Credit: Nicolas McComberUber’s roller coaster ride from ride-sharing pioneer to shunned bad boy should be a lesson to other disruptive startups: Fighting hard is good, while fighting unfairly loses you respect, customers, and perhaps your company.
“A company can fight hard against an entrenched industry like taxicabs. It can fight hard to get the rules changed,” says Rosabeth Moss Kanter, the Ernest L. Arbuckle Professor of Business Administration at Harvard Business School and chair and director of the Harvard University Advanced Leadership Initiative. “But showing outright disrespect by trying to go around all of the rules is not a particularly good idea.”
The resignation last week of Uber co-founder and CEO Travis Kalanick is the latest black eye for the company, which has stepped on many toes during its rise from scrappy startup to global giant. Its intense, take-no-prisoners management style has left in its wake a long line of unhappy stakeholders: regulators, competitors, drivers, customers, and even some partners.
Kanter, who wrote a case study on the company after featuring Uber in a recent book, hopes that Kalanick’s resignation will be the first step toward a comeback by the company. “I see this as part of the transportation model of the future,” she says. “I want Uber to succeed. It’s too important a concept to let it fail. I do think they have a chance to reinvent themselves.”
Uber’s wild ride
The company’s troubles have been numerous and well chronicled. They include arrogantly ignoring cease-and-desist orders from cities trying to enforce local business regulations, allegations of drivers attacking customers, and sexual harassment complaints from employees about the company’s high-testosterone, misogynistic culture. It didn’t help when, earlier this year, a video of the CEO yelling at an Uber driver went viral.
"I want Uber to succeed. It’s too important a concept to let it fail"
Strictly in terms of numbers, Uber’s steamroller strategy has paid off. Founded in 2009, Uber upended the worldwide transportation industry. By 2015, the company was providing rides in 311 cities and 58 countries, and the startup’s reported valuation was estimated at about $70 billion in 2017.
Consumers raved so much about the service initially that many public officials happily rewrote rules to allow the newcomer to take on entrenched cab companies. The love didn’t last, though, especially when Kalanick defied those same cities when they tried to enforce local laws or when Uber would start a service without municipal permission. (Uber argued it was a technology company connecting riders with drivers, not a transportation provider, and thus exempt from ordinances regulating limos and taxis. The company even allegedly built a digital tool that would alert staff when code enforcers were on the way.)
Kanter says the same disrespect shown for authorities on the outside seemed to seep into the company: “That external disrespect gets mirrored in an internal culture. It becomes every person for himself,” says Kanter.
Kanter says it was certainly time for Kalanick to go—and she’s hoping the company’s brash way of doing business falls away with him. She believes Uber is suffering from the same misguided thinking that plagued early technology startups in the 1990s.
“They said, ‘We’re different. Rules don’t apply. We’re in a new realm, and we seek total world domination,’” Kanter says. Most of those companies are no longer in business today.
Uber in the classroom
Uber’s hard-charging style won quite a few admirers, even among Kanter’s own students.
When she has taught her 2015 case study “ Uber and Stakeholders: Managing a New Way of Riding,” many MBA students and business executives in her courses argued that the company’s aggressive stance was necessary to create change. They pointed largely to the many satisfied consumers downloading the app and the company’s rising market valuation as proof that its business methods were justified.
“Many people argued that this startup sharp elbow style—in which the thing that the company was doing was so important that the rules didn’t matter—was seen as what you have to do because the entrenched interests are going to resist and regulators are too slow to catch up,” she says.
But Kanter calls financial results a “lagging indicator” of a company’s health. “They tell you what you’ve just done. They don’t predict the future. Culture is a leading indicator. Culture predicts the future.”
Repairing the damage
With Uber’s daily management now in the hands of 10 executives—and Kalanick remaining on the board of directors—the company faces immediate challenges: It must fill several high-level vacancies, smooth over relations with its 14,000 employees by cleaning up its workplace environment, and mend its sometimes-cantankerous relationship with its 1 million-plus drivers, who are independent contractors.
Besides, Kanter says, the company needs to rethink whether it makes sense to fight one controversial legal battle after the next—or work more on building allies. “The legal cost of dealing with all the problems Uber had is really high,” Kanter says. “Would you rather put your money in human resources, which is the basis for growth, or would you rather pay the lawyers?”
That’s why the company needs to find a leader who is a seasoned executive with a proven track record as a culture-builder and is intent on calming the chaos.
“They better find someone who isn’t concerned with building an empire. The person’s ambition or desire to get wealthy should not be at stake,” she says. “This person needs to calm everyone down and make some really big gestures to show what a responsible company they are, that they’re concerned about the future well-being of society, cities, drivers, women, every stakeholder.”
When it comes to its drivers, for example, the company has an opportunity to partner with government officials on policies to help workers in the “gig economy” collectively receive benefits—a move that would likely build a sense of loyalty toward the company that many of its drivers don’t seem to feel now.
“You have drivers who are angry and want benefits, and they’re not loyal to Uber. They’ll work [with competitors] and go wherever they earn dollars,” Kanter says. “Consumers aren’t sticky or loyal either. This is not sustainable.”
Lessons to be learned
Kanter hopes current and future business executives are learning a lesson from Kalanick’s fall from business stardom. As Uber’s problems have mounted in recent months, some of the same students who had sided with the company a while back have written to Kanter to say they have changed their minds and could now see the consequences of the company’s cutthroat approach.
"They better find someone who isn’t concerned with building an empire"
“It’s a great lesson in leadership and why culture is so important—more important in some ways than strategy,” she says. “It’s a cautionary tale.”
Kalanick may well walk away very rich, she says. But if your ambition is to grow something you love, being pushed out of your own company is not something you want to be known for.
“You want to be known for building something great,” Kanter says. “If you’re not thinking about building your culture for survivability and sustainability, then you’re not leading.”
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