What Would Uber's Business Model Look Like if Travis Used the Lean Canvas?


The story of Uber is an amazing one. Where experience and knowledge brings great success. Don't be fooled though, with great success, comes great changes along the way. Little did Travis Kalanick know, how this would turn out.

Source: Uber

In my latest lectures, I use Uber as an example to illustrate the lean canvas. I figured it's time to dig deep into Uber's written history and put things right.

So here goes.

First, a refresher of the Lean Canvas which I'll use as a guide for the break-down.


Back to the Future
Okay, so we have a Delorian and Marty McFly lives around the corner from our house. Perfect!

Let's turn the dial back to late 2008, reach 88 miles per hour (142 km an hour) :-) and watch the magic happen. Whenever I say this line in my head, I get a huge grin on my face... you know what I mean.

It's a cold and rainy night in Paris in the late 2008. Two entrepreneurs visiting the LeWeb digital innovation conference sat together until 5am bouncing ideas on what should be the next big thing. These guys were Garrett Camp and Travis Kalanick.

Garret co-founded StumbleUpon - a website/content discovery platform, bought by Ebay in March 2007 for $75m dollars. Travis founded Red Swoosh - a P2P (peer to peer) client-side platform, whicwh was sold sold to Akamai in April 2007 for $20m.

Garrett's great idea was to try and fix the taxi problem in San Francisco.


Uber's FIRST Lean Canvas

1. Problem
Passengers
Getting stranded on the streets of San Francisco
Hailing a cab with your hand
You have to stand outside, rain, wind, snow, sleet
Calling a taxi dispatch requires waiting 20 minutes
Lots of friction and time wasted making a cab transaction (cash, no credit card etc)

Drivers
Drivers are often out of work
Relying on a centralized dispatch for customers

2. Customer Segments
Passengers
Passengers who likes to travel in style
Comfort is important
Convenience is critical

-- Early adopters --
Tech scene people (entrepreneurs, investors, advisors, start-up employees etc)
* Reasons: (1) Leverage the network effect in the launch city (San Francisco), (2) Fueling word of mouth growth through the Bay Area early adopting techset

Drivers
Average cab driver in the Bay Area

3. Unique Value Proposition (USP)
Passengers
Roll in style, comfort and convenience


Drivers
Additional source of income
Reliable ordering and transaction services

4. Solution
Passengers
A limo timeshare service called "UberBlacks"
An iPhone app for ordering limos
An Android app for ordering limos
An SMS ordering service
A Website

-- Top features --
Charging via CC
Driver rating
Mileage tracking
Trip history

Source: Yahoo

Drivers
An iPhone app for receiving orders and fullfilling them
An Android app for receiving orders and fullfilling them

5. Channels
Passengers
Founders friends
PR
Sponsoring tech events
Free rides for VC event attendees (they are highly likely to share their experience with tech friends)
Early adopter blogs
Early adopter social media

Drivers
Direct sales
Word of mouth

6. Revenue Streams
Passengers
Cost per ride ($8 base rate, $5 additional for every mile, $15 minimum)

Drives
% of fare

7. Cost Structure
Wages (GM, CEO)
Technology and infrastructure (App, web, SMS: maintenance)

8. Key Metrics
Daily active riders
Total daily rides made


9. Unfair Advantage
Founders are successful entrepreneurs (each had exited a company)
Access to immediate funds (via founders)


Conclusion
If we model Uber's idea using the Lean Canvas, we see a very simple solution to a very common need / problem. This first iteration of the canvas is of course the first version. What is required now is to continue drilling down deeper into specific niches and sub-segments and refine the solution and proposition accordingly.

One additional thing to point out is that the canvas is a tool for modeling Business Models. Obviously, there might be several business models, and if we look at uber.com today, we can see a variety of models addressing different needs for different segments. But you have to start somewhere.


Go-To-Market Strategy
Let's now reverse engineer the go-to-market strategy Uber followed to reach where it's at today. I'll start off with what I call "From Phase 0 to Phase 1". Phase 0 refers to day 0 of the creation of the start-up and phase 1 refers to the launch day of the newly tested and qualified product or service.


Phase 0 - Planning
In this phase, it's essential to truly test the following four building blocks. The pilot will only end when these 4 building blocks are determined.

1 - There is a real problem or need
2 - The product or service solves the problem or provides value to a need
3 - An attractive market exists (profitable, growing, big enough etc)
4 - Key business model components are proven (e.g. monetization / pricing etc)


Phase 0 - Testing (Pilots)
A key component of Phase 0 is the testing of multiple use cases. These tests are often called Pilots. Pilots exist to define, develop and refine early-stage products or services to better understand their position in the given market and to mature the product towards the official launch of the product. These multiple pilots are often referred to as part of the Lean Startup method.

Test #1
The first test was conducted by both founders in San Francisco. They split the costs of a rented Mercedes S Class car with a driver and a parking spot in a garage. They drove around, 'faking' the real product.

The goal was to determine the probability of the main Hire a cab via your phone use case.

Test #2
This test was conducted on a tiny, controlled niche in New York city. The test included 3 cars cruising 3 areas in NY (SOHO, Chelsea and Union Square). Both the product's key features and the pricing were tested.

It is also important to note that Uber employs a fixed 6 weeks pilot period which they used consistently around the world before officially launching in a new city.

-- The test timeline --
- March 2009, Garrett Camp, the co-founder with the idea, started working on a prototype
- August, 2009, Travis joins as chief incubator - responsible for taking the idea from product to prototype
- January 2010, test run in New York: 3 cars cruising 3 areas (SOHO, Chelsea, Union Square)


Phase 1 - Launch
The launch was scheduled for May 31st in San Francisco. To manage the launch and the ongoing operations during phase 1, Travis hired a General Manager. During the launch, additional marketing tactics were tested and discoverd. They are outlined below.

Source: TheNextWeb

During the launch phase, acquisition metrics are carefully monitored as it's the most critical success factor for this phase. In Uber's case, they tracked the effects of WOM (word of mouth marketing channel) and found that every 7 rides generated 1 wom user (14.3% WOM acquisition).

In addition, they were able to categorize WOM 'accelerants' (as Travis calls them). These accelerants are based on specific life events and locations which accelrates standard WOM. Examples:
* Restraurants and Nightlife - Hit the 'Uber' button at the end of dinner to get home safely
* Weather Events - when you don't want to be outside (in heavy rain - 1 new rider for every 3 rides)
* Sports Events - getting out of an event is impossible

-- The launch timeline --
- March 1st, first day of Ryan Graves, the newly hired GM (found through Craigslist)
- May 31st, 2010 - Official San Franciscolaunch

-- Launch stats --
December, 2010:
3,000 to 6,000 users
10,000 and 20,000 rides (Key Metric)
1,000 active riders (Key Metric)


Phases 2 Onwards - Growth
When a company successfully completes phase 1, which includes establishing the company in the target market with a defined product and a defined offering, the focus shifts towards growth. Uber's growth was focused on international expansion as quickly and effectively as possible. Here's their timeline:

Aug 2009* - $200k Angel investment by founders
Oct 2010* - $1.3m
Feb 2011* - $11m
Dec 2011* - $37m (international expansion)
Dec 2011 - Paris
Mar 2012 - Canada
July 2012 - London
Sep 2012 - Australia Pilot (6 weeks)
Nov 2012 - Australia
Jan 2013 - Singapore
Aug 2013* - $258m (thru Google Ventures - expedited international growth)
Aug 2013 - Seoul
Oct 2013 - Capetown Pilot Started (6 weeks)
Sep 2013 - First sports deal (NFL safe rides for players)
Sep 2013 - Johannesburg, SA
Oct 2013 - Capetown
Jun 2014* - $1.2b
July 2014 - Beijing
July 2014* - Nationwide UberX rollout in India
Aug 2014 - Bangalore, India
Aug 2014 - Warsaw, Poland
Oct 2014 - Montreal, Canada
Nov 2014 - Denmark
Dec 2014* - $1.2b (Qatar Investment Authority)
Dec 2014* - $600m (Baidu - Alibaba)
Jan 2015* - $1.6b (Goldman Sachs)
Jan 2015 - Nairobi, Kenya
Feb 2015* - $1b


Fascinating journey isn't it? :-)

Stay tuned for more insights.
Unknown Start-up business model and go-to-market expert

I lecture on Business Model Canvas (BMC) and Lean Canvas at StarTau - the entrepreneurship center at Tel Aviv University. I'm also an active mentor at The Hive - a start-up accelerator in Tel Aviv.