All opinions are my own and do not necessarily reflect those of Novo Nordisk.
A recent article in the New York Times described the rise of rideshare services in cities across the US. One of the more visible is Lyft, whose trademark is a happy, pink, fuzzy mustache attached to the front grill of a car for ridesharing. The article described the conflict that’s going on between established taxi companies and this new kind of service which generally costs less than a taxi and is largely reliant on smartphone apps to match riders with drivers.
Since I’ve been reading Clayton Christensen’s The Innovator’s Dilemma, I thought it would be fun to try and frame these new transportation options in terms of his theories on sustainable versus disruptive change. I believe the disruptive technology in this case is the ubiquity of smartphones and apps for connecting customers and vendors in decentralized ways versus central dispatching. I think the situation qualifies as an emerging example of an innovator’s dilemma in a couple of ways.
Established taxi companies are entrenched, and have developed an infrastructure (central repair/maintenance depos, dispatching, licensing) which has both been an effective tool for business, and also requires a certain level of profit. Taxi companies, I believe, also continually try to move up their Value Network, by trying to create a cleaner, better, more fuel-efficient ride and appeal more to business travelers. Like in this classic Taxi episode.
Lyft, on the other hand makes any monetary exchange a donation (with the nice internal control that riders who are deadbeats quickly gain a reputation online and find themselves with no response to their ride requests). They are serving a potentially downmarket segment (young adults calling for a ride after a night of drinking and partying) which I think may be less attractive to the established taxi companies than, say, the airport travelers. Each car is in general owned and operated by a single individual, who is responsible for upkeep and condition.
So there are definitely elements that reflect a potentially disruptive technology changing an business domain. I’m curious to see how this plays out, since there’s the added question of government regulation. As the article points out, while taxi regulations are justified as a way to increase traveler safety, there is a competing concern for the city of Los Angeles in trying to get as many people as possible out of their own cars and into ridesharing situations of all sorts. In addition, the online reputation mentioned above cuts both ways, and it’s likely that over time poorly run and, frankly, dangerous rideshare cars will themselves be shunned. The LAPD could also access the same reputational information and use it to track potential problem cars most actively. Not completely sure if that’s legal though…
Over time, as the dispatch apps get better and smartphone usage grows more ubiquitous, the rideshare business model could begin moving upmarket, possibly eventually supplanting traditional taxi services.
Where I’d really like to see what happens next is London. Taxicab drivers in London are famous for their mastery of what’s termed “The Knowledge,” a wikipedia-esque memory for every street in London, and the shortest route for a taxi to take from point A to point B. This is not a trivial thing in a city that grew up organically over the past 2000+ years and whose leaders decided a city-razing fire in 1666 was a perfect opportunity to…rebuild the city along pretty much the same streetplan. Taxi-drivers-to-be have to take a test before being allowed to drive one of the black cabs. Wollett and colleagues have actually measured significant growth in the hippocampal area of London taxicab driver brains relative to other Londoners, presumably due to the amount of spatial information cab drivers need to gain and retain.
But what happens in the age of smartphones, GPS, and the convenience of ridesharing? Does London hang on to its traditions, while perhaps adapting them in some way? It’ll be fascinating to see.
*I wrote this post a few weeks back, and already there have been changes to the situation. Will this turn out to be a case of disruptive innovation getting nipped in the bud? We’ll see how Lyft and other companies respond.