THE IMPACT OF TECHNOLOGY ON TRANSPORT SYSTEM (PART 2) By WEREYADIA INSTITUTE

THE IMPACT OF TECHNOLOGY ON TRANSPORT SYSTEM (PART 2) By WEREYADIA INSTITUTE

 USING A CASE STUDY OF UBER, IVM CONNECT AND
COWRY PAYMENT USED BY LAGOS STATE

Growth Model:
How Uber finds customers

In less than 6 years, Uber has
managed to become the best example of a city-by-city mobile service company
roll-out. Many generic pointers that I talked about in this Blog Post regarding
scaling User Acquisition efforts for 
On Demand platforms borrows elements right from Uber’s playbook.

Let’s try to decode Uber’s Playbook and how it plays out as
it launches in a new city or a country:

The underlying principle here is that for every city it
launches, it faces the same chicken and egg problem. The advantages that Uber has as compared to new startups in this space
are:

1.     
A lot of money to incentivize both drivers and customers.0

2.     
Rock-solid processes or playbooks that have evolved through
experience launching Uber in 311 cities till date.

3.     
An already known brand that gets early curious adopters.

Everything starts with a small city launch team. Every city
has a general manager who heads the customer acquisition as well as driver
acquisition. The first cabs to come on board are generally professional drivers
who are already associated with local taxi companies and have their own cars.

First customers come from various local advertising
channels
 like FM radio, newspapers, online advertising etc. Uber is such a large name that people are already
waiting for the cab company to start services in their city.

Uber Business Model
Canvas

4 step
model about how Uber works

·        
Step 1 (Request a
cab):
 The first step in the business
model is about creating a demand. People have a smartphone app which lets
them request a cab instantly or schedule it for some time later.

·        
Step 2 (Matching): As soon as the request is made, a
notification about your details are sent to the nearest driver. The cab driver
has the option to accept or reject the ride. In case he rejects, notification
is sent to another driver in that area.

·        
Step 3
(Ride): 
Customer can track the cab when it is
arriving and the ETA is also shown to the customer. The meter starts as soon as
the customer sits in the cab which can be tracked through the customer side app
as well. Friendly drivers make sure that the ride is comfortable for the
passenger.

·        
Step 4 (Payment
& Rating): 
Once the ride is over, the customer
gets an option to rate the driver. The rating system is an important part
of the business model as it lets a person know about the driver
before booking a ride and helps him trust the driver.

How and Why Uber became so successful:

Uber’s
business and revenue model just can’t be stated as complete if this widely
asked question about their successful journey is not answered. There
were certain factors that led to Uber’s success. Here’s a brief journey
that 
Uber went
through when it launched. The similar journey can be followed by any startup
which aims to make it as big as 
Uber.
 

The problem with local Taxis

Earlier, people had to stand on the street side and wave
their hand in order to signal a taxi to stop. The wait time, the inconvenience
and high rates were a problem for everyone. Quite a few taxis were available
and drivers/taxi companies used to charge whatever they thought was right.
There was no control on prices and people were left with no other option. Apart
from this, the situation was worse during peak hours as it was quite hard to
find an empty cab.  

The launch of Uber

Uber recognised
the ongoing problem in regard to booking a taxi and gave a technological
solution through a mobile app. The solution to book a cab by tapping a smartphone
brought a revolution in the taxi industry. The app was officially launched in
2010 and soon became popular due to the value it provided to people.

The early adopters

It is quite difficult to market a newly launched product or
service in any geographical area. What gave it the edge is that it launched in
San Francisco, a city which is home to tech-savvy people. The first drivers on
the platform came through cold calling. Many of them were professional drivers
with other cab companies or were self-employed as a taxi driver.

To get their first customers, they took to social media
and other mass marketing means. It offered discounts, free rides and rates that
were too less as compared to other cab services in the city. The first
customers were those who enthusiastically wanted to try a new service. It
offered riders from club venues to user’s doorstep so the party people were
amazed. It offered rides to the corporate sector who worked in offices helping
them to save time.

Word of Mouth advertising

Whosoever took a ride in Uber was
baffled by the first-hand experience. This made the early users become regular
customers and they also helped spread the name by word of mouth advertising.
This word of mouth advertising was one of the major driving force.

 

 

 

 

Main Growth opportunities tapped by Uber

1.     
Party people who go to clubs, parties or events.

2.     
Business Travellers and Tourists.

3.     
Cab at the doorstep in bad weather conditions.

4.     
City’s Nightlife.

Problems
Uber still faces

LawsuitsUber has
pending lawsuits in courts of New York and San Francisco. According to 
Uber, all
drivers working for it are its partners while the court says that they are
employees. 
Uber is not the only company facing such a problem but in
fact, almost all companies who hire 1099 workforce are under the scanner.

Chicken & Egg problem (New city Launch): Uber
faces the chicken and egg problem whenever it launches in a new city.
Acquisition of customers as well as partnering with new drivers is not an easy
task. To solve this problem, a marketing team starts working in a new city by
reaching out to professional drivers. Soon, online and offline marketing is
initiated. Discounts are always the main USP to woo customers in the starting
stage. R

Trust and Safety Issues: There
have been cases where Uber drivers have acted rude to passengers. Some cases
where Uber drivers have outraged the modesty of female passengers have come to
the limelight. This is a big challenge for Uber. Although the company takes all
steps such as police verification of drivers and their ID details but still
such cases cannot be ruled out completely.

Takeaways from Uber
Business Model

·        
Go for less ownership model. Uber does
not own any cab but still provides over 1 million rides a day through its
partner network.

·        
Choose an industry. Think about the
most common problem it has. Find a solution and disrupt the existing model
through technological infrastructure. That is what Uber did in the cab
industry.

·        
Treat your initial users as kings. They
are really important for the growth of your business.

·        
Expand step by step. Do not add
everything in your business model in the first go. Uber started with cabs but
now even has boats, helicopters, bikes and other means.

·        
Opportunity won’t come to you. You have
to look for them. Uber created an opportunity by offering discounted rides for
particular event venues and hence got its first customers.

·        
Treat your workforce an important part
of your business. Uber calls its drivers as partners and gives them a decent
80% of the total fare.

There’s no doubt in the fact that Uber has
brought a revolution not just as a taxi company but as a business model where
businesses reach out to serve customers at their location. A lot of startups
have already made their 
app like Uber and
many others have made small iterations to launch startups in various industry
verticals.

Why Uber’s business model is doomed

 Having threatened to pull out of California completely, Uber and
Lyft recently won a temporary reprieve from 
orders to reclassify their drivers as
employees rather than independent contractors. The companies argued they could
not come up with a plan for doing so overnight, even though more than two years
have passed since California’s supreme court ordered them to change their ways.
The Californian labour law AB5 was supposed to end their non-compliance.

One might assume that misclassifying drivers as independent
contractors enables rideshare companies such as Uber to make exorbitant
profits. The reality is far weirder. In fact, Uber and Lyft are not making any
profits at all. On the contrary, the companies have been haemorrhaging
cash for years
, undercharging users for rides in a bid to
aggressively expand their market shares worldwide. Squeezing drivers’ salaries
is not their main strategy for becoming profitable. Doing so merely slows the
speed at which they burn through money.

There
is simply no world in which paying drivers a living wage would become part of
Uber and Lyft’s business plans

The truth is that Uber and Lyft exist largely as the embodiments
of Wall Street-funded bets on automation, which have 
failed to come to fruition. These companies
are trying to survive legal challenges to their illegal hiring practices, while
waiting for 
driverless-car technologies to improve. The advent
of the autonomous car would allow Uber and Lyft to fire their drivers. Having
already acquired a position of dominance with the rideshare market, these
companies would then reap major monopoly profits. There is simply no world in
which paying drivers a living wage would become part of Uber and Lyft’s
long-term business plans.

 

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Only in a world where more profitable opportunities for
investment are sorely lacking can such wild bets on far-flung futuristic
technologies become massive multinational companies. Corporations and wealthy
individuals have accumulated huge sums of money and cannot figure out where to
put it because returns on investments are extremely low. The flip side of
falling rates of business investment is a slackening pace of economic growth,
which economists have termed “
secular stagnation.” It’s this decades-long
slowdown that has generated the insecure labour force on which Uber and Lyft
rely.

In slow-growing economies, labour markets are weak. Older
workers who lose their jobs 
have trouble finding equivalent
forms of employment. Meanwhile, young people just starting out in their working
lives are sending out hundreds of applications only to end up in dead-end
retail jobs. Rideshare companies such as Uber and Lyft feed off the insecurity
that is omnipresent in the modern economy. When the alternative is working
irregular shifts at coffee shops, driving for rideshare companies on one’s own
schedule can seem like a dream. Management by algorithm appears similarly
utopian compared with management by nasty bosses. In the early years of their
operation, rideshare companies even offered rates of pay that were good
relative to available alternatives.

Of course, Uber and Lyft were probably planning to have fired
these workers by now and to have 
replaced them with robots. But like
many promises of automation, driverless cars are still some way from becoming a
reality. Uber and Lyft started squeezing these workers’ incomes to staunch
their own bleeding of cash reserves. At this point, drivers started fighting
back.

This fight for workers’ rights is grounded in a growing
recognition that the expansion of the digital economy does not simply reflect
the triumph of an unstoppable technological change. Behind Silicon Valley
rhetoric, much of what appears to be technological innovation turns out to be a
means of circumventing legal regulations, 
including minimum wage laws. By
misclassifying its workers, Uber avoided paying hundreds of millions of dollars
into US state unemployment insurance schemes. Yet during the Covid-19 economic
crisis, Uber lobbied the federal government to step in and 
pay its drivers’ unemployment benefits anyway.

Why should Uber be entitled to
have it both ways? It makes sense to demand that companies hire workers in
stable jobs, or not be allowed to hire them in the first place. Yet in an
environment of weak economic growth, this demand will be insufficient to win
economic security for all. Capitalist economies have been able to extend
security to widening circles of workers only in periods of rapid economic
growth, when low rates of unemployment made it possible for more and more
workers to demand better wages and working conditions. The era of high-speed
economic growth ended long ago and is not coming back.

High rates of economic growth in the mid-20th century – the
reference point for any politics that seeks to restore economic growth in the
present – were premised on a historically exceptional period. The restoration
of stable international trade following two world wars made possible the
largest growth of economic productive capacity in human history, not just in
Europe and the United States, but 
worldwide. By the 1970s, rapid expansion had given way to worsening
global overcapacity, resulting in rising competition and falling rates of
investment in internationally traded goods. People were left scrambling for
work in the growing service sector, where the potential for labour productivity
growth, and hence economic growth, is 
significantly lower.

Workers’ inability to find stable employment is thus not the
result of recent advances in automation technologies, which, like driverless
cars, have mostly failed to pan out. Their plight results from an everyday
reality of low profitability in economies saturated with capital, and insufficient
opportunities for its reinvestment, such that dividends and 
share buybacks have increasingly become the norm for surplus cash
holdings. With shrinking opportunities for investment, enormous pools of
capital have rushed into highly speculative ventures such as Uber and Lyft that
have little capacity for demonstrated profitability.

That governments turned a blind eye to Uber and Lyft’s
misbehaviour for so long is no surprise. Governments are complicit in making
workers more vulnerable. Facing persistently slow economic growth and high
rates of unemployment, governments have spent decades trying to coax companies
to invest by making it easier to 
deny workers’ benefits and to
avoid paying taxes. Again, this bid to restore conditions of rapid economic
growth, much like supply-side and trickle-down solutions that failed to produce
generalised prosperity, was a failure. The Covid crisis has only made economic
prospects less auspicious.

People need security that is not tied to their job. The pandemic
has revealed this imperative more than ever before. In a world that is as
wealthy as ours, and given the technologies we have already produced – even
without the realisation of the dreams of automation – everyone should have
access to food, energy, housing and healthcare. If people had that security,
why would they choose to work in terrible jobs where they are paid low wages?
The owners of Uber and Lyft know that their business is predicated on a world
in which they get to make the key decisions that shape our futures, without our
input. The world of work is going to have to be democratised. They are just
delaying what should be inevitable.

Can you be the next Uber?

The dream of many
CEOs is to be the next Uber. Take a look at your business: Can you split your
business into supply and demand? There is a good chance you can. The next step:
Is there a way to crowdsource who sells and who buys your product? If you
answer yes to both of these questions, then you might be able to use Uber’s
recipe for rapid growth:

1.      Mobile: Assume your
business is being run on mobile and nothing else. Everyone has mobile, and you
don’t have to invest in new technology.

2.      Inconsistent networks: Don’t rely on
always-connected networks. Build solutions for networks that will drop
occasionally.

3.      Data: Replace
traditional relational databases with modern solutions such as MySQL, Postgres,
Redis, and Riak. The database cannot be the bottleneck of the system

4.      Open source: Don’t
reinvent the wheel. There are many high-performing solutions freely available
such as NodeJS, Java, and Python.

5.      Talent. The secret
sauce for how all of this connects is only as good as the talent on your team.
Invest heavily in the best.

The final word is
that your business will be disrupted at some point in the same way that Uber is
disrupting the taxi business. The question is: Do you want to put in place the
solution that will disrupt the industry you are in and leave your competitors
in the dust?

IVM CONNECT

Innoson Vehicle Manufacturing Co. Ltd.,
shortened as IVM, is a 
Nigerian automobile
and bus manufacturing company. It was founded by Chief, and runs a plant
in Nnewi in
the state of Anambra.Innoson Vehicle Manufacturing is
nicknamed Pride Of African Road.

70% of the car parts are produced locally,while the rest is
sourced from Japan, China, and Germany.

Among IVM’s vehicle models are the five-seaters Fox (1.5-litre
engine) and Umu (2-litre engine) as well as the mini-bus Uzo.

Global Presence

Innoson vehicles are being used in some West African countries
like: Mali, Sierra Leone and Ghana.

Innoson is not based on manufacturing of vehicle only but also

Innoson Technical &
Industrial Co. Ltd

The company commenced operations in October, 2002 with
its head office/factory at Plot W/L Industrial Layout, Emene, Enugu State. They
produce high quality household and industrial plastics, health and safety
accessories, storage container, fixture & fittings, electrical components
and accessories.

Innoson Vehicle Manufacturing
(IVM)

The company was incorporated in 2007 and commissioned on
the 15th of October, 2010 by President Goodluck Ebele Johnathan at Nnewi. It’s
product line includes high capacity city bus, safe and cost effective mini
& midi buses, pick-up trucks and garbage collecting vehicles. The company
also provides good services for repairs and parts supply.

Innoson General Tyres and Tubes
Co. Ltd

The company produces motorcycles tyres and tubes. They
produce about 8,000 pieces of motorcycle tyres and 13,000 tubes daily. The
company’s plant is located in Enugu State, South-East region of Nigeria.

Innoson Motors Launches Amidst Uber, Bolt via IVM Connect in
Nigeria

 

It is a very big call: Innoson Vehicle Motors (IVM) will
launch a vehicle-hailing service in Eastern Nigeria in Q4 2020. 
According to
Techpoint, they will begin with 200 vehicles and then ramp up to 500, covering
most parts of Eastern Nigeria. Drivers will be trained by the Federal Road
Safety Corps (FRSC).

Prospective drivers to operate the fleet must be
tech-savvy, and with  capacity to pay back the vehicle within two years
via a hire purchase agreement. For the integrity of the hire purchase system,
all transactions would be electronic. Yes, IVM is going all electronic on
payment here. This is the way to go: IVM can use this playbook  to even
sell more cars. If that works, it could open it up with a leasing service in
Nigeria.

This is a double play
strategy
. He can lose money on this but in that
process, he will create a brand where IVM vehicles become common on the
streets. Just like that, everyone goes for IVM. Brilliant call by the legend as
he can capture value via sales through brand awareness triggered by IVM
Connect.

The risks are on the aggressive two year hire purchase plan
which I think may not be possible. Also, the vehicle-hailing business has not
shown capacity to be profitable at scale anywhere. But the little losses may
bring popularity through awareness this will bring. 

When great entrepreneurs emerge, nations rise. Well done
Innoson Motors.

 

The IVM Connect is
a five-seater car with 1.5 litre petrol engine, power steering, automatic
transmission, front airbags, fully air conditioned, power windows, multimedia
system, automated/electronic rearview mirror and remote control lock with
sensor.

Chairman of Innoson
Group, Owners of IVM, Dr. Innocent Chukwuma, said in an interview that under
the IVM Connect empowerment {ride-hailing} scheme which kicked off in Enugu
last year, the 500 benefitting youths are expected to make daily returns of
N6,000 for about 30 months, after which they take full ownership of the
vehicles.

“We {Innoson}
invested heavily in designing and producing hundreds of units of two new
affordable vehicle models  –  IVM Connect and a seven-seater IVM mini
bus.

“And they are there
for immediate delivery,” he said.

But like other
indigenous manufacturers, the Innoson group Chairman is not pleased with the
decision of the Federal Government to slash levies on imported vehicles, saying
it is not encouraging to indigenous manufacturers who have invested heavily in
local assembly plants.

Advantage of  UBER over IVM connect

1)    
They
do not own a car which could be liability

2)    
Their
cars are not put on hire purchase

3)    
They
use real time to deliver quality service to customers

4)    
They
operate using cashless policy

5)    
Flexible
drivers

6)    
Price
fixing

7)    
Innovative
approach e.g Senior Citizens Approach

Advantage of IVM
Connect over UBER

1)    
Cars
are manufactured by IVM

2)    
The
hire purchase gives the drivers the opportunity to own a car

3)    
Currency

What IVM Connect
and UBER do not offer or do

1)    
Regular
vehicle pick up for up to 4 persons (Cost sharing)

2)    
Digital
payment using their own Digital card

3)    
Executive
pick up with escort

4)    
Fun
ride

5)    
Vehicle
maintenance for drivers

6)    
Inadequate
drivers documentation

BRT IN PARTNERSHIP
WITH COWRY

Cowry
is owned by touch and pay technologies LTD. The Cowry was developed to aid
payments when using BRT buses in Lagos and accountability. It is a captivating
moment to easy the crowd that gathers at various BRT outlet. Digital banking or
services is disrupting the E- taxi business and Lagos State Government has
taken the bull by the horn. The Cowry card will play a significant role in
encouraging users that their details are save and E-wallet is the game to
future savings.

 

GAMING
CHANGING STRATEGY

The
card will be tapped on equipment in the bus to clock in and when alighting, it
will be tapped again to logout.

The
clocking in, serves as an automatic login that signify that a passenger had
entered and a certain amount is deducted for each bus stop.

This
alone has changed the game of E- bus service; you don’t need to argue with the
bus driver or conductor again. It gives the driver the ability to discharge,
his or her duty effectively. Most conductors will loose their status in the
organization, as their services will no longer be needed. This will go a long
way to save money for the BRT management.

A LIVE
SCENARIO OF INCONCATING THE DIGITAL BANKING TO DANFO ACTIVITIES

The
ill fated activities of the danfo buses have lead to the huge stress faced in
Lagos. The characters and mode of dressing of danfo drivers are something to be
tamed. The drivers needs to be educated and trained adequate to ensure good
customer service. It can only happen, if danfo bus services are digitalized. A
watch can be designed to serve as a digital service tool, just like we have the
ATM. The watch connects with a device in the bus that deducts money
automatically.


To be continued…

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