Uber, was co-founded in 2009 by Travis Kalanick and Garret Camp. It is one of the most disruptive and controversial companies of the last decade. Uber’s business model, built around a Software Platform that is a flagship of the “sharing economy” has been able to destabilize the Taxi industry by impacting the employment levels and income of traditional Taxi drivers and challenging government authorities and regulations of each different country.
Uber’s platform has been successful and continues to expand within the Transportation Industry (long-distance truck transportation, helicopter rides, food delivery, self-driven cars, etc.) and with a defined and clear Supply Chain Management. Not long ago being described as “the largest taxi company without cars”, Uber is now aggressively expanding its base of owned driverless cars (deal with Volvo for 24,000 units) by continue pushing the boundaries of the Transportation Industry.
The great and imposing success of Uber can be attributed to several factors as follows:
1. The initial business model on its own is unique. Rather than focusing on creating an improved product, which competes within a specific traditional Industry, it digitized and reconfigures different parts and components of the service in an innovative way around the ‘job to be done’. The Innovation that Uber brought to the market created distinctive competitive advantages which threatened the established way that the players in the Transportation Industry used to operate.
The “Jobs to be done theory” –from HBS professor Clayton Christensen- which builds upon “disruptive innovation” explains how new entrants are able to reshape the economics of the Industry by focusing on designing products around the Job that a consumer is trying to get done. In general, these new players cause lot of pain at the very beginning. However, in the medium term, their entrance makes the overall Industry adapt and raise the standards as well as creating other opportunities in the ecosystem:
Real estate surge,
Independent contractors plugged into the ecosystem,
Crowd-based job market (as an innovation partner) that allows drivers to manage their productivity in a much better way by increasing their work capacity,
New jobs creations.
2. The nature of their business model around the Platform and Ecosystem allow them to play a “winner takes all” game, where first-mover advantage and ability to scale-up quickly plays a fundamental role in the creation of barriers to enter the market.
3. Attached to their innovative business model, the ability to a very fast execution and performance, aggressiveness and resilience are other keys contributions to such a big success of Management.
Uber´s strategy related to the regulatory environment has been questioned and opposed from the very beginning by (on certain occasions) Taxi Driver´s violent protests and strikes. Neither the Taxi Driver´s, violent protests, Strikes, Lobbies and government pressure have not been able to stop Uber’s continued growth at all costs.
Their way of entering market and competing has been aggressive and sustained over long periods. Evidence of this is Uber’s fight with DIDI for the China market, where both companies destroyed significant economic value in an attempt to grow in this difficult market.
4. While counter-intuitive, Travis Kalanick personality traits played a key role in the success of Uber. An early serial entrepreneur with high levels of agreeableness, Kalanick’s behavior has been in many cases a result of anger and revenge from previous start-up experiences. Kalanick can be described as a highly aggressive and narcissistic leader whom operates under the principle of “move fast and break things”, naturally immature during the early years of Uber’s growth, with low self-awareness and inability to “let it go”.
Despite the meteoric growth and success, Uber have been facing serious issues, which affected its reputation and resulted in the departure of Travis Kalanick as CEO. These issues range from sexual harassment of company employees, aggression towards journalists, used privacy and hidden data breaches, and evasion of law enforcement operations.
So, it is not difficult to affirm that there are several aspects which contributed to shaping Uber’s culture as one of dishonesty, fear, result driven at all costs and meritocracy. Legitimacy can rarely be questioned by those aspects and integrity throughout Uber’s culture could be risking the whole company.
To exemplify how Kalanick has steered the direction of Uber’s cultural attitude we only need to look at the day when he sent a multiple message to the whole organization: “This can be seen as a decisive moment in shaping the company’s culture attitude. Into one where ‘rules are made to be broken’ as long as there was rapid growth and performance”.
Due to the speed of growth and a high level of top-down pressure for delivering software under tight timescales and ensuring operational continuity, Uber created a culture of fear where employees were severely punished for delays and mistakes but at the same time rewarded with promotions as a result of high-performance.
Given the innovative characteristics of Uber and due to the fact that they didn’t figure out the exact business model from the start, there were constant changes in direction and priorities which made it difficult for employees to understand what the priorities and direction of the organization was. Many former employees describe the environment in constant “fire-fighting” mode.
Kalanick hired a highly talented team that shared similar values. Core values help companies in the decision-making processes also educate clients and potential customers about what the company is about and clarify the identity of the company. Especially in this competitive world, having a set of specific core values that speak to the public is definitely a competitive advantage.
This team, referred informally as the A-Team, were most of Kalanick’s direct reports, and as senior management of the organization were responsible for reinforcing this culture.
Certain members of the so called A-Team have been accused by Uber employees of sexual harassment, as it was mentioned before. Most critically, when these cases where reported to HR department, the employees were ignored and no big action was taken. Kalanick failed to recognize these critical issues and act with urgency. He also failed at setting up corporate compliance body that ensure that such cases are directly reported independently to the board.
In the words of Kets de Vries, the “Narcissistic and God’s syndrome can be an advantage for the success of certain leaders”. It all depends on the grade and balance of these personality traits with others as well as the ability of the leader of surrounding himself with the right group of advisors whom can complement his Persona.
Google’s and Facebook’s founders were able to manage this well by getting close advisors in executive positions whom can counter balance their young age, as it was the case with Eric Schmidt and Sherryl Sandberg in the roles of CEO of Google and COO of Facebook respectively. Due to the low-levels of self-awareness, when Kalanick realized that he needed help it was already too late. Damage was already done. Travis Kalanick stepped down as CEO in June –continuing as a board member.
During the CEO transition, some interesting cases of corporate governance and shareholder management developed. In an attempt to reduce Travis Kalanick decision power over the selection of the new CEO, one of Uber’s investors –Goldman Sachs- presented a project to the board that would reduce Kalanick’s voting rights. In response to that, and in order to reassert his control, Kalanick appointed two additional board members.
Dara Khosrowshahi was appointed as new CEO in August 2017. Some of the first actions the New CEO of Uber took were directed to address the cultural problems and reputation of the company.
Firstly; he publicly recognized the data breach the company had in 2016 and terminated the employees that were responsible for hiding this, including the senior management.
Secondly; he introduced new “cultural norms” which can serve as a foundation to start changing the culture into one that allows Uber to achieve the next wave of growth.
These values were created through a bottom-up approach in order to maximize employees buy-in and rapidly identify change agents across the company.
Cultural values can be misinterpreted and used as an excuse to act in ways opposite to what that value wants to encourage. Values like “always be hustling'” or “principled confrontation” were used unproductively as an excuse of wrong behavior, confrontation and back-stabbing.
Thirdly; he recognized that certain aspects of the current culture certainly work so they should be reinforced. On LinkedIn text published by him, he comments: “Rather than ditching everything, I’m focused on preserving what works while quickly changing what doesn’t”.
UBER 14 Values under Travis Kalanick
Uber “New Cultural Norms” under Dara Khosrowshahi
2. Always be hustling
3. Let builders build
4. Meritocracy and toe-stepping
5. Principled confrontation
6. Making bold bets
7. Celebrate cities
8. Make magic
9. Inside out
10. Optimistic leadership
11. Being yourself
12. Own don’t rent
13. Champion’s mind set
14. Obsession with the customer
We build globally, we live locally.
We are customer obsessed.
We celebrate differences.
We do the right thing.
We act like owners.
We value ideas over hierarchy.
We make big bold bets.
Strategic decisions in the way of going to market and competing can send strong undesired cultural messages to the organization resulting in side effects communication and reinforcement of values, behaviors and rules of engagement with different stakeholders is key.
If the communication of the direction is not continuously reinforced the implementation of a disruptive business model can severely defocus the organization.
Personal traits of successful CEOs that are usually seen as negative (narcissism, aggressiveness, God’s syndrome) may be functional for certain companies depending on their stage.
CEOs should surround with a mix of executives that complement and counter-balance his / her natural abilities. Self-awareness is fundamental to be able to understand when help is required before it’s too late.
When facing difficult issues, Senior Management should acknowledge and act with urgency and transparency at fixing them, protecting company reputation. Some issues observed in Uber’s case have zero tolerance.
Culture and values can be misinterpreted for wrongdoing.
Every Culture has positive aspects and assets that can serve as a lever for change initiatives.
– Handling of Data Security breach by the new CEO: https://www.uber.com/en-AE/newsroom/2016-data-incident/
– Uber history: http://www.businessinsider.com/ubers-history/
– Destructive creation and characteristics of Kalanick: https://www.forbes.com/sites/lbsbusinessstrategyreview/2017/10/16/uber-a-story-of-destructive-creation/#68e954897c87
– New cultural norms voted: https://www.cnbc.com/2017/11/07/ubers-new-cultural-norms.html
– Employee blog post: https://www.susanjfowler.com/blog/2017/2/19/reflecting-on-one-very-strange-year-at-uber
– Workplace culture: https://www.nytimes.com/2017/02/22/technology/uber-workplace-culture.html
– The A Team: https://www.nytimes.com/2017/06/12/technology/uber-travis-kalanick-emil-michael.html
– Do CEOs have to be nice?: https://qz.com/1015215/do-ceos-have-to-be-nice-now/
– Frances Frei: https://www.recode.net/2017/7/20/16001948/uber-leadership-interview-frances-frei-kara-swisher-travis-kalanick