Uber is a ride-sharing company. It has created disruption in the taxi industry through the use of technology for allowing individuals with cars as well as spare times for driving individuals who do not want to drive but are having the money. Generally, every city were having two or three taxi organizations, but due to the manner in which they were operating they were not able to scale beyond a certain geographical vicinity. Uber brought a change to all that and a detailed description of the whole process will be discussed through the business model canvas.
Uber Business Canvas Model
Unique Value Proposition
The value proposition regarding the Uber drivers are having the scope for earning extra income, having the flexibility for choosing the hours of work, and also on an average, having the scope of earning more hourly wages.
The value proposition in respect of the customers is having an exclusive ride at a reasonable price, having the scope for on-demand availability, having shorter wait-time regarding a ride and also experiencing a cashless ride.
The Value Proposition of an organization is the distinctive solution that the company’s product or services are offering to the customers. Therefore, the more deeply the customers will be understood, the more equipped the company will be towards building an offering that the customers are aspiring to have. In this respect, an organization will be focusing upon its Unique Selling Proposition or USP (Castellaro 2015).
The value proposition of Uber is at the core of their business model and in respect of the customers, it states that it will always be providing the customers with a ride when they require it and in respect of drivers, the ride-sharing company stated that they will always be providing passengers when the driver wants them.
In a traditional taxi business, the determination of the number of taxis is done by the rides that are having availability over time for supporting that number of taxis as well as drivers. When there is a surge in demand, no excess capacity is available. When the demand is low for a phase, drivers are slow in leaving the market as well as payments in respect of each and every driver suffers because of surplus supply. The supply and demand of a traditional taxi is quite disjointed because the system cannot respond flexibly enough to the current market situation. Uber is able to do that within minutes or seconds due to its technological base, and it also makes it easy for people to make additional money, it’s cash free, and there are lots of small ancillary value benefits (Gassmann 2016).
The value proposition of Uber is therefore, like a market but if it was considered being that much uncomplicated then it would not be having the similar kind of disruptive impact. The only aspect that will be enabling it to do the delivery on the promise above is that it is having the ability for matching the supply with the demand.
Through the use of real-time metrics, there is the ability to observe what the demand is like and then as there will occur the commencement of demand towards exceeding the capacity that is available for reducing demand through the introduction of surge pricing that will increase the prices where the demand is considered to be highest. Similarly, the rise in fares will be encouraging additional number of drivers towards working and as a result, make the increase regarding supply (Wieland 2017).
Uber is having the ability of doing this due to the fact that, the drivers are owner operators. This ride-sharing company is not having the ownership of the assets and therefore, it is having the ability for flexing the capacity within minutes, while a traditional taxi organization will be taking months or years for achieving similar kind of outcomes.
The technological aspect is enabling this value proposition and simultaneously, it will also be enabling the aspect of addressing the traditional pain points at minimal additional expense. When someone is not having hard cash with them, it is not considered being a problematic situation. Uber will be accepting the cards of the customers as well. As a matter of fact, the entire process is considered being cashless that makes it safer in respect of the passengers as well as drivers (Cantamessa 2016).
It is also bringing transparency through the identification of the driver as well as passengers and their positions to one another, and by showcasing in an exact manner where the taxis will be every time. Therefore, reduction will occur in respect of being uncertain as well as being anxious. These were the concerns that were complicated for getting resolved in the business model regarding a traditional taxi (Massa 2016).
Uber is having two customer groups. It is having passengers and it is also having the drivers. In a traditional taxi organization, the segment of the customers is solely the passengers with the drivers being a part of the organization. The major aspect that is distinguishing the passenger’s of Uber from the traditional taxi passengers is that they require having a smartphone as well as credit or debit card. In the absence of these, they will not be using the platform (Euchner 2016).
The other segments of customers for Uber are drivers. As an alternative for providing employment to the drivers as well as to have an asset heavy organization, Uber is using freelance drivers. This however, is a basis of legal battles throughout the world. Moreover, Uber has reached further than the traditional source regarding recruits in respect of drivers and made driving available to any individual having a smartphone, a smart car, a well-groomed look as well as who is interested in earning some cash whenever they are having the requirement.
It is the match making between the drivers as well as the passengers. The drivers are self-employed. Uber is not employing them directly.
The ride-sharing company is completely automated as far as the passenger is taken into consideration. There occurs the removal of the old dispatchers and also occurs the automatic identification of the pickup point through the phone of the passengers. In respect of the drivers, there also occurs a more hands-on role predominantly regarding the aspect of quality assurance. Also, ensuring that the drivers will meet the basic standards regarding quality that is expected from them by Uber. Moreover, they will not be behaving rudely with the passengers or threaten them (Kuula 2017).
Uber did the use of different channels as it kept growing. Previously, the focus was to move from one city to another and to get sufficient drivers as well as users did the signing up and used the app, which stated there was a strong enough market for making it function. Increasingly having a market in every city, the channels are via the mobile app as well as the marketing is via email, word-of-mouth that is exceptionally significant to overcome adoption fear as well as to cross the gap from early adopters as well as public relations. A significant strength of Uber is the amount of money that has been raised by the company that has provided it with a significant percentage of earned media, which as a result has helped in driving the passengers as well as the development of the drivers (Biloshapka 2016). It can also reach the passengers through the social media. The technology that Uber is using helps the passengers as well as drivers to communicate very easily with one another.
With the help of its technology relating to surge pricing, Uber has utilized the weather change scenario in the most effective manner. For instance, when an individual is having the requirement for a cab and is stuck because of bad weather, the individual is having urgent requirement for a cab in that place and the best choice for him is Uber (Li 2017).
Revenue is considered to be very much uncomplicated. Uber did the moving of the traditional taxi meter from the car to its servers, which assists in tracking through the phone’s GPS technology and then passenger gets charged depending upon the miles that are being covered as well as whatever surge multiplier is occurring. When the passenger will be using a different brand of Uber, there will occur the application of the similar method but will be having a varied pricing. Uber is taking 20% cut in respect of every ride (Pisano 2015).
Uber is having three essential resources in the absence of which the entire aspect will be falling apart. Primarily, it is having the platform. This will be connecting Uber to the drivers as well as passengers and both to one another.
Although, this is considered to be essential but not an adequate need. Moreover, the company is having the algorithms such as the pricing as well as the routing algorithms. The pricing algorithms are used for balancing the demand and supply within the market as well as providing assistance for ensuring that there is always the availability of sufficient capacity for meeting the demand, which will assist in the fulfilment of the company’s main value proposition (Bagheri 2017).
The routing algorithm will then be focusing on the aspect to ensure that the wait-time of the customer is as short as possible and through its proposition will be reducing the deadhead time in respect of the drivers, as they need to wait in respect of a new job or drive to a new job.
A major aspect regarding the business model of Uber is to do the development of the platform, and to do the continuous adding of value for ensuring the adoption of the users as well as retention of the users and optimization of the company’s algorithms.
The business model of Uber is also required doing essential marketing on an international as well as domestic level regarding the driver passenger agreement as well as ensuring a sufficient supply regarding drivers (Remane 2016).
Uber still is possessing similar crisis situation as the traditional taxi organizations. The company is serving various individuals relating to the geographical markets that are not connected like in Singapore, Frankfurt, London and so on. Each of them are having particular traits as well as needs and ensures that there is the correct standard of driver assistance in respect of the user, which will assist in the crucial growth to meet its value proposition (Rayna 2016).
The key partners are the drivers who are having the ownership of all their cars. That assists in saving Uber from having a contract with a leasing organization in respect of hundreds as well as thousands of cars. It is having the payment processors as well as the providers of data regarding mapping (Moellers 2017).
The local authorities are missed out most of the time. In various cities, there is the occurrence of legal actions against Uber as the local taxi organizations are fighting to safeguard their businesses as well as persuading the authorities towards erecting entry barriers against Uber. This is regarded most of the time as adversarial but in the longer magnitude of matters, regulation is considered being significant and Uber is required resolving such concerns. Therefore, they are considered being long-term partners, although currently they are not so (Antikainen 2016). Uber needs to find out the good modus operandi to work with the local authorities and also to work out the ways for licensing as well as freedom to impart values to the passengers
Uber also did a partnership in recent times with a mobile manufacturing company in which, it undertook the process of delivering the phone to the customers. These kind of partnerships have assisted Uber in creating the awareness relating to the building of the brand. Uber has also tied up with Zomato for offering a ride when an individual will be booking a restaurant in respect of dinner (Hafermalz 2016).
Businesses can either be considered being cost driven i.e. focusing on the minimization of the investment relating to the business or value driven, which is focusing on the aspect of offering maximum customer value. Certain common characteristics of the cost structure are fixed costs, variable costs, economies of scale as well as economies of scope.
There is the occurrence of huge expenses in respect of the development of the platform, hosting and so on. There are the salaries in respect of the software engineers, the teams for marketing as well as sales and also, the country as well as city managers. Also, then there are the payments in respect of the drivers (Plenter 2017). The revenue is a very standard taxi-based system and the super pricing is also considered being very cost effective.
The word-of-mouth advertising really helped Uber in becoming a popular brand. The initial footing of the organization came from the corporate as well as other high standard individuals but the company had a quick realization that they need to do the targeting of the masses as well as provide options in respect of the customers. This gave rise to different categories such as Uber X, Uber Black, Uber SUV and so on as well as made drivers to do partnership with the company. Uber still is possessing similar crisis situation as the traditional taxi organizations. The company is serving various individuals relating to the geographical markets that are not connected like in Singapore, Frankfurt, London and so on. Each of them are having particular traits as well as needs and ensures that there is the correct standard of driver assistance in respect of the user, which will assist in the crucial growth to meet its value proposition.
Antikainen, M. and Valkokari, K., 2016. A framework for sustainable circular business model innovation. Technology Innovation Management Review, 6(7).
Bagheri, M., Pisano, P. and Pironti, M., 2017. Can proximity technologies impact on organisation business model? An empirical approach. International Journal of Technology Transfer and Commercialisation, 15(1), pp.19-37.
Biloshapka, V., Biloshapka, V., Osiyevskyy, O., Osiyevskyy, O., Meyer, M. and Meyer, M., 2016. The value matrix: a tool for assessing the future of a business model. Strategy & Leadership, 44(4), pp.41-48.
Cantamessa, M. and Montagna, F., 2016. Business model innovation. In Management of Innovation and Product Development (pp. 115-135). Springer London.
Castellaro, D., 2015. An Exploration into the Nature of Sharing 2.0: The Cases of Uber and Airbnb (Bachelor's thesis, Università Ca'Foscari Venezia).
Euchner, J., 2016. Business Model Innovation. Research-Technology Management, 59(3), p.10.
Gassmann, O., Frankenberger, K. and Sauer, R., 2016. Exploring the Field of Business Model Innovation: New Theoretical Perspectives. Springer.
Hafermalz, E., Boell, S., Elliott, S., Hovorka, D. and Marjanovic, O., 2016. Exploring Dimensions of Sharing Economy Business Models Enabled by IS: An Australian Study.
Kuula, S. and Haapasalo, H., 2017. Continuous and Co-creative Business Model Creation. In Service Business Model Innovation in Healthcare and Hospital Management (pp. 249-268). Springer International Publishing.
Li, X., Qiao, H. and Wang, S., 2017. Exploring evolution and emerging trends in business model study: a co-citation analysis. Scientometrics, 111(2), pp.869-887.
Massa, L., Tucci, C. and Afuah, A., 2016. A critical assessment of business model research. Academy of Management Annals, pp.annals-2014.
Moellers, T., Bansemir, B., Pretzl, M. and Gassmann, O., 2017, May. Design and Evaluation of a System Dynamics Based Business Model Evaluation Method. In International Conference on Design Science Research in Information Systems (pp. 125-144). Springer, Cham.
Pisano, P., Pironti, M. and Rieple, A., 2015. Identify innovative business models: can innovative business models enable players to react to ongoing or unpredictable trends?. Entrepreneurship Research Journal, 5(3), pp.181-199.
Plenter, F., Fielt, E., Hoffen, M., Chasin, F. and Rosemann, M., 2017. Repainting the Business Model Canvas for Peer-to-Peer Sharing and Collaborative Consumption.
Rayna, T. and Striukova, L., 2016. 360° Business Model Innovation: Toward an Integrated View of Business Model Innovation: An integrated, value-based view of a business model can provide insight into potential areas for business model innovation. Research-Technology Management, 59(3), pp.21-28.
Remane, G., Hanelt, A., Hildebrandt, B. and Kolbe, L., 2016. Changes in Digital Business Model Types–A Longitudinal Study of Technology Startups from the Mobility Sector.
Wieland, H., Hartmann, N.N. and Vargo, S.L., 2017. Business models as service strategy. Journal of the Academy of Marketing Science, pp.1-19.