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Solve real-world problems, get rid of overhead, and take the first mover advantage

A Startup does not come out as a hero overnight, and most often, the struggles it undergoes in the initial years remain under wraps.

I really don’t know the exact thought or idea that gave way to Uber, or how Uber went on from just another idea to the successful brand it is today. What I do know how Uber is successful as a global brand today, and that every startup can learn from its success.

Uber triggered the on-demand startup segment, by offering on-demand taxi services that catered to convenience, with the added benefits of improving the overall travel experience for the end users. It also leveraged on what is essentially excess supply (of vehicles and drivers), which can be shared with other end-users for a more optimal level of utility.

It is not easy to be another Uber, however, unless you understand how the company managed to create a balance between the end customer’s needs and the needs of its partners or employees. While there have been many Uber-like business models being created, not all have seen the success that Uber has.

In its path to success, Uber has had the toughest ride. It’s important to highlight some of the most important lessons that startups can learn from this industry leader. Here, I have compiled a few lessons that I believe every startup entrepreneur should learn in order to leverage the on-demand economy by creating an app like Uber.

#1 Look for solutions to real-world problems

It’s not unusual for founders and entrepreneurs to target being at the top of the success ladder. This might make one forget the importance of a good idea that actually solves real-life problems. End-customers are facing unique challenges, which your business model may or may not cater to. If you are stuck with a conventional business model, you won’t be able to go any further, either.

Also Read: 5 apps that will help entrepreneurs get through life

Here’s what you can learn from Uber when it comes to finding disruptive business models. The founders were aware of the infrastructural problems that persisted in the public transport sector, and the poor service quality that particularly plagued taxi services. Convenience and personalised experience were two things the end customers were looking for that the taxi industry was unable to offer. The premise for Uber was based on these gaps, and it successfully offered a service that stood out, in terms of disrupting the incumbent.

If you are planning a startup, you need to think of a real-life problem that you can solve and come out with a truly disruptive solution that can shake up industries.

#2 Take the first-mover advantage

The idea was unique, but the quick launch of the idea contributed more to Uber’s success. The company had established its brand at a time when there was no competition in the market. It had the first-mover advantage, as it was the first to work on an idea that solved a problem customers were facing.

Gradually, Uber faced competition from Lyft and SideCar — and Grab in Southeast Asia, among others — but nobody could take away the market share Uber had so painstakingly established for itself. The reason being that Uber had moved into the markets earlier and could actually work on setting benchmarks and enriching the overall experience. The first thought when you think of on-demand cab service is ‘Uber’.

The key takeaway here is to quickly launch your idea to the market before your competition can take advantage of it and move ahead. But, you need to build something substantially strong before you can actually make your move. While an MVP is a good idea, you need to make sure you don’t waste too much time incorporating the feedback, as that will push your launch date farther. To stay ahead of the competition, you need to be loaded and ready to fire immediately.

#3 Minimise overhead costs

When you have surging overhead costs, how will you be able to offer something at a cost-effective price? The expenses keep growing higher when you are starting out, and it is necessary for you to curb these costs.

Also Read: Start up, smart up, scale up: How to successfully scale e-commerce operations

When Uber started out, it learned tough lessons on how to ensure a competitive price in the market. It wasn’t always the cost-effective choice; it was priced higher than the normal cabs, but the only thing that set it apart was the convenience it offered to the end users.

Firstly, Uber built an infrastructure that was not as expensive or as complex as that of the traditional cab services. It did not have to invest in fleets of vehicles and drivers. Its model worked by co-opting private vehicles owned by private drivers — it’s this business model that ensured Uber does not have to put its money into capital expenditures. Rather, it’s the technology that it was able to focus on.

The idea is to reduce infrastructure and overhead costs for a price-competitive edge.

#4 Think it through before expanding abroad

When Uber expanded to foreign shores, it was met with acceptance almost everywhere except China. The company lost out to Didi Chuxing, and had to work a deal with them where they received 20% share of the merged company. So, what can we learn from Uber? When you are expanding to foreign shores, you cannot take your leadership status for granted, and you need to understand local markets just as well as you did your own starting market.

Also Read: Uber China to merge with Didi in US$35B deal: Bloomberg

Check this video by CNBC on why Uber sold its China business to Didi Chuxing:

In the case of China, the innovator that Uber was gained a reputation of being a laggard, as it could not translate its unique selling proposition (USP), or the core differentiation point, to the local people. The USP that Uber had iterated to the China markets seemed irrelevant to them.

When you are expanding to foreign shores, you need to understand the local context and what gives the local competition an edge in that market. This includes any local nuances and quirks. It also includes any regulatory hurdles that you might need to face. Basically, the foreign expansion should be a well thought-out process and done after studying the markets and consumer behaviours.

#5 Evolve with the changing ecosystem

The business ecosystem will keep evolving, and change is the only thing that will remain constant. As a business, you will need to respond to changing customer expectations, emerging technologies, and the regulatory definitions (whenever it changes). This is true if you are planning to expand and operate in unconventional markets just like Uber did.

Understand that customer preferences keep changing with time, and this can be in a radical manner. Governments will also keep on introducing newer regulations to address newer issues. As a player, you will need to keep up with these changing laws and preferences and tweak your model accordingly. When you are operating in a sharing economy, you will face more scrutiny than those in the corporate models, as people expect these companies to be honest and incorporate best practices.

#6 Take feedback and criticism positively

Uber was criticised for its surge pricing model, as well as the deal it struck with Didi in China.

The company took the criticisms as well as the customer feedback and appreciation in exactly the same manner — as a way to improve operations and enhance the customer experience. This is what makes the company stand out amid competition. It took customer feedback seriously and incorporated it into its business model.

If you want to grow as a startup, you should model this method to perfection. You need to take the criticism and appreciation with the same pinch of salt and work ways to improve your products or services.

Be it starting out or, improving your offering or, playing in foreign shores, entrepreneurs can learn important lessons from Uber. It is important to give importance to these key takeaways and incorporate them into your startup idea or model. As they say, life is too short to make all the mistakes yourself, so learn from those made by others.

Uber is an epitome of success that has been achieved through a range of errors and failures. If you want to see this success, it is important to see and learn from the mistakes and failures as well.

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The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, submit your post here.

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