact with the passengers. Following the recent allegation against Uber, Lyft has seemed to regain some of the fame it had a few years ago. But even with negative press releases and somehow bad reputation in recent months, Uber still dominates the car-sharing market. And most of this comes from the strong network effects the company managed to create through promotions, optimizing technology, and positioning itself as the Category King of its field.
UBER & The Power Law: Category King
“The most exciting companies create. They give us new ways of living, thinking or doing business, many times solving a problem we didn’t know we had — or a problem we didn’t pay attention to because we never thought there was another way…” (PlayBigger, 2016).
Uber is probably one of the best examples of what a ‘Category King’ means. In the 8 years Uber has been around, it has managed to position itself from a mere substitute of taxis to one of the most preferred means of transportation in the world. Uber did not only redesign an existing experience, it created a completely new one. Nowadays, to be the sole leader in any one market does not require being the first. It requires making smart choices at the right time, making total use of the newest technologies and ideas, and really tailoring your product or service to the needs of the target individual. Success will ultimately come from a service which users think will benefit them the most. A ‘Category King’ in this sense means indisputably monopolizing a user’s mindshare when a need suddenly arises. For example, Airbnb for holiday accommodation, Uber for instant, private transportation, Facebook for social networking and so on.
Uber is actually just a new Category King. Not very long ago, we couldn’t have even visualized the notion of ordering a cab through your phone.
If you walked out to a given street corner, you had no idea if or when a taxi might would come by, and whether it would fit your travel specifications such as capacity, distance and price range. Yet despite the fact that there didn’t seem to be an alternative way to get an instant car ride, people didn’t seek one out. It was an age-old problem that we didn’t even realize was a problem: the user mind-set, as it still is about so many things, accepted it to be ‘just how it is’. Uber initially built its new category around the simple, clear problem: that taxi service is inconsistent, unreliable and overall usually a bad user experience. Initially, Uber merely created a new way for us to move around the cities in which we live, but as they expanded, they created a new category by framing a broader problem around the notion of taxi services– how do you move safely and reliably around town? Uber committed themselves to educating and ultimately, persuading users that their service was the sole resolution to travel risk, using innovation in technology directly from a smartphone, which at that point almost everyone owned. Once the public understood the problem, it was over for Uber’s competition. And thus, they digitized– and monopolized– the taxi industry. By combining the functionality of smartphones and drivers looking for extra source of income, they created the ultimate platform for car-hailing and sharing. Added value perks such as iPhone charger cables or refreshments in vehicles came as a result of the user-rating feature, which not only increased pleasure of experience, but almost guarantees safe and respectful behavior from both driver and passenger.
It is hard to go through all available solutions to any given problem, as we live in a society oversaturated with information; research can become burdensome. This helps Uber exponentially remain the Category King; after monopolizing the mindshare of market users, they stick. In situations of stress, urgency or practicality (such as using private transportation services), people want to minimize time and cost if they can help it. The last thing they want to do is to pick between multiple services, and so they usually pick the leader. Global networks, search engines and social media allow everyone to quickly identify the top solution if it isn’t already present in the minds of any potential user. “Almost as soon as the problem — the category — is well understood, customers find the most popular solution and flock to it. Especially for digital products and services, there is no reason for anyone to settle for what they see as second or third best”. Anyone looking for the ‘best’ option can get it almost instantly- and literally, at the touch of a button. Companies that root themselves in people’s minds are the true leaders, the Category Kings, who thus take more profit than the rest of their industry competitors combined. In fact, Category Kings make up 76% of the market. Those in second place, and maybe third, remain to compete for attention and the rest…well they just die along the way.
