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The tech sector has shaken up innumerable industries, and whenever that happens, some enterprising types wonder if there’s some opportunity in helping established players stave off the inevitable. But beating back the forces that threaten to destabilize their businesses is even harder than it looks, and few succeed.
The taxi industry is no different. Would-be tech partners and investors sometimes ask me if they should design for, or invest, in this industry. My response: It’s not as simple as just jumping in, whipping up an app for ye olde cabs, and then sitting back to watch it vanquish the new strain of competitors, like Uber.
Not that the industry doesn’t keep trying. Another high-profile attempt just emerged to conquer the taxi business’ arch nemesis. The upcoming Arro, like many of its predecessors, is an app for hailing and paying for taxicabs, similar to other ride-hailing companies out of Silicon Valley.
Partnering with cab companies can be tempting, since many have the resources to pay for a pretty app that apes those of Uber, Lyft and Sidecar. But there are issues fundamental to the taxi industry that make it hard to compete with Silicon Valley startups. In fact, every like-minded taxi app thus far has utterly failed to slow the rise of Uber, often completely shutting down shortly after launch. Here’s why.
Cars Are Capped, And Riders Are Impatient.
Thanks to apps like Uber, Lyft and Sidecar, user expectations are changing, as riders get more impatient. “In some cities, if users see the nearest Uber is more than even 2 to 3 minutes away, they are far less likely to request a car, while in other cities wait times as long as 10 minutes are perfectly acceptable,” Uber’s data team wrote in a blog post.
The longer Uber and Lyft serves a city, the less likely its residents will be willing to wait for a ride.
The taxi industry, by design, limits the number of cars on the road to maintain a stable income for drivers. (Too many drivers would reduce income on an individual basis.) The logical result is that riders have longer wait times. Meanwhile, one 2014 study found that 92% of ride-hailing cars arrived in under 10 minutes. Only 16% of taxis did.
Uber And Lyft Can Innovate Quickly
It’s one thing to design a fancy smartphone app; it’s quite another to be on the cutting edge of features and have all of your workers immediately adopt the changes.
Lyft is just $6 per ride nearly anywhere in San Francisco, thanks to its carpooling feature. New prices and features change pretty frequently in the Bay Area, as Lyft (and Uber) rapidly test out new pricing models to see what customers like best.
Taxis have a metered pricing system that’s overseen by various bureaucratic agencies. They just aren’t equipped to rapidly innovate.
Moreover, cab drivers seem to have difficulty getting their innovations to work, even when it finally rolls out. Last spring, I was asked to demo a new feature for San Francisco taxis from Flywheel, another smartphone app. It claimed to automatically recognize when a rider stepped into a cab, but the feature failed (multiple times). That was largely because the driver had insufficient technical training, and the app had difficulty integrating with the existing way that taxis operated.
Innovation means being flexible and connected, and as a developer or entrepreneur, you may have plenty to spare. But that doesn’t mean a would-be partner in the taxi business does. Government-controlled, unionized industries aren’t used to making innovation core to their business models, which is why Arro will have a tough time competing against—or working with—Silicon Valley.
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Lead photo courtesy of Shutterstock