Sep 09, 2016
I recently posted on Facebook a short rant about digital transformation for established enterprises. The skinny is that there are endless amounts of why and barely no opining on the what or how when it comes to executing any kind of digital transformation of your business or industry. Here’s a link to the Facebook post if you want some context.
Not surprisingly, Uber got caught in the crossfire and became the subject of the comments. Folks declared how Uber is an overused example of a digitally disruptive business.
I disagree with the assertion that Uber is overstated. Vehemently so.
Look, I get it. It’s popular to rage against Uber. And “The Uber model, it turns out, doesn’t translate” is even a legitimate and extremely rational argument. The New York Times’ Farhad Manjoo and Homebrew VC Partner, Hunter Walk, sum it up well:
“Investors saw Uber’s success as a template for Ubers for everything. The industry went through a period where we said, let’s look at any big service industry, stick ‘on-demand’ on it, and we’ve got an Uber.”
The fundamental flaw in citing Uber that has led to, well, Uber-esqe fatigue, has been the notion that Uber’s model can be simply forklifted into another domain or industry. Instead, what businesses need help with in fact is the polar opposite: not the forklifting but the unpacking of Uber to identify the two or three most applicable elements from its operating machinery and growth execution that can spark transformative opportunities in your industry.
I lead a business that helps our customers transform how they connect with employees, partners and customers. Our learnings from building a subscriber base of more than 30 million subscribers are very consistent: Beyond euphoric chitchat about popular buzzwords, it is the elements of successful execution witnessed by the Ubers of the world that every board and C-Suite member must ask, if they are to understand what it takes to play and win in the digital economy.
Predicting and fulfilling demand in real time: My Uber driver used to leave her holding spot outside the San Francisco Airport when the ride was confirmed, making it a 7-9 minute drive to the curb. The other day it took her just 4-5 minutes. Uber is figuring out how to predict demand, presumably based on flight schedules, and can dispatch the driver before a passenger even requests a ride.
We need to get past the euphoric discourse if we truly want to digitally transform.
Essential learning: What is the required adaptability in your business applications and the predictive nature of your data management systems to give you similar levels of agility? And, even if it’s all that, does your work culture encourage your employees to learn and adapt in near real time to improve the customer’s experience?
Simplicity as the key revenue driver: Uber generates $1.5 billion in revenue from a total of roughly three taps that you and I make on our mobile devices. $1.5 billion!
Essential learning: How can you also learn to shield your customer from extremely complex backend technology with the simplest, utilitarian user experience that takes your customer from consideration to purchase to advocacy at a ridiculously fast pace?
Shareholder and fiduciary appetite: Uber says that it is now profitable in developed markets, but back in January of 2016, Business Insider reported that “Uber lost close to $1 billion in the first half of 2015, up from $671.4 million the year before, according to The Information’s report. Even with increasing losses, its (net) revenue was on pace to triple to more than $1.5 billion.” The cost of reformatting an incumbent industry can mean a very ugly balance sheet for a long time.
Essential learnings: Would Wall Street swallow the growth vitamin or spew the loss venom if you had similar financials? Can your current leadership learn to adapt to such an aggressive growth trajectory and absorb the investor heartburn that comes with it?
Exploiting massive cost arbitrage: Uber is one of the many marketplaces that has emerged to remove complexity and lower cost from an incumbent industry. And whilst the final cost of a ride may not end up being exactly where today’s rock bottom prices lie, the approach offers a clear example of how you can unhinge heavy cost structures in an established industry by eliminating layers of operating cost and bureaucratic fat built up over decades.
The fundamental flaw … has been the notion that Uber’s model can be simply forklifted into another domain or industry.
Essential learning: You’re used to going in the opposite direction — raising prices. And, likely adding complexity. The essential question becomes this: What would a brutally honest, stripped-down cost structure and operating version of your industry look like? And, can you learn how to exploit such structures to spark the creation of a new, digital version of your markets?
The corporate affairs function is a first-class citizen: Uber wouldn’t be anywhere without influencing government policy to reshape personal transportation. Corporate affairs is just as important as product management or marketing or sales if Uber is to be a viable entity for years to come.
Essential learning: Will your management team elevate what is often a reactive or passive communications function to a first-class citizen? And do your employees have the discipline to keep adapting the product and commercial model every time you face a policy win? Or a blow?
New rules for governance and ethics: In a natively digital business such as Uber, everything is digital. The good stuff — availability of rides, estimated fare, pick up and drop off location, the driver’s ETA. And the not-so-good stuff — knowledge of the passenger’s whereabouts, her typical travel patterns and her intimate phone or in-person conversations.
Essential learning: Can you embrace and adopt an entirely new code of conduct that is likely the exact opposite of what your conservative culture has espoused for decades?
Land grabs require guerrilla recruiting: Uber’s aspirational growth rate also has it trying really nifty tricks inside its app, such as code jams targeted at passengers who might make great developers.
Essential learning: How are you experimenting with all the creative tricks that high-growth companies employ to recruit the best and brightest before you do?
I could go on, but you get my drift.
Street-smart executives certainly want to know the what so they have rapid-fire responses to their CEO and board when asked to explain digital transformation in the elevator. But those who consider it their fiduciary responsibility to play offense against known and unknown competitors want to truly peel back the natively digital onion, layer by layer.
Digital transformation is real and it’s here. Whilst it might look neatly packaged when you whip out your phone and have a car show up in four minutes, the real transformation to make this happen “automagically” occurs in the guts of the operation machinery — the people, the process, the flexibility of the technology stack and the speed at which you can respond to the customers’ needs. And this discussion is mostly absent.
We need to get past the euphoric discourse if we truly want to digitally transform. We saw big, seemingly revolutionary ideas such as social business simply peter out because we never looked under the hood to see what truly needs to change.
This time around, we need to land the plane and have it stick, quickly. Failing this, efforts to digitally transform established enterprises will end up redlining to nowhere.
Smart Screening, Intelligent Hiring, Proactive Alerts, Effective Compliance and Peace of Mind.