Starting a business is exciting, but it’s not easy. Some of the world’s most disruptive startups learned that is not always enough to compete on products or services alone, you must find new ways of working.
“At first blush, Uber obviously is a transportation company,” says Fortune writer Adam Lashinsky. But it’s not that simple. “Uber doesn’t own cars. Its drivers can work whenever they like; they are subject to nobody’s schedule.” And as for Uber’s wild success: “Hundreds of thousands of drivers. Millions of users. Billions in VC funding. $51 billon valuations, later” — Uber-for “X” is every startup founders unicorn dream.
Taking an Uber-for X approach
Like the Hollywood movie pitch that marries two hits — “It’s Rogue One: A Star Wars meets Captain America: Civil War” — the Uber-for X approach couples a hit (i.e. Uber) with your potential hit business (or idea).
But to make practical use of an Uber-for X approach, it’s important to understand Uber’s business model, described by institutional investor Yuen Lo:
Find drivers with access to a car who want to earn money.
Orchestrate them centrally to offer a highly scaled and distributed transport platform.
Allow people who want to make journeys book these drivers via a mobile application.
Create a review system to ensure great service.
Take a 20-30% cut of all bookings.
Leverage the data collected to minimize wait times and maximize drive times.
We can distill their business model down to three main criteria:
Users use an online platform to access an offline service
Key partners are independent contractors (i.e. service providers)
This is simple. But consider future business benefits. How will your Uber-for X business attract its first 1,000 customers and create a surge in demand?
It’s important to scrutinize your Uber-for X business using a Business Model Canvas.
Business model canvas
The business model canvas, a globally accepted standard, addresses 9 key points that founders should use to describe, design, challenge, and pivot their business model.
1. Key partners
It is rather difficult (and sometimes unfeasible) to operate a business without key partners. If you plan to do everything yourself, plan to be deeply disappointed. Key partners make the business model work. As Cleverism explains, analyze the nature of the partnership using the following key questions:
Which partnerships are critical to our business?
Who are our critical suppliers?
Which of our suppliers and partners are sourcing our key resources?
What type of partnerships would suit our needs?
What is the best cluster/ supply chain where I should be located?
2. Key activities
Consider the main tasks you will execute. For example, will the platform be available via mobile (Android, iOS) or desktop (Windows, Linux, MacOS)? Decide which platform type will be the foundation of your service.
Meanwhile, what key activities sustain your business? Will you need to hire or outsource marketers to fuel supply and demand? Perhaps you’ll need to onboard service providers on a consistent basis? These key activities will drive operational costs, so be ready to incur the expense.
3. Value proposition
In a nutshell, a value proposition explains how your service solves a problem, delivers specific benefits, and why customers should buy from you and not from a competitor. Uber’s value proposition is relevant, quantifiable and unique for both the rider and the driver. The rider is promised a car when they need it and the driver is promised passengers when they need them.
4. Customer relationships
How will you manage the interaction between customers and providers? For Uber, the relationship is highly automated through an app and website. Consider which practices, strategies and technologies you will use to manage the relationship. Regardless of your approach, make sure it is proactive, personal, actionable, easy to use and scalable. And if at all possible, automated.
5. Customer segments
Uber serves two customer segments: riders and drivers and they both need each other. For Uber, a rider wants to get from point A to point B on-demand at a fair price. The driver wants to earn more, work on their own terms and have access to a quantified supply of riders.
Determine your customer segments. They are the center of your profitability. While most companies have trouble reaching one ideal customer type, this approach requires a marketing approach that complements both segments. Clarify the message and make it attractive for each segment.
6. Key resources
Determine what resources you must deploy. For Uber, it’s their platform and pricing and routing algorithms. In a nutshell, key resources are the most important assets you need to make a business model work. “Every business model requires them, and it is only through them that companies generate Value Propositions and Revenues. Key resources can be physical, financial, intellectual, or human.”
How will you reach your customer segments? How is each channel integrated? Which channels work best and are the most cost-effective? Where do your customers prefer to be reached at? These are the questions you should ask yourself when selecting the right channels.
The options are endless, but unique to your business. You may decide to use an app, website, social media, PR, forums, display advertising, SEO, etc. If you’re unsure, gather customer feedback.
8. Cost structure
Which costs are inherent to your business model? To take this a step further, which key resources and key activities are the most expensive? For Uber, it is platform development, sales and marketing, salaries and driver payments. For your Uber-for X business it could be app development and maintenance, marketing and payments to service providers.
9. Revenue stream
You provide value for customers, so what are they willing to pay for this value?Consider the types of revenue streams you can tap into as well. The revenue model you select is unique to your business.
By taking a deeper look into Uber’s business model, you can better understand how starting your Uber-for X business can take time and resources, even if it seems simple at first glance.
There are many considerations to tackle, but “the journey of a thousand miles begins with one step.” (Lao Tzu). Keep moving and you will eventually succeed.
This article has been edited.
Sergey Lipchenko is a copywriter at Cleveroad, a Ukraine-Based web and app development company that successfully implements various projects of any complexity. Their main goal of the company is to provide clients with quality and exceptional software. Connect with @cleveroadinc on Twitter.