How often does the name of a tech company become a verb? The fact that we now “uber” somewhere in the same way we “google” something, is a sign of the disruption that transformed the way people move around. The market for shared-mobility (including ride-hailing, ride-sharing and mobility-as-a-service), which is estimated at $54 billion today (2016)[1], is forecasted to grow yearly by 35% through 2020[2]. By 2030, the global share of miles travelled in shared vehicles could reach 26%, up from 4% today[3].
The challenge for companies moving in this fast-growing space is ferocious competition against players who don’t have to be profitable (in 2016 alone, Uber recorded a $2.8 billion loss[4]). Against such competitors, a frontal assault is borderline suicidal. Yet time and time again, new entrants are trying to secure a share of that growing market. Unsurprisingly, the vast majority fail. But not all. So, what does it take to survive in this cutthroat environment?
Research we conducted earlier this year offers valuable insight to inform a winning B2C mobility strategy. In this article, we will share some guidelines, with a focus on ride-hailing.
DIFFERENTIATING YOUR SERVICE THROUGH FUNCTIONAL BENEFITS ONLY WORKS UP TO A POINT
In U.S. cities, the median waiting time for an Uber is three minutes[5]. In other global cities, it’s about four minutes. People we talked to during our research told us this is good enough, and a shorter waiting time wouldn’t make much of a difference. This is consistent with research done by Lyft that shows that once you hit the three-minute pickup time mark, there is no direct benefit to having more people on the network[6]. Said differently, positive network effects in ride-hailing only work up to a point. This is a powerful insight, as it goes against the common view that ride-hailing is necessarily a city-wide winner-takes-all market.
As a corollary, innovative mobility players can do one of two things to differentiate and gain market traction: 1) focus on improving the drivers’ experience, which has largely been neglected so far – this is how the NY-based startup Juno managed to grow to a $200M valuation in one year[7]; or 2) go beyond meeting functional needs to provide an enhanced experience to passengers and drivers.
RECOGNISE PEOPLE OFTEN ENJOY BEING ON THE MOVE
A commonly held view, mainly in business and economic circles, is that travel time is wasted time. Consequently, when designing mobility solutions, most of the effort is focused on reducing travel time. Yet this is a simplistic view of a complex problem.
When asked about their ideal commute time, people don’t answer “none.” They answer on average 16 minutes[8]. This is consistent with findings from our research. People we interviewed often spoke about their daily journeys fondly. For them it’s a buffer between work and home, a moment to escape from social interactions and pause. Whether driver, passenger, or in public transport people develop routines to make the most of this time, when only they decide what to do. As Josh, a young, inner city resident we interviewed in Melbourne, told us: “I need this 30-minute drive time before arriving at the office. It’s on my ride to work I get my senses and get mentally ready for my day”.
In societies where social pressure is intense because people spend more time at the office or live longer with their parents, the importance of journeys as personal time increases. In Singapore, Uber drivers told us they started driving as a part-time job to create a moment in their lives when they could disconnect from their office jobs and families.
As mobility becomes commoditised, successful services will focus on enriching trips and helping people get the most of that liminal time.
IN A RAPIDLY COMMODITISING MARKET, DIFFERENTIATE BY ENRICHING THE JOURNEY EXPERIENCE
Ride-hailing heavy hitters Ola (Indian market leader), Lyft, and Uber are all on a push to improve their in-car experience. Ola partnered with Qualcomm to build a tablet connected to the vehicle’s operating system, allowing passengers to take control of the in-car experience, including music, video content, e-books, navigation, and temperature[9]. Lyft recently developed an in-car Bluetooth dongle. Uber is focused on building partnerships, including one with the Washington Post to gain access to content, and others with Spotify and Pandora to let passengers play their own tunes during a ride.
The example of Spotify illustrates how small changes can transform the mobility experience. Jaye, an all-star (4.9/5 rated!) Uber-driver from Sydney, told us the most important skill for a driver is understanding after just a few exchanges of words if a passenger wants to chat or not. Yet the first bits of any conversation with a stranger are bound to be boringly generic. Having the passenger playing his own music in the car via Spotify changed that. Jaye told us chatting about a tune the passenger chose is a perfect, personalised ice-breaker, which enabled her to talk more frequently with passengers, without having to go through the mundane predictable chat about the weather.
When their functional mobility needs are met, people stop thinking about how to get from one place to the other and see being on the move as an opportunity to do other things. Best-in-class mobility services will be the ones modular enough to adapt to the contextual needs of users, whether it is disconnecting, socialising, or getting things done.
UNDERSTAND LOCAL MARKET SPECIFICITIES TO EFFICIENTLY CONNECT WITH USERS
While in Singapore, we wanted to understand people’s views of Uber and Grab, the main local competitor. To our surprise, most people we talked to preferred Grab, because they felt it was a local company, with which they could relate to on an emotional level.
Further south, in Indonesia, the local ride-hailing startup GoJek is successfully fending of Uber with a similar strategy: emphasising GoJek drivers and riders as part of a locally rooted community[10]. Most of GoJek’s communication is based on Indonesian culture. As an example, one of their particularly successful campaigns was centred on enabling passengers to donate food during the month of Ramadan[11].
But beyond communication and positioning, the real edge comes from designing services better suited for local markets. Ola is excelling at this. They accepted cash when Uber didn’t. The app was available in eight Indian languages while Uber was only in English. Drivers are paid daily instead of weekly, and vehicles have a wifi hotspot. All of these features are praised by Indian passengers[12].
Since they sold their China operations to Didi Chuxing, Uber’s international efforts are focused on India. The battle between the local champion and the Bay Area juggernaut will be fierce. For now, it is impossible to predict who will come out on top, but designing a ride experience rooted in local needs has been instrumental in allowing Ola to punch above its weight, for now[13].
WHERE ARE THE NEXT OPPORTUNITIES IN MOBILITY?
Unmistakably, ride-hailing already has disrupted mobility. From this revolution, the most valuable privately held technology company in the world has emerged. For users, this first wave of disruption fundamentally transformed how they move around in cities, providing them with better flexibility, convenience, and efficiency. Yet we think most of the disruption still lies ahead.
Ride-hailing is still built on an underlying model where each place has one function: you work at the office, relax at home, and get entertained in bars, cinemas, or restaurants. Uber has been exceptionally successful at optimising this system. But this paradigm is becoming obsolete. Soon, each journey will be conceived not as a negative externality, but as an opportunity to leverage a distinctive set of characteristics (being alone or being surrounded by strangers, being outside or being in a confined sound proof environment, being actively moving or being transported…) to create unique experiences.
If your company is entering the mobility space, don’t pick a battle you can’t win. Instead of vying against Uber to optimise how people go from A to B, look ahead, and design services enriching the mobility experience with a focus on emotional needs.
If you are interested in learning more, drop us an email, or let us know if you’d like a follow-up article diving in on other insights from our research.
REFERENCES
[1] http://www.mckinsey.com/industries/automotive-and-assembly/our-insights/how-shared-mobility-will-change-the-automotive-industry
[2] https://www.rolandberger.com/en/press/Shared-mobility-Global-market-for-shared-vehicles-and-mobility-offerings-to-gro.html
[3] https://www.morganstanley.com/ideas/car-of-future-is-autonomous-electric-shared-mobility
[4] https://www.ft.com/content/52b54056-214d-11e7-b7d3-163f5a7f229c
[5] http://www.newsweek.com/exclusive-heres-how-long-it-takes-get-uber-across-us-cities-289133, https://www.youtube.com/watch?v=GY6A2KgZplg
[6] Of course, this serves well Lyft business rationale: if every city is a winner takes all market, Lyft’s value is pretty much zero… http://www.latimes.com/business/technology/la-fi-0105-lyft-growth-20160105-story.html
[7] https://www.curbed.com/2017/1/31/14455292/uber-juno-deleteuber-app-ridesharing-ridehailing
[8] As shown in the foundational study on the positive utility of travel, by Redmond and Mokhtarian https://link.springer.com/article/10.1023/A:1010366321778; or vulgarized https://www.citylab.com/transportation/2014/08/the-ideal-commute-is-not-actually-no-commute/375609/
[9] https://www.recode.net/2016/12/3/13765342/uber-lyft-ola-ride-hail-battle-rider
[10] https://theconversation.com/the-limits-of-silicon-valley-how-indonesias-gojek-is-beating-uber-69286
[11] http://www.campaignasia.com/article/go-jek-social-impact-delivered-on-two-wheels/428084
[12] https://www.bloomberg.com/news/articles/2016-06-15/uber-finds-passage-to-india-blocked-by-30-year-old-ola-founder
[13]On this front, Uber could learn from another West Coast global giant: Starbucks. Its successful international expansion, and foray into China, is largely based on carefully crafted product localisation. More: https://rubric.com/en-US/starbucks-product-localization-proof-localization-pays-off-big-time/