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Innovation

Think twice before picking Uber as a business model

It is not enough to compete on products, companies must find new ways of working

Andrew Hill

© Reuters

DECEMBER 5, 2016 by Andrew Hill

Electrolux’s new chief executive took a beating last week for his excitable comment that the
white-goods company was testing the idea of “a laundry Uber, where people share their
unused laundry time”.

“Aside from anything else, why exactly would an equipment maker want people sharing their
washing machines? Surely they prefer everyone to buy their own instead?” commented one
Financial Times reader.

I also wanted to hang Jonas Samuelson out to dry. The phrase this is “the Uber for . . . ” has
worn as thin as a pair of much-laundered underpants. You do not have to search far to find

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an aspiring Uber for laundry in China — Edaixi — and a defunct one, Washio, in the US. In
the past two years, we have reported on Ubers for water, private jets, drones, pot, trash and,
indeed, “everything”, not to mention an “Amazon for travel” (Ryanair, since you ask) and an
“Airbnb for migrants”.

Stephan Chambers, former chair of Oxford’s Skoll Centre for Social Entrepreneurship, got so
fed up with hearing new ideas described this way that he outlawed the formula — along with
the similarly tired vision of any unlikely technology hotspot as “the Silicon Valley of”
wherever.

The Uber-for approach may help a few unimaginative venture capitalists picture a new
business (or journalists describe them). Like the Hollywood movie pitch that shackles
together two hits — “It’s The Hunger Games meets The King’s Speech!” — it may tempt some
to dream of Uber-sized values for an as yet untested concept. But as a strategy template, it is
distracting, derivative and limiting.

So I am grateful to Mr Samuelson for stopping the spin cycle for corporate comparisons. But I
also thank him for the reminder that companies must invent different ways of working, not
just different things to sell.

Too often, innovation debates focus on new products, particularly ones with superior
technology. But as Alexander Osterwalder, who devised the widely used “business model
canvas” to help people frame their approach, points out, Nintendo’s Wii shook up the games
console industry with an inferior technology and a much better business model that attracted
casual gamers and milked revenues from game licences.

“Competing on products was last century’s competition; now you need to be able to compete
on business model,” Mr Osterwalder says. Even companies with long pedigrees of product
innovation, such as Post-it note maker 3M, now realise they could squeeze even more from
their business by re-examining the way they operate, too.

This is where an Uber-for provocation can come into its own. Mr Osterwalder uses Nespresso
to prompt clients of Strategyzer, the consulting company he founded, to think about how they
could shake up their systems. The coffee pods and machines were a product innovation for
Nestlé, for sure, but they were also a new model, based on recurring revenue and direct sales.

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Rethinking your business as though constrained by someone else’s model, can also be
fruitful. For example, what if you had to give away your most successful product? If only
newspapers had brainstormed that idea before it came expensively — and, for many,
catastrophically — true.

Even assuming you hit on an innovative new way of doing business, nobody can afford to
stick with it forever. To some degree, this has always been true. Sears, the retailer, started as
a mail-order company and only began building department stores when threatened by bricks-
and-mortar retailers in the 1920s.

A century on, though, the pace at which companies have to reinvent themselves is far more
rapid. Amazon — a Sears for the online age — is now experimenting with offline bookstores
and grocery pick-up hubs. Those innovations are founded on the original “everything store”.
Amazon Web Services, more radically, has developed into the fastest-growing and most
profitable part of the group, using the same technology but a different model for the sale of
computing power in the cloud, on demand.

“We could have stuck to the knitting. I’m glad we didn’t,” Jeff Bezos, Amazon’s founder, said
in his most recent letter to shareholders, while lauding AWS for adopting the same customer-
focused approach as the rest of the business.

As for Uber, it is a fast-developing study in the inadequacy of simply laying out an Uber-for
future and sitting back. Since it launched as a car-sharing service, the group has branched out
into parcel dispatch, food delivery and self-driving tech. It is running an evolving portfolio of
business models. Next time you are tempted to describe an idea as the Uber for anything,
bear this in mind: Uber itself is no longer just “Uber for” the thing it was once Uber for.

andrew.hill@ft.com

Twitter: @andrewtghill

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