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Uber and the Terrible, Horrible, No Good, Very Bad Year: Can a New CEO Save the Company From Itself?

By: Bridget Clerkin July 3, 2017
Uber has come under fire for its cultural and business practices even as its valuation has soared to $70 billion.

Travis Kalanick went to bed with gum in his mouth. And now there’s gum in his hair. It has been a terrible, horrible, no good, very bad year.

The man responsible for making “Uber” a verb—and an enterprise worth $70 billionstepped down from his post as CEO earlier this month, capping off a dizzying 8 years that encapsulated both the app’s meteoric rise to prominence and the dramatic downfall of its reputation.

Pushed out by top investors, Kalanick ceded his chief executive post at Uber late on June 20, after weathering an especially troublesome first half of the year with the company, which saw everything from protests against the service to corporate culture catastrophes to federal investigations.

With a leadership vacuum added to that long list of concerns, Uber has hit a critical moment in its young existence: Does it soldier on under Kalanick’s vision, which has brought it so far so fast, or attempt to wipe the slate clean and find a new business model?

Pivotally positioned in powerful Silicon Valley, the forthcoming decisions from the company may shape not just Uber’s future, but that of the rideshare industry, and even the automotive world itself.

As it contemplates its next move, all eyes are now trained on Uber’s San Francisco offices—and who is paying them visits.

Repeal and Replace

Among its staggering to-do list, the most important item for Uber is installing a new chief executive officer—fast.

With no one at the helm, the company has essentially been left to founder through an especially unwelcome sea of problems—in the latter half of a year when Uber was widely expected to launch its initial public offering, which could solidify the company’s place as the world’s most valuable start-up.

And the longer it stays in such a leaderless position, the more dangerous it is for Uber, according to Harvard Business School professor Rosabeth Moss Kanter.

“That’s the real historic lesson, that you need to move quickly or you’re highly vulnerable,” Kanter told NPR. “It’s a perfect time for competitors to start poaching the best executives, for morale to go down, because even staff who have great ideas aren’t sure they can implement them.”

It seems the company’s board agrees. The body is looking at a 6-week timeline in which to bring on a new head for the corporation, according to the Wall Street Journal.

"It’s a perfect time for competitors to start poaching the best executives, for morale to go down, because even staff who have great ideas aren’t sure they can implement them.”- Harvard Business School professor Rosabeth Moss Kanter.

Top contenders for the post reportedly include YouTube CEO Susan Wojcicki and former Disney chief operating officer Thomas Staggs, who were both tapped earlier this year as potential candidates to step into a secondary role at Uber under Kalanick; Facebook COO Sheryl Sandberg; Former Ford CEO Mark Fields; former Yahoo CEO Marissa Mayer; and Anthony Foxx, who was Transportation Secretary under President Obama.

Facebook COO Sheryl Sandberg is a rumored candidate for Uber's next CEO.
Facebook COO Sheryl Sandberg is a rumored candidate for Uber's next CEO.

Even before Kalanick’s ouster, the idea of replacing him was recommended by former U.S. Attorney General Eric Holder, whose law firm was called on to investigate widespread reports of sexual harassment within the company.

Holder’s report also suggested replacing senior leadership—although that has long been a need for the ride-hail giant. Along with its CEO vacancy, Uber is currently working without a chief operating officer, chief financial officer, chief marketing officer, head general counsel, and a senior vice president of engineering.

Whoever is ultimately chosen to fill those roles will immediately have their collective hands full, however, as the major lingering questions at Uber concern not just the company’s litany of ongoing issues, but clashing ideas over where it should go in the future.

At the Crossroads

Kalanick unquestionably leveled the transportation landscape, but his grand vision for rebuilding it in Uber’s image has yet to be fully realized.

The former CEO had the company deeply involved in the development of self-driving cars, positioning Uber as one of the top contenders in the world to produce such vehicles in coming years.

The idea of not just utilizing but actively producing that technology has played a big role in the company’s legal and financial troubles, but many believe it could be the only path for Uber to remain relevant—and solvent—moving forward.

For Kalanick, and those who agree with him, the vertical integration offered the best shot at the company’s longevity, considering the rideshare market was crowded out with competition nearly from the moment Uber launched in 2009.

The key, Kalanick said, was being first to market with the innovative tech.

“If we are not tied for first, then the person who is in first, or the entity that’s in first, then rolls out a ride-sharing network that is far cheaper or far higher-quality than Uber’s, then Uber is no longer a thing,” he said in a 2016 interview with Business Insider.

Moves he made reflected that viewpoint, such as the rapid acquisition of self-driving truck startup Otto, a company comprised of ex-Google employees who developed autonomous vehicles for the search engine giant. That venture was headed by Anthony Levandowski, who is now at the center of a contentious lawsuit between Uber and Google, his former employer, who is accusing Levandowski of theft of trade secrets.

Aside from the legal mess it’s brought upon the company, developing the technology is expensive.

Uber spent nearly $1 billion on the self-driving initiative last year alone, and for its money got a buggy program that even Kalanick would likely be loathe to admit is “tied for first.” Maintaining top talent in the autonomous industry, meanwhile, will take even higher investments to keep away potential poachers in a fiercely competitive field populated by companies with deep pockets.

Evaluating whether the self-driving venture should be bolstered or abandoned will ultimately fall on the incoming CEO’s shoulders.

The potential payoff? Ownership of extraordinarily valuable technology that would allow Uber to move its most expensive expenditure off the books: its drivers.

But an autonomous fleet—if it comes at all—is still far in the future. In the meantime, the new chief executive must consider the flesh and blood drivers Uber currently employs—and their own long list of grievances.

Not Budg(et)ing an Inch

Uber may have been a trailblazer, but it didn’t take long for others to follow their lead.

To deal with the saturated rideshare market—and undercut competitors—the company reportedly subsidizes about 50% of every ride. The only problem: It hasn’t found a way to recoup that money elsewhere. And the method enforces a dangerous model for the company: The more riders who choose Uber, the more Uber must pay out to cover their fares.

In 2016 alone, Uber blew through nearly $3 billion—with the subsidies constituting a huge portion of that number—and it’s faring no better in 2017, already losing $708 million in the year’s first quarter.

Uber blew through $3 billion in 2016 alone. It lost $708 million in the first quarter of 2017. 

To make up for lost funding, the company tried taking a higher percentage of the total fare for itself—at the expense of its drivers—although that method backfired spectacularly in New York, where Uber is now bleeding out millions more to pay back its contract employees.

And the method hasn’t exactly helped the ride-hail giant curry favor with the people steering its fleet, many of whom are seeing their commissions continue to drop even as they’re stuck paying the company directly for subprime loans on cars they leased or purchased in order to drive for Uber in the first place.

Bending budgets to focus more on current driver pay and benefits could be a better usage of the self-driving billions, some in the company argue, as it not only cultivates a happier workforce but guarantees Uber at least a functioning business, if not a cutting-edge one.

Should employee relations continue to tank, Uber will have no choice but to wait for self-driving cars—and hope it can continue to outspend and outpace the crowded and well-connected autonomous field.

But bolstering its taxi business would likely lead to more expensive rides, which could also put Uber on dangerous ground.

With an expensively-shoed foot in both worlds, the new CEO will have to dance out of Uber’s self-made mess—or watch the company continue to flounder. Perhaps instead of scouting from Silicon Valley, the board would be better served looking to Broadway.

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