Since innovative developments in technology started changing virtually everything we do, the word disruption has been used more than ever.
For established business models that have been around for decades, the threat of these new innovations has been responsible for their demise or for dramatically reducing their market share.
However, because these businesses have been around for so long, their political clout and place in society has allowed them to go after their competition in a manner that could be described as heavy-handed at best, and draconian at worst.
One of the companies facing the wrath of an established industry, taxi service, is Uber.
The arrest of Uber France CEO Thibaud Simphal and Uber Europe GM Pierre-Dimitri Gore-Coty shows how far the backlash can go. They were taken into custody after being charged with running an illegal taxi operation and concealing digital documents.
Based on this and other issues, UberPOP (the designation for the company’s service in Europe) has been suspended. The company awaits a court decision.
While customers appreciate the convenience the company provides, traditional taxi drivers have been up in arms, quite literally. UberPOP drivers in Paris were attacked and their vehicles were vandalized as the French police watched the whole incident. Eventually the events led the company to the decision of suspending services to ensure the safety of their passengers and drivers.
Uber has also asked the European Commission to investigate whether restrictions on its service in Germany currently violate the law.
Taxis have been around since the 17th Century when horse-drawn carriages started providing services in London. With such a long history, it has become ingrained in our culture. So the innovations Uber is introducing to the industry have not been welcomed by taxi drivers around the world.
Uber was founded by Travis Kalanick and Garrett Camp in 2009 to introduce a more efficient transportation service. The company’s app uses GPS to detect your location and sends you the nearest driver. The cashless system automatically takes payments from your credit/debit cards. It then lets you choose the type of car you want. And it does all this at better price points than regular taxis.
So the question now becomes, does the creator of a truly original business model run the risk of being arrested if it causes major disruptions?
In the case of UberPOP and the French government, the answer is yes. And the long term prospects are negative all the way around. True innovation can be stifled. Investors can be discouraged from funding companies in countries where these types of actions can take place.
For companies like Uber, with valuations of tens of billions of dollars, fighting unions, governments and other competitors is possible, but not so for small businesses.
Small companies that have groundbreaking solutions in the pipeline have to take into consideration the same possibilities Uber is facing. Making concessions to the risks they face can negatively affect the products and services they introduce in the marketplace.
The 2015 edition of the Global Risks report by the World Economic Forum (WEF) highlights (PDF) two very important issues. These can be seen as threats for new technologies. They are the interplay between geopolitics and economics and the governance of emerging technologies.
According to the report:
“This threatens to undermine the logic of global economic cooperation and potentially the entire international rule-based system … Oversight mechanisms need to more effectively balance likely benefits and commercial demands with a deeper consideration of ethical questions and medium to long-term risks.”
The pace at which technology is being developed is getting faster. This not only risks existing economical infrastructures that have been in place for a long time. It also jeopardizes the innovators creating these technologies if regulations are not in place to protect them globally.
So the problems Uber is facing are just the beginning. But they could be even worse for your next groundbreaking startup.
Behind Bars Photo via Shutterstock
Nick
I’m an entrapeuner, firm believer in taking personal responsibility, have worked more than my fair share of 24/7 weeks, and enjoy disrupting markets/exploiting weaknesses. Think of that as you read my comment.
I’m tired of fear mongering… 99.9% of small businesses won’t get hit with this type of litigation and their founders certainly won’t get arrested (unless their biz model is something like silkroad). Also, when an innovative business scales to a billion dollar valuation and then gets hit with serious litigation, there’s still PLENTY of profit to keep the founders and their families wealthy for generations.
I’m not saying Uber’s model is inherently evil or that innovation is bad. The issue is the precedent it sets: massive corporations using majority contract labor with zero assistance. For Christ sake, if your company is worth $10 billion and the majority of your production workforce is investing a substantial amount of their own personal capital (car, gas, repair payments, etc.), at least give them a merrit based stock option.
I have no sympathy for companies like Uber that masquerade their obvious attempts to limit their liability (using contractors) as some sort of “free market gift” that the world should be thankful for. Eroding workers rights and benefits at a time when the wealth gap is at 1920’s levels is starting to make these guys look like the robber barons.
Massive tech companies need to start being looked at in the same way massive banks are: skeptically.
Michael Guta
Hi Nick,
More than fear mongering it is a cautionary tale. I will give you 99 percent of small businesses won’t face the same litigation as Uber or even have their official arrested; but what if you disrupt a market so completely the industry in question and government comes after you to shut you down?
Regarding the VC environment responsible for creating Uber’s astronomical valuation. It is the system that is in place, and no matter how much you and I might disagree with it, there are to many people making a lot of money for it to change anytime soon.
This is dump! Let the free marked decide. I remember when it was one state owned taxi “company” in Sweden. You called to book a cab, and you got this message: “Please wait in line…”
It is typical that French bureaucrats are trying to stop an innovative business model…
Michael Guta
Hi Martin,
I agree, free market is the way to go.
Kip Marlow
This just one of thousands of advanced private sector ideas that get thwarted by entrenched and backward government bureaucrats. Until people of the world wake up and understand that government retards freedom and prosperity they will wallow in economic mediocrity. Greece anyone?
Michael Guta
Hi Kip,
The inefficiencies of bureaucracies are well documented, far to many examples to list here; Greece being one of them. Even though I wholeheartedly believe in a free market place, I also see the need to reign in those that don’t play fair. Finding the right balance is key.