Innovation leads to growth for all?

IMG_0135Taxi companies have been up in arms about the disruption to their business from Uber. Earlier this week, Deloitte Access Economics published a report that showed that Uber had grown the market in Australia by 61% (see below). We have seen similar impacts when Virgin and Jetstar were introduced in the domestic airline market. Often a market will have latent demand and so a lower priced disrupter will create growth way beyond what is expected.

So while it is understandable for the incumbents to be concerned about their business, more time should be focused on how the they will differentiate themselves from the disruptor.  In the taxi industry, the effort seems to be on trying to create a regulatory block, rather than developing a winning proposition against Uber.

I have been asking taxi drivers (booked through Uber) where their business comes from. At the moment, 1/3 is flagged, 1/3 called through the taxi cooperative and 1/3 through Uber. This is anecdotal but seems to support the Deloitte Access Economics research.

“Ride-sharing company Uber is generating annual benefits to Australian consumers worth more than $80 million a year, according to analysis by Deloitte Access Economics. Deloitte’s report, Economic effects of ride sharing in Australia, commissioned by Uber, showed uberX, the standard ride-sharing service offered by Uber, had grown the market for commuting to a specific destination via a third-party driver by 61 per cent as consumers switched from driving their own car, using public transport, walking, or were simply enticed to travel. Uber operates an app that connects drivers to users, processes fare payments and identifies drivers who are given a rating by consumers. Deloitte found the service was delivering an annual benefit of $81 million. Less than half, or $31.5 million, of the benefit was the result of cheaper prices, while $49.6 million was derived from a “consumer surplus”, or the amount consumers would have paid above the price charged for the service.”

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