Strategic Alliances and Mergers

Lyft has done a great job of acquiring and partnering with some key stakeholders. I'll list a couple of statements, so you can get a feel for their activity:

"We’re thrilled to announce that we’ve acquired Hitch, the ridesharing platform that connects multiple passengers traveling along similar routes. With this acquisition, Hitch co-founders Snir Kodesh and Noam Szpiro will join the Lyft team as we continue to expand personal transit to more cities across the country."

Also:

"After serving two markets in California, ride-sharing startup Lyft is getting serious about expanding into other markets. To do so, the company has acqui-hired the operations team behind Cherry, the on-demand car wash startup. And it’s got plans to launch in Seattle, making its service available there seven days a week beginning April 12.

The acquisition of Cherry comes as Lyft looks to add some operational experience ahead of its launch in the Emerald City and beyond. That means moving fast and getting into as many markets as possible. But it also means managing both supply and demand in whatever city the company launches service in."

The big dog on the block is of course Uber. There has been talk for a while of one of them buying out the other one. Its at a bit of a stalemate, with new companies trying to gain a foothold in the market. It's been an amazing ride (share) for Lyft, and I'm really excited to have been able to learn more about the company over this journey.

Strategic Leadership in Place

Some of the key team members have come from a Who's Who of the tech world.

Jesse McMillin, Creative Director (former Creative Director at Virgin America)
David Estrada, VP of Government Relations (former Legal Director at GoogleX)
Chris Pouliot, VP of Data Science (former Director of Algorithms and Analytics at Netflix)
Ron Storn, VP of People (former Senior Talent Leader at Facebook)

The company also has a strong track record of hiring well-qualified women;

"Lyft has no specific programs or policies in place for recruiting and retaining women, but that the company "works to create an environment that caters to all backgrounds and genders" and believes that "female perspectives are critical in shaping the direction, mission, vision, and values for a company built on trust and safety in each community."

"When we're talking about new ways of doing something, whether it's a new way of taking a picture, a new way of managing your finances, or a new way of getting from point A to B, there is an old way," says Wampler. "Getting the new way adopted is classic crossing the chasm. You don't cross the chasm because the same 10 people who always do the new thing just keep doing the new thing. You cross the chasm because you get to early majority, and that means a more diverse set of people whose perspectives drive better adoption."

The company has many awards its won for invention and marketing. It's key is the strong leadership its developed from within, while also not being afraid to make tough hiring choices when they need to.

Diversification

This post is going to be about another company that shows some ways that Lyft could actually diversify into other options for customers. They already have a fleet of drivers at their disposal, so why not find other ways to use them!

I want to showcase a company called PostMates. From on online newspaper:

"The concept of couriers is far from new. The idea traces back to America’s earliest roots, but Postmates looks much different than the Pony Express. Founders Sam Street, Sean Plaice and Bastian Lehmann founded the company in 2011 after realizing the logistics of moving goods around a city weren’t up to speed. There was no easy way to move something from point A to point B,” Postmates spokeswoman April Conyers said, “so they created Postmates with the intention of solving that problem.”

Conyers said the company has had “huge growth.”

The company has raised more than $22 million in capital so far, according to venture capital company Spark Capital. Conyers said Postmates has about 8,000 couriers in 22 markets. Conyers said consumer demand has fueled their success: “It’s the adoption of the on-demand kind of movement. Being able to get things when you want them is appealing.” Douglas Olsen, an associate professor at the W.P. Carey School of Business at Arizona State University, agreed and said he believes businesses like this have adapted to our culture.

“There’s no question that we have become a fairly impulsive generation,” he said. “We do expect things to the extent that we can get them now with fairly minimum effort. That’s something that we have certainly been gravitating to.”

I don't see why a company like Lyft couldn't maximize its efforts by letting its drivers respond to two types of calls.

Vertical Integration?

There was talk for a while that maybe Lyft should evolved into a type of vertical integration with its own fleet of vehicles that it could rent out to drivers. That way, drivers would feel more loyalty and not be tempted to drive for other businesses.

By not doing this, they have opened them up for another company to come in and take advantage of the missed opportunity. From a website call, the BillFold.com:

"Uber and Lyft drivers, as a rule, tend to show up in relatively new, very clean cars. That’s one of these car services’ selling points, after all: with Uber and Lyft, you won’t have to ride in a junky taxi where the air conditioning is broken and the upholstery is torn. But how do Uber and Lyft drivers afford these cars? Some, no doubt, already own or have access to these kinds of cars—but if you don’t, there’s a startup ready to help you, and it’s called Breeze.

Breeze rents cars to ride-share drivers. Or, as they put it: Breeze empowers job seekers by handing them keys to cars optimized for use in today’s on-demand ecosystem. The startup provides cars to drivers in San Francisco, Los Angeles, and Seattle, all for a $250 membership fee plus a $195 weekly fee. Drivers get 2,500 miles per month included; anything above that costs 15 cents a mile."

The math would be hard to work, but something like this would allow for another revenue stream

Tacit Collusion

Small Number of Firms in an Industry

"Tacit collusion depends on the sending and interpreting of signals of intent to cooperate."

Of of the big keys to the growth of Lyft was the inability for taxi companies to rally around each other to try to prince them out of the market. There isn't one taxi company in a given city, there are sometimes dozens. When an outsider came into the picture to rock the boat of their industry, they couldn't leverage any sort of collusion in pricing to move the needle.

According to an article in the International Business Times:

"Customers riding with Uber and Lyft will spend less than they would on the same ride with a taxi almost all the time, except in the hours that the transportation companies have surge pricing in effect. That’s the result of a new study from What’s the Fare, a site meant to help customers determine once and for all the best way to get around. The study comes after Uber and Lyft, themselves rivals, have spent years sparring with the taxi industry and local regulators over their right to ferry customers through urban areas. There are a lot of factors at work, the researchers concluded, so a customers’ best bet is to compare their options before ordering a ride. While collectively ride-sharing services are almost always cheaper than taxis, individually there’s more variability,” What’s the Fare creators Matthew Liu and Jonathan Goldman wrote in a blog post announcing their results. “In Los Angeles any of the ride-sharing services are cheaper than taxis over 95 percent of the time. But in San Francisco and New York, UberX only winds up cheaper than a taxi three out of four rides, and Lyft is cheaper 72 percent and 64 percent of the time, respectively.”

Now, Lyft has been able to secure its place in the industry

Market Uncertainty

"The extent to which managers understand how a new product or service will be received in the market."

I mentioned in an earlier blog post about how market entry can be very frustrating for Lyft. That does not necessary hold true for market uncertainty. When the company makes a decision to move into a market, the downtown crowd will usually keep the company moving in a positive direction. Usually the organization is focused on a metropolitan area with access to a major airport to keep the customer base up.

The problem again is when the government decides to get in the picture. From a New York Post article:

"Uber, the taxi-hailing app, continued its recent string of bad news this week when it a Nevada judge ordered it to stop doing business in Sin City — and the rest of the state. So apparently prostitution, legal in the Silver State, is OK, but Uber is way too risky. The Nevada ruling comes 48 hours after Uber — and rival Lyft — were banned from picking up passengers at the Louisville (Ky.) Airport.. "

The Relationship Between a Firm and Its Customers

Product Mix

"The way by which products are customized for different customer applications."

Lyft has usually been setup so that each customer gets a completely random car and driver. Last year, the company announced the following:

"Today, we unveil Lyft Plus, a fresh and modern transportation experience with lower prices and higher capacity than current premium options. You can now request a sophisticated, custom six-seater just as you would any other Lyft ride. It’s the most versatile option available anywhere. Enjoy Lyft Plus on a date or a night out, on your own for maximum comfort, with clients on a business trip, or when traveling with your five best friends."

This gives customers the sense of customization and the ability to get a personalized type of ride. There have been rumors about them having an option to select the specific car you are choosing if you have a number of options in a given area. There are a lot of issues with that model, but it looks like Lyft is moving in the right direction.

Worker Motivation

"As workers become more cogs in a machine, worker motivation wanes, and productivity and quality both suffer"

From an article on CNN Money:

"The way Lyft is making passengers aware is by putting the vehicle's base ID on its picture on the app, per TLC requirements. In practice, the average passenger would not notice.
The TLC is considering revising its rules because the field of black car services has changed so dramatically. The landscape of ride-on-demand apps has become increasingly crowded, with services like Hailo, Sidecar and Gett developing followings. Uber, with its $18.2 billion valuation, is by far the biggest. One driver described his process: "I got a tablet, my phone and my Uber phone...when I have no passengers in my car, I turn on all my applications and whichever one gives me a job first, I take."

One of the biggest issues facing Lyft is securing driver loyalty. Most people that are doing the driving really don't care who they are driving for. As we look at human capital as such an important part of an industry, the company needs to start locking down their good drivers who see themselves as a mercenary for hire.

Human Capital

"The training, experience, judgement, intelligence, relationships, and insight of the individuals workers at a firm."

Lyft has been able to secure access to an amazing workforce, simply by opening to door to so many backgrounds and expertise levels. I've used the company a number of times, and I never am not amazed by the unique stories I hear from drivers regarding their backgrounds.

For example in a major metropolitan city, here are the stats on how many drivers exist:

"The total number of transportation network company (TNC) drivers between Lyft, UberX and Sidecar in Seattle is approximately 3,000."

Even though the below chart is from their competitor Uber, it shows the scope of what's going on.

Technological Leadership

"Firms that make early investments in technology can be at a huge advantage against competitors moving forward."

One of the first patents applied for by Lyft was for the following:

"System and method for operating a service to arrange transport among parties through use of mobile devices,” while others refer to more specific features of the company’s operations, which are based on consumers using an app to summon nearby drivers."

The company has been on the forefront of this industry and field. They talk about it in all of their major interviews:

"Our vision is for every ride to be a Lyft ride, where we fill every seat in every car," says Wampler. "We've achieved that vision when the mom in the minivan is Lyft enabled, because technology has removed any friction for her to pass by my house when I need to get to the BART station and that's on the way to where she's going. But it's also the sense of humanity that [Lyft co-founders] John [Zimmer] and Logan [Green] came up with—sitting in the front seat, the fist bump, these rituals. For every ride to be a Lyft ride, we have to fill every seat, and you can't do that if you're only sitting in the back. And by the way, she's not going to pick you up if you only want to do that, she's already chauffeuring other people."

Barriers to Entry Into and Industry:

Government Regulation of Entry

According to an article in the Wall Street Journal: "Lyft is one of two popular ride-sharing services (Uber being the other) that have faced significant opposition from traditional competitors such as taxi companies. Governments around the country have attempted to enforce regulations on them"

It has gotten to be such an issue that Lyft has a host of people employed, simply to fight/advocate for their company in local state and principalities. The strict regulations on the taxi industry has cause much frustration. In a lot of ways, the app is a way around the traditional taxi medallion that is so hard to secure in some cities. I could literally become a driver after a sign up and quick background check. Its a pool of workers that has to be very frustrating to peers.

Again, the biggest hurdle for new competitors is the risk of government regulations on the entry of new people into the field

Economic Value

"The difference between the perceived benefits gained by a customer who purchases a firm's services and the full economic cost of the services."

One of the amazing things about Lyft is how many times I've heard individuals say that they would much rather use the service than a taxi. Regardless of actually value, there is a true perceived value at play with the company. Of course, it goes without saying that the temporary rental of a car is much better than walking, but a lot of times people will see more value in renting a temporary driver than actually driving their own car on that specific night. 

With the ease of use, Lyft has been able to create a distinct economic and competitive advantage over taxi services in most cities. The problem, as I'm sure we'll get to in later chapters are the competitors that have also created the same sort of economic value with customers. It really feels more intimate than a taxi and that helps people feel like home.