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Creative Destruction and the Sharing Economy

Uber as Disruptive Innovation

Henrique Schneider

While creative destruction and disruptive innovation change the entrepreneurial landscape; regulation – especially regulation of sectorial markets and competition regulation – can delay this change or even bring it to a halt. Uber plays an active role between these two forces: first as an agent of creative destruction and then possibly in championing regulation on its own terms. Grounded in a particular understanding of the economic concept of the market as a series of processes, this book explores the implications of creative destruction, competition regulation and the role that businesses play. Instead of discussing these relations in a purely abstract manner, this book uses Uber as a case study.
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Chapter 2: What is Uber’s business model?

Henrique Schneider

Extract

What is Uber’s business model? Uber capitalizes on convenience. In order to do so, it identifies idle capacity, aggregates it and allocates it to consumers willing to pay the price. Uber is an intermediary of idle capacity. This intermediation happens at lower costs, which allows Uber to create value-added to customers. It makes finding a taxicab easier, it provides different service levels, it gives information about the quality and price of the ride and it allows interaction. This value-added is redirected at the company in form of feedback by the customers prompting their trust and loyalty. Characterizing Uber as an intermediary, as a technology platform offering its services as a matchmaker for those willing to sell spare capacity of cars to those willing to pay for this capacity, is therefore correct. Uber could have applied this business model to other different sectors, but it chose transportation. Transportation, however, is not the core of what Uber is. Rather, it is just its application.

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