Investors, first and foremost, are concerned with the value of a company. So make no mistake, Uber’s investors have calculated the company’s toxic culture..
So Uber’s blowhard-in-chief Travis Kalanick is finally out, out as CEO — after some of its most prominent investors put the squeeze on him to go (not just take a time out) .
Scandal after scandal has hammered the company in recent times, culminating in an external investigation into a corporate culture accused by a former female employee of being rife with sexism, aggression and inequality.
Kalanick’s aggressive style of management has been the Uber rule, not the exception — and arguably, setting aside the current slew of internal scandals, the company has been taking a more emollient approach, at least vis-a-vis business expansion. Working to change rules, for sure, but not always so publicly riding roughshod over them as it used to.
Although in private the underhand tactics have evidently continued.
Which does beg the question, why now? Why is Kalanick finally being pushed from Uber’s driving seat?
The short answer is because a toxic corporate culture has the power to kill a company stone dead by turning its customer base against it.
#deleteuber has been a very potent hashtag indeed.
Contrast that with the thrusting Uber upstart that was, revving its engines against regulators and able to enlist its own user-base as a lobbying army to help get its rubber on the road — messaging and mobilizing users to apply pressure to city authorities Uber slammed as bureaucratic and anti-innovation.
Petitions to ‘save Uber’ have, previously, garnered hundreds of thousands of signatures. The company even Uber-ed in its own users to pad out pro-Uber demonstrations in years past.
How times change. And how far the mighty can fall when they squander goodwill.
Investors, first and foremost, are concerned with the value of a company — because that will ultimately determine the value of their investment. So make no mistake, Uber’s investors have calculated the company’s toxic culture under Kalanick’s leadership is a risk to their long term investment.
Yes, it’s not just Kalanick who’s gone. There are a raft of changes being driven through the upper echelons of Uber. Prior to Kalanick’s resignation his controversial righthand man, Emil Michael, also departed — one of the recommendations from the external investigation.
More than 20 other Uber employees were also fired earlier this month, following the report. Others are still under investigation.
Meanwhile, Uber poached a female marketing lead from Apple for a new senior role: chief of branding. Repairing the company’s ‘fratboy’ image is clearly front of mind for board member Arianna Huffington, who was reportedly responsible for hiring in Bozoma Saint John.
“Boz has a long track record of successfully creating emotional connections between people and the products they love, ” said Kalanick in a statement about the hire earlier this month. “Her creativity and deep understanding of consumers will allow us to build the same love and appreciation for Uber’s brand as we’ ve built for Uber’s service.”
Having the (now ex) Uber CEO talking about “emotional connections” and “love” is about as far from Travis Kalanick 1.0 as it’s possible to get. Yet here we are.
Also recently coming in at senior level: another woman, Frances Frei, an academic from Harvard Business School, who takes up another new role: SVP of leadership and strategy.
The message from Uber’s investors is clear: aggressive tech bros out; responsibility, accountability, empathy and diversity in.
In Travis’ own words, Uber needs to “grow up”.
Whether this last ditch reboot comes in time to save Uber’s tattered and tarnished brand remains to be seen. But Uber’s investors clearly want the company to project a very different set of values — and view a radical shift in how outsiders perceive Uber as key to its future.
Sexism, bullying, inequality, lack of diversity, low empathy all are being judged as negative factors for ROI.
Looking beyond the immediate damage of a campaign like #deleteuber, there’s something else to consider for the long term: A big part of Uber’s perceived value has been attached to the notion that autonomous vehicle technology will enable the company to slough off its (human) driver cost-base entirely, i.e. not just by (as it does now) minimizing employment costs by using — some would say exploiting — low paid, ‘freelance contractors’ who do the actual work of driving people from A to B.
As far back as 2014 Kalanick has been saying Uber’s future lies in driverless cars.
“When there’s no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle. So the magic there is, you basically bring the cost below the cost of ownership for everybody, and then car ownership goes away, ” he said three years ago, when Uber was valued at around $17BN, and without apparently a thought for the thousands of “dudes” he planned on leaving in the dust down the road.
Uber’s most recent valuation is ~ $70BN — although it’s not clear what portion of value investors are attaching to its autonomous long term vision. (Also worth noting: some question whether Uber is worth half so much .)
Questions about the profitability of ride-hailing models are certainly being asked much more frequently these days. And while Uber’s business has been growing, with the company pulling in $3.4BN in revenue in the first quarter and narrowing its losses to $708M, it is still burning a LOT of cash. Uber’s route to profitability must at least be on the mind of its very long list of investors — who have packed its coffers with some $8.81BN over the years.
These investors sure don’ t want to see their money getting sucked into a toxic sinkhole.
One reason for the company’s backers to be asking more questions about its future profitability now is because labor costs are unlikely to do anything but rise in the short term — i.e. before it’s able to replace all drivers with robots.
Not least because lawmakers and regulators are paying closer attention to the gig economy — eyeing what are being seen as employment law loopholes.
And also because a proliferation of ride-hailing rivals are available at the switch of an app to lure away disgruntled Uber drivers.
Hence Uber finally adding tipping to try to keep its drivers happy — and, if we’ re honest, to provide a way to raise their financial remuneration (i.e. via customer largess) without having to increase how much it pays them.
While Uber trying to flip a future profit by raising the price of rides would of course risk an exodus of users accustomed to cheap Uber trips.
But — if you’ d bought into the big autonomous vision, as Kalanick painted it — those sorts of near term problems (and costs) standing in the way of Uber’s profitability looked set to evaporate over the long term, once the app could deliver shiny, driverless cars on demand, 24/7.
Or if, rather, Uber’s management could deliver on the autonomous promise.
The problems Uber has run into in developing self-driving technology are thus of huge significance for its investors. And there are problems aplenty.
At the end of last month Uber fired the person Kalanick brought in to lead its autonomous efforts, Otto co-founder Anthony Levandowski, who is now embroiled in a trade secrets lawsuit between Uber and Waymo, the Google-owned company where Levandowski used to work.
It’s not clear how the case will shake out, with the judge denying Uber’s request for a stay pending its appeal for arbitration earlier this month. In the meanwhile Uber’s efforts to develop self-driving tech are facing an obvious set back. That has to have been a big black mark against Kalanick’s judgement as far as Uber investors are concerned.
