\n
In the summer of 2016, Uber found itself in a difficult strategic position. \u00a0It had initially launched as a premium on-demand service for black-cars before moving down market into the taxi market with UberX and most recently group transportation with UberPOOL. \u00a0As the average price for ride started to decrease and margins started to lessen (greater ridership helped top-line revenue still grow), the race for scale was starting to bankrupt Uber, who was burning billions of dollars a year to launch and stay afloat in the hundreds of markets in which they operate.<\/p>\n
Uber operates as a marketplace, a glorified mobile-enabled dispatching service connecting riders and drivers. \u00a0Margins typically were in the 15% range, with the driver collecting 85% of the fare. \u00a0As Uber continued to drop prices, it became increasingly difficult to manage their most valuable asset: their driver community.<\/p>\n
Eating 85% of their gross margin, labor presented the largest cost for Uber, and the greatest area for potential savings to help the company ultimately build a sound unit economic model. \u00a0In the personal transportation market, automation and AV’s were on the verge of early adoption, with competitors such as Tesla, Lyft, Volvo, BMW, Ford, Toyota and GM all having made massive investments in the space and with plans to roll out on-demand offerings. \u00a0Uber was in a strong position still, with the most valuable brand in on-demand transportation as well as the largest active user base, who all kept their credit card stored on file within the app. \u00a0But as the long term strategic importance and value their most valuable asset (their drivers), started to deteriorate in a self-driving world, they needed to figure out what was next.<\/p>\n
Shipping and long-haul freight present arguably the largest opportunity in the world of automation and AV’s. \u00a0There are currently 1.8m truck drivers in the US, the most common job in 34 states. \u00a0Labor laws only allow truck drivers to be on the road for 60 hours a week, so including the 5 hours it’s estimated they spend working but not driving, means that shipping in the US is only working at 31% capacity. \u00a0If trucks can run 22 hours a day, this presents the opportunity to move goods 3x faster and at lower costs per mile due to the benefits of driving during less peak hours and greater gas efficiency as cars drag.<\/p>\n
As Uber saw greater competition in the personal car market, they decided it was time to both a) bring in high quality robotics talent into the company and b) enter the shipping industry by acquiring a Bay Area AV business named Otto. \u00a0Otto, which spun out of the Google self-driving car group, is retro-fitting 18 wheelers to make them “Level 3” autonomous. While a driver currently needs to be in the front seat to make sure everything is going according to plan, Otto allows the truck to travel fully autonomously on the highway as well as on and off ramps. \u00a0When you think of the implications for the global shipping industry, the opportunity to move goods and services 3x faster at a cheaper cost per mile is absolutely enormous.<\/p>\n
Otto will have a profound impact on other industries as well. \u00a0Food and beverage, especially perishable grocery, will see spoilage rates seriously reduce as perishables reach grocery stores 3x faster. \u00a0Flights will be less needed as shorter routes that still needed freight shipped by air can now be on the ground. \u00a0Same day delivery for numerous industries now become a much more realistic option. \u00a0Under-utilized inventory in trucks can now be matched in real time as the same way UberPOOL optimizes two people on the same route, Otto can now do with shipping.<\/p>\n
Traditional shipping carriers that don’t take advantage of automation will certainly see business decline, with longer trip time and more expensive cost per mile relative to their competitors. \u00a0They may have to win on service or focus on segments of the trucking market (such as minerals, mining, natural resources), that are slightly more regulated and require more industry specialization. \u00a0Regardless, it will be tough for them to compete which leads many industry experts to believe that once autonomy hits the shipping industry, it will escalate faster than most people can imagine.<\/p>\n
(Word Count: 708)<\/p>\n
Works Cited<\/p>\n
Bergen, Mark. “We Took a Video Tour of a Self-driving Semi from Otto, Uber’s Newest Purchase.” Recode<\/i>. Vox Media, 23 Aug. 2016. Web. 18 Nov. 2016.<\/p>\n
Lee, Timothy B. “Self-driving Trucks Are Here, but They Won’t Put Truck Drivers out of Work – Yet.” Vox<\/i>. Vox Media, 25 Oct. 2016. Web. 18 Nov. 2016.<\/p>\n","protected":false},"excerpt":{"rendered":"
Uber’s acquisition of Otto, the leader in AV’s for the shipping and long-haul freight industry, has the potential to redefine how we transport goods globally<\/p>\n","protected":false},"author":1844,"featured_media":20239,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-20238","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"\n