Reason Behind the Success of Uber Like On Demand Business Startups

Reason Behind the Success of Uber Like On Demand Business Startups

The magnitude of success of on-demand businesses

Starting from morning till night, we do most of our daily chores and activities using the app-based startups. It all started some years back with the online taxi booking. People were tired of manually calling taxi in the middle of the street for decades and a few taxi startups with an innovative business model changed the way people booked the taxis. These startups leveraged the technological advancement to disrupt the conventional taxi industries that were suffering from a dire need for innovation.

Soon, many other startups mushroomed to provide various business services by following the innovative business model and they are called as on-demand businesses. Some of the examples of on-demand services are online food delivery, handyman services, airport taxi, grocery delivery, errand services, laundry service, in-house healthcare, in-house tutor, hotel booking, and many more.

I will explain this further but before this, I would like to throw some stats regarding the success of on-demand businesses.

At present, there are 280 companies that provide on-demand services in 16 industries. 45% of the US population used on-demand services in 2018. Taxi startup Uber alone is valued at $85 billion in 2019 after it went public.

It is estimated that in 2025, the market for app-based business services will reach $335 billion. Interesting thing is that 23 out of 300 private firms valued over $1 billion belongs to on-demand companies. More than 50% of the on-demand patrons are millennials. You can now understand why many on-demand services are aimed at millennials.

Such is the magnitude of widespread success on on-demand firms.

Why emulate Uber business model?

Uber is the market leader in online taxi booking and it operates in 160+ countries globally. I said earlier about the taxi firms that disrupted the conventional taxi industry. Uber is one among the firms.

Uber found a simple solution for a problem that sustained for decades and filled the gap for a real need. They harnessed the technology revolution and allowed people to book a cab with just a tap on their smartphones.

Mobile apps were provided to riders and drivers. Riders can register their details and request for a cab anywhere and anytime. The rider’s cab request is sent to the nearby driver. The driver confirms the request in his app and goes to the rider place for pickup. After the ride, the rider pays the fare via mobile itself. Seems very easy right. This is not the end.

Uber also followed an innovative business model. Uber operates millions of cabs worldwide and none of them is owned by them. They partner with car owners for the service. For each ride, Uber get some commission. So, the capital needed for the infrastructure is very low in their case.

Finally, Uber’s business model and their operation became a benchmark and many other new startups and app-based firms started to follow it.

This way many other industries like restaurant, education, entertainment, food, etc were disrupted by following the on-demand Uber business model. Various services offered by startups that follow Uber business model are fondly called “Uber for X” where, X denotes various services.

Reason for the success of on-demand startups

Solving people’s problem with a genuine solution

It would be easy to understand with examples of some on-demand services. Online handyman service and online food ordering and delivery.

Handyman services like plumbing, electrical work, carpentry, lawn maintenance, car repair, etc are in demand all the time and skilled people are also present for these works. But, there was a huge gap between the recipients and service providers. People struggled to get handyman services.

On-demand Uber model reduced the gap by getting on-board the handyman service provider in a single app and customers can view and book them for different services like an online marketplace.

People like office goers had very little time for cooking and online food ordering and doorstep delivery became a boon to them. Surrounding restaurants are brought under one app again as a marketplace and users can order delicious food and it will be delivered in minutes.

“You just have to pay attention to what people need and what has not been done.” – Russell Simmons, founder of Def Jam

Such a way, problems faced by people in day to day life are solved by the Uber business modeled on-demand startups.

The spread of smartphones and the internet

No wonder, such a huge success of on-demand startups wouldn’t have been possible without smartphones and internet connectivity. Over 40% of the population use smartphones. Access to affordable mobiles and internet to even the remotest part of a country have made the people to easily get the services provided by the startups.

Marketing is important for any company and with widespread internet reach, the on-demand startups used social media marketing for their business and it is mainly aimed at the age group between 20 and 35. The little to nil expenses for social media marketing made them leave no stones unturned to get the service reach the people.

Lower risk business model

Earlier I told that Uber owns none of the cabs it operates and this model of operation is one of their reason for fast expansion to other countries and quick value building. This model is followed by almost all on-demand startups. Very small capital means the overall risk involved is low.

So, they can focus on their core business service because of the risk and money involved in the Uber business model is less.

This less ownership mode of operation is a huge hit and entrepreneurs find it easy to bootstrap a new on-demand startup.

Satisfaction from all stakeholders

You can follow whatever business model. You can do whatever to get the service to reach the consumers. But the only thing that really makes all the difference is the satisfaction of all the stakeholders involved in it and most on-demand startups have made it.

Whatever you take, online cab booking or online food delivery or handyman services, along with the customers, the delivery partners, drivers, skilled service providers, etc are benefitted.

63% of the on-demand employees say that they are happy with the on-demand startups. A lot of opportunities for the non-skilled workforce is created by these startups. The workers are independent and they are their own boss. More than 80% of startups have flexible timings for their workforce.

“ By putting the employee/worker first, the customer effectively comes first by default” – Richard Branson

People get everything at their doorstep

Book an errand on your mobile. He will be there at your house in minutes. Order food online and it will be at your doorsteps in less than an hour. Such is the speed of service delivered by the Uber modeled startups.

People have an affinity for things they can get instantly. The supply chain of on-demand startups are so optimized and innovated that it can work efficiently and effectively.

Still, constant innovation and technology adoption is done in the supply chain to further strengthen it so that the service is available to people even faster.

Some on-demand services that have good potential

  • App-based fuel booking service
  • Online pet taxi service
  • On-demand healthcare
  • Online medicine ordering and delivery
  • Online tracking service
  • On-demand courier service

Final say

What new firms can learn from Uber business model?

The above-said reasons for the success of on-demand startups are the part of their core business and apart from it most successful startups constantly improve their service with innovation and technology updation.

Whatever service offered using the Uber business model cannot be successful. So, first, find the magnitude of the problem and construct a perfect solution for it.

The service you offer should make a connection with the consumers. For that, you must localize perfectly by making the product in line with diversity, demographics, ethnicity, etc.

New entrepreneurs who want to start an on-demand service similar to Uber can get Uber clone scripts for their app solution which is affordable and can be easily altered to suit any service.

So, don’t wait for anything. Just go for it. As Ron Conway rightly said, “ Any time is a good time to start a company”.

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