Borrow these ridesharing insights to unravel growth in your markets
Original Publish Date: January 10, 2021
There are always lingering structural and business inefficiencies in any market. These inefficiencies serve as new avenues for growth should any company solve them. Often these inefficiencies crossover multiple markets, industries, and sectors.
There were so many preexisting inefficiencies in the mobility space that gave rise to ridesharing companies like Uber, Lyft, DiDi, Ola. Some of these inefficiencies may also apply to the different markets you play in right now. Look out for them since they can open a whole new world of opportunities for your business and offer the next step-change in growth.
Inefficiency #1 – “The Hotel Occupancy Problem” / “Underutilized Assets”
Relevance to ridesharing apps –
It doesn’t matter if you’re looking at the US, UK, or Singapore estimates. There’s one recurring stat.
“Private cars sit parked 95% of the time. In fact, a single car usually occupies at least two parking spots: one at home, another at work.”
John Zimmer of Lyft considers this the “hotel occupancy problem” drawing a parallel to empty hotel rooms and the desire of hotels to ensure 80-90% occupancy rates anytime.
Similar examples from other markets –
The option to gain access to products and services without owning them outright creates a whole new world of transactions. Several online platforms match people who own these underutilized or “idle assets” with other folks who have a need for them. Let’s look at 3 examples from 3 different markets.
Airbnb – allows travelers to use your vacant rooms or homes
The RealReal – lets you make money from clothes you don’t wear too often
LendingClub – puts the extra cash in your bank account to use through peer-to-peer investing
Inefficiency #2 – “The Cost to Operate” / “The Cost to Participate”
Relevance to ridesharing apps –
Two types of cost imbalances played perfectly into what ridesharing apps resolve.
In a city like New York, there are different costs one must incur to become a taxi driver. Everything from driving courses to a medical examination to a taxi medallion. This works as a cost barrier and a deliberate constraint on the number of taxicabs.
The cost of owning a car keeps rising for folks living in major international cities (for ex: London, Toronto). The general push for the adoption of public transit and reducing peak hour congestion means higher insurance rates, higher fuel surcharges, higher parking rates, to name a few.
Similar examples from other markets –
The cost to operate or participate doesn’t always have to be monetary and a strict barrier to entry. Sometimes it takes the form of delays due to bureaucracy, opportunity cost, artificial limits to access – to name a few – that get baked into the status quo as operational inefficiencies.
Few examples of business models built around lower costs (cheap or free) and ease of participation,
Robinhood – provides free stocks, options, ETF trades, and zero account minimum requirement
Coinbase – anyone, anywhere can easily and securely buy, sell, store, use and earn cryptocurrency
Alto IRA – allows investors to invest in alternative assets in an IRA
Inefficiency #3 – “The System Bottleneck”
Relevance to ridesharing apps –
DiDi’s business grew out of the favorable characteristics in the Chinese market. These characteristics highlight major urban mobility bottlenecks that hold true for several international cities.
“…China has only about 160 cars per 1,000 inhabitants, compared to 867 in the United States. There are many obstacles to owning a car in China…in Shanghai, in response to urban congestion, the cost of a license for a conventional car is often more than that of the car itself. Even if you have a car, parking is a challenge in cities that were not built for cars.” – ‘The New Map’ by Daniel Yergin
Similar examples from other markets –
The story of Netflix’s win over Blockbuster takes different forms. Often, it’s shared as a cautionary tale of disruption and corporate inertia.
During the early DVD-by-mail days, Netflix won over customers by eliminating bottlenecks that were part and parcel of the Blockbuster experience. Try recalling your Blockbuster experience. Remember limits to the number of rental days before late charges, charge for every rental video, a fixed number of store locations, limited store hours?
Inefficiency #4 – “The Knowledge Barrier” / “The Information Barrier”
Relevance to ridesharing apps –
Taxi drivers in London can only get a license after proving a thorough knowledge of the thousands of streets and landmarks in the city – see “Knowledge of London” for the rigorous process.
“The six-mile radius from Charing Cross, the putative center-point of London marked by an equestrian statue of King Charles I, takes in some 25,000 streets. London cabbies need to know all of those streets, and how to drive them — the direction they run, which are one-way, which are dead ends, where to enter and exit traffic circles, and so on. But cabbies also need to know everything on the streets. Examiners may ask a would-be cabbie to identify the location of any restaurant in London. Any pub, any shop, any landmark, no matter how small or obscure — all are fair game. Test-takers have been asked to name the whereabouts of flower stands, of laundromats, of commemorative plaques.” – The New York Times Style Magazine
Similar examples from other markets –
Another way to think about knowledge or information barriers is what economists call “information asymmetry”. There are always segments in different markets that traditionally accumulate ‘power’ on the side of institutional sellers and muddy the whole buying experience. There are companies capturing a lot of value for themselves by tackling this information imbalance and improving the buying experience.
Redfin – enables agents to focus on service by offering critical info for potential home buyers and sellers
TrustRadius – helps B2B technology buyers decide using validated customer reviews
CarMax – offers an omnichannel car buying solution with a focus on transparency and convenience
Use the above inefficiencies that gave rise to the ridesharing apps as a starting point to see if they apply to your markets too. Even if they don’t apply, keep a running list of structural and business efficiencies for every market you participate. They can serve as new growth avenues.