Co-founder Risk

Uber CEO resigns

2017.07

Co-founder & CEO: The double-edged sword in the company
Co-founder Risk
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I. How Uber grew and scaled so quickly

Uber Technologies Inc. is an American technology company that pioneered the sharing economy to offer cheap and easily accessible car transportation services.

  • Uber: Uber is a ride-sharing service that connects car-owners with people looking for rides through a mobile application.
  • Uber’s competitive advantage: Uber has offered solutions to issues in the taxi industry using the sharing economy and its app.
    • Vehicle quality: Vehicles registered with Uber are required to maintain a high level of cleanliness.
    • Driver attitude: Compared to the average yellow cab driver, Uber drivers are regarded as being safer and offering higher quality customer service. Users of the app may rate drivers, and a low rating might diminish the driver’s pay or ability to find users.
    • Pick-up and drop-off: While passengers of yellow cabs must know the precise location of their destination, Uber drivers and users access Google Maps to determine not only the passenger’s destination but also their pick-up location.
    • Ride allocation: Uber prevents drivers from rejecting a ride request by revealing the destination only after the passenger is picked up (i.e., a passenger requests a ride Uber contacts drivers in the passenger’s vicinity a driver accepts the request Uber navigates the driver to the passenger’s location Uber discloses the passenger’s destination only after they are picked up and directs the vehicle to the desired location)
    • Dynamic pricing to reduce wait time: Uber fares are based on a dynamic pricing model, in which fares are higher during periods of high demand for rides (e.g., 1.5X during rush hour). When rides are in high demand in a certain area and there are not enough drivers in that area, Uber fares increase to get more drivers to that area and to reduce demand for rides in the area.
    • GPS navigation: While yellow cabs rely on a driver’s judgment and expertise to take a passenger to their destination, Uber tracks the car’s location using Google Maps and guides the driver through the quickest or shortest routes.
    • Payment method: The rider is charged based on the time and distance of the ride. At the end of the ride, payment is made based on the rider’s pre-selected preference, which could be a credit card on file, cash, or, in certain cities, other methods such as Google Wallet.
    • Price: In San Francisco, UberX rides, on average, are 20% cheaper and UberPool rides are 50% cheaper.
  • Uber as a solution: Uber revolutionized the car transportation industry by offering safer and more convenient rides for passengers.
    • The wait time for a ride decreased dramatically with Uber.
    • Passengers are never denied a ride.
    • Uber shook up the cab industry, making the passenger, rather than the driver, the central figure of the business.
    • Uber maintains a high level of service through a two-way rating system.
    • Uber has made cab rides a safer experience, by giving both the rider and the driver access to each other’s profiles and by tracking the route taken by the driver in real time.

    → Unlike KAKAO Taxi, which connects regular cabs with passengers, Uber bridges together regular car-drivers with riders via a dynamic and convenient smart phone app.


Since launching in 2009, Uber has destroyed the taxi industry in key cities around the world and operates in 80 plus countries today.

  • Taxi vs. Uber: In 2015, the number of Uber vehicles exceeded the number of yellow cabs in New York City. In 2017, the number of Uber vehicles was 4X the number of yellow cabs. In San Francisco, Uber has pretty much wiped out the traditional taxi industry.
  • Global expansion: Since launching in San Francisco in 2009, Uber has expanded to Los Angeles, New York City, and other key American cities. Afterward, the company has launched operations in Paris, London, and Tokyo, at a total of 670 cities worldwide.
  • Revenue growth: Uber’s revenue was $103M in 2013, $445M in 2014, $1.69B in 2015, $4.96B in 2016, and continues its growth (from 2013 to 2016, the annual growth rate has been 540%, 330%, 280%, and 200% respectively).
  • Company valuation and funding: In late 2011, Uber raised an additional $32M in funding from several investors, including Goldman Sachs, Menlo Ventures, and Bezos Expeditions (Amazon founder, Chairman, and CEO Jeff Bezos’s venture capital company). In June 2016, Uber raised $3.5B in Series G funding from Saudi Arabia’s Public Investment Fund. After 16 total funding rounds, Uber is now the highest-valued private technology company at about $69B. The next highest valued technology companies come nowhere close to this number (i.e., AirBnB at $31B and Snapchat at $20B).

To catch up to such tech giants as Google and Amazon, Uber has pursued aggressive methods of expansion and innovation.

  • Monopolizing the transportation industry: By providing car transportation, as well as flights, boat rides, and distribution channels, all through the sharing economy model, Uber aims to monopolize the world’s transportation and distribution industries.
  • Business diversification: Applying the sharing economy model to the food delivery industry, Uber launched UberEats in 2014. In May 2017, Uber also unveiled its first Uber Freight vehicle in Pittsburgh. The plan would extend the company’s ride-sharing model to cargo and connect shippers with truckers.

At the heart of such aggressive growth and innovation was founder and CEO Travis Kalanick.

  • Founding motivation: Kalanick’s co-founder Garrett Camp developed the idea for Uber after spending $800 hiring a private driver with friends and [1]mulling over ways to decrease the cost of black car services. Aiming to create a service that would completely replace traditional taxis, Camp built the first prototype, bringing on Kalanick as a “mega advisor” to the company.
  • Quick decisions: Originally, the application only allowed users to hail a black luxury car and the price was 1.5 to 2X that of a taxi. Foreseeing the challenges of this limitation, Kalanick drastically reinvented Uber’s business model, introducing a service option that would allow anyone to drive for Uber using their own car. This model led to a natural rise in the supply of rides at lower prices and compelled drivers to offer better services to their customers. This was the beginning of Uber as we know it today.
  • Aggressive drive and execution: Uber’s aggressive expansion often clashed with local regulations, but CEO Kalanick refused to submit to these challenges and rather pushed harder for Uber’s growth. With Kalanick at the company’s helm, Uber was able to dominate the world market for car transportation.


II. The consequences of Uber’s rapid growth

Unfortunately, underlying Uber’s aggressive growth were several alarming signals that were going unnoticed.

  • Uber received a lot of press from tech outlets, but half of the coverage was negative or portrayed the company in an unfavorable light.
  • Uber was ranked fifth in LinkedIn’s 2017 Top Companies ranking in the US. At the same time, Uber did not make Forbes’ America’s Best Employers guide (Google and Facebook ranked second and 13th in the Forbes list, and even Amazon – a company with a poor reputation for its grueling hours and pace – was ranked at 109th).

Uber’s workplace culture is toxically competitive and meritocratic.

  • Uber is said to encourage aggression and back-stabbing of co-workers, and employees are lauded for bringing incomplete and unreliable solutions to market in order for Uber to appear to be an innovator and winner. Uber employee Joseph Thomas, a handsome and accomplished software engineer, committed suicide after five months at the company, and his widow blamed the company’s aggressive work culture for Thomas’s mental decline.
  • Another former engineer at Uber quit the job after seven months, saying that the company was male-dominant, “[2]fratty,” and performance-oriented, making the workplace culture “poisonous.”
  • In Silicon Valley, a resume with a previous position at Uber raises flags among employers, who believe that those who have thrived in Uber are likely to be terrible fits in their own companies.

Uber has also been criticized for breaking laws to disrupt its competitors.

  • Greyball: Uber developed an internal tool called Greyball which uses data collected from the Uber app and by other means to avoid giving rides to certain individuals. The tool was used to avoid operations by known law enforcement officers in areas where its service was illegal.
  • Stealing proprietary information: Alphabet is suing Uber for stealing 14,000 files on Alphabet’s autonomous car technology by hiring a former executive, Anthony Levandowski.
  • Disrupting competitor Lyft: In 2014, Lyft reported to the press that Uber employees in New York City had deliberately ordered and canceled rides from Lyft. Furthermore, Uber told its employees to ride with Lyft and convince the driver to quit and join Uber. If successful, the employee would get paid $750 per driver.

Finally, Uber is [3]taking heat for its unethical practices and workplace culture.

  • Sexual harassment allegations: Former engineer Susan Fowler was sexually harassed by a male manager at Uber, but the company protected the high-ranking manager, forcing Fowler to leave the post instead. Afterward, a New York Times investigative piece revealed that 30 plus female employees had been sexually exploited by male employees during their time at Uber.
  • Escort-karaoke bar scandal: In 2014, CEO Kalanick and Senior VP of Business Emil Michael took male Uber managers to an escort-karaoke bar in Seoul, where the employees picked women working at the bar out of a lineup. The company tried but failed to hide this information.
  • Digging into the personal lives and backgrounds of media figures: At a private dinner in November 2014, Emil Michael suggested that Uber hire a team of eight opposition researchers and journalists, with a million-dollar budget, to dig into the personal lives of media figures who reported negatively about Uber. The controversy made national news and led to much criticism of the company.

As a result, many of Uber’s employees are leaving the company.

  • Approximately 20 employees have departed since the escort-karaoke bar and Greyball scandals have broken, and the CFO, CMO, General Counsel, and Head of Engineering positions are vacant.
  • Uber acquired the autonomous truck startup Otto upon the recommendation of a former Waymo (a subsidiary of Alphabet) executive Anthony Levandowski. Uber subsequently fired Levandowski.


III. The world’s and our view of Uber

Despite the barrage of controversies, Uber’s business continues to expand.

  • The revenue growth in the first half of 2017 has plummeted relative to last year’s figure, but Uber still flaunts an impressive 40% growth rate.
  • Despite the #DeleteUber boycott, the percentage of users who actually quit the app was a meager 4%. In 2017, 200,000 people quit the Uber app. This number pales to the 40 million monthly active users on the app.
  • Ride-sharing competitor Lyft has achieved significant growth in the US, but Uber still has a 77% market share, and Lyft does not have the global presence that Uber has.

→ Customers’ views on Uber rely more heavily on the convenience of the app, rather than the questionable ethics of the company. This is how Uber has lasted through all of its negative publicity.


Significantly, Travis Kalanick, who was also at the core of much of the controversies, has resigned from his post as CEO.

  • In June 2017, Kalanick resigned as CEO of Uber Technologies Inc.
  • Afterward, Uber filled two of its three vacant executive positions in response to questionings of its leadership capabilities. The company also hired a Global Head of Diversity and Inclusion at Uber in a move to change the company’s culture for the better.
  • Uber opened channels of communication within its quarters to facilitate reporting of unethical behavior.
  • Uber has phased out its previous informal vision statement, “Always Be [4]Hustlin” with a message that encourages cooperation and peace.

→ Uber is communicating to its employees, drivers, and customers that it is truly changing for the better.


However, those who prefer Uber as a “hustling” company, rather than an “ethical” company, have voiced their support of former CEO Kalanick and his return to his position.

  • After Kalanick’s resignation, about 1,100 people, most of whom were Uber employees, submitted a petition to the board of directors, stating that Kalanick’s resignation would be the beginning of the end of Uber.
  • Some media figures have claimed that Uber needs Kalanick’s leadership to help the company surface from its recent controversies with Alphabet, Lyft, and sexual harassment lawsuits.

There are two questions that arise from the history of Uber and Kalanick’s story.

  • What are the most important values of a tech company? Should it pursue objectives other than value creation and rapid growth? If so, what should these be and why?
  • What are the pros and cons of having a co-founder of a company also be its CEO? Is it better for the company to let a non-founding member take charge once the startup has gained momentum? Why or why not?

Please discuss Uber with your Ringle Tutor and take the opportunity to work on your spoken English.

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