Personal Transportation is being disrupted. That’s the fact. It’s either an opportunity or threat for your transportation business.

Let’s make a forecast for year 2020. Yes, I know, forecasting the future is challenging. Big changes in our life rarely are actually consisting one big change but rather series of smaller steps that suddenly surprise us. Typically we’re overestimating the changes happening in the near future and underestimating what will happen on a longer term. And so called black swans are (by definition) almost impossible to forecast.

Let’s start with data-driven approach. Statistics, that is.

Personal transportation is the second largest household budget item in the US. Thus, there is motivation to find alternatives offering the same convenience level but for less money. At the same time, the proportion of young adults with a driver’s license has fallen both in the US and other countries. It means that there is increasing demand for personal, affordable transportation services.

Taxi apps are becoming popular but it’s just the surface

Uber, Hailo and others are enjoying success in new kind of ways to order a taxi. You can be sure that you actually get a cab, you can see the vehicle approaching on the map on your smartphone and payment is done conveniently with the pre-registered credit card. The initial users consists mainly wealthy people and more importantly, wanna-be rich people. Drivers also earn more in this model so they naturally like it (for now).

Simple mathematics shows, however, that this model may not economically be feasible in the long term. Competition is getting tougher (pressure to lower the costs) and at the same time the drivers want to earn more (pressure to increase the fees). Self-driving cars are only a partial solution. It may take the expense of the driver out of the question, but it’s not enough. Congestion and  space on the road still remain, calling for other solutions.

So it’s safe to estimate that these companies are after something much, much bigger thing.

Incumbent transit operators suddenly face two disruptions simultaneously

New companies want to change the rules of the game, effectively wanting to change the regulation. For the end-users all this is visible in the form of easy-to-use mobile app enabling you to order a taxi. That’s the official appearance of the business. Customers will protest against any authority taking actions to take down these new players (as they offer so convenient service).

More money is spent on lobbying and other activities aiming to change the regulation. Incumbent players cannot invest the same amount of money to fight the lobbying. So it’s likely that the regulation will change.

At the same time, the self-driving car revolution (another disruption) has potential to make more and more taxi drivers unemployed. It’s not an overnight change but will happen.

driver_free_taxi_medium

The incumbent players need to change the mode of operation

Fighting two disruptions (self-driving car and disappearing/decreasing regulation) is impossible at the same time is practically impossible. The rules of the game will change, and one needs to change oneself as well.

First, it’s important to understand the situation. Only then the right solution for the problem can be created. Some players have for example thought that Uber’s service is all about ordering a taxi with a mobile phone. So they created their own app to offer the same technical functionality, with no measurable visible success.

Second, a proper solution has to be created. As Marc Andreessen famously forecasted, software will change everything. Now it’s transportation segment’s turn to be disrupted. Acquiring software skills is suddenly a must. At the same time, some companies have spent millions in creating working solutions for this segment. So it’s likely that starting from scratch is bound to fail, especially if there is no “software culture” in the house already. The fundamental change is much bigger.

Third and maybe most importantly, these incumbent players need to change the corporate culture as well. They have to start thinking in a disrupting way themselves. That’s the major difference between corporations and startups. In a corporation you’re fired if you make a mistake. In a startup you’re required to make mistakes, learn, iterate and win. This inevitably means new people are needed to manage this change. No manager with corporate background can manage this so external people with entrepreneurial background are needed to cultivate the new model.

Self-driving vehicles combined with ridesharing just might be the future of urban personal transportation 

French engineers already pioneered this concept long time ago but now they are adding the “social graph” of Facebook to the equation and they may have a winning combination.

projet-link&go-detail

http://gizmodo.com/is-this-ride-sharing-smart-minivan-the-future-of-self-d-1542547679

Released earlier this year at the Geneva International Motor Show, the Akka Link & Go 2.0 is an autonomous car that’s designed to be social. It has all the technology that allows it to drive unaided by humans—cameras, lasers—and it can transform from human-driving to computer-driving mode by retracting the steering wheel and pivoting the drivers seat around to face the back. But this is the interesting part: The Link & Go 2.0 has an integrated system which connects multiple passengers over a network to help with carpooling and car-sharing.

Did I say this is going to happen in 2020? It might actually happen faster, nobody knows.
 
What’s the best way to prepare for this revolution of self-driving cars + ridesharing? It’s a no brainer again. Start offering the same service but initially with the drivers. Enter personal transportation business with an existing, simple service (taxi transportation). Then trial with service with non-professional drivers to learn more. Experimenting with ridesharing services is the next obvious step. And once you switch to self-driving cars, you no longer need the drivers. So the fight for the blue ocean market share has already began and some of the public transportation as we know it today, may soon be something we read from the history books. 
 
Guess who might be doing just that?

2 Replies to “Personal Transportation is being disrupted. That’s the fact. It’s either an opportunity or threat for your transportation business.”

  1. So, you have just described Texxi (www.texxi.com) the first company to do all this and describe the business model in your last paragraph.
    Not only was a patent filed in July 2006 on using mobile devices, social networks, geolocation and a futures exchange to enable largescale ridesharing, but working prototypes were demostrated in 3 locations in the UK from March 2006 – December 2008.
    Pitches were made to taxi firms in Australia, Singapore and the USA, predating claims by Google to have invented usign advertising revenues to pay for taxi rides.
    A system to create a Futures Exchange for all types of Transit – beginning with simple taxi hailing by SMS, moving to shared rides, adding apps and complexity as uptake increases. The longstanding problem of

    Dragons Doorstep Pitch from 2005

    What things connect to a Transit Exchange
    http://www.slideshare.net/Texxi/communing-with-the-drt-exchange

    The Seven Modes of Texxi
    http://www.slideshare.net/Texxi/the-7-modes-of-texxi-12593411

    Clear Channel Pitch | Advertising Revenues from Transporting People to Locations
    http://www.slideshare.net/Texxi/clear-channel

    Texxi Smartphone Application (GPS App) | Examin Technology 2006 – 2007
    https://www.youtube.com/watch?v=CaE17qbeCZU

    Leapfrogging in Reverse | WorldChanging.org
    JEREMY FALUDI, 30 JUL 2005
    http://www.worldchanging.com/archives/003216.html

    GreenCarCongress JUL 2005
    Texting (SMS) for a Shared Taxi: Demand Responsive Transit Brokerage
    http://www.greencarcongress.com/2005/07/texting_sms_for.html

    Isle of Wight County Press | Jul 2008
    Get home safely with taxi text
    http://www.iwcp.co.uk/news/get-home-safely-with-taxi-text-21350.aspx

    Ticket to Ride | PlentyMag | June 2007
    With a new carpool service, you can text your way home | By Mark Anderson
    http://www.plentymag.com/features/2007/06/ticket_to_ride.php

    Frugal cab patrons hail Texxi | Toronto Star Feb 2009
    If you have ever waited an eternity for a cab on a freezing Toronto night, then fought others when one finally stopped before paying a small fortune to get you home, a U.K. taxi-sharing system called Texxi might be the solution.
    http://www.thestar.com/news/gta/2009/03/03/frugal_cab_patrons_hail_texxi.html

    Transport: A New Beginning (describing the vision from 2004)
    http://texxi.com/pres/web/viewer.html?file=newbeginning.pdf

    Texxi – The market opportunity (GBP 3 TRILLION per annum)
    http://texxi.com/pres/web/viewer.html?file=marketopp.pdf

    Texxi – How it was invented
    http://texxi.com/pres/web/viewer.html?file=underpinnings.pdf

    HolyRood Magazine April 2009
    Advances in Communication are leading to new ideas in Transport
    http://texxi.com/pres/web/viewer.html?file=holyrood.pdf

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