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Uber Is Finally Growing Up

Tim J. Smith

When Dara Khosrowshahi left Expedia to take over for Travis Kalanick as CEO of Uber, he assumed responsibility for resolving a series of potentially fatal business missteps, maintaining high growth, and preparing the company to go public. Uber was in the crosshairs of governments, competitors, employees, and customers, with many questioning its morals.

For most, this would have been career suicide. For Khosrowshahi, it has been an opportunity to demonstrate that moral courage and strategic tradeoffs can drive improved performance. In doing so, he broke past corporate norms and brought reform in three key areas.

Respecting regulators

Khosrowshahi’s approach to addressing government challenges is typified with his handling of London. In September 2017, shortly after Khosrowshahi assumed the helm, London canceled Uber’s operating license, citing inadequate working conditions and failures to report sexual assault. By June 2018, Khosrowshahi had provisionally convinced the courts that Uber was turning over a new leaf, winning a conditional license to continue operating for 18 months.

The director of licensing for London’s transportation agency seemed pleased with Uber’s new tack, saying during the hearing that the licensing process “certainly works better when an operator is asking permission rather than seeking forgiveness.”

Another instance of the new CEO’s change in tack is the company’s changed stance on UberPOP, essentially a low-cost ride-hailing option in Europe similar to UberX in the U.S. Over the last few years, European countries like Spain and Germany banned UberPOP, arguing that it illegally used non-professional drivers.

Now Uber has taken a more compliant position, dropping its appeal to restore UberPOP service in Germany and planning to initiate a new UberX service in Barcelona with licensed drivers. Uber’s director for Southwest Europe acknowledged the company’s previous mistakes in a blog post accompanying the latter announcement.

“We are changing the way we do business,” he wrote, “putting integrity at the core of every decision we make and working hard to earn the trust of the cities in which we operate.”

Even when it comes to flying cars, Khosrowshahi has declared Uber will “play by the rules.”

Co-opting competitors

Uber has taken a similarly non-combative approach with its industry cohorts. In February 2018, Uber settled a lawsuit with Alphabet, Google’s parent company, over allegations that Uber had stolen autonomous vehicle technology developed by Waymo, another Alphabet subsidiary. Uber pledged not to use Waymo’s autonomous vehicle technology, gave Alphabet a 0.34% equity stake in Uber, and expressed regrets over how the situation was handled. Settling the suit was a great move, as it quelled bad press and distraction at a time when many other issues need to be addressed at the company.

Such de-escalation is also visible in Uber’s approach to competitors in foreign markets. The company strategically retreated from Southeast Asia and Russia in exchange for equity stakes in competitors Grab and Yandex, respectively. Uber continues to compete in Brazil and India, but this kind of a strategic decision-making demonstrates that Uber is no longer focused solely on growth and world domination. It may even be finally focused on profits.

Getting the house in order

Other changes may be less noticeable outside of Silicon Valley, but are nonetheless significant in creating a company that will endure. Uber suffered from Silicon Valley’s immoral “brogrammer” culture, where a blind eye was often turned to sexual harassment and racial discrimination, and arrogance and winning at all costs ruled. The inattention to creating an inclusive workplace resulted in only 36% of Uber’s worldwide employees being female as of March 2017. In addition, only 15% of its technical team were women.

Khosrowshahi was well aware of the challenges of diversity in technology from his time at Expedia. He started to fix the internal culture by soliciting feedback from Uber employees. Two dozen employee focus groups, 1,200 submitted ideas, and 22,000 votes later, he scripted a new set of cultural norms. Now, instead of encouraging stepping on toes, Uber has adopted mantras such as “We do the right thing. Period,” “We celebrate differences,” and “We value ideas over hierarchy.” Changing the language of cultural norms is a positive step toward changing Uber’s culture itself.

Along with cultural change, Khosrowshahi has also cleansed the executive ranks. The chief of human resources, chief product officer, and several others departed in the last year. Overall, of the 16 executives running Uber when Kalanick left, only seven remain at the company.

What’s next

Khosrowshahi has had an auspicious start at Uber, but his reformation is incomplete. The goal of a level playing field for women and minorities in technology remains distant. Uber’s challenges with regulators are not fully resolved; earlier this month, New York City voted to freeze the distribution of new ride-hailing vehicle licenses for one year while it studies traffic congestion. And Uber must address the fast-moving competitive frontier in transportation, from autonomous vehicles to electric bikes and to autonomous flying machines.

We can take hope in Khosrowshahi’s own words. In February 2015, while he was still head of Expedia, Khosrowshahi wrote on LinkedIn, “Taking big risks combined with having a team you believe in and that believes just as much in you as a leader make for long-term wins even in a game of inches.”

Tim J. Smith is the founder and CEO of Wiglaf Pricing and an adjunct professor of Marketing at DePaul University, and the author of Pricing Done Right.