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Preventing the “Uber risk”: Managing App-based startups in the sharing economy

 Uber's public scandals and its spreading business, legal and financial consequences showcases dramatically the importance of grown-up, well-balanced management at the helm of fast-growing high-tech startups.

 

Uber's plight illustrates the challenges and of growing App-based startups the shared economy. Using the Uber's case and the experience and research produced during the past 15 years at the Performance Improvement Institute, our new article shows new models and tools to manage App-based companies in the sharing economy, reduce risks and increase benefits for all stakeholders.

 

Using management programs  specifically designed for the new realities of the shared economy and App-based tools that reflect and help the App produce positive benefits for all its stakeholders, App-based new enterprises can avoid Uber-like crises, help the unemployed rejoin the economy with well-paying, independent jobs and create shared wealth.

 

 

For those following the news coming from Uber[1], its contradictions can’t be more paradoxical. On one hand, the company seems an unparalleled success, rising in just eight years from startup to a 70 billion dollars-market cap[2] by introducing a clever and helpful ride-sharing App[3]. On the other hand, Uber's top management looks like a frat house steering the company into a free fall of business scandals and conflicts with its own stakeholders[4].

One after another, social media exposed the abrasive management style[5] of Tavis Kalanick, Uber’s CEO. A YouTube video caught him losing his temper with an Uber driver and became viral, creating a PR storm.

 

Litigation spread in multiple fronts: from harassed employees and disgruntled drivers to district attorneys filing charges of corporate malfeasance and competitors suing over intellectual property rights. Forced by investors pressure, Kalanick and its entire top management team resigned, but the conflicts escalated and the company's future turned uncertain.[

 

At the Performance Improvement Institute[1], an international incubation and acceleration program affiliated with ISPI[2] and InBIA[3], we have studied startups for the past 15 years and come to identify certain patterns in new businesses' failure. Problems like Uber's  are not “black swans[4]” or consequence of some unknown Napoleonic personality virus, but signs of out-of-balance, toxic management models.

 

 Most high-tech entrepreneurs are good visionaries but poor organizers or jerky bosses (as the young Steven Jobs or Tavis Kalanick). Others are builders, passionate about products and processes but sometimes at the expense of business vision, like once dominant IBM and Microsoft or one-term President Jimmy Carter. Some entrepreneurs can be engaging and charismatic salespeople, natural politicians and "schmoozers", like President Clinton or GM's founder Billy Durant. "Schmoozers" tend to be poor organizers -like Clinton and Durant- and lacking of a long-term focus.

 

If we think the organization as a pyramid and the three dimensions as the proportions of its base, we can see that if our management model fails in some of the three dimensions, fast growth will only increase instability and risk.

 

 If the organization grows fast without "growing up" its management model to one that can balance business, organization and people's interests , chances are that they will end like Uber’s CEO yelling at the backseat of an Uber car for a viral video. At that point, it is already too late for anger management or coaching.

 

So, how can we prevent Uber-like crises?

 

Our MBI program helps entrepreneurs setup App-based management systems that help them self-evaluate against research-based standards and gather honest and specific feedback from peers, supervisors, clients and collaborators. The first stage og the MBI program is close and personal. Each entrepreneur must gain self-awareness about in all three dimensions in order to be able to manage him or herself.

 

We can summarize some key recommendations we have found critical for managing App-sharing business models:

  1. Think that a shared-economy business model goes beyond a single organization. It is part of a complex value chain in a business ecosystem. Map the value chain stakeholders and set metrics to make sure your model creates value -or alternatives-for all of them.

  2. Include a performance scoreboard in your App that collects 360 feedback and has an aggregated double bottom line[1] performance dashboard. This "back office" side of the App can help managers to keep balance on real time the company's performance with regard to different stakeholders such as:

    1. End users (B2C): riders, renters, customers in the "gig" economy that work with your App. Measure things such as:

      1. Sustainability: is working with your App better than competitive alternatives?

      2. User experience: are the App features and service valued by the end user?

      3. Benefits / savings end user makes

      4. Qualitative feedback (comments, ideas, summaries)[2]

    2. Partners (B2B): drivers, asset owners, "offer" in the shared economy that work with your App. Measure things such as:

      1. Sustainability: is the revenue adequate and sufficient to keep partners engaged? Is their ROI and business case working for them?

      2. Turnover, churning, transfers to competition

      3. Qualitative feedback (comments, ideas, summaries)[3]

    3. Shareholders: angel and venture investors can check in real time the "organic" growth and health of the core business. Other stakeholders like the drivers or homeowners can also appreciate such transparency.

    4. FANG value chain: these are the multiple organizations involved in the App's service -logistics, materials, marketing, payments and so on)

This graphic summarizes the conceptual design of our App Performance Dashboard or APD™

 

 

Figure 4: Multi-stakeholder, double bottom line performance dashboard App (APD™)

 

 

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