In a world in which disruption is considered the holy grail for fledgling companies, Uber is held up as a gleaming example. In many ways, rightly so, with the ride-hailing app all but killing off an age old taxi cab industry in just a few years. Disregard the backlash from private entities, taxi drivers, sectors of the public, as well as countless other scandals, and Uber’s business model has proved flawless in its ruthless expansion.
So successful has Uber been that its name has become synonymous with a peer-to-peer business model; disruption of this kind is ‘Uberization’, something Airbnb and Netflix, for example, have followed. But what then of the companies that follow the same previously disruptive model in the same industry? The concept of the ‘fast follower’ has grown (suitably) alongside that of the disruptor, with companies springing up in an attempt to mimic the predecessor’s success, ordinarily with a niche or better-priced incarnation of the product.
Lyft entered the fray as an extension of Zimride - a ridesharing service which catered for long distance trips. It was to be the established company’s on-demand equivalent within cities, and launched just three years after Uber’s 2009 entrance onto the scene. After some incredible funding drives - including a $60 million venture financing round completed in 2013 - and a series of offers designed to undercut Uber’s already lauded prices, Lyft has been in a position to genuinely challenge the giant for their unbelievable user base.
There’s a long-standing theory that the first mover in a disruptive market is not in reality the most likely to succeed. In fact, a first mover has a 47% chance of failure compared to just 8% for that of a fast follower. The discrepancy can be, in part, explained by the fact that any successful disruptor has not only found a model and industry that works, but has also introduced the notion to the public. Fast followers have a working business model to emulate, and Lyft have exploited Uber’s success well with a design immediately accessible to Uber users. But this can only take you so far - in July of this year, for example, Uber completed 62 million trips to Lyft’s 13.9 million. Clearly, the latter needs to innovate now or be consigned to second-best.
Where Lyft hopes it can next outpace Uber is, perhaps counterintuitively, those potential customers without access to a smartphone. Both have the younger generation cornered, and Uber has come out on top, so it’s no surprise Lyft are keen to market to an underexploited 36% of the US population. 70% of Americans aged 65 or older don’t have access to a smartphone at all, and most of the 30% that do ‘don’t use mobile apps like Uber and Lyft.’ Lily Sarafan, CEO of Home Care Assistance, said: ’These types of ride-sharing platforms developing partnerships or specific solutions for the aging market is part of a growing trend to make transportation more accessible for the aging population.’
Even so, it seems Lyft may have been too late to the party to properly challenge Uber’s dominance. A fast follower should be expecting to grow at a higher rate than their competitor, for if they don’t the gap between the two can only increase. From June 2015 to June this year, Uber saw a 15% increase in US trips, against just a 12% increase from Lyft. Trips don’t necessarily equate to profits, either. Lyft has been aggressively promoting its service in New York, with half price trips during the week and no commission taken from drivers. According to Fortune, ‘Uber has gained an extra 6% of the city’s ride-hailing market since then.’ This is just a one-city example, but Uber is now so synonymous with ride hailing that it seems very unlikely it’ll be toppled by any product less disruptive than its own.
Lyft is remaining defiant, though. In 2014, Uber tried to buy the startup but wouldn’t pay more than $2 billion, according to Bloomberg. The deal would’ve made sense - much like Uber China and Didi Chuxing merging earlier this year, Uber and Lyft would no longer have to compete for drivers and customers, and would have fewer reasons to lower prices. For now, it’s undeniably good that Uber has competition; CEO Travis Kalanick told the Economist: ‘It’s a really powerful thing for a company to compete. It makes you fierce about serving your customer.’ And that is just what Lyft will have to do if it’s to succeed in its autonomy: find a way of better serving the consumer.