Posts Tagged ‘taxi’

Uber’s app lowers barriers to formalization for unorganized taxi industry in Kenya

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Nairobi Taxi stand, Kenya. February 2016 (photo: Niti Bhan)

This interesting article in the Kenyan news made me think about the role that an app like Uber could play in markets where there’s a high proportion of informal & unregulated business activity.

As with much technological advancement, resistance comes with change. Mpesa and the internet were once thought to be passing fads and have later changed industries. Uber’s disruptive strategy strayed from the normal operations in the local taxi industry. However, its benefits cannot be slighted. The app organizes the industry while creating a registry of taxi operators complete with their personal details and revenue earnings.

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Deal with the local taxi organization or the app. Under the current laissez-faire model, the taxi associations are unregulated with the government unable to protect the consumers. Uber has stepped in to shape an unstructured industry into a formal operation.

What’s really interesting here is that same elements of the sharing economy that disrupt the more structured, formal markets in the industrialized world, are those that could provide structure and organization to the chaos of the cash based, informal sector in the developing world.

In effect, the gap between teh formal and the informal required something that could provide flexible, negotiable business models and organization structures in order to bridge effectively. Prepaid business models are one that work for the informal sector’s cash flows but they don’t provide any facility for an industry to organize – here, taking the necessary elements of flexiblity, negotiability, and reciprocity one step further into an app, the Uber solution offers information neatly captured and accessible at your fingertips.

Emerging Markets Competition – this time its technology

Around twenty years ago, when the Indian and Chinese markets first opened up to global brands, many were surprised to discover domestic incumbents were stronger than they had imagined.

Proctor & Gamble’s laundry detergents battled for the Indian housewife’s attention and share of wallet. It wasn’t just their usual competitor Unilever either but indigenous upstarts like Nirma, who’d carved out the low price category all by themselves.  Other FMCG brands faced varying degrees of pressure, with a wide variety of outcomes, some of which still haven’t settled down. Even Coca Cola, the planet’s favourite refreshment, wasn’t immune to the local preference for Limca and Campa and Thumb’s Up.

Now, as the African emerging markets similarly capture global attention, there’s a new trend in pushback. Uber’s Nairobi entry hasn’t been unchallenged, as local apps leverage their greater local knowledge of the way things work. Ben Bajarin has already noted that in each of the major emerging markets of the developing world, its local incumbents in e-commerce, apps and hardware who take the lead.

Being overlooked for decades as a serious market seems to have had the same effect in the key sub Saharan economies as being closed off from the outside world had on the Indian and Chinese markets. Local solutions have grown and flourished. Market entry will not be a cakewalk and its a dangerous assumption for new entrants to make.

How can I end this short note without mentioning MPesa, Kenya’s inimitable and ubiquitous mobile money transfer system? Mobile payments have overtaken credit cards as the preferred cashless mode for transactions.

Technology is the new consumer product.