Beware the ill-conceived strategy - The case of the cab companies vs Uber
June 18, 2014
In London, cabbies called a strike against the entry of Silicon Valley-based Uber. Uber is a service that allows people to book rides off their mobile phone app. Private service providers, instead of cab companies, offer these rides. So long as the car owners have a commercial insurance on their car, they can sign up as an Uber driver. And they can monetize the use of their car and earn a second stream of income. What makes this so compelling for users is that you don’t get the normal “schtick” about bad service and poor attitude from normal cabbies. Uber drivers are genuinely happy to do what they do, and they do it with a smile. For a couple more dollars over the normal cab fares, you can book your Uber ride to arrive at your place in less than 10 minutes. As far as disruptions go, Uber has been able to dish it out to incumbents in all the countries they operate out of. This led to cabbies calling a strike on 11 June in London, Paris, Berlin and Madrid against "unfair competition" from Uber. Unfortunately, their strategy yielded unintended consequences, as can all ill-conceived plans; because as a result of the strike, the Wall Street Journal reported that the number of people signing up for Uber service soared to more than 8 times the normal rate! So their actions pushed more people to take up the Uber offer. Talk about cutting off the nose to spite the face!
Yet this outcome was predictable. So let us again see how the strategic thinking could have avoided this.
One wonders what the intent of the European cab companies was. Surely they will know that people will react to the strike by finding alternatives? So if their intent was to cause disruption and irritate their customers, they got that. If their intent was to show that their service was superior, that action was incongruent. And if their intent was to inhibit the growth of Uber, they not only did badly, but caused Uber’s market share to grow! Strategically thinking, the latter intent should have been the cab companies’ intent. And there decision should have been anything BUT call a strike! So what should they have done? To answer that, we need to look at the success factors.
Obviously, seeing a slow, zero or negative market share growth for Uber would be a key success factor. The ultimate would be for the service to close down in these markets. Another success factor could be see their own occupancy rate increase significantly over time. Finally, there could also be organic growth factors in cab companies’ own app use.
Once we see the success factors, we realise that the strike is a very risky option that will more likely not achieve its intent. At this point, they should have abandoned that option and come up with other better options like:
up the current service quality;
make the app more responsive and user-friendly;
embark on a price-war
Any, or all, of the above options has the capability of achieving the intent. Unfortunately, the cabbies opted to go for a time-honored tradition of strikes, and failed to achieve their intent in a most spectacular fashion.
They paid for their folly
In all likelihood, the people who decided to call for the strike were operating out of outmoded thinking and poor assumptions. They failed to look at other possibilities and mitigated the risks of their favourite option – the strike. Ultimately, they paid for their folly.
So the next time you have a strategic decision to take, stop and identify your strategic intent, articulating the success factors; and play with the best case and worst case scenarios. These might just inform you that your thinking is wrong and that there are better options available for you.