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GROUP 1 FINAL PROJECT
Group 1 Final Project: UBER
Kirstie Berkheiser
Timothy Baker
Joycelyn Calloway
Katie Little
Denise James
Code Rogers
Stephen Patterson
Liberty University
Dr. Mark Ellis
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GROUP 1 FINAL PROJECT
Leading Change at Uber
Description of Organization
Uber’s business model is that of many organizations that use independent contractors.
With the rise of technology and public need for better transportation, Kalanick and Camp saw a
need for change. To better serve those who needed a transportation service that is cost effective,
the founders sought for a solution to the problem. They created a smartphone application that
allowed the user to call for a ride without having to worry about missing a passing taxi. The user
is able to book a ride in advance and is notified when their ride arrives as well. But how does this
technological marvel work as a business model? Traditionally, transportation service companies
employ individuals while providing a vehicle and means of collecting the fare. This allows
complete control of the business through employees. Uber’s business model reflects more of how
builders work with contractors. The business model of Uber has empowered independent
contractors to transport individuals in their own vehicle, while Uber provides the medium for
payment via mobile phone applications (How Uber Works, Uber Business Model & Insights,
2018). Their business mode, which can be described as driven, disruptive (Watanabe, Naveed,
Neittaanmaki, & Fox, 2017), is attributed to their significant advancements via technology,
consumer orientation, and the owner-driver relationship for their workforce.
Their advancements in communication technology is regarded as the “crown-jewel” of
information communication technology (Watanabe et al., 2017). They have created an amazing
application that allows drivers and customers to communicate with one another. This technology
allows users to reserve rides via mobile application and not have to worry about cash payments
or tips while providing a payroll-free resolution for independent contractors (Uelnue, 2018). It is
consumer-oriented in its design because it allows for reduced costs because the company does
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not have to maintain a fleet of vehicles (How Uber Works: Insights into the Business & Revenue
Model, 2018). Finally, the relationship between the company and independent contractors allows
for a positive organizational culture because of the flexibility of scheduling which drives
increased recruitment numbers. The mobile application allows the drivers to accept or deny ride
requests, effectively creating their own schedule and allowing flexibility with the independent
contractors (Cohen & Kietzmann, 2014); which provides a significant incentive for prospective
contractors.
So how does the company make money? Since the company’s governing body is smaller
due to the use of independent contractors (How Uber Works, Uber Business Model & Insights,
2018), there is less payroll for full-time employees which provides a greater percentage for
profit. Uber relies on its independent contractors for their primary source of revenue and they
have been significantly growing in the infancy of their organization. The company reports that
they have achieved $11.8 billion dollars in the first 18 funding rounds (Watanabe et al., 2017)
which is unheard of for a technology company. They have also globalized their business model
to countries that sought relief from traditional taxi transportation and have controlled the market
against competitors (How Uber Works: Insights into the Business & Revenue Model, 2018).
Even though the company is not in the transportation business (Steinberger, 2018), they have
created and fostered a medium which threatens the taxi industry. There have been some legal
battles with their business model, including whether the independent contractors are considered
employees (Steinberger, 2018); however, they have overcome many obstacles and have created
one the most successful technology-based communication mediums in the world.
The future of Uber depends only on the limits of their imagination. They intend to
diversify their portfolio with creating technology that will allow for more than just delivering
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people. They have begun to deliver food and it has become the fastest growing meal delivery
services in the country (Aouad, 2018). With advancements in driverless technology, in the not so
distant future, Uber could have driverless vehicles that transport people, food, or even shipment
deliveries for businesses. Furthermore, the company is considering using their technology to
ride-share flights throughout the world (Cannon, 2018). Ultimately, so long as Uber makes every
legal consideration and technology continues to advance at a rapid pace, these dreams could
become reality.
The Uber-All Economy and Global Business Growth
Uber is a rapidly expanding global business that is changing the global economy. It is
setting the stage for future fast track economies. The “Uber-All” business model focus on two
aspects of providing personal service and technology (Smith, 2016). An Uber-All economy will
find a way for “one in which all consumer goods will be available as a service and all consumer
services will be available on demand” (Smith, 2016, p.383). A focus to meet customer needs
quickly and on-demand can be attributed to their focus on technology. Technology, more
specifically mobile apps closes the gap on these demands (Smith, 2016). An Uber-All economy
predicts that “investors and entrepreneurs will focus more attention on existing assets and
infrastructure. Owners of existing assets will benefit from new income streams” (Smith, 2016 p.
389).
Challenges in an Uber Economy…. Need for Change?
Technology is a key to Uber’s success, but it has also become a challenge for Uber. It is
through technology that Uber can capitalize in the transportation industry at a global level.
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Uber’s dependence on technology to create a business where it serves as the conduit between
drivers and riders at the global level (Jordan, 2017). With its ability to utilize a digital network
through technology and apps, it has become a global competitor where, in more than one
occasion it has put local taxi companies out of business. However, this fast-paced success has
created competition for Uber from companies such as Lyft (Waters, 2017).
The organizational structure between the CEO, managers, headquarters, to drivers is one
that challenges Uber. There is no clear vision at the company and Uber provides its riders with
few resources. With this lack of vision, Uber has had what is called a culture of misbehavior
(Waters, 2017). This includes multiple lawsuits and allegations against Uber that include privacy
violation of riders, mistreatment of woman employees, and an aggressive corporate image with
fraud allegations. These challenges within the organization caused CEO Kalanick to resign in
late 2017. With this sort of corporate culture, how will Uber rebound and change?
Communication
The communication culture of a company starts from the top, and Uber CEO Travis
Kalanick created a communication culture that resulted in negativity impacting the company.
Uber had already been experiencing criticism and there were several events where Kalanick was
making public relations errors. One major public faux pau involving Kalanick making
derogatory comments to an Uber driver was caught on video.
Additionally, lack of communication and mishandling of communicated information
resulted in a sexual harassment investigation. The article, “Communication in times of crisis”
(Hoffman & Moyer, 2007; Parsi, 2016), discusses the importance of addressing harassment with
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urgency and care. When such incidents are not addressed quickly, an organization may
experience employee turnover, adverse financial impact, and a damaged reputation.
In the case of Uber, the hashtag #DeleteUber circulated and as a consequence Uber lost
approximately 200,000 users. Furthermore, an investigation by the U.S. Attorney General was
performed as well as employee terminations. These challenges led to senior executives leaving
the company, including the departure of Rachel Whetstone, head of communications. Rachel
Whetstone was a well-respected leader with a decorated history at Google. Whetstone was
responsible for attempting to mitigate the video incident involving Kalanick as well as the other
crises surrounding Uber. Even Whetstone found managing Uber communication somewhat
challenging and ultimately resigned.
Analysis and Recommendations
Definition of Project
Despite Uber's global success, $70 billion-plus valuation, growing market share, and
soaring revenues, Uber continued to hemorrhage money with losses in 2017 exceeding $3
billion. Fundamental flaws in Uber's business model have resulted in a rapidly growing company
that leaves its drivers and shareholders empty-handed (Sherman, 2017). Driver dissatisfaction
has been coupled with public scandal and a toxic culture to leave Uber vulnerable to collapse.
Furthermore, due to the innovative nature of Uber’s business, typical management strategies are
ineffective or irrelevant; this means Uber is left alone to figure out it’s behemoth issues (Jordan,
2017).
Diagnosis of current situation
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Theoretically, Uber has a profitable business model because it does not hold numerous
assets; its primary business is to connect a rider and a driver, and the driver is supplying the
assets necessary for the business exchange (Jordan, 2017). Uber drivers are not subject to the
regulations that taxi drivers are; furthermore, Uber has fewer sunk costs because they do not
have to obtain medallions to operate, drivers do not need additional training, and Uber does not
have to purchase vehicles solely for corporate use (Gabel, 2016). As of 2016, Uber was one of
the most rapidly growing start-ups worldwide; the unique business model based on information
and communication technology (ICT) propelled the company through rapid expansion
(Watanabe, et al., 2016). Unfortunately, due to the nature of ICT, the self-propagating nature of
Uber’s development led it to decreases in productivity and profitability; therefore, this rapid
expansion actually hurt Uber’s bottom-line and involved it in a number of legal battles
(Watanabe, et al., 2016).
Furthermore, Uber is suffering from a lack of understanding the historical background of
the industry it took over so suddenly. Unregulated growth was found to be unprofitable by the
taxi industry, due to the “low barriers to entry, high variable costs, low economies of scale and
intense price competition—and Uber’s current business model doesn’t fundamentally change
these structural industry characteristics” (Sherman, 2017). Additionally, Uber cannot completely
usurp the taxi market because Uber drivers are prohibited from accepting street fares, they must
have a rider established through their app (Gabel, 2016).
Uber has pioneered a new domain of business interactions in the transportation
community; however, Uber is the next in a long line of business situations where technological
innovation has outpaced business structure (Jordan, 2017). This has led to several battles over the
legality of Uber driver operations. Others have noted that, “Due to the nature of their business,
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Uber and the IT industry often venture into untried waters as they introduce products and
services that don’t fall into current definitions of business, regulation, or law” (Elsey, 2017, p.
27). Uber overall has fewer legal battles in countries where there is greater flexibility of wage
determination and lower dependence on unions and collective bargaining agreements (Watanabe,
et al., 2016). It is in one of these countries that has a higher flexibility of wage determination,
New Zealand, that Katrina Johnson and her team are fighting battles to create new legal business
frameworks that allow Uber to operate within local regulations (Elsey, 2017). Furthermore, the
business model that Uber has, based on new technology, is inherently re-defining previously
widely understood business concepts related to ownership, authority, and the psychological
contract between employees and employers (Jordan, 2017). Due to the complete innovation of
Uber’s business model, it has been noted that “no existing hierarchy serves as a useful precedent;
the company is a pioneer, with all that term implies” (Jordan, 2017, p. 5).
Based on the complex nature of pioneering new inventions, “New organizational forms,
structures, and processes will have to be invented, and these will likely rely much more on
cultural values than strict procedural discipline” (Jordan, 2017, p. 7). Regrettably, Uber has had a
‘win-at-all-costs’ culture ingrained since the beginning. Uber knowingly bypassed local
regulations in multiple cities; it allowed unsafe trials of self-driving cars without proper
authority. (Jordan, 2017). Not only did Uber bypass regulations, it actively worked to undermine
municipal authorities looking to hold the company accountable to local laws (Jordan, 2017).
Damon Brown (2017), an entrepreneur and co-creator of Spoonr, commented on Uber’s culture:
“The Uber brand is a representation of [Travis Kalanick], through and through. You nor I could
recreate Uber, even with a billion dollars. Uber belongs only to Travis. People can compete, but
they cannot replicate” (p. 56). Brown (2017) also noted that if a business’s culture is not
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intentionally developed, it will inevitably become an unintended replica of the founder’s own
personality.
By 2017, Uber was obsessed with growth, to the neglect of human resources training that
could have mitigated the toxic culture (Bhuiyan, 2018). Commentators noted, “On the next level
down, the 3,000 managers at Uber rarely had any formal training and many were first-time
managers. Finally, the 15,000 employees of Uber didn’t have a common sense and understanding
of the business’s strategy — a dangerous thing for an organization that was known for
empowering an individual’s ideas” (Carson, 2018).
The organizational culture must be fixed; however, doing so presents an almost
incomprehensible challenge. Uber’s corporate decisions are, by a large majority, made by
algorithms; there is a complete lack of traditional managerial-level oversight (Jordan, 2017). This
lack of human interaction means traditional culture change models are not effective; therefore,
Uber will have to pioneer an entirely new paradigm of creating culture change in a corporation.
Another area of concern that Uber desperately needs to fix is its complicated relationship with its
drivers; they are more like contractors than employees. Uber has often referred to them as “driver
partners” (Bhuiyan, 2018). While Uber intentionally setting fare prices thirty percent below the
competition is attractive to customers, it hinders attraction and retention of drivers (Sherman,
2017). By summer 2017, Uber’s turnover for drivers was approximately thirty percent per
quarter (Bhuiyan, 2018), and they were running out of new drivers to recruit. Uber altered the
app’s algorithm to favor new or recently re-instated drivers; practices such as this led to a
decrease in trust between drivers and Uber (Bhuiyan, 2018). Uber drivers were not satisfied with
the company’s platitudes designed to keep them on board.
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In response to growing driver demand, Uber allowed tipping to be incorporated into the
app in the Summer of 2017. Uber attempted to pacify driver complaints through increased
transparency of fares; they further re-structured fares to benefit drivers. Drivers would now be
paid additional for long trips, receive a flat rate for each UberPool additional stop to add a rider,
and would start to be paid for their time spent waiting on customers (Bhuiyan, 2018).
However, these steps have not yet been enough to regain the trust of Uber drivers. Uber
drivers feel like their concerns are not being heard or addressed. Furthermore, they are frustrated
by the lack of procedural justice, which is the “perception of the fairness of processes” (Nimmo,
2018, p. 83). Drivers feel that their rights are not being considered when Uber goes back on its
word; Uber initially introduced a driver destination feature but then rescinded this decision
quickly thereafter (Bhuiyan, 2018). According to the idea of the psychological contract, both the
employer and employee have mutual obligations towards each other; however, “as the
psychological contract is not well defined or formally acknowledged, employer and employee
may have very different views on what constitutes a breach of the contract” (Nimmo, 2018, p.
83). Uber should take steps towards understanding employee’s perception of the fairness of
policies in order to gain insight into employees’ expectations of the psychological contract.
Mediating the perceived breach of contract with employees has been shown to reduce employee
turnover (Nimmo, 2018).
Recommendations
“Part of the goal for training and development is to help people get a common language
and mindset about the organization… the key to true cultural change is consistency and
comprehensiveness” (Carson, 2018). The new CEO has taken an important first step by creating
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new cultural norms with extensive input from employees through submissions, focus groups, and
voting to create cohesion (O’Brien, 2017). At this time, Uber’s expressed cultural norms are:
“We build globally, we live locally; We are customer obsessed; We celebrate differences; We do
the right thing; We act like owners; We persevere; We value ideas over hierarchy; We make big
bold bets” (O’Brien, 2017).
Uber needs to carefully consider the specific markets in which it desires expansion.
European Parliament even noted that “institutional issues as employment issues, internal
regulations, environment, taxation, and consumer protection are crucial for smooth acceptance of
Uber” (Watanabe, et al., 2016).
Implementation Plan
Summary
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Sherman, L. (2017, December 14). Why can’t Uber make money? [Blog post]. Retrieved
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