Uber: Tough questions to our culture of innovation in Europe

Reaching new fundraising heights, Uber is now seeking to conquer the world — willingly or by force. Neither white knight nor bloodsucking scoundrel, Uber is posing tough questions to our culture of innovation in Europe

The smartphone-driven rideshare and taxi alternative service company  Uber,  founded in 2009 and headquartered in San Francisco, has announced for the second time in 2014, a billion dollar-plus fundraising ! The company, which offers applications linking customers with drivers, now overtakes records previously held by Facebook: € 2.7 billion raised (with $ 600 million of additional potential), and a market valuation at $ 40 billion.

Yet if Uber is known to the public it is more for the controversies it is raising in its “war” against the taxis, which has in recent months turned into a crusade against all comers and for “free mobility”: against street taxis, against national governments and regulators, against local governments, and even against less controversial private hire services (in France the so-called VTC hire services have joined a lawsuit against Uber).

france paris uber taxi strike

If there is to be only one winner in this latest huge fundraising, this will certainly be the company’s (high priced) lawyers that it relies on in almost every country where it settles in order to deal with competitors’ complaints and court proceedings.

Opposition to all a marketing strategy

Uber has made opposition to all a pillar of its marketing strategy. To those who unite against them to preserve the status quo, Uber is opposing its incredible success and growth with enthusiastic customers all over the world. Uber has gambled that most regulators and governments would have to change their position if they can win the “opinion battle”.

Uber has thus become an easy target for everybody, a modern scapegoat for all those who favor the status quo. This idea is now so consensual it makes me suspicious. Yes, there is a “problem Uber” for regulators, local governments and incumbent players. However Uber holds many of the promises of the collaborative economy and a new paradigm for transport. If it were to fail we might have to regret the missed opportunities.

My goal in this article will be to share some balanced but at the same time, let me warn you, somewhat opinionated views on the subject.

Uber: An investment worth 400 km of motorways

Some rightly question if Uber is not the symptom of a new tech-bubble ready to burst in the Silicon Valley. Admittedly $ 2.7 billion is a large sum for a “startup”. Yet Uber operates in the field of transportation where huge investments in physical assets are the norm.

In France for instance, the cost of a kilometer of motorway averages about 6.2 million Euros. So if we look at it from this angle, the money raised by Uber thus far is equivalent to the financing of around 400 km of motorways. Not even enough to finance a motorway from Paris to Lyon! However Uber is currently rolling out a new transportation solution in 250 cities in 50 countries for several million customers. And planning for many more!

More than building a technological solution, Uber works on new business models, developing new services, building a network of partners and drivers, and more specifically on coping with restrictive legislation for its activities in almost all countries or cities where it starts. All this requires money. All this, if successful, will provide valuable assets.

And several investors, among the most prestigious in the Silicon Valley, have understood that. Add to this an excess of liquidity and the belief that “the winner takes all” will apply once again to a huge market, and you can easily understand why Uber is now valued at $40 billion.

But one should understand that Uber aims much more than taking big market shares in the taxicab business in “only” 250 cities, mainly in Europe and North America. Uber’s ambition is also much bigger than conquering the promising Asian markets where local players are already taking grounds. Actually Uber’s moonshot is to do for urban transportation what highways once did for long-distance car-travel.

Uber wants shared-vehicles for hire to be more effective and affordable than owning a car, in the same way that highways unloaded national and local roads running right through the middle of towns and villages.

This is in its way a “utopian” vision, a brave new world of mobility services, a great vision for this time. It is a vision that more and more people appear to share and be ready to buy into, and Uber is among the few players today that might make it happen.

 

“Too big to fail”?

In France and Europe of late, “Google-bashing” has become kind of fashionable (the EU parliament just proclaimed Google and the likes should be dismantled!) though it tends thus far at least to remain in the stage of wishful thinking by certain kinds of minds and institutions.

Uber not only has Google Ventures in its capital since 2012, but also shares the same tech culture, so common and valued in the Silicon Valley: shoot for the moon, and because the world you wish to conquer might not be exactly compliant to your vision, just take off the gloves and change the world!

Uber is kind of a perfect scapegoat not only in Europe but also in the US. If we add a touch of arrogance, aggressive marketing strategy and tactics, and a vindictive approach to negotiation, it is hardly surprising that Uber faces such an eclectic league of critics, from « friends » of the sharing economy (for being too capitalist) to their « enemies » (the proponents of the status quo, first and foremost the “asshole” taxi industry).

Yet Uber gives every sign of feeding itself from the institutional opposition it meets. Firstly because the transport market is so highly regulated and extremely locked that it generates huge frustration for users and potential customers (we rarely talk about customers in transport!).

Secondly laws and regulations from another age usually combine to prevent local entrepreneurial ecosystem (especially in France) to develop (and finance!) the most innovative solutions. I know so many entrepreneurs who have dreamt for years to do what Uber is doing today but who had to withdraw given the current negative context.

Uber now has the will and financial resources to “fight its war” against established conservatism. Since no other player (in Europe) can afford to compete with Uber on its most innovative service for fear of legal, political and even physical retaliation (taxi drivers attacked Uber cars in Paris during a strike), they can grow their customer base very fast and make them very happy and strong supporters of its service. As a consequence in France even other players of the “vehicle for hire” business have sued Uber for unfair competition, since Uber does not fully comply with current antiquated regulations.

Uber, which has no more virtue than the sum of individual virtues of its partners and associates (some have recently demonstrated that they were lacking some), is now depicted either as a foil or a white knight. It is neither.

If Uber were to fail with its most disruptive services (UberPOP service where the driver is an (non-professional) individual, UberPOOL for sharing a trip and its cost) end up being banned in Europe, we will have collectively lost a lot. We will have lost a great opportunity to move away from a system based on the individually owned and driven motorcar, once a dream for all but today increasingly a symbol of the failure of urban mobility (costs, congestion, pollution), into a central instrument for the new urban mobility system.

By organizing to crush deep innovation just because it calls for deep changes, we will have failed to make the system more sustainable, more efficient, and more affordable.

If Uber, for now so big and powerful, were to fail, who else will dare to challenge the established and antiquated system? Uber has become such a symbol, it has become so big that it cannot fail.

Uber has become “too big to fail” because if it fails much of the sharing economy in transport (but not only) will suffer: P2P carsharing might suffer, carsharing might suffer, and even advanced ridesharing (and its integration in public transport) might suffer.

That’s where things stand today, unfortunately. Innovators and entrepreneurs in Europe have to hope that a giant from overseas, powerful enough to lead the way, will break the lock-in. But if it does, will it tomorrow control the ecosystem it created?  That too is a more than troubling thought.

 

The Google of mobility?

One may and should question the legitimacy of the means used by Uber, which in each city or country is taking the risk to launch its services illegally, or at least not in full compliance with all regulations. Those who stick to legalism will explain to us that this is an unacceptable method which is challenging our legal culture.

But Uber brings with it another innovation culture, a culture where one can launch an innovation and get cease-and-decease orders from local authorities or unfavorable court decision before negotiating a way to draw new standards and regulations to reach a new equilibrium market where different players (old and new) have fair rules. This is what has happened in California for example.

However this is not our culture in Europe, at least not for the most part. This is sadly pictured in the ridiculous legislative episodes in recent months. France’s parliamentarians went as far as banning the use of GPS for driver – customer matching.

We might then consider that this culture of disruptive innovation is perhaps not ours, and so strive for a quick rollout of Uber out of France and Europe. Some might demand anti-Uber laws along the lines of the  “anti-Amazon law” or “anti-Google resolution,” with all the efficiency and ridicule that we know. We might even ban some of Uber.

And if we do all that it just may be that in ten years yet we will complain we have not seen the emergence of French or European champion in urban mobility, just as we have not had a champion to develop search engines on the web. We will complain of the hegemony of ruthless “Anglo-Saxon” players, Uber or other, whose “core services” will support whole ecosystems dependent on them.

In ten years we will also complain we are far from the path to Factor 4 (division of CO2 emissions by 4 in 2050) in transport.  We will still be outraged few days a year because of the toxic “smog” in our major urban areas. We will look with envy at megacities of another world that will have grown more sustainably, against all odds, by integrating the car differently in their urban transport systems.

An opportunity for French mobility champions

As a professional involved in new mobilities, I am enthusiastic about what Uber is doing because I think it might have very positive impacts on the society. As a customer I am pleased to see that a newcomer shakes the market and by its level of service challenges every competitor to improve its own service.

However as a citizen I am concerned if the only way we found to make things change is through decidedly aggressive and ruthless methods. As a French / European entrepreneur and innovator I worry that the way we handle Uber (and others) in Europe will have negative impacts on our innovation ecosystem. I think that when Uber will have unlocked the market they will be a dominant player, like Google and GAFA have become in their own fields. This is because very innovative startups in France and Europe will have been prevented from growing their business.

France and Europe lack neither skills nor talent nor entrepreneurial ecosystems, nor even a certain political will (especially on the part of local authorities). France is certainly not lacking seeds of European or even global champions either: BlaBlaCar, Autolib, Deways and Carnomise, and so many others attest it.

I’m finally concerned Uber is threatening the whole collaborative economy because of its methods and because being so big if it fails it would be a terrible defeat for the whole collaborative economy, with negative image impacts.

I strongly believe we should see Uber and consort as a fantastic opportunity to make new mobility paradigm happen both in private transport and logistics. To do so we need to work collaboratively on improved regulations that make the market fair for every stakeholder: customers, all drivers, local governments and regulators. This is achievable since in the new paradigm the market should be much bigger. Let’s trade our culture of mistrust for an open culture of negotiation and compromise. There is so much at stake.

So what about this?  Let’s step back and take a more careful look before leaping.

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About the author:

Ghislain Delabie (Telecom Bretagne, ESSEC MBA) is an expert in mobility. He has led Ghislain Delabieseveral large-scale projects, from conception to roll-out : smart charging for EV fleets, sharing and support services for EV corporate fleets, carsharing and ridesharing integrated services. From 2012 to 2014 VP for Innovation and B2B services at Deways, a pioneer P2P carsharing company in France. He designed and rolled out dedicated P2P carsharing services for corporate customers and worked with carmakers on innovative EV and charging infrastructure networks sharing-schemes. Since 2014 he is senior partner at Techneo Consulting, in charge of developing the Smart City & Mobility practice.  He is lecturer at ESTACA (MSc in Automotive Engineering), teaching new business models in automotive and services.

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About the editor

Eric Britton
9, rue Gabillot, 69003 Lyon France

Bio: Trained as a development economist, Eric Britton is a public entrepreneur specializing in the field of sustainability and social justice. Professor of Sustainable Development, Economy and Democracy at the Institut Supérieur de Gestion (Paris), he is also MD of EcoPlan Association, an independent advisory network providing strategic counsel for government and business on policy and decision issues involving complex systems, social-technical change and sustainable development. Founding editor of World Streets, his latest work focuses on the subject of equity, economy and efficiency in city transport and public space, and helping governments to ask the right questions and in the process find practical solutions to urgent climate, mobility, life quality and job creation issues. More at: http://wp.me/PsKUY-2p7

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