Americans love a good head-to-head conflict: Batman vs. Joker, Luke vs. Darth, Cats vs. Dogs, Democrats vs. Republicans, Uber vs. Lyft.
Uber and Lyft dependon our love of dichotomy because it allows them to define the future of transportation as a simple who-will-win contest between two companies selling nearly identical services.
The reality is not that simple: for example, one potential third party disrupter for the dominant ride-hailing services is Waze Carpool, which is cheaper, reduces congestion, and just announced a big upgrade. Then come Waymo’s robo-taxis. And, as I’ve articulated previously, other potential disrupters are nonprofit, local counterparts.
An underlying presumption behind the Uber vs. Lyft competition is that one or both of the companies will survive as independent offerings, and that, I believe, is flawed. Instead, ride-hailing and other forms of transportation will become modular offerings bundled with other services.
In their book The Innovator’s Solution, Clayton Christensen and Michael Raynor argue that when technologies and services reach a “good enough” status the companies that create them need to shift from proprietary, interdependent offerings to an open and modular approach. Ride-hailing has reached this point: there is no particular difference between Uber and Lyft, nor will there be among future competitors. That makes ride-hailing a feature, not a product.
We’ve seen this movie before in other industries.
Is Uber like Friendster, MySpace, or… AOL?
For years, I’ve thought that Uber in the transportation revolution was equivalent to Friendster and MySpace in the social media revolution: an early experiment that would collapse but in so doing pave the way for a more viable successor, like Facebook.
Lately, though, I’ve begun to see that a better analog for Uber is AOL, circa 2000.
In the dial-up internet era, Internet Service Providers like AOL, MSN, and EarthLink (I worked at the latter from 2000 to 2004) believed that subscribers would be attached to their brands, their email addresses, and to the software packages that managed their internet experiences.
They weren’t.
Not only were customers comfy abandoning their old dial-up email addresses for new high-speed addresses provided by their phone or cable companies, but also with Hotmail (1996) and Gmail (2004) they could get freeemail addresses that were independent of their ISPs. There was no brand loyalty.
Like Uber now, AOL then was a radically overvalued company (remember, AOL bought Time Warner in 2000 in what was then the largest merger in history) that presumed its only product was a service unto itself rather than a modular feature of a broader service or collection of services.
Fast forward to 2019, companies bundle internet with other services. Cable providers, for example, offer “triple play” bundles that combine television, internet, and voice. This covers all your entertainment, digital information, and communication needs.
The same is likely to happen with transportation in the near future: in a new triple play, companies will bundle internet connectivity (5G and/or in-home), miles delivered through ride-hailing (with both self-driving and human-driven cars), and product delivery/return. This new combo-platter will cover everything in the old triple play (entertainment, information, communication) as well as getting you and the people you live with where they need to go (transportation), and also getting the things you buy to your home or business (delivery).
Seen through this lens, the likely future competition for Uber and Lyft suddenly expands to include Alphabet, Amazon (they should have bought Lyftmonths ago), AT&T, Comcast, Verizon, and Walmart, among others, each with different offerings in different combinations.
These days, Uber and Lyft are trying to cost-cut their ways to profitability, and this reminds me of what venture capitalist Scott Nolan once said about the lean method in manufacturing and startups:
Lean provides a useful toolkit, but it can bias you towards the incremental rather than the transformational. You cannot simply iterate your way into orbit.
We shouldn’t let our love of a good head-to-head conflict blind us to complexity, no matter how much the players in such a drama might want us to do so.