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Uber’s New Power Failure

Uber built a model network, but failed to match that excellence in values.

Uber’s New Power Failure
[Photo: Flickr user Leo Hidalgo]

There are lot a reasons Uber has touched a nerve with so many people recently.

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Upsetting its drivers, some of whom are beginning to unionize against it. Upsetting taxis drivers. Upsetting regulators. Upsetting its passengers. Upsetting women. Upsetting journalists.

Many have identified a core conflict fueling this motorcade of complaint. As Fred Wilson of Union Square Ventures summed up:

I am in awe of what they have done. It is about the best execution I’ve witnessed in a long long time. But I am not in awe of how they conduct themselves. And I wonder if the two are connected at the hip. Can they lose the swagger without losing the execution? I guess we will see. That is the $100 billion question.

But we would argue that Uber’s greatest challenge is really about its structure not its swagger. This saga will prove to be much more than PR problems or growing pains (or perhaps that should be “bro”-ing pains, given the frat house ideology that seems to hold sway at Uber). Once the current headlines have passed, and the obligatory “lessons have been learned,” Uber’s fundamental issue will be in how it thinks about channeling its growing power.

In this month’s edition of Harvard Business Review, we featured Uber as a case study in our piece on “Understanding New Power,” which analyzed these kinds of new participatory or peer-driven models that are operating very differently to traditional institutions. In it we identify a central tension playing out across the sectors, between what we describe as “old power” and “new power”:

Old power works like a currency. It is held by few. Once gained, it is jealously guarded, and the powerful have a substantial store of it to spend. It is closed, inaccessible, and leader-driven. It downloads, and it captures.

New power operates differently, like a current. It is made by many. It is open, participatory, and peer-driven. It uploads, and it distributes. The goal with new power is not to hoard it but to channel it.

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In many ways Uber offers the perfect example of how the tension between old and new power is playing out. And there are many important lessons here, especially for organizations whose business models rely on peer coordination, sharing or mass participation.

On the one hand, Uber’s huge growth depends on their extraordinary new power model. They have built an extraordinarily fast-growing and dense transport network without any physical infrastructure at all. It has built-in “feed-in” loops that empower the passenger (who rates the driver) and the driver (who rates the passenger). A driver with consistently low scores gets jilted. A passenger with consistently low scores will struggle to get picked up.

But if Uber merits five stars for its new power model, it scores zero stars for its new power values.

Uber has built an extraordinary new power network, but it is failing to build or champion a new power community. Its business relies on participation, sharing and self-organization, but it seems to have little commitment to these values. It has a “many by many” model, but often default to a “serve the few” mindset. And if Uber does not start to build greater community with both its drivers, riders and beyond, it will making a very big bet that it can survive simply on the strength of its new power model alone. But this may be a very big risk.

As Katie Jenner wrote for Bloomberg, “Uber refuses to make its drivers actual employees, and those drivers can always go to a competitor that offers a better deal. Consumers aren’t locked in either. So if a mass group of consumers (not just those that obsess over industry blogs like TechCrunch and Valleywag) now see Uber as a company that doesn’t respect their safety, their data or their drivers, they can drop Uber from their trusted group of apps. Other options are available.”

The challenges Uber faces point to a structural challenge for many new power models reaching scale. If you’ve raised billions in the old power capital markets–or you’ve IPOed and must now operate within a system oriented very heavily toward financial returns–it’s going to be increasingly difficult to distribute and share value more equitably with your network participants (in Uber’s case, drivers and riders; in Facebook’s, almost all of us). And these challenges will only compound. After raising $1.2 billion from investors in 2014, Uber now has greater pressure to deliver returns by squeezing drivers and riders even further.

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Is the lesson here that new power companies inevitably start to look a whole lot like old power, at least on the values dimension? Will the new power boss end up being the same as the old power boss? Not necessarily.

Airbnb has so far been much more successful than Uber at keeping its network participants on side and has been organizing its hosts as an army of defenders against regulatory challenges. Its brand proposition (and expressed values) heavily emphasize ideas of community and belonging, much in the way that Uber’s biggest competitor Lyft positions itself as “your friend with a car,” implicitly promising a deeper and less transactional relationship. Both these companies depend on smart digital connectivity, but they see the great opportunity in building strong human connections too. They understand new power models and new power values.

As we look a little further out, there may be other ways that new power commercial models can stay true to new power values. As crowd-funding models for businesses begin to scale, some more purpose-driven founders may try to lessen their reliance on big funders looking for quick returns. Co-ownership models, which we identify as a particularly potent form of new power, will prove easier to implement at scale. And this is when things might start to get really interesting.

The next Uber might be co-owned by the drivers.

Jeremy Heimans (@jeremyheimans) is a cofounder and the CEO of Purpose, a social business that builds movements. He is also a cofounder of the online political communities GetUp and Avaaz. His TED talk on the meaning of new power is here.

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Henry Timms (@htimms) is the executive director of 92nd Street Y, a cultural and community center in New York. He also founded #GivingTuesday, a global philanthropic movement.