Uber. Just uttering the word triggers a range of positive feelings among people who want to see the company soar higher and higher. And of course, it stirs some ugly sentiments among those who believe Uber never, ever plays fair.
I’m accustomed to hearing both of these fundamentally different sentiments every time Uber makes the news. This chorus of praise and blame almost never gives way to a more dispassionate, reasoned assessment of what the company has done right and what needs to be rethought and reformed.
Just yesterday, however, I heard an idea worth considering. An idea that is not only provocative when placed against the backdrop of Uber’s rapid growth, but also instructive when carefully mined for its broader implications. A colleague asked the following question: What is to stop Apple or Google from building a ride hailing service? Couldn’t Apple just integrate something exactly like Uber into the latest iteration of iOS?
This is a great question. Some of the best social networking applications — including Twitter and Facebook — have been deeply integrated into Apple’s iOS platform. The rationale for those integrations is simple: Users love having quick, frictionless access to services like Twitter and Facebook. Why not do the same thing for Uber? And Lyft? And the dominant ride hailing services in China? And Brazil? You see where this is going.
Would Apple ever build an Uber competitor? I don’t think so. The case against Apple — or any platform company, including Google — building a competitor can be summarized in Three Ds: It’s a Different business, it’s really Difficult to execute this business model globally, and it would be a huge Distraction.
Let’s start with the claim that Uber’s business is fundamentally different from anything Apple has conquered. A lot of people think of Uber as a software company or as a transportation company. There are good reasons for using either of these categories to capture what Uber does, but fundamentally Uber is a logistics technology for market-shaping. When Uber works at optimum efficiency, the platform actually shapes the demand curve within its target domain. Say this again with me: When Uber’s at the top of its game, the company positively impacts demand for ride sharing.
It may seem that Apple does something similar. One could argue that the Cupertino juggernaut has amassed almost $200 billion dollars by convincing ordinary consumers that they need iPads and Macs and iPhones. Isn’t this an example of stimulating demand? Yes, indeed it is. But Apple isn’t stimulating demand for services in the way that Uber is. Apple builds devices, coupled tightly with app and content ecosystems, that promise entertainment and engagement, while Uber strips away friction to make it easier and cheaper for consumers to get from point A to point B. Apple adds by building things, but Uber subtracts by removing friction.
Second, running a logistics service like Uber is not easy. In addition to running a platform that serves rides to hundreds of millions of people worldwide, Uber has to handle extremely tough regulatory, insurance, safety, and operational challenges. For example, before Uber goes public, the company will, ideally, come up with a plan to refine its employment model so it complies with a number of very different approaches to worker classification across the globe.
This single regulatory challenge will be an enormous source of stress for the C suite at Uber. In addition to this headache, Uber also faces a number of (a) class action lawsuits, (b) regulatory inquiries by state regulators, and (c) attempts to curb the company’s right to provide as many Uber drivers as local demand requires. Can you truly imagine Apple’s management voluntarily taking on the same set of challenges?
Third, conjuring a competitor to Uber would be a distraction for Apple. While improving key products like the iPhone, Apple must also develop wearables that are every bit as compelling as its existing set of mobile tools and toys. And remember, the common thread running through all of Apple’s products is that they provide premium experiences. Thus, Apple’s very identity is incongruent with entering a market where the experience on offer — a ride in a very old technology, the automobile — is and must be a utility service, not a premium experience.
Uber is a fundamentally different business from any market — computers, smartphones, music — that Apple dominates today. This doesn’t mean that Apple will never attempt to tackle opportunities within the transportation space. In fact, Apple appears to have taken steps to prepare for the design and production of an electric vehicle. This endeavor, called Project Titan, is being led by design and engineering visionaries recently poached from Mercedes Benz and Ford. One day, perhaps the iCar will become a reality. Until then, don’t expect Apple to encroach on Uber’s hard-won turf.