Uber: Or, What’s Kosher in Competing?

Part One: The Attacks on Uber are Backfiring

By Ben Gilad

We are trained to think competition means offering customers better product or service than our rivals’. Based on this business-school perspective, we look for companies to use innovation, speed, service and other familiar factors to create competitive advantage.

How 2004 of us. In 2004, Elon Musk showed that using government and riding a favorite cause for the ruling party pays handsomely. (See Best Companies to Work For.) It is not that companies didn’t know that competition involves paying attention to regulators and lawmakers; it is that Elon Musk made it both an art form and a crucial element in his strategy. Without government subsidies, Tesla might have become a modern Tucker for all I know. (Never heard of a Tucker? That’s the point.)

Then came 2009, when Uber used the exact opposite strategy. It used a loophole in local governments’ tight control of public transportation to offer a service over which consumers went gaga. It’s not exactly a new strategy. Frederick Smith started FedEx in 1973 by exploiting a loophole in regulations that prohibited large airlines from owning the entire chain necessary to create an express-mail service. The strategy hasn’t lost its effectiveness.

Now Uber is at the center of another competitive factor, but this time it is on the receiving end. The wildly successful company (valued at up to $30 billion recently, now more like $40 billion; adding $10 billion in a few weeks is nice work if you can get it) tends to clash with the press over many issues. For example, its brazen pricing approach. Uber’s prices “surge” during peak demand, which some don’t think are fair even though no one is forced to use the service. Another: its unusual marketing, as in declaring it will hire “hot chicks” for its French drivers, to entice male passengers to use the service.

A particularly nasty critic of Uber’s strategy, calling it creepy, misogynistic, and the poster child of “asshole culture,” is a reporter (more like a blogger but who knows the difference these days) by the name of Sarah Lacy who’s called out specific Uber investors and shamed them publicly with personal information about their familial situation to make a point. In an off-the-record talk between Uber’s senior vice president Emil Michael and a Buzzfeed reporter, Mr. Michael made a comment that Uber should spend money investigating her (and other journalists’) personal life.

The Buzzfeed reporter very quickly reported the off-the-record remark. According to a USA Today editor present at that meeting, that reporter “mostly has one setting” as a “gotcha political blogger,” and his behavior raises a lot of questions. To a suspicious mind it looks like he was just waiting for this type of slip of the tongue. But why? Perhaps the explanation is as old as competition itself. It so happened that the investors behind Lyft — Uber’s ubercompetitor, which is being beaten badly in the market by Uber’s better strategy — are also investors in Buzzfeed and the tech website, PandoDaily, which was founded and is headed by…?

You guessed it, Sarah Lacy. Small world, isn’t it?

Now we know: to some people, in business as in politics, all means are legitimate. No need for better service, a more-convenient app, or better pricing. Just invest quietly in blogs that appear objective, to fight your competitors.

I, for one, added Uber to my iPhone right after I read this piece, not only because I like any company that fights for consumers’ freedom of choice (against entrenched interests and entrenched city officials), but also because Lacy’s underhanded, politically motivated campaign backfired with me. I will not add Lyft.


Part Two: Uber Keeps Finding Feet to Shoot Itself In

by Mark Chussil

Does Uber demonstrate the noble skill of competing? Or does it stand for something more sordid?

Some say skill at competing is that which makes money, not enemies. Think about Coca-Cola and PepsiCo, both very big, both very profitable. Although they have competed vigorously for over a century, they learned long ago not to scorch the earth. They don’t even try to battle to the death because they know neither is capable of killing the other and it’d be colossally expensive to try. Uber might be able to kill Lyft, but why bother? The technology that made Uber and Lyft possible in the first place will reduce barriers to entry almost to zero for others, too. If Lyft is gone, we’ll soon have Nhxt, Ryd, or Hytch.

Some say skill at competing is skill at brawling. Grab every customer and every dollar you can. Business is something metaphorically violent like war or maybe football (See What Can Business Learn from Football?). Think about Amazon.com versus Hachette. Think about Walmart versus any supplier. Think about the days when Microsoft was denounced for steamrolling its competitors. Many who extol Uber admire their brawling macho swagger. Uber can make money as long as there are enough people who seek brawling macho swagger in their urban transportation.

Some say skill at competing goes beyond brawling to ambushes and deception. But even if your tactics aren’t illegal, don’t get caught; they look bad, and looking bad is bad for business.

I think it’s pretty clear which approach Uber prefers. For a litany of alleged misbehavior against customers, competitors, investors, and journalists, see “Uber’s Rough Ride,” “Uber, a Start-Up Going So Fast It Could Miss a Turn,” “To Delete or Not to Delete: That’s the Uber Question,” and “We Can’t Trust Uber” in the New York Times, and “Are You Safe In Your Uber?” in The Daily Beast. Something(s) must look bad indeed when reluctant customers suffer “Uber shame” and an angel investor deletes her Uber account out of privacy concerns.

Some customers are losing trust in Uber, and that diminishes whatever competitive advantage Uber might otherwise have. You don’t want people to speak your company name and “shame” together.

“’Culture eats strategy for breakfast’ is among the most cherished sayings in Silicon Valley,” said the “Going So Fast” article. I’d say instead that culture causes strategy. Your strategy is not what you say. Your strategy is what you do, and it is very hard to get people to do things outside their cultural beliefs, attitudes, and styles. A company with a we’re-really-nice-guys culture isn’t going to launch a “campaign” to “sabotage” the competition (“This is Uber’s playbook for sabotaging Lyft”) or choke off its capital (again, “Going So Fast”).

Yes, perhaps unsavory actions come from a few bad apples in the barrel. The test of the barrel’s culture is whether it ejects the bad apples, or at least their behaviors. Uber has… what? Tweeted that it won’t try to lean on a journalist? That’s it?

I appreciate that Uber CEO Travis Kalanick tweeted “the burden is on us.” It is, as it is on all companies. Promising not to spend a million to intimidate journalists, that’s nice. Now, how about the alleged dirty tricks against Lyft? How about the alleged threats to lock investors out of Uber if they invest in Lyft? How about the alleged lapses in customer privacy?

Just as I was finishing my part of this essay, I came across another article. This one wasn’t about dirty tricks, threats, or customer privacy. It was about Uber deliberately breaking the law to enter a city via fait accompli (“Uber to Portland: We’re Here. Deal With It.”). And just days after its CEO announced, on the company’s blog, that it would “be making changes” to “lead to a smarter and more humble company.”

I won’t use Uber. I don’t respect their way of doing business, I don’t appreciate their invasion of my city, and I don’t trust how they’d do business with me.

About the author  ⁄ Mark Chussil & Ben Gilad

Mark ChussilMARK CHUSSIL is founder & CEO of Advanced Competitive Strategies, Inc., and, with Benjamin Gilad, a cofounder and partner of Sync Strategy. He has conducted business war games, built custom strategy simulators, and taught workshops on strategic thinking for dozens of Fortune 500 companies on six continents, resulting in billions of dollars made or saved.

A pioneer in quantitative business war games and a highly rated speaker, he has 35 years of experience in competitive strategy. One of his simulation technologies has won a patent; a patent is pending on another. He has written three books, chapters for five others, and numerous articles.

He has been quoted in Fast Company, Harvard Management Update, The New York Times, The Wall Street Journal, and elsewhere. He received the Fellows Award from the Strategic and Competitive Intelligence Professionals society in 2013. He earned his MBA at Harvard University and his BA at Yale University.

Dr Ben GiladBENJAMIN GILAD, PhD, is founder and president of the Academy of Com­petitive Intelligence, Inc., and with Mark Chussil, a cofounder and partner of Sync Strategy. He is a former associate professor of strategy at Rutgers University’s School of Management, and a pioneer in the field of competi­tive intelligence and war gaming. He has published seven books and more than 90 articles in academic and practitioners’ publications on the topics of behavioral economics, competitive intelligence, and business war gaming.

He has been running war games for Fortune 500 companies since the 1980s and teaching a course on war gaming as part of Fuld-Gilad-Herring Acad­emy of CI which grants CIP certification in the field of CI. The Strategic and Competitive Intelligence Professionals society awarded him its highest Meritorious Award in 1996.

He earned his PhD in economics at New York University, MBA at the University of Central Mis­souri, and BA at Tel Aviv University.

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