There are many forms of the sharing economy, but for our purposes let’s focus on one very specific aspect of it: Where consumers (that’s you and me) are paying to access someone else’s goods or services (in Uber’s case, people with cars who want to share their services, for a fee).
What’s Uber’s role?
It’s a ride sharing app. They recruit drivers, vet them, add them to their app, and as the consumer you download the app, add your credit card details and find a driver on your smartphone.
For the consumer it couldn’t be simpler. And that’s Uber’s magic. In the most simplistic sense possible, it’s the conduit between people who have cars, and people who need rides. The business matches a need with someone who can fill that need.
Why it’s working
Let’s look at how well this has worked for Uber: What started out as Ubercab five years ago in San Francisco is today a multi-national business that operates in 300 cities across 58 countries. There are more than one million drivers working on the platform, and conservative estimates value the company at US$40 billion.
Uber is the current poster child for a disruptive innovator. The lesson here is that if you want to make a mark in an established industry, you have to be willing to disrupt the market. And that’s certainly what Uber has done.
The textbook definition of disruptive innovation is generally credited to Clayton Christensen, the author of The Innovator’s Dilemma, who says that a disruptive innovation creates a new market and value network that will eventually disrupt an already existing market and replace an existing product.
The incumbents generally can’t change their business models quickly enough, and so the new guys on the block move up, and eat into the already existing market share. Cue Uber and clashes across the world between the disruptor and established metered taxi drivers.
What we can learn from Uber’s business model
1. Even big companies start small
As we’ve mentioned above, just five years ago this global company was a four-person team in San Francisco. This is not a unique story. Google and Facebook were started from a garage and dorm room respectively.
Innovation and disruptive ideas can take shape anywhere, and they don’t need to be backed by large balance sheets to make waves in the market.
2. Great businesses solve a problem
The most successful start-ups start by zeroing in on a very specific problem, and then fixing it.
One of the founders of Uber wanted to be able to push a button and get a ride to wherever he wanted to go. That’s it. The app and business grew from this seed.
3. Give people a better, cheaper and more convenient option
Consumers are driven by convenience and price. If you can offer both, you have the ideal business model.