How Uber Revolutionized The Taxi Industry

In this era of data and technology, competition for customers is fierce across various industries and evolving every day. Thanks to that, some truly great business innovations have surface and take the world by storm. It is hard to ignore names like Uber, Airbnb, or FedEx… whose innovations the way we think and the world we live in forever. Innovations come in various forms, but most of them make it easier for not only the customers to achieve certain goals, but also for the businesses to have a better understanding of their customers and control the quality of their goods or services. In the scope of this paper, the case for Uber and its innovation that disrupted the taxi industry will be discussed, with the focus revolving around the customer ordering process and the value of the information that Uber gathers.

Uber was founded from the idea of lowering the black-car service using your phone. In June 2010, Uber’s service and mobile app were officially launched in San Francisco. Originally, the service only included black luxury cars pricing at 1.5 times that of a normal taxi. In 2012, Uber introduced UberX, an option that allowed people to drive for Uber with non-luxury cars given that they had passed the requirements regarding car standards and background checks (Hartmans, 2016). Starting in April 2013, UberX started allowing drivers to use their own personal vehicles, lowering the price quickly.

As of 2017, Uber has reached 75 million customers, 3 million drivers, completed 10 billion trips worldwide, an average of 15 million trips each day, and expanded to 65 different countries. From a brilliant idea, Uber has turned into a global phenomenon that almost everyone has heard of.

Uber’s core service is matching customers with drivers using the Uber platform. The GPS on the customers’ smartphones allows their locations to be transferred and utilized to match them with the closest drivers with the vehicles that suit their needs. The customer would request an Uber ride on their phone and wait approximately 5-10 minutes for their drivers to come and pick them up. The vehicle's whereabouts is continuously updated within the Uber app, and when the driver arrives, a text message will be sent to the customer’s phone. Throughout the whole process, it is possible to contact the driver via text message. Furthermore, the customers do not have to go through the payment process after each trip since their payment method has been saved within the Uber app.

To sum it up, the classic taxi process does not give the customers much information about what they are getting into, does not give the taxi drivers anything more than where the customers are very hard on the operators to organize a pickup. On the other hand, the Uber process gives customers clarity of what the experience they are about to have (who the driver is, what is the driver’s rating, how long it will take him/her to come, what kind of car is going to show up, how much the trip will cost prior to finalizing ordering, and how long the trip will take…), gives drivers some insight into the next trip (who the customer is, what is the customer’s rating, where the customer is, and an approximate amount of money they will make from completing the trip); and gives Uber a lot of information on the customers’ behaviors that can be fully utilized to make everything more efficient and to charge the customers effectively.

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Let’s dive into why this process innovation have made Uber into one of the most recognized and successful businesses in the world. In the scope of this paper, only the benefits of customers and Uber are discussed.

Firstly, this process innovation makes the traveling experience much more convenient for the customers. Instead of having to call a taxi company, going to a taxi station, or waiting aimlessly for an empty taxi to pass by, with Uber, the customers can select a vehicle that they prefer (luxury or normal, big or small, shared with others or private) at the tap of their fingers, which helped Uber match them appropriately give the correct pricing. Instead of having to describe where they are, where they want to get to, as well as how to get there efficiently, with the GPS on their phones, the Uber app tells the customers the estimated shortest time it would take to get there, the exact price they will have to pay and how long it will take their vehicle arrives, as well as where the vehicle that has been assigned to them currently is. Furthermore, the customers do not have to take out their wallets and worry about payment at the end of their trips since their payment methods have already been saved in the Uber app. Last but not least, Uber does not feel like a taxi, since these cars do not come with the classic taxi look, making it feel like some close friends or relatives have dropped the customer off at their destination. At the end of the day, most of the frustrations and inconveniences associated with a taxi ride have been addressed.

Secondly, this process innovation makes it easier to control the quality of their service. First, let’s look at the rating system that exists for both customers and customers. At the end of each ride, both customers and customers have the opportunity to rate their experience from 1 to 5 stars, with the option of leaving a comment if they want to. The ratings are of course anonymous, making this act a lot more reliable. Drivers that do not meet a certain rating standard are not allowed to drive for Uber anymore and customers with a good rating over a long period of times are granted with extra benefits like a free upgrade to a premium vehicle or prioritized booking. This simple system gives incentives for both customers and customers to behave since as for the customers, there are rewards and for drivers, there are consequences. This method seems much more effective in keeping both parties in check. Particularly for the driver case, since with the classic taxi system, the only way to complain was to memorize the driver’s name and his/her vehicle number, then to file a complaint or to call a hotline, which is usually a lot of work and an unsatisfied customer might just forget about it all. With this innovation, Uber gets free insight into what they might improve in general, and which drivers or customers need additional attention. Second, with every available vehicle in the system and a map of current customers immediately displayed with every order, Uber can effectively determine which driver is best for picking up a certain customer to ensure the shortest possible length of the trip. This is not feasible for the classical taxi service since not all taxi drivers report back to the operators after having picked up a customer and it is impossible for the operators to determine which taxi driver would be best to pick up certain customers.

Last but not least, this process innovation makes it possible for Uber to earn additional income with various tactics. First, the price surging feature. Uber can effectively charge the customers a lot more money if the demand is high at a particular time of the day around certain areas. This brings back valuable added income that the traditional taxi service does not have. The additional income generated can make up for a slow flow of completed trips during rush hours, for example. The customers are also more willing to pay the additional fee, knowing that the service they are requesting is in high demand. Uber does not force the customers to pay the higher fee, since the customers are always informed of the current price surging period and are presented with the fees that they will have to pay before completing an order, thus giving the customers a sense of control, making them less frustrated with the extra fees they have to pay. Second, the car type features. Before completing an order, the customer have an option to select various types of vehicles: bigger 7-seat cars, normal 4-seat cars, or premium 4-seat cars. Each car types comes with a different price chart. However, what is interesting is that the customer can get any of the car types when they just order the normal 4-seat cars, but they will have to pay more money if they want any other types. This brings back valuable added income when the customers’ demands are met. Last but not least, this process innovation makes it possible for various customer-focused campaigns to boost popularity and usage. Since everything is run through the app, promotions and perks can be easily sent to any group of customers. This allows Uber to encourage more usage from casual customers and bring back customers who have stopped using the service for an extended period of time. These type of promotion tactics is very rare with traditional taxi companies.

With its business process innovation, Uber has disrupted the whole taxi industry, and changed the way customers think about services that get you from point A to B. The business innovation not only helps Uber operates smoothly, efficiently, and profitably but also helps Uber customers have a convenient experience getting to different destinations, especially in a foreign country since you do not need to know the language to be able to order an Uber. Uber is a prime example of innovation gone right. It all started with the desire to meet a need that has not existed before that blends in well with the modern technology and data era. When you have found a way to do things more efficient (finding the fastest route), to tap into valuable information that is barely utilized before (being able to keep and analyze customers data on all rides), with better quality (ratings help control behaviors, meeting customer’s demand with up-front pricing, vehicles options, whereabout of vehicles), it is not hard to see Uber becoming such a huge success.