Uber has had a terrible run this year.
2017 started with Uber facing backlash from riders after it tried to profit from New York city taxi drivers being on strike against the recent travel ban in the USA. #DeleteUber began trending on Twitter, with some estimating that more than 200,000 people deleted the app.
This was swiftly followed by allegations of sexual harassment and misogyny in the firm revealed by a former employee, and a lawsuit from Google-owned Waymo against Uber for allegedly stealing key technologies. Last week, Uber’s Greyball software — aimed at preventing city officials attempting to vet the service from getting a ride on Uber — came to light.
But by far the most revealing of Uber’s culture was a video of CEO Travis Kalanick himself, secretly filmed by an Uber driver. Kalanick argued with his driver over how Uber treated its drivers. The conversation ended with Kalanick telling the driver that people need to “take responsibility for their own sh*t”.
We need a new breed of unicorns
But it wasn’t always this way. Uber started out with a good idea: to make it easier for commuters looking for a ride to find one. The company’s platform business model brought together commuters looking for a reliable taxi service, and drivers looking to earn extra cash using their cars as an existing asset. And it was a winner.
After going live in July 2010, the company closed its first round of funding in October of that year with US$1.25 million. Uber is today the world’s largest tech unicorn, currently valued at US$68 billion. It is available in over 400 cities globally, and fulfills over one million rides a day. It has over 9 million users, and receives payments of more than US$1 billion each year.
Uber has become synonymous with the term “disruption”, inspiring a whole new generation of start-ups each claiming to be the Uber of their industry.
But aside from Uber’s innovative business model, there is not much left to be inspired by — unless of course one gets dazzled by the eye-popping valuation, propped up by a strategy to achieve exponential growth at all costs. David Heinemeier Hansson (@DHH), creator of Ruby on Rails and founder of Basecamp, sums up this phenomenon well:
“There is no higher God in Silicon Valley than growth. No sacrifice too big for its craving altar. As long as you keep your curve exponential, all your sins will be forgotten at the exit.
“It’s through this exponential lens that eating the world becomes not just a motto for software at large, but a mission for every aspiring unicorn and their business model. “Going viral” suddenly takes on a shockingly honest and surprisingly literal meaning.
“The goal of the virus is to spread as fast as it can and corrupt as many other cells as possible. How on earth did such a debauched zest become the highest calling for a whole generation of entrepreneurs?”
Startups aren’t the only ones who have fallen victim to this negative form of exponential growth. The failed US$143 billion takeover bid of Unilever by Kraft Heinz is a case in point. Unilever, with its focus on creating long-term, sustainable value, has profit margins half the size of Kraft Heinz, despite being much bigger. In analysis by INSEAD, what’s attractive to Kraft Heinz here is the possibility of repeating its cost-cutting and asset sale approach in service of negative growth.
Breakthrough unicorns need Breakthrough business models
In Volans’ 2016 Breakthrough Business Models report, written for the Business & Sustainable Development Commission, we acknowledged that we are indeed living in exponential times, with innovative technologies and business models as key drivers of exponential growth.
Negative outcomes of such exponential growth will threaten to create chaos across climate, ecosystems and societal spheres. Good exponential outcomes, however, will help us close the gap between where we are and where we need to be as the world’s population accelerates towards 10 billion people.
The Sustainable Development Goals (SDGs), also known as the Global Goals, present a good outline of these needs (and opportunities), with an urgent delivery timescale of 2030. Peter Diamandis, entrepreneur and co-founder of Singularity University, agrees. His mantra to students — “Want to be a billionaire? Find a billion person problem”.
Consequently, a new breed of unicorns that enable good, rather than bad, exponential outcomes, is needed. Perhaps more importantly, a new type of business model is needed, too.
Defined broadly as the way organisations create, deliver and capture value, business models hold the key to both the ability of companies to become profitable, and also, the nature of outcomes and impacts created as a result of the business.
Our 2016 report highlights four key characteristics that will be representative of business models capable of effectively contributing towards a Breakthrough future of achieving the Global Goals:
- Social X, delivering both financial and extra-financial value through positive impacts for people, in the present and in the future;
- Lean X, optimising the use of all forms of capital, from physical and financial through human and intellectual to social and natural;
- Integrated X, managing financial and extra-financial value creation across economic, social and environmental systems; and
- Circular X, sustaining inputs and outputs at their highest value in both technical and biological cycles.
We suffix each characteristic with ‘X’ as shorthand for each of these characteristics applied in a radical, transformative, exponential manner. Crucially, building a Breakthrough business model is not just a tick-box exercise where companies fulfil single characteristics but not others.
A new breed of unicorns that enable good, rather than bad, exponential outcomes, is needed. Perhaps more importantly, a new type of business model is needed, too.
Instead, we want to see the unicorns, and incumbents, of tomorrow look to embrace the possibilities of addressing all four characteristics. Not simply to create value in the obvious sectors they operate in, but to look at opportunities to create value for multiple stakeholders across wider systems.
Is this achievable? Only a few iconic companies have attempted such an approach — with varying degrees of success. We need a new generation of Breakthrough unicorns willing to apply their agility to the more challenging opportunities presented in the Global Goals.
In Part 2 of this article, I will come back to Uber as an example, exploring what the company might be able to achieve if it were to adopt a truly Breakthrough business model.
Jacqueline Lim is Manager, Research and Special Projects at Volans. This post was first published on Medium and republished with permission.
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