Uber’s Business Model:
Who doesn’t want a personal driver? Uber solves this problem with a simple business model: creating a marketplace at scale for drivers and riders while taking a cut of commission by use of technology. It is based on an on-demand economy which includes a driver, a passenger and a fare. With the slogan, “Everyone’s personal driver”, Uber functions by users opening an app on their smart phone and requesting a taxi like service. It is easy to track your driver’s movement on the map and within minutes a driver pulls up to your location ready to drive you to any destination for a reasonable fee. Yet it gets better for the millennials…no need to bring cash because this all gets charged to a predetermined credit card.
Uber’s Operating Model:
Since Uber was the first big player in the on-demand economy driving business, they created an operating model that captured the attention of all technological entrepreneurs. The core piece of the operating model is the technology. However, there are other components that contribute to the success of the business model and operating model together including product diversity and ease of use.
As you go to call an Uber, there are two pieces to consider: time and money. Uber offers different products based upon which is more important for the customer. For example, if you are in a rush and time is more valuable than money, you could take an Uberx which is a private car for you and your guests. However, if money is more of a concern, you could take an Uberpool which allows you to carpool with other passengers along the same route. This creates diversity for the client but also allows Uber to capture market share they otherwise would not be capturing.
Internally, Uber leverages technology to create a new system that is easy to use. When you are ready to find a ride, you click on the Uber app and select the type of car you want to pick you up, based on size, money and time. The app uses GPS to track your current location and recognizes that as the default pickup location. If you want to switch that location, you type in the location you would like to be picked up and auto-complete finds the address or you move the pin to a more appropriate location on the map. Once you have entered the pick-up, you press the “REQUEST uber” button. The map shows how far away the driver is and a physical tracking of where the car is and the route it is taking. The visibility of the map eases the customer as you know when the car will arrive and where it is physically located. If there are any doubts about the route or driver arrival, you can also contact the driver right through the app.
The access and information flow is an element of surprise that Uber has solved. This technology solves two major issues. The first of which is a customer no longer has to go online and use a cumbersome website or call a service, they can click a few buttons on a map and have a car on the way. The second is the concern of the driver getting lost or being late when time is of the essence. The GPS tracking shows exactly where the car is and with a timer on top of the car, exactly how far the driver is from the arrival point. The assurance and ease to the customer is a new concept when it comes to personal drivers.
Travis Kalanick and Garrett Camp recognized an opportunity to create a business based on portable technology that would provide immense value to any consumer who uses public transportation. The business model and operation model align in a way that works for all parties involved: owners, employees and customers. Based upon a $60 billion valuation and many competitors who have launched based on this model, Uber seems to have found a winning combination.