4 Key Elements That Will Impact Your Uber

7/25/2019 4 Key Elements That Will Impact Your Uber

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4 Key Elements that will impact your Uber-like

Business Model

Logistics = Efciency !eliability

Uber has built a $40 billion company based on these

core principles. At the heart of this valuation lies the

success Uber has showcased in making a previously

inaccessible service cheaper and more accessible. Not

surprisingly the disruptive innovation has gone on to

impact many other industry value chains. The termUber "or #! is now being used to describe the model of

increasing number of startups looking to deliver"service

practically everything on demand.

#ut how do you convert eciency and reliability into

%uanti&able insights that can help you take business

decisions for your 'n (emand startup)

*essons drawn come from unlikeliest of places + heading

,ugnoo- an 'n (emand *ogistics startup out of ndia. The

e/perience over the past months competing with Uber

and 'la 1Uber!s ndian clone2 and creating a niche for

,ugnoo resulted in insights that believe are at the core

of Uber!s success.

,ugnoo is in the process of building a hyperlocal

marketplace in ndia. The ob3ective behind this is to

provide everything ondemand 1like rides and deliveries2

with the help of auto rickshaws- which are the most


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common means of intercity transportation in the

country. t!s interesting to note that even Uber was

unsuccessful in achieving this elusive dream- however

,ugnoo was built around the concept of multiple use casefrom ground up. 5tarted around months ago- we are

already in the business of doing 6000 transactions

including auto rides- meal and grocery deliveries each

day.

7ere are some de&nitions to help us establish the theory

+

!eliabilityis the ability of the platform to service any

demand while ensuring 8TA for the re%uest is below a

certain acceptable threshold- /. 9or the purpose of this

discussion we will use 8TA as a %uanti&able metric to

represent reliability.

Efciency- : e%uals the number of minutes per working

hour the average logistics unit stays engaged servicing

the demand. As a platform you need to cross a certain

threshold to become pro&table.

/ depends on a lot of factors + geographic- vertical that

you are operating in- cultural- competition- etc.

Assuming that you know : and / at every point during

your growth we can proceed to draw key insights based

on these metrics.

$% &ritical Mass


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;ritical mass for a certain region is the amount of total

supply and total demand where you are ensuring both

reliability and eciency- thus re%uirements of both the

8TA and supply being engaged above a threshold aremet.

nsights into total supply and total demand- re%uired to

attain li%uidity- is a %uanti&able way to make many

business decisions.

7ere is the analysis used to pull o< these numbersAvailable 5upply- =- re%uired at any point that can

service any incoming re%uests>8ngaged 5upply or Total

(emand- N- that is busy servicing particular re%uests at

any point.Total 5upply ? = @ N

= can be back calculated by increasing the available

supply to a point in di


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platform- vary per hour- in a typical day- cumulated over

a period of months.

n this era of startups on steroids where startups backed

by B; war chests can burn money to create arti&cial

demand and supply- starting with the analysis of a

;ritical =ass to sustain might seem counterintuitive. #ut

the concept of li%uidity in the marketplace still remains

the most important metric that any marketplace should

strive to attain.

Cnowing these numbers helps you plan your organic or

B; backed growth for a particular city.

Dou can also base the calculations of investment


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re%uired o< these numbers.

Eeaching these numbers shields you from any

established competitor" startup entering the area with a

similar concept.

B% 'ynamic (ricing

Uber!s surge pricing has been one of the most

controversial aspects about Uber for a long time. =any

authors F7yperlink to one of the articlesG have gone on

to o


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ma/imiKe revenues per transaction while keeping

service %uality high.

The diculty to sta< or enable the platform for thehighest demand is a problem almost every industry

value chain that deals with Juctuating demand has to

deal with.

LIhile dynamic pricing is a logical answer in the 'n

(emand logistics vertical- the decision on its

introduction should also weigh in the price sensitivity ofyour audience and the competition.M

&% Multiple )er*ices

A logistics network by de&nition can be used to do a lot

more than taking the users from Hoint A to Hoint #. Uber

has been e/perimenting with things as diverse as

bringing users ice creams and kittens. Ihen startedconceptualiKing and creating a logistics network based

on Auto Eickshaws- had set my eyes on creating

anUber for Everythingin ndia.

Although many people have advised me that spreading

yourself thin and concentrating on multiple verticals is

not a wise strategy. #ut here!s the thought process +

'ur LproductM is essentially a collection of a tech

platform- logistics Jeet and consumer data. Eides and

deliveries are 3ust di


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use cases. There is no logic behind choosing one use

case over another. These multiple use cases smoothen

the demand.

Using ,ugnoo Autos we were able to reach 60

additional rides every day. Oetting additional demand

during the o< peak hours via the meal delivery and

hyperlocal delivery service was an attempt at leveraging

the underutiliKed inventory during the o< peak hours.

'% &hoice o" the logistics plat"ormIhen started there was no one who was providing an

Uber like seamless service for people who want to hail

autos. Around 4 million auto rides happen every day in

ndia and its safe to claim that ndia moves on autos and

not ta/is. Ihat didn!t know at that time was how this

ties in with providing multiple services.

LThe choice of auto rickshaws as a base unit to create a

logistics network comes with opportunities and

challenges.M

Ihat!s important from the standpoint of this discussion-

is that- an average ride in an auto rickshaw in ndia costs

around $6.P. ;ompare this with around $4 average for

ta/is in ndia. This is the reason why Uber has not

chosen to do multiple services as a coherent business.


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'n the other hand- an average meal and grocery

transaction also ranges between $Q. 5o everything on

demand is 3ust a natural &t for ,ugnoo.M

This unit economics is thus a challenge as well as an

opportunity. The analysis of this unit economics for any

'n (emand business is important before hand as

challenges from realiKations later can sometimes make

the complete business unviable. 9or instance 'la was

generating around 60 orders a day for some of the

restaurants when it started a month ago and according

to reports these orders have reduced to 6 a day now

3ust because they are using ta/is to deliver these meals

+ dicult from both the delivery time and cost

perspective.

4 Key Elements That Will Impact Your Uber

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