How Uber is breaking through the barrier to entry

In the world of business there are two reasons for barriers to entry.  One is to protect the customer, the other to protect the business or livelihoods of owners, employees or practitioners.

There are very good reasons for the first; protecting the customer. In this situation barriers to entry ensure that our limbs are amputated by properly trained and regulated surgeons, for example.

There are less good reasons for the second; protecting livelihoods. Everyone is entitled to make a living, but not to artificially inhibit others from doing so if they are suitably competent.

In the past licensed London taxi drivers were protected by a very strong barrier to entry. “The Knowledge” was a guarantee that when you stepped into a taxi you would be taken to the place you asked to be taken to.  The test was rigorous and notoriously difficult to pass. This also meant that once acquired, a licence to ply ones trade as taxi driver, able to pick up passengers off the street, was a valuable asset and it was rarely abused for fear that a complaint would lead to the licence being revoked. This in itself protected the customer whose safety, it could be argued, was less secure if they used an unlicensed minicab where the driver might be unknown.

London Taxis forming a barrier to entry.

London Taxis forming a barrier to entry.

Minicabs can only pick up passengers when they have been booked in advance.  They cannot tout for business on the street – a great advantage for taxis when someone needs a ride at short notice.

Then came satnav.

With the introduction of this technology one of the key arguments of the taxi driver became obsolete.”The Knowledge” no longer represented a benefit to the consumer.  Now all that riding around London on mopeds and learning archaic test routes was for one thing only – to enable a qualified taxi driver to be hailed down off the street and, with that, to maintain high prices.

Then came Uber.

Uber offers the knowledge (satnav), safety (rigorous identity checking, a record of the journey, and driver training) and speed of response.  True, it’s unlikely that you will pick up an Uber as quickly as a taxi if you are standing on a busy street corner in central London, but for most other trips an Uber car is more responsive than a conventional minicab or a dial-a-taxi services. What is more, they are considerably cheaper than taxis and because of this the taxi drivers’ power is massively reduced.

Taxi drivers are resisting Uber desperately, and they have some powerful political friends who are helping them but they can’t hold back the tide.  The barrier to entry into the business of immediate response private hire has crumbled.

Whether you are setting up a business, launching a new product or going for job interviews it’s critical that you understand what the barriers to entry are or could be.  Starting a business or launching a new product with low or no barriers to entry is risky because it means anyone can easily enter your space and take your customers.

As a prospective employee the concept differs slightly. In this situation the question is “what do I have that makes me the strongest candidate for this role that other candidates perhaps don’t have?”  That could be to do with skills, personality, experience, or knowledge. Whatever it is, make sure the potential employer knows because this represents the barriers that your competitors for the job will need to overcome.

Most important, remember that things change and one day those capabilities that helped you to secure the job may no longer be relevant, so keep moving with the times by developing you skills and knowledge.  For business owners, the innovation that made your product or service better than the competition when you launched may be replicated in some way so you need keep innovating and developing your service to stay ahead of the competition.

In other words, don’t be the old London taxi driver who has suddenly been wrong footed by technology. Be an Uber, offering yourself to the marketplace with a new, better way of solving an old problem.

Comments are closed.

%d bloggers like this: