The New York Times recently published The Uber Model, It Turns Out, Doesn’t Translate. The article is well researched, highlighting a few startups using the Uber model that just didn’t work and showing how bad Silicon Valley is at understanding why Uber has been a success.
It shouldn’t come as a surprise that most on demand services fail. Most ideas don’t even sound viable on paper to an objective listener. The number of horrible ideas getting funding to take a stab at being the Uber of X, shows the blinders investors put on when chasing a success story. That’s part of the venture capital model, invest in companies that could have a 100x return, not companies with a high probability of a 10x ROI.
Uber and services like it use technology to democratize and existing, stagnant business model. To a large extent ridesharing services have disrupted the multi billion dollar taxi industry. If you don’t know what I’m talking about, you’ve somehow avoided years of headlines about the taxi industry v Uber and other ridesharing services.
It’s true ridesharing services have hurt the taxi market, but that’s also largely the fault of the taxi industry, because simply put taxi’s are terrible. Many people have to use them, but the often times unreliable drivers, the annoying process of ordering and the cabs that speed away to avoid taking you that far up town make for not just a bad user experience, but consumer horror stories.
Ridesharing apps offerer push button ordering of a service you needed. Attach that simple order process to a service of comparable or better quality and sign me up! Uber signed up over eight million users, because the app is meeting a need better than the competition.
The same concept applies to e-commerce. An online store is just like a catalog, but you don’t have to call to place an order. In many cases if you create an account with your address and payment info saved you can buy in one click. Amazon has pioneered the one click buy and nearly perfected logistics. Most items I order on Amazon with one click will be on my porch in three days.
Building a unicorn isn’t easy, but if you’re upgrading the quality of service people already pay for, providing an easy onboarding and are able to do so without a substantial price increase you’ve created a product that is ripe for mass consumer adoption.
If your replacement service is difficult to use, expensive or degrades quality you’re out of luck. But price is still the make or break for most people. You could create a world-class onboarding process and provide an amazing service; every aspect of your user experience could be stellar, but if it cost too much it’s not gaining widespread adoption.
Let’s say a product is 15% better than any competitor on the market, it maybe worth 15% more to customers, just 10% more or worth nothing extra. What if customers will pay 10%, but overhead is 20% extra for the service? It would be mathematically impossible to gain adoption and make a profit.
I’ve used Uber and Lyft hundreds of times now, nearly every time I travel, my cars in the shop or another time the old solution would’ve been taxi. Contrast that with the five times I’ve used Postmates.
I think Postmates is a wonderful service, but having takeout and drugstore items delivered at a markup often isn’t filling a need. Sure, I’ve needed an emergency item that I’m couldn’t pick up myself and in that case I was willing to pay handsomely, but that’s not a daily occurrence. It remails to be seen if you can build a crowd-sourced staff for a company like Postmates off of the fringe use cases.
It’s not just price making many of these apps less desirable to me than something like Uber. I don’t just enjoy eating from a restaurant, I enjoy going out to a restaurant. So ordering food at home at an additional cost is not often appealing to me. I don’t just want a product I want an experience. I don’t need to run a focus group to know other people feel this way, just look at what people spend eating out (hint it’s a lot).
Other products like the Uber for parking make some uncomfortable. Many people don’t want others driving and parking their cars.or as one friend put it; “I don’t want strangers driving my car – that’s where I keep the guns and drugs!”
The simple reason Uber and Amazon have had breakout success is they fill existing needs and they do it well. Both companies have clearly put a focus on customer experience, from signing up to logistics and fulfillment.
Want to be disruptive? Disrupt something, don’t just collect VC money with an app that makes pizza cost $3 more. Stop trying to build the Uber of Whatever and start trying to create solutions to problems.