{"id":5803,"date":"2015-12-09T20:04:46","date_gmt":"2015-12-10T01:04:46","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/uber-a-winning-strategy\/"},"modified":"2015-12-09T20:04:46","modified_gmt":"2015-12-10T01:04:46","slug":"uber-a-winning-strategy","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/uber-a-winning-strategy\/","title":{"rendered":"Uber: A Winning Strategy"},"content":{"rendered":"

Uber Technologies Inc.<\/strong><\/p>\n

Uber is a personal transportation network that connects available drivers with passengers in need of a ride through a lightweight user-friendly smartphone app. As of May 2015, the Uber app and ride sharing service was operational in 58 countries and 300 cities worldwide. Uber drivers use their own vehicles and are afforded high earning potential with a flexible work schedule. Its adherence to a network orchestrator model\u2014as opposed to the more capital-intensive service provider framework to which traditional transportation companies subscribe\u2014has provided Uber with higher profit margins, continued growth opportunities, and the agility to respond more quickly and effectively to market changes relative to\u00a0its competitors.<\/p>\n

 <\/p>\n

\"Uber's<\/a>
Uber’s growth over time by total number of drivers<\/figcaption><\/figure>\n

Human Capital<\/strong><\/p>\n

Uber\u2019s dual business model delivers value to both drivers and passengers alike by catering to each group\u2019s unique incentives in constructing a symbiosis between the two. Thinking of drivers as the \u201cother customer\u201d and not merely a resource deployed in providing a service to the end user has enabled Uber to cultivate a higher-quality workforce, resulting in both lower employee churn and increased customer satisfaction. Not only do Uber drivers\u2019 hourly wages exceed those of taxi drivers, but Uber\u2019s employees are saved the downtime and inconvenience associated with procuring a hackney carriage license and renting a vehicle from a cab company. From a fiduciary standpoint, paying drivers an 80% commission on their fares as opposed to an hourly wage more accurately ties revenues to local market share and unlocks increased analytical capability. Furthermore, having drivers use their own cars allows Uber to boost bottom line profits by saving both the capital expenditure required to invest in\u00a0a fleet of company-owned vehicles as well as the operating expenses associated with insurance and repair costs. These operational decisions are directly in line with Uber\u2019s business model aimed at converting driver satisfaction to customer satisfaction through industry-competitive employee incentives and innovative business practices.<\/p>\n

\"Comparison<\/a>
Comparison of Uber drivers’ average earnings per hour with driver earnings in comparable service industries<\/figcaption><\/figure>\n

Tech Focus<\/strong><\/p>\n

Uber\u2019s heavy investment in the development and iteration of its mobile app reflects an underlying commitment to continued growth and competitive performance. Connecting drivers with passengers via their smartphones eliminates the need for Uber to establish a brick and mortar presence in each new city to which they expand operations, making this a highly scalable strategy with limited barriers to future growth. This scalability also unlocks the potential for Uber to expand into contiguous service segments such as food delivery without material changes to the company’s operating model. Optimizing for ease of use, learnability, and efficiency in the app\u2019s user interface design has won customer loyalty and mitigated competitive pressure as passengers are less likely to switch providers if doing so requires them to learn and adapt to a new technology.<\/p>\n

 <\/p>\n

\"Uber<\/a>
Uber app screenshot<\/figcaption><\/figure>\n

Pricing<\/strong><\/p>\n

The Surge Pricing algorithm is a cornerstone of Uber\u2019s business model that has provided the company with an information edge in capitalizing on the dynamic relationship between supply and demand and willingness to pay. When there are more passengers than available drivers in a given area, the algorithm increases rates in order to equilibrate this discrepancy. The first benefit of this model is that it attracts drivers to areas offering higher rates, thus increasing their numbers in regions of high demand. Second, it narrows the initial pool of potential passengers based on how much they value a ride, allowing Uber to more accurately segment their customer base and satisfy those users who need their service the most. This creates a stronger brand image because customers will associate Uber with getting where they need to go in the times when convenience and speed were most important. Thus the Surge Pricing model serves the purpose of capturing the highest possible margins for the company while establishing a targeted base of loyal users and a positive brand perception.<\/p>\n

 <\/p>\n

Sources<\/strong><\/p>\n

James Bacon (3 February 2012). “Innovation Uber Alles; Personal-Driver Service Can Revolutionize Transportation Services”. The Washington Times<\/em>. Retrieved 7\u00a0December 2015.<\/p>\n

Rusli, Evelyn (June 6, 2014). “Uber Dispatches trips”. Wall Street Journal<\/em>. Retrieved 7 December 2015.<\/p>\n

“First Round Uber”. First Round Capital<\/em>. Retrieved 6 December 2015.<\/p>\n

“Driving Jobs Vs. Driving with Uber”.\u00a0Uber.com.\u00a0<\/em>Retrieved 5 December 2015<\/p>\n

“Where Is Uber Currently Available?”.\u00a0Uber.com.\u00a0<\/em>Retrieved 5 December 2015<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Uber effectively aligns its business model with innovative operating practices to maximize profits and optimize the experience of both the driver and the passenger. <\/p>\n","protected":false},"author":1321,"featured_media":5881,"comment_status":"open","ping_status":"closed","template":"","categories":[443,384,36,37,940,55,336],"class_list":["post-5803","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-competitive-advantage","category-customer-focus","category-efficiency","category-innovation","category-supply-and-demand","category-technology","category-tom-winners"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\nUber: A Winning Strategy - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/uber-a-winning-strategy\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Uber: A Winning Strategy - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Uber effectively aligns its business model with innovative operating practices to maximize profits and optimize the experience of both the driver and the passenger.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/uber-a-winning-strategy\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/video.yahoofinance.com@40d2db72-2976-37c8-b12d-b4858de5bb20_FULL.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2000\" \/>\n\t<meta property=\"og:image:height\" content=\"1340\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/uber-a-winning-strategy\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/uber-a-winning-strategy\\\/\",\"name\":\"Uber: A Winning Strategy - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/uber-a-winning-strategy\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/uber-a-winning-strategy\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/12\\\/video.yahoofinance.com@40d2db72-2976-37c8-b12d-b4858de5bb20_FULL.jpg\",\"datePublished\":\"2015-12-10T01:04:46+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/uber-a-winning-strategy\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/uber-a-winning-strategy\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/uber-a-winning-strategy\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/12\\\/video.yahoofinance.com@40d2db72-2976-37c8-b12d-b4858de5bb20_FULL.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/12\\\/video.yahoofinance.com@40d2db72-2976-37c8-b12d-b4858de5bb20_FULL.jpg\",\"width\":2000,\"height\":1340,\"caption\":\"File illustration picture showing the logo of car-sharing service app Uber on a smartphone next to the picture of an official German taxi sign in Frankfurt, September 15, 2014. 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