How Uber and Lyft got lost

Uber and Lyft can have a long-term vision to transform the face of transport. However, it is clear that businesses have a key problem: their short-term state of mind when it comes to implementing this vision. Last month, Uber drivers in California staged protests demanding better workers' rights. Last week, the Teamsters protested against the status of "group worker" drivers. And now, this week, California passed a law setting out drivers' rights as employees rather than workers.

Both Uber and Lyft continued to grow at a record rate, penetrating aggressively into new markets at highly discounted prices compared to similar incumbents. However, they have repeatedly failed to prioritize their relationship with drivers who, at least in the short term, are their main asset in maintaining this growth. Uber's stated ambition of lending money to its drivers reflects the importance of its drivers as a primary market for the company, but does not meet the concerns of most drivers.

Self-driving in a problem

Drivers know that businesses consider them a temporary necessity. It's no secret, Uber and Lyft want to switch to autonomous vehicles. Their drivers would be forgiven for having the impression that the company considers them disposable – feeling perhaps magnified by the fact that neither one nor the other was willing to give rights to its workers without struggle. Their lack of consideration for their workforce means that they put the drivers angry much earlier than would have made the switch to autonomous cars.

While last month's protests concerned only a few drivers who were closing the street to unionize and support the California bill, these events can be expected to burst out when the two companies begin serious business. autonomous taxis.

Where the short term meets the long term

The contrast between increasing the number of drivers and scaling up via long-term autonomous vehicles creates a chasm for Uber and Lyft, who have forgotten the medium term. They have focused too much on short-term growth and growth to appease investors while developing a long-term strategy of destroying much of their existing model that is unlikely to be sustainable before years because of factors beyond their control. .

Driverless cars are touted in the press as the next inevitable step in the evolution of motor vehicles, but they are not as imminent as the news would have you believe. In fact, autonomous cars are still difficult to solve due to a number of problems, one of the most important being the infrastructure. In order for autonomous vehicles to work, they must communicate with other vehicles and transfer high-speed positioning and safety data to and from the cloud – the kind of speed that can only be achieved when traveling via a 5G connection.

Although many networks tout their 5G capabilities, they are still in the testing phase rather than ready for deployment. Even once deployed, 5G will be largely limited to large cities in developed markets.

It is therefore likely that Uber and Lyft rely on drivers to be at least the engine of their growth over the next five years. They will need much longer in some areas, especially if you take into account their evolution. futures markets.

Threats to the economic model

Uber and Lyft may not see the value today of working to empower and encourage their drivers given their ruthless focus on the margin, but the reality is that their business model rests on drivers – more than on reducing the cost of their remuneration.

The recent success of its competitor, Bolly, in the UK and in Eastern Europe, shows that another solution is possible. Bolt, which has made significant progress in areas that Uber and Lyft were slowly targeting, such as Eastern Europe and Africa, is only charging 15% of its drivers (almost half of that 'Uber) while charging customers less. It can be argued that this strategy is not viable in the long run, as Uber has trouble generating profits even with a 25% commission. But prioritizing driver well-being is a good strategy for developing goodwill and name recognition for both the driver and the customer. And as Bolt does not currently plan to enter the sexy (but slow and expensive) world of driverless cars, he still has more capital to focus on in the medium term.

If Uber and Lyft fail to find a way forward for their drivers, they may find themselves in trouble – long before driverless vehicles can intervene to save them.

Alyssa Altman is Transportation Manager at Publicis Sapient.