From: Dara Khosrowshahi Date: Fri, Sep 22, 2017 at 12:53 PM Subject: Re: Update on London's License Thanks Pierre, and thanks to everyone working on this issue. Like all of you, I'm hugely disappointed in the decision by London's Mayor and Transport for London. It could have profound negative consequences for the 40,000 drivers who depend on Uber for work and the 3.5 million Londoners who rely on Uber to get around. It's particularly discouraging that this is happening in the UK, where the team has led the way on partnerships with local groups to increase the number of wheelchair-accessible and electric vehicles on the road. While the impulse may be to say that this is unfair, one of the lessons I've learned over time is that change comes from self-reflection. So, it's worth examining how we got here. The truth is that there is a high cost to a bad reputation. Irrespective of whether we did everything that is being said about us in London today (and to be clear, I don't think we did), it really matters what people think of us, especially in a global business like ours, where actions in one part of the world can

But 2019 again started with trouble. In January taxi drivers in Spain - first in Barcelona and then in Madrid- literally went on the streets to ask the local regulators to keep their business protected. As a result of the decision of the Catalan government to impose a 15-minute delay before passengers could be picked up, the two main ride-hailing services that operated in the city of Barcelona, Uber and Cabify both announced to abandon its service in the Catalan city on February 1st 2019. In sight of developments like this, key questions about Ubers future remain. How much are Ubers future possibilities hindered by their past actions? Changes in the companys leadership and culture, the internal turnaround, were clearly key to the companys future. But what about the broader implications? How much could the company really rethink its value to clients, drivers and society? How could they discover which were the real value drivers to a sustainable business model in the long term? And, above all, how could they convince all involved stakeholders to join this new ride?

THE EARLY BEGINNINGS: TRAVIS KALANICK - THE ENTREPRENEUR

Travis Kalanick has always been the entrepreneurial type. He grew up near Los Angeles in a suburb called Northridge. Kalanick followed the entrepreneurial footsteps of his mom, a retail advertiser. He went door-to-door as a teen, selling knives for Cutco. Kalanick, a bright student, was often bullied by older students, and later vowed that he'd never be pushed around by anyone again. At the age of 18 years, Kalanick launched his first business, a SAT-prep tutoring service called New Way Academy. He created a course called "1500 and over" and has claimed that the first person he tutored boosted their score by 400 points.[2]

Kalanick studied computer engineering and joined the Computer Science Undergraduate Association at UCLA, where he met classmates Michael Todd and Vince Busam. In June 1998, they together worked on a side project called Scour, a peer-to-peer search-engine startup which led Kalanick to drop out of UCLA and join in fulltime. Though Scour gained some traction it was unable to sustain operations and filed for bankruptcy protection in October 2000.

Almost immediately, unfazed by the failure of Scour, Kalanick began plotting his next business with Scour co-founder Michael Todd. The pair bootstrapped their new startup, which they dubbed Red Swoosh, apeer-to-peer file sharingcompany. The IRS (Internal Revenue Service) discovered that Red Swoosh had been withholding taxes from employees' paychecks, which Kalanick denies having prior knowledge of. The founders had to pay a $110,000 IRS bill and some alleged this incident led to the falling out between the two co-founders. Akamai was interested in buying Red Swoosh, and in 2007, the server giant acquired Red Swoosh for close to $20 million.

Kalanick now a millionaire, in possession of a large house, a personal chef and a thick wad of investment capital to put into other people's startups. Kalanick spent his first year as a millionaire traveling around the world. His new home, called "the jam pad," got its name for the tendency of young entrepreneursto congregate there, "jamming" on business ideas and playing Wii Tennis until the early hours of the morning. Kalanick began blogging about his investments and his philosophy, occasionally boasting about his new millionaire lifestyle.[3]

Kalanick was in Paris at the Le Web technology conference in 2008 where he met Garrett Camp. On a snowy Paris evening, they had trouble hailing a cab. Little did they knew that this instance would lead to the creation of Uber. What started as an app to request premium black cars in a few metropolitan areas is now changing the logistical fabric of cities around the world.[4]

Eric Schmidt, executive chairman of Alphabet, said that "Travis is the definition of a serial entrepreneur in its purest form, with all the strengths and weaknesses that comes with. He's a fighter. He is against institutional structures. He has to get up every day and make something. He can be disagreeable in that sense that, well, he disagrees." He has been called a visionary, a disrupter, a genius and an immature CEO.

EARLY HISTORY OF UBER

Casino Royale, released in 2006, showed James Bond looking at his phone with a graphical icon of the Mondeo moving on a map toward his destination, the Ocean Club ( see Exhibit 1 for the video). This image stuck in the head of Garrett Camp, founder of Stumble Upon, who had a building sense of irritation towards the existing cab services in San Francisco. For decades, San Francisco had deliberately kept the number of taxi medallions capped at around fifteen hundred. New permits usually became available only when drivers died, and anyone who applied for one had to wait years to receive it. Demand for cars greatly exceeded supply and so taxi service in San Francisco, famously, sucked. Even when a passenger arranged for a taxi via phone, he couldn't be sure the cab would show up; the driver might decide to pick up a street hail instead.[5]

Camp was obsessed with a new notion and he frequently talked with his friends about the idea of an on-demand car service and vehicles that passengers could track via a map on their phones. The original idea was to buy cars, then share the fleet among his friends who were using the app. On November 17, 2008, he registered UberCab as an LLC in California. UberCab was officially in development and Camp left for Paris for the LeWeb conference in December, where he was meeting McCloskey and a close friend and fellow entrepreneur Travis Kalanick. Travis at that time was envisioning a company that would operate a global network of luxurious lodgings, identically furnished and separated into different classes, that could be leased via the internet. Camp was convinced that the right way to start the business was to buy those top-line Mercedes. Kalanick strongly disagreed, arguing that it was folly to own the cars and more efficient just to distribute the mobile app to drivers.[6]

After coming back to San Francisco, they agreed to start the service by convincing black cab drivers. Garrett Camp, Oscar Salazar, and Conrad Whelan built the first version, with Kalanick serving as a "mega adviser". UberCab pivoted to Uber and launched in San Francisco in 2010. At the time, it cost about 1.5 times as much as a cab, but people could request a car in San Francisco by sending a text or pressing a button. A product which was not only disruptive, but also solved customer's problem. It quickly became a hit in San Francisco. Kalanick and Camp agreed on one thing: they both wanted to run Uber but neither of them wanted to run it. Ryan Graves was hired and was named the CEO of Uber.[7]

Early success allowed Uber, in October 2010, to close a $1.25 million seed funding round from First Round Capital, Kalanick's friend Chris Sacca, and Napster co-founder Shawn Fanning. As Uber foresaw massive growth in the coming years Ryan Graves, who had become CEO, unexpectedly stepped down and became a COO in December 2010 in favor of Kalanick. Kalanick said he's been thrilled with Ryan as CEO but wants to step back in to an operating role at a startup: "Ryan has shown the ability to build and scale an operation. Ryan will continue to drive that scale growth as we expand nationally and worldwide, and he's the archetype for the kind of people he will hire to further scale the business operations side of the house." He added "I'm frickin' pumped to be on board full-time with Uber!" With-in the next four months Uber closed an $11 million Series A funding round that valued the company at $60 million. Benchmark Capital led the round, and its partner Bill Gurley who would later play a pivotal role in Kalanick's resignation joined Uber's board of directors.[8]

With strong capital infusion and ambition to grow, Uber was launched in New York City in May 2011, which is today one of its biggest and most controversial markets. Uber provided nearly 170,000 trips per day between April 2015 and April 2016. Uber also looked to expand internationally and was launched in Paris in December 2011. In the meantime, money did not seem to be a problem as it closed a $32 million Series B funding round led by Menlo Ventures, Amazon's Jeff Bezos, and Goldman Sachs.

In August 2013, Uber moved into India and Africa, and it closed a Series C funding round that sees an enormous $258 million investment from Google Ventures. This round valued Uber at $3.76 billion. In July 2014, Uber entered China after raising a $1.2 billion funding round at a $17 billion valuation in June. China was perceived to what will eventually become Uber's biggest market.[9]

Uber raised a total of $6.7 billion in the next year to aid in its fight in the China market, expand international operations and invest in research and development and engineering. Of this $3.5 billion from the Saudi Arabia Public Investment Fund, Uber's largest investment from a single investor.[10] In May 2016, Uber with its aspiration to get into self-driven cars signed a "memorandum of understanding" with Toyota to explore how the two companies could work together.[11] At this time Kalanick proclaimed that Uber is profitable in hundreds of cities globally, but that that money is being reinvested in its war against Chinese rival Didi. At the time, the company said it was losing $1 billion each year in its fight against Didi.[12]

Uber announced in mid-July of 2016 that it had completed its two-billionth trip, just six months after reaching one billion rides. Meanwhile, Uber's costly battle in China came to a close as Didi and Uber China merge in a $35 billion deal. The merger basically meant that Uber had thrown in the towel in China, likely to the relief of both Didi's and Uber's investors.[13]

Uber continued its investment to develop new businesses and in October 2016 decided to get into the long-haul business with a new division called Uber Freight. The plan built on Uber's acquisition of Otto, a self-driving trucking company that Uber bought in July 2016. Uber also launched in December 2016: a new self-driving car pilot similar to the program it was already running in Pittsburgh.[14]

Uber continued to grow and for 2017 it grossed bookings of$37 billion ($17 billion more than 2016) with Net revenue: $7.5 billion (excluding China) and Adjusted net losses: $4.5 billion. Uber's current valuating as of 2018 was $72 Billion with only Toyota, Daimler, Volkswagen and BMW ahead in the automobile industry. (Please see Exhibit 2for the latest figures).

UBER AND ITS BUSINESS MODELThe initial proposition

As in so many situations, the rise and success of Uber lies in the problems of the existing value propositions of the local taxi industries. Standing on the street, waving hands in order to signal a taxi to stop used to be a generalized but uncomfortable activity for people in cities around the world. Waiting times, inconveniences and high rates were a problem for everyone. Pricing depended on regulation, and was not dictated by basic supply and demand rules. In peak hours, it was usually hard to find an empty cab. In addition, many cities had strong lobbies of taxi drivers who influenced the city councils to restrict giving away new licenses.

Uber recognized the ongoing problem of finding available rides and gave a technological solution through a mobile app. The solution to book a ride by tapping a smartphone has been at the roots of the revolution of the taxi industry. The rise of smartphones, and internet connectivity around the world fueled the growth of Uber and similar ride-hailing services tremendously. Uber was also able to offer lower prices, undercutting the traditional taxi prices in most of the cities. (see Exhibit 3).

In addition, Uber constantly innovated in order to keep growing. Variation in cab fares according to situation are an important aspect of Uber's business model. Whenever the demand increases, per mile prices are also automatically increased. The new price depends on the number of available drivers and the number of requests made by people who want to travel. Uber applied for a price surge technology patent in the US.

Uber is part of what is generally called the new "sharing economy", Uber leverages its business model on the ease of data-sharing available in the internet age and a sense of trust in online communities, similar to other tech-based firms such as Airbnb, TaskRabbit and BlaBlaCar. They provide ways for people to share their under-utilized possessions, holding out a promise of increased sustainability and democratization of the workplace; redefining the way people do business and, as the name suggests, holding promises of mutual benefits and responsible actions.

But along the way, many of these companies -including Uber- have at times gained their competitive advantage by sidestepping regulations, taxes, permits and sundry charges that competitors in traditional businesses face.

At the end of 2018 Uber was present in over 600 cities, spread around 65 countries. It was serving around 75 million Uber passengers, which were being served by 3 million drivers. In their 10 years of operation, 5 billion trips had been completed. Uber successes has undoubtedly made life of a rider easy. However there are other stakeholders which feel that all of what Uber stands for is not correct.

Uber for Riders

As one of the early customer Nick from New York says "Uber creates a great amount of value and is easy to order and pay by just a few touches on the smart phone". On being asked what is the value created to him he said, "That with Uber there is no need to wait for a taxi for long times, prices lesser than the normal taxi fares, free rides on certain occasions and discounts from time to time, fixed prices for common places like Airport and the cars are most often better than the usual taxis." This gives a great option to the consumer in many cities where there is no control on taxi prices and people were left with no other option. Apart from this, the situation gets worse during the peak hours as it is quite hard to find an empty cab. By offering a flexible and easy to use service, ride-hailing companies all over the world have proven that they do add value to riders in many ways.

Uber for its drivers

Uber offered drivers to get into the market of driving passengers in urban environments. The number of drivers working for Uber has increased exponentially in recent years, and at the end of 2018 there were 3 million Uber drivers worldwide, 750.000 in the US and 2,25 million in the rest of the world.

Many individuals have found Uber a flexible way to top up their income, and find drive jobs as a convenient way of increasing their average income. Hence, in 2017 45% of Uber drivers were earning less than $100 per month driving for Uber. Another 39% was making between $100 and $499 dollars (see Exhibit 4 for a complete earnings breakdown). 61% of Uber drivers in Boston, Chicago, Washington, Los Angeles, New York and San Francisco had another job. Drivers usually liked a number of things; Earnings per hour for Uber drivers are normally higher than the hourly wages of taxi drivers and chauffeurs in Boston, Chicago, Washington, Los Angeles, New York and San Francisco, but estimated earnings for Uber drivers do not account for costs incurred during the trip but only for Uber fees. Also, Uber drivers appreciate flexibility: they can work as much or as little as they want. The phone/application can be turned on at any time to work and turned off just as easily. Thus, drivers create their own schedule on the fly, an ideal situation for a part-time driver.[15]

On the other hand, some drivers have become depended on Uber as their main source of income. In these cases Ubers classification of drivers as "self-employed", and thus not giving due benefits to pay rolled employees, was perceived to be wrong. One example of a complaining driver in the UK was James Ferrar. In October 2016, he reported that he felt "tremendous pressure" to work long hours and accept jobs and said that there were "repercussions" from the company if he canceled a pickup.He said some months he earned as little as 5 an hour - far below the 7.20 that employers are obliged to pay workers aged over 25. He took the matter to the London employment tribunal, on behalf of a group of 19 Uber workers who argued that they were employed by the San Francisco-based firm, rather than working for themselves. In this matter, the UK employment court ruled that Uberdrivers were not self-employed and should be paid the "national living wage", holiday pay, pensions or other workers' rights. Uber immediately said it would appeal against the ruling.[16]

While many welcomed the verdict, some drivers were worried by this evolution. "If the whole model changed, where Uber had to employ drivers and then take the risk of whether there were jobs for them, it wouldn't work and therefore I wouldn't have the flexible lifestyle that I have," said 66-year-old Steven Rowe, who had been with Uber for nearly four years. "My biggest concern is that they would pull out of the UK," he said. He also said that "apart from just being an additional source of income, it gives him flexible working schedules, he can work part time or simply whenever he likes, it has easy payment procedure and Uber pays drivers to be online, even if they don't get any request, which is amazing."[17]

UBER IMPACT ON THE EXISTING TAXI INDUSTRY

Uber and its ride hailing service was generally seen as a tremendous threat to the existing taxi services in cities all over the world. Opposition to its operations were the norm, and in some cities and countries the reaction was especially belligerent.

Hence, for example, in Feb 2016 in Madrid, Spain, around 2,000 drivers and their relatives marched to the headquarters of the National Markets and Competition Commission (CNMC), located in downtown Madrid."It is serious for a public agency such as the CNMC, which should defend the interests of Spaniards, to become an executioner for 100,000 families who live off the taxi sector," said Miguel ngel Leal, president of the Madrid taxi drivers Federation stating that the drivers have paid a huge sum of money to obtain the license to drive in cities like Madrid and Barcelona and this liberalization will have drastic effect on them. Other marchers underscored the fact that this issue had also come up in other parts of Europe. "We criticize the fact that sector liberalization would entail unfair competition fromportals such as Uber. The problem is no longer Spanish, it is European," said Miguel Barcel, a 54-year-old taxi driver who traveled to Madrid from Mallorca.[18]

Notwithstanding Ubers impressive growth and equally impressive protests by the incumbent taxi industry, at present the number of taxi licenses is far higher than the number of HCD (hired cars with drivers) cars in most of the cities where the ride-hailing company operates. In 2017 Barcelona had a total of 10.523 taxi licenses vs 799 for hire cars with driver; Paris 18.000 taxi licenses vs 12.000 of HCD cars; London 21.500 taxi licenses vs 87.409 HCD. (See Exhibit 5for more details on the number of licenses in European cities).

During their first years of operation, Uber insisted to be classified as a technology company, and worried little about compliance with existing taxi regulations. As a consequence, it was often local courts who had to decide about how legal Ubers service offering was in concrete cities. Ubers services were temporary banned in dozens of cities. The company had to learn how to make adjustments and concessions to comply with local rules. Once learned those lessons, they often could relaunch their services in affected cities. One of these examples is the city of Barcelona, where the UberPop service was banned in 2014. In March of 2018 Uber managed to re-enter the Barcelona market with UberX, operating with professional and licensed drivers, meeting the Spanish transportation laws. At the time of service introduction a company official stated "we are changing the way we do business, putting integrity at the core of every decision we make and working hard to earn the trust of the cities in which we operate. Barcelona is no exception."[19] Still, just a few months later, it would turn out that those efforts had not been sufficient to create sustainable conditions over time.

Uber for regulators

The entrance of Uber has given regulators all over the world a lot of work. In 2017 London authorities revoked Uber license to run the services in the city stating that Uber's lack of attention towards drivers medical and background checks. This ban in one of the world's most cosmopolitan and a city which embraces technology was a symbolic blow to Uber. Uber filed an appeal towards this decision and during the summer of 2018 a judge granted the company with a provisional 15 month licenseso that it could continue to work on satisfying the conditions it had failed to meet previously. Upon demonstration of meeting the required standards, the company could then apply for a regular, five-year license to operate.

All over the world, but particularly in Europe, taxi companies or unions have gone to court, arguing that Uber does not comply with taxi regulations, therefore engaging in unfair competition. Uber has been (permanently or temporarily) banned or set subject to serious restrictions in Belgium, France, Germany, Italy and Spain. These decisions have intensified the debate around Uber and shown that regulatory bodies around Europe were not ready for platforms like Uber. Regulators failed to react to the emergence of ride sharing online platforms, and often were incapable of handlingstrong taxi lobbies. Former European Commissioner Neelie Kroes characterized a court decision to ban Uber from Brussels as "crazy" and in favor of a taxi cartel. More than eight years after Uber started to operate in its first city, the situation was far from being resolved.

NOT ALWAYS A SMOOTH RIDE: 2017 BECOMES UBERS MOST TUMULTUOUS YEAR

"When you do something successful not everybody is happy."- Travis Kalanick said while delivering a speech at Y Combinator Startup School on October 20, 2012. It was clear that the disruptive nature of Ubers value proposition would come with a number of tensions, but the reality probably surpassed even Travisearly raised expectations. The list of controversies became longer and longer (seeExhibit 6) and 2017 proved to become a especially tumultuous year in Uber.

In February of 2017 more than 200,000 furious Uber riders deleted the Uber app after the company continued operating its service at John F. Kennedy International Airport during a protestof President Trump's executive order on immigration. Since the taxi companies went on strike to join the protesters, Uber's continued service created the perception that it was undermining the protest.[20]

Later in the year former Uber engineer named Susan Fowler alleged in a blog post that she was sexually harassed at Uber and experienced gender bias during her time at the company. The New York Times published a bombshell report that suggested Fowler's claims were part of a larger cultural problem at Uber. According to the report, employees did cocaine during a company retreat and a manager had to be fired after groping several women. Fowler said that managers propositioned her, but HR did nothing because the offending individual was a "high performer". A week later - Amit Singhal, a well-respected engineer, and SVP at Uber, was asked to leave the company after it emerged that he was involved in a sexual harassment case.[21]News like this increased the reputation of Uber as a toxic working environment that was harmful to women. In coming months, after three years as Uber's head of product and growth, Ed Baker left the company under something of a cloud. According to Recode, his departure coincided with a number of employees raising their concerns about his behavior.[22]

Uber hit the news again after the publication of a video that showed CEO Travis Kalanick arguing with Uber driver Fawzi Kamel over a reduction in ride-sharing fares. The ever-sympathetic Kalanick said that people who complain "don't like to take responsibility for their own shit." While Kalanick quicklyissued an apology saying he planned to seek leadership help, it did not seem to clear the perception of a leadership crisis at the company.

And the troubles continued, since in February 2017 Uber investor Google filed a suit against the company, accusing Uber of using stolen technology to advance its own autonomous-car development. Waymo, Google's self-driving-car unit accused Uber of stealing its trade secrets and intellectual property and of infringing on patents related to its lidar systems.

In February of 2018, already under Dara Khosrowshahis leadership the companies reached an agreement. Waymo received a financial settlement of assumingly $245 million. In a statement,Khosrowshahi said that his job also included "correcting mistakes of the past" and apologized to Google employees. [23]

2018 - TOWARDS AN URBAN MOBILITY COMPANY?

Under Khosrowshahis leadership Uber started introducing some subtle but probably profound changed to their current business model: the company seemed to move towards a strategy that involved the entire urban transportation ecosystem. According to KhosrowshahiUber was envisioning a future in which they would "reduce individual car ownership and expand transportation access... by bringing togethermultiple modesof transportationright in our app."[24]

Consistent with this vision, in February of 2018 Uber launched its first new product in three years, ExpressPool, a new shared ride option that allowed a user to join other users with a similar route in order to share the cost of the trip. Users of the feature were asked to wait a few more minutes, during this time the Uber algorithm searched for the optimal match to share a ride. Once a match was made, users would be directed to walk a few extra blocks to their pickup location where, if the algorithm did its job, they would meet one or two additional users who had also been matched.[25]

In March of 2018 Uber reached an agreement with rival Grab to sell its operations in Southeast Asia. Grab would acquire all of Ubers operations in the region, including its ridesharing services and UberEats. Khosrowshahiwrote:"One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors. This transaction now puts us in a position to compete with real focus and weight in the core markets where we operate, while giving us valuable and growing equity stakes in a number of big and important markets where we don't." Since the company had already left the Chinese and Russian market, the sale meant that the company would no longer offer services in most of the Asian cities.[26]

In April of 2018 Uber announced it had acquired Jump Bikes; an electric, dockless bike-sharing company. Khorsrowshahi explained: "We're committed to bringing together multiple modes of transportation within the Uber appso that you can choose the fastest or most affordable way to get where you're going". Jump has a base fare of $2 per 30 minutes and is thus considered to be a cheap alternative for an Uber-ride. The bikes could be reserved through the Uber app. At the time of the case, jump was available in San Francisco and Washington DC.

Besides the acquisition of Jump, Uber announced it planned to launch Uber Rent by the end of 2018. An instant car-renting service, accessible through the app. It also announced a partnership with Masabi, a global leader in public transit mobile ticketing. This partnership would make it possible for Uber customers to book and use transit tickets in the Uber app. Furthermore, in order to improve the cities in which the company operates, it was going to share data and insights with public agencies.[28]

THE FUTURE

2017 had been a especially turbulent year for Uber. 2018 was the year in which Uber initiated fundamental changes to its business model. While some results were already visible, it was still too soon to tell if Uber's efforts were going to have a long lasting impact in terms of the companys future sustainability. The company had started to make some significant changes, but governments along with regulators still were continuing to battle the ride healing company. Would they be able to turnaround, to correct some previous missteps? Moving to an urban mobility organization was the first step. But was this enough for Uber?

prepare answers to the following questions:

1. What is the nature of network effects in the case of the Uber platform? How does the use of data and algorithms affect or change the network effects?
2. What is the role of algorithms in the Uber platform and work environment?
3. How does the use of algorithms to manage platform work in the Uber case create tensions and how do Uber drivers respond to these tensions?

Answer rating: 100% (QA)

Based on the provided text it seems like youre tasked with analyzing the case of Uber particularly focusing on network effects the role of algorithms and the tensions they create within the platform a... View the full answer