Cab Aggregation Business And Its Endgame?

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Context

Note: The primary objective of this post is not to offer a perspective on the cab aggregation business. The main objective is to give an example of sensemaking. And, for that purpose, I am using the context of Cab aggregation industry. My expertise does not lie in the cab aggregation business. Rather, my expertise lies in sensemaking skill. And I want to help the readers to be able to develop this skill.

A business can have 4 types of edges

Business model edge: A business may be successful primarily due to its business model. WhatsApp is successful because it has a platform business model which has strong network effects.

Technology edge: A business may be successful primarily due to its technological superiority. Google’s search engine has been much superior to all its competitors.

Funding edge: A business may be successful primarily due to having huge funding sources. I don’t have a strong example here, but I assume that some businesses do succeed in a war of attrition due to their funding advantage.

Strategy edge: A business may be successful primarily due to its Strategy (i.e. a unique set of consistent choices). Apple and Southwest airlines are examples here. 

But, in the context of cab aggregation business, 3 of the above 4 may not be real edges at all!

Business model edge: It is a fallacy to think that a cab aggregation business has Network effects. In the absence of network effects, a cab aggregation will never have a business model edge. 

Technology edge: Cab aggregation business is hoping for a technological breakthrough–the autonomous car. But, if this technology becomes commercially usable, will it prove to be an edge for a particular business? My view here is: No. Because, during the times of Google and Yahoo when the commercial attractiveness of search engine technology was not clear and so Yahoo mis-directed its efforts in the lure of easy money and Google was able to taken a clear edge. But, in case of auto-driving cars, there are already multiple companies in the chase. And it is unlikely that there will 1 clear winner. And if there more than 1 winners, we will be back to the problem of losses driven by high competition! 

Funding edge: The funding edge works like a war of attrition. The last man standing wins. But, such as war can be devastating for both parties if both parties are well-matched in their strengths. It is quite likely that 5 odd cab aggregation companies that are in fray right now will combine to form at least 2 well-matched fighting parties. Most likely, it may be a fight between Uber and Didi+.  

Strategy edge is the only edge that is up for the taking!

Strategy is a unique set of consistent choices that points to a clear positioning. The positioning/choices become defensible if and to the extent a business integrated all its value-chain activities around that positioning/choice-theme. For example, Apple’s positioning is to be a premium product. Therefore, it integrates its product design, pricing, distribution, and even HR policies around that premium positioning. What makes a strategy difficult to copy is that other companies do not often have the guts to make similar clear choices. Even if those companies can muster the guts they often do not have detail-orientation needed to integrate their various value-chain activities as per there positioning. 

A cab aggregation business player can possibly succeed by identifying such a clear strategy. Strategy provides a sustainable defense against competition (which is the crux of the problem in this industry). Southwest airlines is a good case in point. I will add this case in some time!

The strategy edge, unfortunately, will not be taken by any company.

Why?

For this we will need to connect a few dots:

  • Making choices is not easy 
  • Making choices requires connecting the dots, which is typically done intuitively rather than logically
  • There are multiple stakeholders (mostly investors) involved now, and each person comes to the table with his own strong viewpoints
  • It is difficult to communicate one’s intuition

In such a situation, there won’t be any Steve Jobs or Herb Kelleher to show the strategic direction. 

Our view on the endgame for the Cab aggregation business.

A war of attrition ends up devastating the 2 opposing alliances (Uber and Didi+). A new big player with deep pockets (e.g. Reliance in India) or a set of small players having deep-enough pockets for their narrow region (regional players operating is a geographical region) who has/have been watching this game intently now enter(s) the fray and take over the market. 

P.S. This is a preliminary attempt at a sensemaking model. Overtime, as more events unfold, one can refine the storyline further. Readers can use this model as a starting point to make their own models!

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