How Uber and Lyft Disrupt the Establishment
- Jason Galliger
- On June 12, 2014
With the rise of technology, a new class of entrepreneurs has emerged known as disruptors. Their sole purpose is to take on existing industries with innovative business models that shake things up. Two of these companies are Uber and Lyft, which are looking to disrupt the taxi industry.
Founded in Silicon Valley, both Uber and Lyft rely on a smartphone app to connect users and drivers together. Uber offers a range of vehicles from its cheaper, fuel efficient UberX to its Black Car SUV, which is akin to a limo service. Lyft offers just one vehicle option, which is equivalent to UberX. The only difference is that Lyft vehicles sport a large pink mustache, a nod to Lyft’s San Francisco heritage. As the demand for their services have grown, Uber and Lyft have engaged in an aggressive (and potentially unethical) business rivalry, similar to something you would see on “Game of Thrones.”
Uber was recently valued at approximately $18.2 billion, with its latest funding round bringing in over $1.2 billion in investments. Lyft, by contrast, is valued at a little under $1 billion.
Despite their surging popularity, Uber and Lyft have faced some setbacks and criticisms.
The Virginia DMV recently released a statement saying that Uber and Lyft’s activities are both illegal under current Virginia law. However, both Uber and Lyft have been working with the state to create a new legal framework that will allow operation. Since the announcement, both companies have announced that they will continue to operate in the state, despite risking fines.
Virginia isn’t the only state to take issue with the companies. Both Uber and Lyft have faced accusations that they are operating illegally in Texas, Washington D.C., Chicago, New York and other cities.
The criticism isn’t just domestic. Since launching in London, Brussels, Paris and other large European cities, there have been massive strikes and protests against Uber. Protesting cab drivers have even attacked Uber riders in Paris.
The argument by both international and domestic taxi drivers is the same: traditional taxi services usually have to abide by heavy regulations and pay high prices per month for operating permits. Uber and Lyft, as disruptors, hinder this process because their drivers technically don’t have to measure up to the same standards, tests and scrutiny. In addition, Uber and Lyft’s business models fall outside of many existing legal frameworks. This presents an interesting challenge for lawmakers who have to scramble to construct a framework all while demand for the services continue to rise. Ironically, after facing protests from London’s black cabs ridership demands for Uber rose to 850%.
Making matters even more complicated is that both Uber and Lyft see themselves as technology companies, offering an app that connects drivers to consumers, rather than a taxi or transportation service. Both companies also take pride in their roles as disruptors claiming that their services are turning the stodgy taxi industry on its head, forcing lawmakers to reexamine decades-old laws and, most importantly, providing a cheap competitive service to consumers.
With demand rising and profits soaring, it’s unlikely that Uber or Lyft will go anywhere any time soon. Even if they operate in a grey area of regulation and face potential backlash from a traditional industry both here and abroad, the benefit for consumers is too great. By offering a competitive service, these disruptors have already forced the industry to adapt. For example, here in D.C., Uber and Lyft have forced many traditional taxis to have credit card machines in their cars. It’s a small but monumental change for people in the District.
Only time will tell what other changes Uber and Lyft will bring to the industry.
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