Draft an essay outlining your recommendations for actions Uber can take to restore its reputation and without damaging its business model. Evaluate Uber’s response using William Benoit’s framework to describe how Uber addresses its several character issues.
William Benoit’s framework:
1) Denial
a) Simple
b) Shift the blame
2) Evasion of Responsibility
a) Acted after provocation
b) Lack of information
c) Accident
d) Good Intent
3) Corrective Action
4) Minimize the Offense
a) Bolstering
b) Downplay
c) Substitute motivation
d) Counter-attack
e) Compensation
5) Mortification
Uber Technologies: Wrongdoing And Corporate Reputations i1v2e5y5pubs W21064 UBER TECHNOLOGIES: WRONGDOING AND CORPORATE REPUTATIONS1 Gwyneth Edwards, Andrea Kim, and Michael Carney wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e)
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[email protected]. Copyright © 2021, Ivey Business School Foundation Version: 2021-01-18 In September 2017, Dara Khosrowshahi, was hired as chief executive officer (CEO) of Uber Technologies Inc. (Uber), with instructions to prepare Uber for an initial public offering (IPO) and repair the company’s internal culture and reputation.2 By the end of 2019, however, Uber’s past wrongdoings were continuing to haunt the organization. Khosrowshahi had to deal with ongoing legal issues related to driver classification and a new ruling in the US state of California that would require drivers to be paid minimum wage and receive sick days and health benefits.3 Uber also faced accusations by a former Uber manager who claimed that employees had engaged in questionable tactics to steal trade secrets.4 The public learned that Uber paid US$100,0005 to hackers to conceal a November 2016 data breach, which exposed the personal information of 57 million riders and drivers.6 In July 2019, Uber came under investigation by the US Equal Employment Opportunity Commission over accusations of gender discrimination.7 Later that year, Uber’s licence to operate in London, UK was revoked.8 Almost 18 months into Khosrowshahi’s tenure, the path to repairing Uber’s character reputation and struggling market value was still not clear. MARKET ENTRY (2011–2013) Uber was founded in May 2009 by Travis Kalanick and Garrett Camp. In 2010, the two founders launched the Uber iPhone mobile application (app) in San Francisco, California. Uber entered the New York City market in May 2011 as a premium car service company, priced higher than traditional taxis but similar to already existing black car and limousine services. The company worked with local limousine companies and owners of privately-owned vehicles. Their motto was to be “everyone’s private driver.”9 In 2012, Uber extended its services to include other concepts such as a lower-priced (than its premium) car service, a hybrid car service, a taxi service, and a sport utility vehicle service that targeted larger groups. Upon launching its premium car service, Uber’s innovative app-driven service offerings were well received: Once you sign up for Uber’s free app and enter your credit card information, you can call a car by opening the app and telling it your location. The system tells you how long the driver will take to arrive, and a map will show the car’s progress as it makes its way to you. The vehicles are particularly nice by livery standards; you do feel important when a black Cadillac Escalade pulls This document is authorized for use only by Kristopher Durham in Marketing in Transformative Helathcare - Fall 2021 at Wake Forest University Medical School, 2021. mailto:
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[email protected] Page 2 9B20M221 up to your stoop. There is also a feeling of camaraderie with the drivers, who act as though everyone in the car is in on a secret. The fare (tip included) is automatically charged to your credit card upon arriving at your destination, and you receive a receipt by e-mail.10 In a similar vein, Uber investor Shervin Pishevar of Menlo Ventures sang the praises of Uber’s premium service offering in the early years: “You can magically push a button and 120 seconds later a black car shows up wherever you are.”11 As Uber’s reach grew, more competitors emerged in the ride-share market. However, Uber took centre stage in the regulatory battles, given the positive public response to its new services and rapid market expansion efforts. Transportation regulators, senior city government administrators, city mayors, and taxi incumbents took swift action to terminate Uber’s operations, on the basis that the company was operating an unlicensed commercial transportation company. For example, Uber’s launch in San Francisco, California, with its premium car service offering (called Uber Black) was met with a cease-and-desist order and fines issued by the state’s Public Utility Commission. Efforts to ban Uber increased when the company extended its offering to include UberX, a service that was priced slightly lower than its premium car service but higher than taxis. Uber maintained its legality on the basis that it was distinct from both taxis and limousines: “Are we American Airlines or are we Expedia? It became clear, we are Expedia.”12 In New York, Uber’s entry into the yellow cab market generated a vibrant set of reactions by the city’s transportation regulators, city councillors, the mayor, and taxi incumbents. Taxi incumbents called into question Uber’s legality on the basis that it was a taxi company and was in violation of long-standing rules governing taxis, such as a ban on pre-arrangement. Avik Kabessa, a chief executive of a New York car and delivery service described Uber’s conduct as the “Wild West.”13 The NYC Taxi and Limousine Commission (TLC) was forced to determine how to embrace the emergence of new technologies, consistent with the city’s tech friendly image, while respecting the needs of taxi drivers: “I feel like I have a responsibility to listen to those people. These are people’s livelihoods. It’s no joke,” stated TLC’s commissioner Nora Marino.14 TLC’s chairman David S. Yassky, who remained consistently supportive of ride-share apps, wrote in an email that allowing new entrants would be “the policy choice most consistent with N.Y.C.’s image as a ‘tech-forward’ place to do business.”15 However, TLC eventually disallowed the app, at least on a temporary basis, citing existing payment processing vendor contracts that did not permit payment through smartphones. Although deeming the UberCab illegal, Mayor Michael R. Bloomberg’s office stated that “we are excited about taxi apps and working to make them legal soon.”16 A month after its launch, Uber announced that it would be withdrawing its UberCab service in New York due to an inadequate supply of yellow cabs, but that it would continue to offer its luxury black car services. In a post made on the company’s blog, Kalanick stated: Demand far out-stripped supply, making you feel pretty lucky when you got a yellow [cab] from your iPhone. We did the best we could to get more yellows on the road but New York’s TLC (Taxi and Limousine Commission) put up obstacles and roadblocks in order to squash the effort around e-hail, which they privately have said is legal under the rules. We’ll bite our tongues and keep our frustration here to ourselves.17 Uber’s market entry approach consisted of entering markets without regulatory approval, ignoring local officials who deemed the service illegal, continuing to operate, and managing regulatory issues only after establishing an active user base. Uber’s ability to overcome regulatory challenges stemmed from leveraging public support to petition local governments. This approach was described in the media as a “don’t ask for This document is authorized for use only by Kristopher Durham in Marketing in Transformative Helathcare - Fall 2021 at Wake Forest University Medical School, 2021. https://ourselves.17 https://Marino.14 https://e-mail.10 Page 3 9B20M221 permission, beg for forgiveness” approach.18 Uber launched its service in Washington, D.C. in December 2011. However, Ron Linton, the chairman of the D.C. Taxi Commission, perceived the ambiguity of Uber’s business model as support for the company’s violation of existing rules: Under the commission’s rules, there are limousines, which set a price with passengers in advance, and there are cabs, which have meters that charge by time or distance. He said Uber was breaking the rules by trying to be both. Uber calculates fares by time and distance, and then bills the customers’ credit card.19 With the city’s taxi commissioner deeming the service illegal, Uber drivers were taken on by the city’s law enforcement. In January 2012, a sting operation led by the city’s taxi commission issued tickets to Uber drivers. In an attempt to revise existing taxi laws opposing Uber, the Council of the District of Columbia discussed a legislative amendment that would fix Uber sedan fares at five times the minimum cost of cabs. Immediately following the proposed legislative amendment, Kalanick took to social media requesting that customers sign a petition and send emails to council members in protest. Over 37,000 tweets and 50,000 emails were received by the city council, resulting in the withdrawal of the amendment. Instead, council drew up and passed a new bill that formally legalized sedans like Uber’s and eliminated the minimum fare requirement. Kalanick revelled in the victory in Washington, D.C., stating that “[w]e brought real thunder in 18 hours. . . . We gave a lot of constituents a voice, people who would never have been heard before.”20 While Uber experienced sustained attacks on the legal status of its business model and boldly disregarded