Putting empty cars to work: what Uber’s success tells us about platform solutions

Putting empty cars to work: what Uber’s success tells us about platform solutions
July 21, 2016 Jason Wyatt

Putting empty cars to work: what Uber’s success tells us about platform solutions

By Jason Wyatt, Managing Director Marketplacer

One of the biggest business stories of the past few years has been the rise of Uber. It has captured our imagination because it provides a perfect example of how a tech-based solution can totally redefine and solve a problem.

The problem Uber founder Travis Kalanick identified was that people couldn’t find regular and reliable private transport options. Neither the taxi industry nor town cars were really cutting it on the streets of San Francisco for Kalanick and his friends.

What Kalanick and his cofounder Garrett Camp did was to look with fresh eyes at the problem of finding a quick and comfortable ride.

They saw part of the solution was already in place. Empty cars driving past them. Empty cars that could have been ferrying people from one place to another; satisfying rider demand and making at least petrol money for the drivers. An underutilised resource.

Uber didn’t become just another taxi company. It didn’t build a new type of car. It didn’t see putting more cars on the road as the answer to the problem of providing private transport for urban dwellers.

What Uber did was to look at the problem through the lens of technology, and with the aid of a powerful app, think about it not as inadequate supply but as poor resource allocation.

San Francisco’s urban populace didn’t need more cars. They needed better access to the multitude of cars already on the roads. The Uber app gave riders the power to summon on-demand cars, while drivers were incentivised by the potential of additional income. After a few early tweaks to the model, those two sides of the market quickly scaled.

Uber built a platform that could connect the people looking for rides with the people driving those empty cars. The app became the conduit for this elegant resource allocation solution.

We can see this move to platforms across all kinds of industries and it is largely driven by technologies like cloud computing, mobile devices and more widespread provision of Wi-Fi internet services.

Platform businesses are powerful because they generally redefine the problem of supplying goods or services to meet demand, and improve the utilisation of existing resources.

Platforms connect, collate, curate and create new value by harnessing technology. This is what some platforms do:

  • “Facebook helps you connect and share with the people in your life.”
  • “Across borders, cultures, and languages, we’re [Uber] proud to connect people who need a reliable ride with people looking to earn money driving their car.”
  • “BikeExchange is the place to buy or sell any bike, accessory, component or part from anyone, anywhere, anytime.”

Underlying these platforms is the recognition that supply-side production, scarcity, is no longer really the problem for consumers in mature economies. The problem is connection.

For example, bike riders aren’t looking for just any bike, but the bike that best fits their requirements. How do they find that? There are thousands of bike models on the market, so the issue is not supply. The problem the consumer faces is how do they pick and find the bike that’s right for them? An online marketplace platform informs and connects the consumer with the retailer who can fulfil that function.

Businesses will continue to invent and manufacture new products – the pipeline will keep producing. However, increasingly in mature economies value growth is about what platforms can do to organise available resources, connect buyers with sellers, and provide information that enables buyers to make choices and enables sellers to better market their products.

BikeExchange recognised there was no need for another bike manufacturer or retailer. There were already plenty of great ones out there. Instead, the value proposition was contained in the idea we could provide a better way to organise that abundant product supply for a growing number of bike riders in a fragmented market. We had to build a platform, not another pipeline.

In his book Platform Power, the business model expert and author Sangeet Paul Choudary sums up what he calls the shift from “pipeline to platforms”: “Every business today is faced with the fundamental question that underlies platform thinking: How do I enable others to create value?”

It’s that question that led us from our success with BikeExchange to starting Marketplacer and building the world’s leading enterprise marketplace platform. We’ve developed an enterprise marketplace platform that allows entrepreneurs to move from pipeline to platform thinking, creating new value for marketplace buyers and sellers.