From Uber losing the right to class its UK drivers as self-employed, to Karhoo going bust, it’s been a bad few weeks for taxi apps.
The two stories are of course very different: while Uber lives on to fight another day – not to say several rounds in the appeal courts, Karhoo is no more, leaving investors, suppliers and over 200 staff out of pocket. It’s easy to dismiss these twin developments as teething troubles in an emerging market.
Yet they raise important three reputational issues for the sector’s consumers, employees and investors:
Cabs are a commodity: passengers want to get from A to B quickly, conveniently, safely and cheaply without thinking too deeply about their choice of cab company or taxi apps. To date, entrants into the taxi apps market have rightly focussed on delivering a great digital and user service.
Monochrome Uber, which transformed consumers’ relationship with taxi hire, is still seen as “cool”, especially by users downloading it for the first time. Meanwhile colourful Karhoo emphasised the fact it allowed consumers to safely compare and book local cabs online to ensure they got the best deal.
So far, so customer friendly.
Yet the recent spate of negative headlines about both companies risks forcing consumers to think more deeply about their choice of taxi apps going forward.
Is Uber that cool if it’s deemed to be denying workers basic employment rights?
Is it worth downloading a new Karhoo-type taxi app or will that be another six-month wonder, leaving a trail of debt in its wake?
Culture and values are important because, as consumers, we generally prefer to spend money with likeminded organisations – hence the importance of the fair trade movement and the enduring popularity of small independent businesses.
While the Uber ruling and Karhoo going bust are unlikely to change consumer behaviour overnight, there remains a gap in the market for a taxi app that combines a great user experience with a company whose values consumers can buy into.
Whether it’s a scheme giving drivers a share in the profits, or which also delivers groceries to the elderly, in the future consumers may decide they want an ethical as well as a coolly convenient dimension to their taxi app choice.
Reputational issues don’t just impact consumers’ perception of a brand; they can also affect recruitment. Millennials for example are attracted to employer brands they admire as consumers. However, it’s a well-known trend within recruitment that candidates – especially top quality talent – tend to reject the chance to join start-ups and businesses that have a negative press, in favour of less controversial organisations.
In a recent PWC Millennials at Work survey over half of respondents said they would avoid working in a sector if it had a bad reputation. Gig economy brands – Uber in particular – have revolutionised the idea of “work” replacing bureaucracy, hierarchy and uniforms with flexible hours and the lure of (apparently) being your own boss.
Regardless of whether Uber and companies like it end up legally defined as employers or not, they still need people to work for them. Yet the bad publicity surrounding Uber and its drivers suggests businesses in this space haven’t given enough thought to the strength of their “employment brand” and how attractive it is to future workers/employees.
The Uber ruling looks set to be a game-changer for any gig economy type brand whose business model relies on classing workers as self-employed as a way around employer responsibilities and costs and may make it harder for new entrants to get off the ground.
Meanwhile Karhoo’s approach to its business model borders on spoof startup territory with misleading reports that it had raised $250m – recently denied by chief executive Daniel Ishag – and the ludicrous decision to offer hundreds of pounds of free rides to users.
Going forward, improved corporate governance is required to ensure that reports of profligacy and poor decision-making circling Karhoo, don’t deter future investors from funding taxi apps or even the UK tech sector as a whole.
When it comes to Uber, rather than spending time and resource challenging employment tribunal rulings, why not work out a way to disrupt the market, deliver a great service, make money and be a best in class employer?
These issues need to be resolved, as if anything the ride hailing market is expected to become even more disrupted with a much greater range of apps on offer.
In this context, companies that boast a great workplace culture and a business model based on values that resonate with consumers, employees and investors, are most likely to survive and thrive.
Alex Pavlou is the founder of Bamboo Crowd, a talent and recruitment destination for innovation, strategy and design.