How could’ve Taxi companies seen UBER coming?

We live in times where user preferences are changing faster than the ability of companies to adapt. Organizational ambidexterity, or the ability of an organization to respond to these changes, while defending existing revenue stream, is getting increasingly important for survival and growth. 

Companies like Blockbuster, Polaroid or Blackberry were once the kings of the hill. They had all the resources in the world and yet they could not see the disruption coming or, even when they noticed, could not muster enough organizational energy to effectively react to the disruption. The average life expectancy of a company in the Fortune 1000 has dropped from 65 yrs in 1960 to less than 20 yrs today. Can we build a company that grows perpetually? And if yes, how would this company look like? What kind of organizational model would enable them to rapidly adapt to the changes and yet continue to defend their moat.

For this article, we will examine these ideas from the perspectives of Taxi companies facing the emergence of Uber in 2009/2010. What could they have done to increase their longevity and relevance in the market?

Overview: Background of the Taxi Industry

This is a heavily fragmented space, although some Taxi companies have been in operation for over 100 years. Taxi driving, while a low paid and sometimes dangerous profession, can offer reasonable economic opportunity and lifestyle to a large number of people. Regulations impact the Taxi market considerably. The cab rides are expensive in the markets that are regulated (NYC) given the high price of medallions; while in de-regulated markets (San Diego) an increased number of drivers compete for the same passengers. Oftentimes, medallions acted as a barrier to entry for new entrants. UBER entered the Taxi market in San Francisco in 2009 with a mobile app that allowed anybody to do peer to peer ride-sharing without the need of a medallion. This considerably increased the buyer’s experience. It also increased the supply of drivers, while making driving a lifestyle choice for many drivers rather than a career.

Part 1: Understanding the “Basic” value 

“The customer rarely buys what the company thinks it sells.”?—?Peter Drucker.

So what was the “true” value that a taxi company in 2009 offered to its customers?

One might say convenience. An alternative to public transportation, perhaps even a personal transport?—?at an affordable price.

Basic Value: Convenient, Personal Transportation, Affordable Price

What were the “unmet needs” of the industry that the Taxi companies were not providing:

Sub-optimal ride experience, quality of drivers, non-availability, time-to-ride : You could not always hail a cab where you were, when you needed it, with a high degree of certainty. There were also a lot of issues around the quality of car, safety, trust, optimal fare and the drivers. 

Unmet Needs: Poor Ride Experience, Availability

Oftentimes the most difficult questions to answer are the simplest ones?—?like what market do we really compete in? What basic, fundamental value do we provide or not provide? What are the different ways our business can be disrupted? Nailing down these core questions can be the first step towards identifying an emerging threat.

Part 2: Asking the Right Question

How are we to ascertain where we stand in our market space, in our customer’s minds? It could begin with a simple question like?—?

Who can provide Basic Value> or meet Some of the Unmet Demands> BETTER than us?

BETTER in this context refers to multiple things and is very different depending on what the Basic Value> is. BETTER = Better price? Better product? Better design? Better experience? Better relationships? The list goes on.

So the question that taxi companies should’ve been asking themselves was, 

Who can provide Ubiquitous, Convenient and Personal Transportation better than us, while delivering on some of the “unmet needs” of our customers ?

Part 3: How Taxi Companies viewed their Competition in 2010

“In business, the competition will bite you if you keep running, if you stand still, they will swallow you”?—?Victor Kiam.

Competition is essentially the driving force for change and the reason every company is forced to do their best. Knowing your competition and their every move is as tantamount to survival as customers ponying up to whatever you’re selling.

Here’s how the traditional taxi companies thought about competition in 2010,

— To provide ubiquity, you needed a fleet of cars & drivers within a short distance from the customer. 

— To provide personal transportation, you need medallion (a scarce resource and a perceived moat to the business).

— To capture leads, you need a dispatch center and provide a good-enough experience for customers from requesting a cab to drop-off & payment. 

Assessing who has access to the above resources allows you to chart all the perceived threats.

The Taxi companies mostly viewed other Taxi companies, or at most the rental car companies as their competition. Number of Taxis in operations or Medallions (if applicable) provided a false sense of security in this space.  

Part 4: Acknowledging Uber in 2010

Growth in Uber rides from June 2010-March 11

Uber in 2009/2010 did not exactly looked like an existential threat to the Taxi companies. It was genuinely difficult to anticipate a competition like Uber. However, it should not have been that difficult to "react" to Uber after they became a success in the very first market they launched. Back in 2010, Uber had raised only $1.25M in funding. They had spent a year in San Francisco and has just moved to New York. If the Taxi companies had taken Uber more seriously as a competition, at the very least they would have increased their longevity. Let’s assume the owners of some of the NY Taxi companies heard of Uber in 2010. Should they have gone back to their whiteboard to cross-reference Uber’s business model with the list of “basic values” and "unmet demands” of their own business to see if Uber was potentially providing a better service at a lower price? 

Note: Your "future competitor" will meet the “unmet needs” of your customer and provide “basic value” better than you.

Part 5: Defending Moats

The rules of capitalism dictate that competitors will attack or disrupt a business. Building a business is essentially pointless if the business can’t be defended and the capacity for defense is directly related to the size of the moat. Moat is, in essence, the distance between you and your competitors and it is built on multiple dimensions ranging from cost & scale advantages like Wal-Mart to brands like Coke to high switching costs like Microsoft.

Taxi companies’s biggest moat was the “Medallion” and the local jurisdiction in which they operated. Uber worked around the Medallion moat rendering them worthless and the very fact that a company was operating a taxi service in 2009/2010 without a medallion in San Francisco should have triggered a red flag as an existential threat.

Below are some other options the Taxi companies could have pursued to expand on their moat and counter Uber

Mobile App: An universal mobile app that works across multiple towns/territories - just like the library card that neighboring towns share, thereby forging an alliance in the fragmented industry

Subscription Service: A discounted “pre-paid” subscription based cab service that you call using your mobile app, so you don’t pay for individual rides. A Netflix for Cabs - this would appear specially to regular commuters. A monthly payment from such commuters could have locked them into the service rendering them unavailable for Uber

Lock-in Drivers: Taxi companies could have provided better benefits and locked-in drivers into longer term contracts to increase Uber’s cost of driver-acquisition

Community Programs: Since Taxi companies were local, they had an opportunity to create a strong brand to slow down Uber’s reach into the community

Legal Options: Taxi services could have pursued preemptive legal barriers from the cities they operated in?—?while this may not have completely stopped Uber, it could have slowed them down

Premium Service: Taxi services could have started a premium service that guaranteed fair prices, safety and a much superior ride experience for loyal customers

We all know how this story is evolving. It is much easier to analyse this in the hindsight and far more difficult to react to these situations as they show up in the front view mirror. New processes and organizational models are required to enable organizations to adapt and react to the fast changing user preferences and market trends.  

We intend to discuss, learn & write a lot on the subject of perpetual growth in the coming months. Do follow us here at

Guru Pandian?—?@gurubit17 

Santosh Sharan?—?@santosh.sharan