Digital Disruption comes to the taxi industry

 In applications, digital disruption, mobile

UPDATE: 30 December 2013TechCrunch reports that France is bringing in legislation from 1st January forcing taxi industry disruptors such as LeCab and Uber to wait 15 minutes to pick up passengers.

This shows how digital disruption is hitting the French taxi industry. What amazes me is that a Government would instead legislate an for an inferior level of customer service, rather than take a cue from new entrants such as LeCab and Uber and fund innovation to provide a better service.

The reason that Uber, Lyft (profiled below) and others have emerged and are taking market share is because the existing industry is broken.  You will find that industries and business models get disrupted by smarter entrants when the existing ways no longer work for consumers.

The following post was published on 30th June 2013.

Regular readers of London Calling will note how I love writing about digital disruption.

I witnessed it happening first hand in the taxi industry on a recent trip to San Francisco.

Mid-morning last Thursday, the team needed to get to a meeting at Google, across town in the financial district.

Waiting on the busy intersection of Third & Bryant street, we were unable to hail a cab after waiting for nearly 10 minutes – they were either full or not interested in picking us up.

My colleague turned to her cellphone and said “I’ll get a lift”.

What she actually meant was that she was getting a Lyft car to come and pick us up.

Within 3 minutes, we were all inside the Lyft car, and with a welcoming fistbump (the Lyft way of saying hello), we were on our way in no time.

At the end of the journey, the transaction was processed automatically and no cash changed hands.

Lyft is not a taxi service, they instead call themselves a “ride sharing” service.

Their members have a distinctive pink moustache placed on the front of their car so you can recognise them, and you can track the progress of the car on your phone – how modern!

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Lyft is not the only service out there giving the established taxi operators a run for their money – Uber is available in London and even Sydney.

The difference between the existing taxi services and these new upstarts in the user experience.

In many cases, the challenger services have a real-time app that allows you to see where your car is and information about the driver, and also pay by credit card through the app.

lyft-app

The traditional services such as Black Cabs in London, Yellow cabs in San Francisco and Taxis combined in Sydney have all been slow to adapt to new technologies.

While there always seems to be a black cab nearby in London, very few of them take credit cards, and if they do, more often than not the driver lies about the machine not working.

For years now I have been using the alternative – Addison Lee who have a sophisticated online presence and app – they even text you the registration number and driver’s mobile phone number when you book.

al-map

Hailo is another service that actually works with London’s 23,000 black cabs, however it seems that the London cabbies are wedded to the old way of doing things.

Today I saw 3 black cabs waiting at a cab rank in London outside a hotel.  I watched to see how long they waited there before they secured a fare.

For between 5 and 20 minutes, these cabs were idle, with no fares.  If they had used an app like Hailo, then they would have probably had a local fare in no time.

taxis-stand-london

Any management consultant will tell you that it’s all about utilisation of your assets.

The reasons that planes don’t sit on the ground for more than 45 minutes or so is that when they are on the ground they are not making money. The same can be said for taxis. When sitting idly at a rank, they don’t make money until the next ride commences.

The Taxi industry is not alone

In every industry, disruption is taking place. It happens when technology is used to make the process more efficient or benefits the customer.

The simple innovation of knowing where your taxi is, and the registration plate massively benefits the customer.

In contrast, the Cabcharge payment system in Australia takes 10% of every transaction involving credit cards. If you want to pay by credit card you have no alternative in an Australian cab – Cabcharge has the monopoly on taxi payment processing.

The industry has said that this figure is more than 10 times what it actually costs to process the transaction – so what is Cabcharge doing with the balance of the fee?

They are certainly not investing it in technology, otherwise firms such as Uber, and new Australian start-up goCatch would not exist.

Proof that these new models are disrupting the status quo

Uber and Lyft have had numerous run-ins with local taxi companies and regulators in Los Angeles and New York and have been issued with cease-and-desist letters. No doubt these old-school monopolies fear their lunch is about to be well and truly eaten and are lobbying the regulators very hard.

These existing companies should  be scared. Simple technical innovations around mobile apps mean not only benefits for consumers, but for the drivers as well.

What is happening in LA and New York with Uber, Lyft and others proves that the existing regulation cannot keep pace with technical change and the ensuing digital disruption.

The arguments being thrown at the newcomers include the fact that the drivers are not licensed, have no insurance and that proper background checks have not been conducted.

The reason these upstarts are bypassing regulation merely points to the fact that the existing laws do not provide enough flexibility in a disrupted environment.

Let’s assume that these new companies will quickly solve these issues to the satisfaction of the various transportation regulators.

Most already vet drivers personally and also have their licence and taxi cards on file.

Even with the existing checks in place with old-school taxi companies, I often feel like I am putting my life in the hands of a wannabee formula 1 driver each time I get into a new taxi at the airport.

At least with services such as Lyft, and Uber, I can see a picture of the driver, their name and even a community rating before they pull up at the kerb – arguably providing me with more comfort about the suitability of my driver than just a yellow car with a sign in the roof.

What remains is that while these companies may be treated and regulated in a similar way to the big guys in the short term, they are much further ahead of the incumbent dinosaurs when it comes to technical innovation.

If the existing players do not invest the windfall provided while running a monopoly (I’m looking at you Cabcharge and your 10% “fee”), then they will be seriously left behind when the nimbler competitors convince government regulators that the ridesharing model can and does work, and benefits consumers with a more cost effective and convenient solution.

Footnote – I could not find a twitter handle for Cabcharge to use in my tweet about this post- enough said!

Disruption exists because an existing business model is inefficient and outdated. The existing taxi models worldwide are about to get completely disrupted – government regulation notwithstanding.

About 

Futurist Keynote Speaker and former IBM Global Managing Partner, Andrew is a popular and sought-after presenter and commentator on issues around digital disruption and emerging technologies. He is a multiple TEDx & International Keynote Speaker. Watch his speaking showreel here, enquire about availability & fees here or listen to his latest Podcast - "The Practical Futurist Podcast" on your favourite app.

Showing 16 comments
  • @TanOnTheStreet

    RT @AndrewGrill: Digital Disruption comes to the taxi industry with @goCatchApp @uber @lyft @hailo paving the way http://t.co/EFHec9Hncw

  • @Convers8tion

    London Calling » Digital Disruption comes to the taxi industry http://t.co/4sxSHicj2N

  • @pmobiweb

    London Calling: Digital Disruption comes to the taxi industry: Regular readers of London Calling will note how… http://t.co/jibUiLKWrX

  • @dannywootton

    Digital Disruption comes to the taxi industry – London Calling http://t.co/43TJDJU02T
    Interesting article by @andrewgrill

  • @TanDuarte

    RT @AndrewGrill: The taxi industry is the next to undergo #digitaldisruption thanks to @goCatchApp @uber @lyft @hailo http://t.co/EFHec9Hnc…

  • @steve_penfold

    Nice post – @AndrewGrill explores digital disruption in the taxi industry http://t.co/5qtU2CBOm5

  • Steve Penfold

    Hi Andrew – all great points. I find it really interesting how an industry that has already invested heavily in IT (the larger cab companies at least) can still beaten by startups that focus on ease of use for the end customer. Just proves that there are still thousands of industries out there waiting to be disrupted in a similar way.

  • Andrew Grill

    Steve, two reasons for the disconnect:

    1. The leadership of these companies do not get this new world – we need more “social CEOs” – the subject of an upcomign blog post – stay tuned!

    2. The Digerati have the best tech and a commitment to change the culture – see http://lc.tl/digerati

    Without digital savvy leadership and a culture change, they will continue to be disrupted by nimbler startup and even competitors.

  • @goCatchApp

    RT @AndrewGrill: Digital Disruption comes to the taxi industry with @goCatchApp @uber @lyft @hailo paving the way http://t.co/EFHec9Hncw

  • Des Walsh

    As a former Sydney taxi driver – Red Deluxe (later Taxis Combined), ABC Radio Cabs (now Taxis Combined I believe), Taxis Combined – I’m not really surprised at the apparent complacency of Taxis Combined incumbent ownership. It will be interesting to see how long TC and the industry (and NSW government) can hold off disruption. And your comments about taxis waiting on a rank for fares reminded me of the comment of one seasoned cab owner i drove for: “nobody ever made money sitting on a rank”.

  • Andrew Grill

    Des, I appreciate your comments, and glad that what I am seeing from afar resonates with someone who has been deeply involved with the taxi industry.

    Disruption is coming and planning for it starts at the top.

    Do you think the Taxi Council/Taxi operator’s execs are ready to embrace change?

  • Theo Theodorou

    Good article, go to cities like Berlin and you see that nearly all the legacy taxi services are now plugged into My Taxi app (like hailo) and similar apps. The element I really like about these apps and one you touched on but think is worth highlighting is the visible rating of the cab drivers post journey. These app’s provide a simple, efficient stress free way of booking cabs, but also give the cab driver a way to build reputation and deliver good service that is visible to potential customers, This is very disruptive and can only benefit those drivers that understand this and provide excellant customer service and of course the consumer as it puts choice of driver back into their hands. This is massively disruptive. In the past you flagged down a cab and it was pot luck on the type of service/driver you would get.

  • Andrew Grill

    Theo, great insights here – thanks for sharing.

    Looks like many leading cities in Europe are embracing this rapid change.

  • @LudwinaDautovic

    Great article by @Andrew Grill CEO of Kred. It’s a prime example of how businesses fall behind when they don’t… http://t.co/LSd3bQKQWT

  • @idoshavit

    “Digital Disruption comes to the taxi industry” http://t.co/e2YDsnYTur (via @pocket)

  • @AndrewGrill

    Rewind: Digital Disruption comes to the taxi industry https://t.co/EFHec9Hncw

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