Adapt or die, we told industry incumbents when the poster child of the on demand economy, Uber came knocking on our doorstep. With a tried and tested model and deep pockets from numerous rounds that pundits struggled to justify, the death knell sounded for an industry that had remained unregulated for years with price fragmentation and a quality of service that was all over the place. The altercations, misdeeds and legal battles notwithstanding, we had been shown a new way. The space had been officially disrupted and soon there were many contenders to second place, unfortunately all using the same playbook but on a budget.
Giants do fall, and Uber seems to have stumbled with a strategy misstep even as the ink dries on the $35 billion buyout deal with China’s ride hailing service behemoth Didi Chuxing, itself a marriage of convenience and survival between Didi Dache and Kuaidi Dache in 2015, that pushes a self-reported 10 million plus rides a day and led by Mr.Cheng Wei and Ms. Jean Liu, both under 40.
The Chinese exit points to the place and effect of local market dynamics and platform thinking, where beyond the sleek user interfaces and fine-tuned user experiences, the peculiar habits of consumers may lend a certain “je ne sais quoi” to situations on the ground.
Uber irked its drivers, the producers on its platform with an arbitrary chop on rates, a loss leader move that has worked for it in other markets where after starving the competition, prices normalize or even get hiked. Locally it seems to have driven the producers into the arms of Craft Silicon’s Little Cab, who having tripled their rides over the past week and feverishly iterating on their platform are gaining traction without any above the line marketing which Uber themselves have started on by placing billboards.
Little Cab seem disinterested in getting into a price war, a smart move where the agenda is “valuable growth” and not a vanity metric that would exalt a ride count over a healthy and “in the black” bottom line with defensible unit economics.
As it is now, the flavor and efficiency of the technology is not a differentiator but the emotions roused by the different services that are make or break. A classic study of different competition models at play.
The dance is far from over and I am keen to see how commoditization of the building blocks that power on demand services will drive business strategy in a market where the CXO’s and senior executives seem to be looking the opportunity and route to monetization through different lenses.