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August 28, 2013

Disrupting My Ride

Posted by Sanjay Dalwani (View Profile | View All Posts) at 10:39 AM

John Stossel ~ Taxi Innovation [Source: RonPaulCC2012 http://www.youtube.com/watch?v=kCIfJhwDaUw]

Getting there is half the fun, right? Maybe. If you work in a congested city in the Americas, Europe, or Asia, then you probably shudder at the thought of having to hail a taxi in the middle of the day in order to get across town for an important meeting. Think about it: There's nothing efficient about a taxi ride. In New York City, for example, the daytime shift ends at 4:00 pm, just as the evening rush hour is beginning. So lots of taxis go off-line just as tens of thousands of commuters need them. Who came up with that timing?

Then there's the whole notion of a cabbie driving around town in search of a fare. Gasoline prices being what they are, it doesn't pay for drivers to spend more than a fraction of their time without someone in the back seat. Add to this business model the fact that most cities require you (or your company) to buy a license to chauffeur people around, and your margins become razor-thin indeed.This age-old business model seems to be at the end of its lifespan, however. You can't say it didn't have its day in the sun: even the ancient Romans had a taxi system not unlike what our cities have today.

Then there's the stereotype of the cab driver in many cities: a surly, cigar-chomping man with a lead foot who demands cash despite the presence of a credit card swipe machine in the backseat. But here's what brings all of these elements together: More than half of us carry around smart phones that are GPS-enabled. That means someone who wants a ride can theoretically connect with someone who is offering one. The driver who is merely the closest doesn't necessarily win all the time. It might be the driver who has the nicest car or the best driving record or charges the lowest rate for where you want to go.

Mobile apps allow for would-be passengers to get drivers to compete for their business. But something else is going on here. Before the onset of the digital age, would you have been comfortable plugging your personal information into a database to have complete strangers (in this case, taxi drivers) look it over? I think that one of the profound transformations of business models everywhere, including transportation, is that people are comfortable doing business with strangers. Think of how you can rent out your apartment to anyone on Airbnb. The new taxi services enabled by mobile apps are based on a similar premise - you can rate your driver and see past reviews of his performance, cleanliness of the car, etc.

One of the new companies to use a mobile summoning platform is Uber, which will pick you up in a luxury sedan and, should you be riding with a colleague, allow you to split the fare on your credit cards. Of course, when a new technology or innovation starts to unsettle an established model for doing things, it usually meets with some measure of resistance. In certain cities, the established taxi and livery companies have filed petitions and injunctions against the new mobile app-based driver services. They claim such services are unfairly cutting into their business. In response, Uber used its cars in some cities to deliver ice cream while its owners were challenging the bans. Doing so raised awareness and built the brand while they worked things out in court.

Innovators should expect no less. Whenever they come up with a better, more efficient way of doing things, it's the practitioner of the status quo who digs in his heels rather than raising the level of his game. Think of the biggest criticism of Henry Ford more than a century ago: The preponderance of motorcars would require having refueling stations in every city. Now that could never happen!

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