What Uber’s crisis means for the company

Here is a German version of this article.

After a chain of scandals and negative reports, Uber is dealing with a gigantic PR and trust crisis. The criticism of the company’s culture, business practices and overall business model is mounting and its ability to survive being questioned.

But does the negative press and a damaged reputation actually matter for Uber? Let’s have a look at the five groups that Uber is relying on.

Riders

Even though the revelations by the former Uber engineer Susan Fowler who painted a (not very surprising) picture of Uber as a hostile work place especially for women, led to calls for boycotting the service under the hashtag #DeleteUber, the permanent effects most likely will be minor. People forget quickly, especially if they like a product/service and if they appreciate its (low) price. Furthermore, Uber has only regional rivals (such as Lyft in the US, Careem in the Middle East, Grab in Southeast Asia), no global ones. That means that there won’t be a powerful international anti-Uber movement. And if necessary, Uber knows how to use discount codes to lure people back into the service.

Drivers

Uber is traditionally not very liked among its own drivers, mostly thanks to its practice of occasionally forcing lowered fares onto drivers from one day to another. But Uber doesn’t need to be liked among drivers either. In fact, the whole idea is to leverage the lack of alternative income sources for people in precarious situations. As the number of jobs for people with lower or outdated skill sets is shrinking, Uber won’t have to worry about a lack of potential drivers. However, it is not to be ruled out that the company will initiate a charm offensive, both to ensure that drivers don’t focus too much on Uber’s regional rivals (many drivers tend to use multiple services & apps), and also in order to please the groups I am going to mention next.

======
Do like more than 300 other smart people (as of January 2017) and sign up for the weekly email loaded with great things to read about the digital world. Example.
======

Authorities

Uber is active in about 80 countries, and the company has an interest in finding common ground with local authorities and government agencies (instead of dealing with expensive and distracting lawsuits). Depending on the market, legal situation and involved parties, a worsening public perception of Uber won’t help with this endeavour. That Uber allegedly used methods to block officials from using its app for hailing a ride threatens to destroy the little trust that might have been there.

Employees

Here Uber is facing a serious problem. A damaged employer image will make it harder to recruit talent, it weakens employee retention and it leads to a loss of knowledge and experience. How frequent departures of key people can prevent a company from fixing itself can be witnessed by looking at Twitter. However, as another former female Uber employee pointed out in a recent post defending her old employer (LinkedIn log-in required), Uber “absolutely is not for everyone”. Essentially, the company doesn’t need to be popular among people who would hate to work there anyway. So there is a possibility that the long term effects on Uber’s attractiveness as employer among the people that specifically thrive in an aggressive culture (and these people in fact do exist) won’t be that big either. After all, those who seek themselves to that type of company are mostly in it for two things: fame and a lot of money. If that assessment is correct, a bigger threat to Uber’s employer brand would be a loss of momentum.

Investors

Uber’s investors mostly care about one thing: a fantastic exit. As long as the company can convincingly keep selling its growth story until the day of an IPO, it won’t have to worry about lack of capital, despite continued losses. However, the higher the valuation, the more challenging it’ll be to be convincing with this growth story – especially if a chain of missteps and problems accumulates to a point at which the relevant key performance indicators (KPA) show signs of stagnation or even decline. This would get dangerous. An end to the crucial momentum which Uber’s growth story is built on could lead to a domino effect and an eventual collapse – which in practical terms might force the company to withdraw from most foreign markets and sell itself to a tech giant or car company for a fraction of the current valuation of close to $70 billion.

Conclusion

While the current situation is serious for Uber, it is not dramatic – yet. The most important question remains to be whether the business model leads to positive economies of scale in more than a few markets, and whether CEO Travis Kalanick can continue to make the public believe that this is the case. However, if the answer is “no”, then Uber in its current form won’t have a future.

======
If you like what you read, you can support meshedsociety.com on Patreon!

Leave a Reply

Your email address will not be published. Required fields are marked *