Why Everybody Wants To Be Like Uber
Lately, I hear of so many businesses becoming ‘the Uber of… something’ that it has become something of a joke in mobile technology circles. The Uber for haircuts, the Uber of dog walking, the Uber of food delivery, the Uber of laundry and so on and so forth. Where on earth are the taxis in all this ‘uberisation’?
Perhaps we should take a small step back and work out why these businesses are so keen to compare themselves to Uber, when clearly they have nothing to do with taxis or ride sharing.
Perhaps Uber has nothing to do with taxis and ride sharing? In the past two years, I have heard Uber being referred to in a statement that goes something like this: ‘The world’s largest taxi company owns no taxis, and the world’s largest hotel booking company owns no hotels!’
As overused as this dramatic reference to Uber and Airbnb may be at technology conferences, the concept underlying the statement is changing business rapidly and globally, and it therefore bears scrutiny.
In any company, the value chain is essentially the process followed to get a product from production to the customer. For example, if you buy the latest Justin Bieber album at your local music shop, that CD got to the shop through a complex process.
The music was recorded in a professional studio, produced, cut to a master disk, distributed to production facilities, mass produced, shipped to wholesalers, distributed to local stores and then sold to the customer.
Each of these steps is a component of the value chain. In the scenario above, every party in the value chain adds cost to the final product because they are making money for the value they add.
As we know, CD sales are not doing so well because digital music distribution has removed the need for most of the value chain above. A faster, better and cheaper customer experience is the key driver for the shift away from this old model.
In the music industry, the digitisation of the product has dissolved much of the value chain. A more likely customer journey these days would be a couple of clicks in the iTunes store on the day the album is released. Seconds later, the customer is listening to their favorite new music.
The Uber and Airbnb story has similar aspects worth consideration. No physical product, no physical distribution and almost no marketing or promotion in ‘traditional’ channels. After all, an Uber trip is just a taxi ride. How is it that the experience is so improved that millions of customers have switched to using Uber for hiring a taxi?
Managing supply and demand is perhaps the core function of any business in a market economy. Any business lives or dies based on having customers that want the product they produce.
In the case of Uber though, the ‘product’ is a service, and that service is managing supply and demand between customer and producer. It just happens to be that there is significant demand for a better taxi ride.
How can we be so sure that Uber really isn’t about taxi rides? Because Uber has already started branching out into other services. You can now hire a helicopter with Uber or have food delivered by them in certain territories. In the coming year there are plans to move freight with Uber. My guess is that many new services will be added in the years to come, this is just the beginning.
As a result of the shrinking value chain, the divide between producer and customer has been diminished. An Uber driver in his or her own car is put directly in contact with a stranger, a transaction value is agreed up front, and the app closes the negotiation and takes care of payment. Fundamentally, Uber is managing peer-to-peer transactions.
This is a world changing idea, and is really what the ‘uberisation’ of things is really about: The dynamic management of supply and demand across a peer-to-peer network.
As services like these are launched across the globe, the need for simplifying and speeding up the payment method between parties is growing. This is especially true in emerging territories, where large portions of the population have limited access to banking and certainly do not have credit cards. Some services are experimenting with cash payments, but ultimately the trends toward digital cash in one or other form seem inevitable.
With WeChat Wallet in South Africa, we are doing our best to figure out how to make a fully digital cash experience as useful and accessible as possible for our customers. Our aim is to deliver a digital wallet experience that allows a customer to do what they would normally do with a leather wallet in their pocket. Pay with cash or card, give cash to a friend instantly at no cost, convert digital cash to physical cash at an ATM machine, buy services online and in physical retail stores, and top up your cash balance at retail stores the way you would virtual airtime.
The digitisation of cash becomes ever more relevant as mobile first peer-to-peer services grow. As these services grow in emerging territories, the participation of under or un-banked individuals will be crucial to facilitate the scale and network effects required for these businesses to succeed. We hope WeChat can play a crucial role in enabling these opportunities.
By Brett Loubser, CEO, WeChat Africa Services.