Uber- COVID-19 speed bumps puts Uber’s suspension to the test!
We all know Uber- a company that has achieved “verb” status! However, this doesn’t mean that Uber is immune to failure. The COVID-19 pandemic could turn Uber into a “Xerox” of “Blockbuster” ! Or not…?
The corona virus pandemic and subsequent lockdown has hit ride sharing platforms particularly hard. Uber, which was never closer to being profitable, took a major turn for the worse. Data from SuperFly shows Uber rides in the U.S. have fallen by as much as 94%.
This is one of those fabled crossroads for Uber- where their actions could determine whether they would weather the storm or be consumed by it.
The existential question for Uber
Uber’s strength and weakness lies with its cross side network effects- more drivers mean more riders and more riders mean more drivers. Uber had plenty of both. Sadly, for Uber, network effects work in both directions. The problem came when ridership dropped from the lockdown. Uber lost its riders and this left its drivers high and dry. Driving for Uber is the only source of income for many of its drivers and this has put a monumental economic stress upon them at a time when the entire economy is racing towards another recession.
This pandemic too shall pass- this is not up for question. The question is what it will take with it- and more relevantly for Uber, will drivers be the ones that go?
When the lockdown is lifted and ridership goes back up (*knock on wood*), Uber needs to offer the same quality of service that riders have come to expect. The problem is that drivers wont wait around for Uber to pick itself back up. They would have taken up other jobs or even sold their cars to offset their loss of income! Uber CEO, Dara Khosrowshahi, said Uber had plenty of cash on hand to tide over the coronavirus crisis. However, their existential question lies in whether they are capable of holding on to their drivers through this pandemic.
Enter Work Hub!
On a Monday morning (that was starting to look too much like every other day), Uber drivers received an email announcing Work Hub. Work Hub offers Uber drivers the opportunity to find alternative gig work, in such areas as customer service, food production, and logistics. Through Work Hub, Uber drivers can connect with three other Uber platforms: Uber Eats (for food deliveries), Uber Freight (for trucking), and Uber Works (for blue-collar temp shifts).
While Uber’s ride sharing platform has taken a fall for the worse, their food delivery app- UberEats- has been seeing an increase in demand. Likewise, Uber Freight is also gaining demand and is looking for more drivers with commercial driver’s licenses to help with freight hauling. While these platforms were able engage more drivers, Uber quickly realized that there wasn’t enough work for its massive pool of drivers. To further drive opportunities, Uber started partnering with other companies to help with their logistics. These companies include McDonald’s, PepsiCo, UPS, 7-Eleven, Albertsons, Dollar Tree, FedEx, Hertz, Land O’Lakes, and Walgreens. Uber could in the near future even be delivering your Amazon packages!
In addition to offering drivers a source of income and purpose, the introduction of Work Hub achieved one significant thing- it kept drivers within the Uber ecosystem.
When the corona virus pandemic has passed and our hands are less pruned from constant washing, the partnerships Uber is forging today could set them up to be a one-stop transportation solution for everything- food, packages and of course, even people!
What can we learn from Uber?
Dont put all your eggs in one basket
Uber was uniquely poised to respond to the pandemic in this way because of its investment in diversification. Uber hasn’t really been just a ride sharing app for a while. It had been steadily investing in both Explore & Exploit strategies. When the door closed on ride sharing, Uber could ring the bell for food deliveries.
Knowledge is power
Uber was able to leverage its strengths quickly to come up with a solution. As soon as Work Hub was ready, they were able to announce the opportunity to over 240,00 drivers in the US. Uber recognized that its strength was the number of drivers they knew and leveraged this to strike partnerships with many companies with logistical needs. Even Dominos, who notably chose to stay from Uber, has become a partner today.
See the forest and the trees
Problems are rarely as simple as they seem at first glance. Uber would not have been able to pivot and even capitalize on the lockdown had it not recognized the larger need. By solving the larger issue of driver engagement instead of just focusing on getting through the pandemic, Uber was able to set itself up to become a larger transportation solution company.
Time is money
Problems often have a nasty habit of getting worse with time. Uber took months to come up with Work Hub which has cost them significantly. However, it would have been even worse if they had waited longer. The ability to respond quickly and effectively during a crisis is an invaluable skill.
Conclusion
Uber has made a very smart move to deepen and broaden partnerships and at the same time keep their driver engaged and financial afloat during this time of hardships. The new foundation they have built during these troubled times could bring in a new era where Uber could become the next tech giant- the google of all things transportation!
Or it might still fail.
I, for one, am optimistic and curious to find out!
References
- https://www.forbes.com/sites/simonchandler/2020/04/07/coronavirus-turns-uber-into-gig-platform-for-all-work/#22bd66ac1db9
- https://www.theverge.com/2020/4/6/21209396/uber-work-hub-drivers-eats-freight-jobs-coronavirus-gigs
- https://www.reuters.com/article/us-health-coronavirus-uber/uber-shares-soar-after-ceo-says-enough-cash-to-ride-out-coronavirus-crisis-idUSKBN2162MN
- https://www.businessinsider.com/uber-rides-united-states-down-94-percent-coronavirus-superfly-data-2020-3?r=US&IR=T
- https://www.nytimes.com/2020/04/17/technology/uber-lift-coronavirus.html?auth=login-facebook
- https://www.zdnet.com/article/uber-revamps-app-functionality-introduces-hub-to-keep-drivers-in-alternative-work/
- http://platformthinkinglabs.com/uber-lyft-war-teaches-us-building-next-uber-x/
- https://streets.mn/2019/04/30/as-lyft-and-uber-go-public-the-future-of-mobility-remains-up-for-grabs/
- https://www.uber.com/blog/work-hub/
- https://www.reuters.com/article/us-health-coronavirus-usa-uber/uber-connects-out-of-work-u-s-ride-hail-drivers-to-delivery-production-jobs-idUSKBN21O1LV
I agree with your comments on the strategic intelligence of Uber expanding into more than just ride share, however, it will be interesting to see how long they can go relying on Uber Eats to be the dominant source of their revenue. Especially since food delivery services is a very competitive market.
Thanks for this very interesting article Krish. I did not know Uber was venturing into other revenue streams than Eats and its traditional pool. Although I find it very interesting and resourceful from Uber management, I fear that the company does not have the right mindset for this sort of crisis. Uber is known for being a cash black hole. If they are not able to have a sustainable business that generates results now (and not in a few years) it might not be able to go forward, as liquidity in the markets is likely to dry and cash to become scarce!