The initial phases of Uber’s technology-led “disruptive innovation” proved particularly powerful because they lowered in a remarkable way the barriers of entry to both the supply of urban transportation services and the demand. Few disruptions influence both sides in such a dramatic and lasting fashion.
By allowing massively underused assets -- personal vehicles otherwise sitting idle -- to double as taxis, Uber significantly increased the provision of the service. And by measuring client satisfaction in a timely and high-frequency manner, it ensured that the bulk of this additional service would be clean, responsive, accountable, efficient, cost-effective and friendly.
The revolution on the demand side came from Uber’s understanding -- and use -- of the power of mobility, big data, and artificial intelligence. In doing so, it met the growing digitalization desires of clients (initially, mostly millennials, but increasingly encompassing a larger part of the population) eager to gain greater direct control over activities that had become ill-served, increasingly distanced and, in some cases, alienating. By also making the payments and settlement process more efficient and transparent, Uber further improved the experience for riders -- leading many to substitute the service not just for other forms of public transportation, but also for private cars.
Due primarily to regulatory and legacy issues, Uber has not totally eliminated the incumbent taxis. But now these more traditional suppliers of urban transportation are forced to modernize and upgrade their services in an attempt to moderate the erosion of their diminished market share. And once again, the consumer benefits.
The Uber experience of beneficially influencing both supply and demand is still in its early stages, especially as it is sure to spread to other market segments and industries. It enhances the need for other companies, especially startups, to study not just Uber’s innovative accomplishments but also its internal failures, including the importance of culture, humility and ensuring that rapid growth is backstopped in a timely fashion by adequate structures, compliance and people. And all this will take place as a humbled Uber itself learns from past slippages and, judging from the series of recent encouraging announcements, course corrects, including through its own more timely self-disruption.
Mohamed A. El-Erian is a Bloomberg View columnist. He is the chief economic adviser at Allianz SE and chairman of the President’s Global Development Council, and he was chief executive and co-chief investment officer of Pimco.
This column was provided by Bloomberg News.