MOST South Africans have heard about Uber, not only because of the company’s marketing tactics, but also because Uber has been in the news for all the wrong reasons. Spawning strikes, outbreaks of violence and intimidation by the traditional taxi industry, the service — hailed as a business model innovation by many a scholar — is doing what technology innovation does best: disrupt.
Uber’s is described as a collaborative consumption business model, which is a derivative of the sharing economy.
According to global law firm Norton Rose Fulbright, such business models are an unstoppable force that has taken root in the wake of the financial crisis. Now generating about $15bn in global annual revenue according to a recent PwC report, the so-called sharing economy has already revolutionised a number of industries and is showing no signs of slowing down.
Driven by a fundamental shift from private ownership to shared usage and access, the sharing economy promises to provide potential benefits to the economy and society through the shared consumption of goods and services.
The rapidly developing segments in the sharing economy have profitably leveraged unprecedented advances in technology to match cultural trends and the evolving needs and demands of customers.
Collaborative consumption business models such as Uber’s are described as "sharing redefined by technology". They tend to use two-way online platforms and smart algorithms to conduct business, and break away from the traditional notions of doing business by linking stakeholders and decreasing transaction costs.
ONE of their chief claims is that they empower individuals to become micro-entrepreneurs who make their assets, skills or time available publicly through a digital matchmaking platform. Digitally driven business models are allowing new entrants — sometimes from low-income groups — to access markets and disrupt well-established players and gain a competitive advantage.
This alone must make them worthy of consideration in any discussion about boosting economic growth in highly unequal emerging markets. Such business models have the potential to be rolled out into other areas of the economy.
Imagine, for example, if governments could leverage mining-related infrastructure for regional economic development. Facilitating the shared use of mining infrastructure between mining companies and third parties could contribute to the wider distribution of the benefits of mining investments. But despite the seductive promise of collaborative consumption business models, there is ambivalence and uncertainty about the stakeholder effects of such models, especially in emerging economies such as SA, where almost no research has been done.
"There is no reason to assume that collaborative consumption business models are sustainable business models. The question [of] whether collaborative consumption leads to more sustainable business is especially unclear within an emerging market context, where it might be of special importance due to the particular vulnerability of the potentially affected social groups," says Betine Dreyer, a researcher at the UCT Graduate School of Business who co-authored a paper that investigated the effect of collaborative consumption models on stakeholders in SA.
Dreyer and coauthors Ralph Hamann and Kristy Faccer from the graduate school and Florian Lüdeke-Freund, from the University of Hamburg, say critics have suggested collaborative consumption models could be exploiting people, rather than empowering them, because they do not sufficiently protect workers’ rights.
The protection of consumers, too, often appears to be of secondary concern.
Uber has been slow to comply with regulations protecting passengers, or to conform to established practice.
So while the models do hold significant potential for economic empowerment, especially of marginalised groups, more attention needs to be paid to local context and understanding the effect of business model changes on local stakeholders.
The effect of a shift in Uber policy at global level could have very different effects on drivers in the US than on drivers in SA.
AN EXAMPLE is the introduction of cash payments earlier in 2016. While on the surface this move was good for consumers and business, in SA it undermined two important stakeholder benefits: the perceived security for drivers and customers associated with cashless transactions in a high-crime environment; and the market differentiation between Uber SA and the traditional taxi industry.
Collaborative consumption business models are agile. Changes can be implemented relatively easily and swiftly, given the technological platform at the core of the business model. But this brings threats as well as opportunity.
The research concludes that collaborative consumption business managers should pay greater attention to local context when making business model changes. Regulators and activists should go beyond generic arguments around stakeholder effects of collaborative consumption business models, and rather recognise specific and disaggregated stakeholder effects and how they may be influenced by changes.
Uber’s success demands the model is given serious consideration as an enabler for economic development.
The National Development Plan declares SA must keep on trying to succeed. This demands that we learn from the shortcomings of business model innovations such as Uber and build on their successes.
• The authors are MBA students at the UCT Graduate School of Business