Culture Clash Can Make/Break the Uber-Careem Deal
And what Uber can learn from other companies.
With the recent acquisition of Careem, the Middle East’s own unicorn, Uber is set to take over the region’s on demand taxi service. The billion dollar deal has been hailed as a major milestone for the startup ecosystem in Dubai and the rest of the Middle East as well, as a strong signal to foreign investors to take the startup scene here more seriously.
But these companies have contrasting origin stories which promises two outcomes:
- Cultural transformation.
- Or death.
Why Culture Matters— How Does a Company Behave?
When M&A deals are talked about, culture can be the last thought that comes to mind.
Compared to strategy and merging balance sheets, it’s relegated in priority. But when companies like McKinsey and Bain & Co. say that culture is a critical factor to a M&A deal’s success, it should make you think otherwise.
But, it seems to be a missing component when talking about the recent Careem-Uber deal. Which is off putting because:
Culture represents the behavior and values of a company. It explains the decision making process of the company. From the CEO to the receptionist, culture binds the organization.
Bain & Company have outlined steps for integrating cultures after a merger. In brief:
- Awareness —
- How have you achieved your success till now?
- What have been your guiding principles to your decisions?
- What was good/bad about these principles?
2. Editing —
- What should be kept while moving forward with this deal?
- And what should be left by the wayside?
3. Transform —
- What can you borrow from the other company?
- What should be accepted to create a cultural fit?
- What cultural gaps are in your company’s behavior?
When Culture Goes Wrong — X.com and Confinity
Paypal is the world’s most popular payment services company. But its early years saw a major milestone — the merger between Peter Thiel’s Confinity and Elon Musk’s X.com.
What happened afterwards was a clear culture clash. The authoritarian leadership style of Musk grated with Confinity’s old employees. Musk also wanted to move Ebay’s systems from Unix to Microsoft, a move that spurred co-founder Max Levchin to stage a coup.
Levchin and other executives posed an ultimatum to the board — get rid of Musk or they will quit Paypal. Consequently, Musk lost his CEO role at Paypal.
Uber and Careem’s origin stories can signal a culture clash —
“Whatever we do has to be massively impactful over time, and it has to be meaningful. It’s not about making money. Money is going to come. It’s only the byproduct. It’s really about improving the lives of people, making an impact and ultimately building something that will be our legacy in the world.”
— Mudassir Sheikha, Startup Arabia
Though an extremely similar service, Careem is a different type of company. For one, they are value driven. The arabic word for “generous”, Careem is a company that looks after their customers, drivers and their colleagues. They aim at teaching professionalism to the drivers and referring to them as “Captains”. They provided stock options to their employees, a generous reward especially with the recent Uber deal, worth almost $3.1 billion.
A key feature of their success has been their ability to keep track of the region’s pulse — Careem prioritized the needs of the region by providing cash payment options and providing protection for your contact details.
This hyper local focus helped the company stave off Uber, who needed to re-align themselves to the region’s unique challenges. It gave Careem a three to six month headstart and the ability to capitalize on less money compared to competitors like Uber.
Did Uber’s Culture Help It ‘Win’?
Uber on the other hand, is disruptive and controvertial, at best. In terms of controversy, there is a laundry list of aggressive business tactics, sexual harrasment allegations, lack of background checks for drivers and illegal establishment in countries.
For competitors like Lyft, Uber employed burner phones to make fake bookings to waste their competitor’s time while on the wheel. Drivers themselves, referred to as ‘independent contractors’, were paid the minimum wage for their work while working insane hours. Sometimes upto 80 hours per week.
With a “do then apologise” culture, the company established itself in countries like Germany without verifying with law makers or other regulators through “principled confrontation” — setting up shop without permission.
All of this, without even talking about Susan Fowler, and the various sexual allegations in the company. Clearly, culture at Uber was broken.
There were also less public struggles, like it’s lack of transparency between departments — instead a siloed mess that lacked coordination.
Dara Khosrowshahi, the current CEO of Uber can argue that this culture led to where Uber is now. In a talk at Stanford GSB, Khosrowshahi argues that the company wouldn’t have succeeded without this culture. But this success has resulted in ignoring the problems developed with this culture. And that is what he wants to change at Uber.
Uber 2.0 — Are They Moving Forward?
“We did go through quite a bit of trauma last year as an organization, and I always try to remind people that Uber is made up of 18,000 people and there are thousands of people within Uber who are change agents right now, who want to see us become a better organization and to live the true vision that we want to be. We were Uber 1.0 and we don’t want that anymore. We want to be Uber 2.0.”
— Bo Young Lee, Chief Diversity and Inclusion Officer
With Dara Khosrowshahi at the helm, Uber is making a move to change their culture. And while the sexism is being tackled, the aggressiveness of their bro culture is a work in progress.
One article by Inc. argues that everything will not change just because the CEO has been replaced. Instead, a greater focus should be made on the engineering department, which is where a lot of the harrasment can be pinpointed. Encouraging more women into leadership roles in the technology company can help fight this toxic culture.
And that is exactly what Uber has been doing in 2018, by increasing the amount of women to upto 38 percent in their global workforce. This is also what Khosrowshahi did at Expedia before joining Uber. As CEO of Expedia, he brought the women US workforce upto 51%, as of 2016.
To read more about how Uber’s new CEO has gotten Uber’s house in order since joining, check this article out by Fortune.
Microsoft Refreshed — How Nadella changed culture for the better
Satya Nadella story with Microsoft has a similar parallel. A large technology company with executive infighting and siloed hierarchies. Bad communication was hurting it’s future potential. After Stever Balmer’s 14 year tenure as CEO, Nadella’s first day with the reigns started with — a book.
Nadella took the quiet approach, by giving each senior executive a book titled ‘Nonviolent Communication’ by Marshall Rosenberg. He set the tone on how he wanted to change the culture in the company, by working on the way departments communicated with eachother.
He also borrowed ideas heavily from the book titled ‘Mindset: The New Psychology of Hope’ by Carol Dweck. He wanted to stimulate from this book the ability to harness a growth mindset — a commitment to learn from one’s mistakes as a behavior.
Of course, executives were not just reading books but also making active changes to how the company operates and values. For instance, Microsoft Office products were launched for Apple products like the Macbooks, a sinful act in the Balmer era.
Will It Make A Difference?
Uber 2.0 has a long way to go for sure. And with Uber’s million dollar losses and lacklustre IPO launch, the company has multiple issues to sort out. Solving their cultural problems might be the best step to solving these issues.
The Careem acquisition might be valuable for Uber’s cultural transformation, because they can borrow the best parts of the brand to fix how they operate in the world
But let’s assume Uber 2.0 is successful, will that make the deal a successful one? Maybe. But if the cultural transformation doesn’t go well, it can be a harmful deal for not only the two companies but for the Middle East’s startup ecosystem.
You can DM me on Instagram (@notjustwriting) or leave a comment.
I am not an expert on Mergers & Acquisitions nor corporate culture itself. I just found it strange that no one was talking about cultural transformation for this milestone deal in the Middle East.