Uber's Big Data Effect On The Taxi And Transportation Industry

Robert Cordray

Whenever a disruptive force enters an existing marketplace, chaos and confusion are sure to be present. That certainly seems to be the case when it comes to Uber, as experts and analysts try to measure how much of an impact the new company is having on more traditional transportation methods, particularly taxis.

Uber has, without a doubt, sliced right through the status quo. Though the company, and others uber driversimilar to it, have inspired legions of dedicated fans, it has also courted a degree of controversy. Uber’s use of Big Data, and its clear aim at upending the transportation industry, have many worrying what the overall effect will eventually be. Are we seeing a total transformation as a result of this revolution, or will the end results be more subtle compared to the seismic shift we are now witnessing?

Uber didn’t gain so much popularity by simply being a new, cutting-edge business. In many ways, it served a need that taxis and other transportation services simply weren’t meeting. Part of the key to this success has been the company’s use of Big Data analytics tools. Much like other companies that use Big Data, while Uber was helping customers get from point A to point B, it was busy collecting valuable information about their behaviors and choices. This helped Uber identify its customers on an individual basis. By knowing where customers are likely to go and what places they like to visit, Uber could take customer service to a level that taxi companies could only dream of, such as partnering with hotel chains and offering special discounts. Now imagine that level of service and offers – only spread out to more businesses, such as tourist destinations, restaurants, airports, and even more. That’s the potential of what Uber can provide, leaving many transportation businesses in the dust.

Partly due to its impressive and rapid success, Uber has amassed its fair share of critics. Many opponents of Uber say the company isn’t just about supporting itself but about attacking more traditional transportation models. Critics specifically look at the impact Uber has had on local transit and urban infrastructure, saying the company is using its data not only to meet customer demands but also to influence local politics and push out its rivals. Such tactics, they contend, should not be tolerated, and governments should work to limit Uber’s influence.

Many of these criticisms don’t appear to be gaining hold. Uber hasn’t been shy about discussing the effect its Big Data efforts have had on the transportation industry in general. Taxi companies in particular have been hit hard by the new competition. In just one, statistically backed instance, the number of people using cabs in the city of San Francisco has fallen off dramatically. Back in March 2012, the average taxi made more than 1,400 trips per month. In late 2014, that number had fallen to just about 500 trips every month. The startling drop is blamed on the growing use of services like Uber, and the effect has been a negative one on taxi cabs. Though San Francisco has seen a sizable decline, others within the taxi industry are urging people not to panic. As the head of New York’s Taxi and Limousine Commission has stated, while taxi use has declined, the industry will continue on and is not facing the threat of going completely out of business.

In fact, another effect Uber is having on transportation might just be greater innovation. More competition usually leads to more breakthroughs and new offerings, and that’s exactly what is happening with taxis. Returning to the San Francisco example, some taxi fleets have embraced a new tech-savvy role by adopting e-hailing programs designed to compete with Uber and other companies. Others have lowered prices as a way to attract customers. This reinvention is a necessary component of an evolving marketplace, one that usually leads to better things for the consumer.

The disruption we’ve seen in transportation in the past couple of years is only the beginning. Self-driving cars will also represent a disruption of revolutionary proportions, and as Big Data and cloud computing become more common, other ideas will likely come to the forefront, concepts that are only now on the drawing board. Uber has certainly had an effect on the taxi and transportation industry, and it’s one that many businesses should take a closer look at as a successful way to grow a company.

Like many disruptive businesses in the digital economy, Uber’s biggest asset is likely its intellectual property. Learn more about What Happens When an Idea Becomes the Product?