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3. Uberization in practice: study case in France

I. Socio political context & impressions a. Digitalization à la France

In little less than two decades, as it’s been said in the last two sections, the latest industrial revolution –the arrival of digitalization– to both developing and developed economies, has represented by all means a radical transformation in almost all the sectors and activities as we traditionally knew them. This, in short, has meant that for a new generation of companies –and the old resilient ones that have found a way to survive– a change in the way in which profits are made and growth achieved has taken place. We explained on the first section of this paper how the appearance of on-line economy, or the immediate provision of goods and services through new technologies first revolutionized the old ways of doing business and creating value in some countries. Pioneers such as Jeremy Rifkin, in the first instance, and more recently scholars and experts like Eric Brynjolfsson and Andrew Mcaffe, have warned us of the numerous implications of these changes on modern societies; among which rise of unemployment or technological displacement is the most palpable and worrying. Other critics have also helped us to filtrate, within the complex amass of neologisms that originated on the process of what defined as a Second Machine Age, the most relevant concepts and to understand their true meaning and recognition on more practical basis.

In spite of the amalgam of repères that should help to orientate us, we see how the same technologies defy different realities that depend on the circumstances of each country and region of adoption: social openness, political leverage, individual adaptability and over all public and private interests, just to name some. The only certitude being that no industry or profession is exempted from what Maurice Lévy popularized as Uberization: governments, companies and employees will always react in terms of their inherited values; and those same values will define the outcome, failure or success of new enterprise and entrepreneurs. When it comes to digital technologies, France is a case a part given a history and complexity, but also because of the multiplicity of actors and the interests at stake.

On a more personal basis, my own experience in France during the last academic year has granted me the opportunity to understand better some of the consequences that digital giants such as Google, Apple, Facebook and Amazon (GAFA) have brought to the

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country. It is nevertheless Uber –and to a certain extent Airbnb– the foreign entity that has had more impact on the real economy so far, for several reasons that I will expose next. First of them given the fact that, unlike the famous GAFA, it has imposed an entirely new business model to an existent profession that was unable to innovate for decades; and second of all, because this business model has been able to resist one of the most regulated markets, but also one of the most powerful unions. In a nation that still praises social advantages and that actively defends them against raw liberalism, the taxi service has been one of the activities most favored by the state. Uber and other digital platforms, even though they disrupt certain industries or professions, are more and more seen just as more effective response to an unsatisfied need from customers and in certain instances suppliers. As a local journalist from the FrenchWeb.fr magazine confirms: “Ubetization is the consequence, and not the cause60”.

So to be clear from the start, Uberization not only represents a threat from American startups and other foreign entities, it is a more complex phenomenon –sometimes even locally generated– that we will try to clarify here after.

So how does an entity or an individual get Uberized? The blogger Olivier Ezratty tells us that most of the migration of value (not creation, just a change of hands via optimization of resources) is nowadays linked to intermediation mechanisms and to the Internet of things. Their biggest representatives are Amazon on the commerce sector, Google in advertisement and research, Netflix in video entertainment and Airbnb in housing or space sharing, or Uber in the riding service. He confirms what has been said here several times already: “no sector could be exempted from this transfiguration, only those that promptly adopted the still blurred canons of ‘digital transformation’ and ‘open innovation’.61” Already familiarized with the concepts thanks to the Marketing of Innovations class that I took this semester, I asked our local expert, the ESCP associate professor Boris Durisin, to explain me this process of pursuit of growth and value creation from companies in their natural race for subsistence.

During our meeting I quote a statement attributed to Cisco’s CEO John Chambers, through which he affirmed that 2/3rds of the biggest world companies would cease to exist during the first quarter of this century. He confirms that the source comes from the innovation consulting firm Innosight (cofounded by Clayton Christensen), then adds that the

60 http://www.frenchweb.fr/uberisation-du-business-et-taxisation-de-la-relation-client/226621

61 http://www.oezratty.net/wordpress/2015/eviter-uberiseration-1/

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fatidic year actually turns out to be 2027 and that the big companies we’re talking about belong to S&P 500 family. We analyze together some of the main references he uses during his lectures to show his students the number of companies that disappeared between 1917-1987, according to Forbes Magazine (1987) and Foster and Kaplan (2001). From the Forbes100: 61 firms ceased activities, 18 managed to stay in the top 100, 16 underperformed the market and only 2 outperformed the market average (corresponding to 7.5% (General Electric with 7.8%

and Eastman Kodak with 7.7%). He also shows me a second slide where he keeps data from analysis, based on 197, 1930, 1948, 1963, 183 and 1997, on 200 largest US manufacturing firms. The results are that only 5% of them appear in the top list, all periods considered; but even more interesting, partially confirming Innosight’s forecast: more than half of all the firms appear period after period, and each time period 35% of companies are new comers.

The example of Eastman Kodak is actually a very illustrative one because it confirms what the blogger Manuel Diaz calls Kodakization62 (another term in vogue similar to that of Urbanization). Manual Diaz also explains –similarly to what was Xerox’s main reason to lag behind vis-à-vis digitalization– that Kodak didn’t know how to leverage on its innovations, just on the brand name and reputation related to it, which made of it a worldwide undisputed leader in cameras for an entire century. Boris Durisin calls this same phenomenon the Xerox Grounding Error (that also was born in the 90s), which depicts the situation of a company that, even if possessing all the necessary elements to achieve success, simply ignores how to exploit them or, even worse, refuses to do so, losing competitive advantage to new entrants and existent competitors. Real entrepreneurs know what they’re giving up, but they never know what they might get in exchange. A first cause of decline is thus internal; let’s now talk about the external causes.

The also visiting professor at Bocconi University tells me that indeed, what explains the failure of Xerox and Kodak is that, even though they had the existing capabilities to create a new market for their offerings (governed existing value trajectories), neither of them was able to leverage on them to ultimately take advantage over competitors. He then elaborates on a second cause that has been named after Lewis Carol’s character the Red Queen, from his well-known book Alice’s Adventures in Wonderland. The Red Queen Effect would represent, as the story tells: “a slow sort of country [in which], you see, said the Red Queen to Alice, it takes all the running you can do to keep in the same place. If you want to get somewhere else

62 http://manueldiaz.fr/connaissez-vous-la-kodakisation/

demands from companies is to find way to keep growing at double digits so as to make sure they cross the famous chasm that separates innovators and early adopters from laggards. A good metaphor that symbolizes what General Electric and Eastern Kodak once were in comparison with their direct competitors. Boris Durisin concludes our meeting refereeing me to a famous sentence attributed to the two management experts Levinthal and March, which prays as follows: “the basic problem confronting organizations is to engage in sufficient exploitation to ensure its current viability and, at the same time, to devote enough energy to exploration to ensure its future viability.64

In the particular case of France, being a state and not a private company or organization, the second –external– cause would correspond more what the blogger Bertrand Duperrin calls “the illusion of preeminence of offer over demand”. In what he considers as a vicious interpretation of the trickle down theory previously mentioned, he directs his critics to the taxi industry. He gives the name of taxization to a policy of supply that dictates that clients should accept whatever taxi drivers offer to them; the opposite of what Jean-Baptiste Say advocated with a policy of supply that would be aligned with the optimal demand in a given market. Duperrin adds that the taxization of any business and that of the relation with customers would be equivalent to believing that the mediocrity of a service that was once efficient but currently outdated, can become once again adequate as long as the government sets up the appropriate barriers of entry to protect it65

Strategy was not guided, in this case, by what should normally be the interest for any company: to gain competitive advantage through the experience of its customers. For most of the taxi drivers in France, there was until recently an explicit indifference towards clients’ expectations, which in essence opened the door to a company like Uber to become what it is now. It also inspired others to recreate its business model and to apply the formula to other sectors and industries: Uberization came over almost simultaneously. It is not a coincidence if it was in Paris that, during a work trip in 2008, the three founders of Uber found the inspiration still needed to revolutionize the problem of taxization. Departing from two basic notions of on-demand economy, the immediate provisioning of a service via an efficient and intuitive digital platform, they created the application that would allow private drivers and

63 In: Marketing of Innovations’ Book of Slides, Boris DURISIN, year 2015-2016. 2nd semester: January-April 2016, p. 5.

64 Ibid. p. 6.

65 Op. cit., http://www.frenchweb.fr/uberisation-du-business-et-taxisation-de-la-relation-client/226621

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customers in search of more effective and innovative solutions to connect. Garret Camp, Travis Kalanick and Oscar Salazar original idea was simple and sweeping: ubiquitous and reliable transportation, for everyone and from everywhere. Furthermore, they argue, with Uber drivers set their own hours and are their own boss, Kalanick has always sustained, “there is a core independence and dignity you get when you control your own time”.

And yet Uber does not have control on everything. From inception, Travis Kalanick, the company’s CEO, has struggled to find a balance value creation and stability in the countries where Uber first established. Launched in 2009 in the San Francisco Bay, a rapid growth enables the company to easily expand to 25 cities outside the United States. He’s partly sponsored by a major fundraising coming from Goldman Sachs. It is during the 2011 edition of the Salon LeWeb in Paris that the company officially launches its riding service in metropolitan Paris. From august 2013, Google Venture invests US258 million on the startup, elevating the amount of capital invested on Uber to US2.7 billion. The company decides to expand even more its services to reach, by 2015, 51 countries in 253 cities worldwide. But the first symptoms of what some see as a viral expansionism appeared even way before this second expansion. In Paris, the consequences have been drastic than at any other city and this in part helps to explain the vivid opposition against all that is related to the company’s name and practices. Here is a summarized story of what has happened since last year, first from my own experience, then followed by information that I was able to gather from interviews, conferences, public organizations and local media.

Months before I first move to Paris for my exchange academic year, I had already read extensively from what the reactions were to Uber aggressive expansion in different countries in Europe and North America, where most of protests had taken place. I learned from articles and friends living in on both regions that some of the manifestations had turned into violent riots by taxi drivers contesting what they called the imminent “Uberization of their profession”. The launch of the integrated service knows as UberPop in 2014, allowing unregistered drivers to provide a shared service to clients everywhere in Paris, had outraged those accredited professionals whose rights and privileges were on the verge of “disruption”.

So by the first week of June, these angered taxi drivers, backed by the local firm Groupe 7 (G7) that represents more than half the taxis in Paris, started to burn tires and to snarl traffic across the city. In reaction to this, in what seemed to be a prudent decision from Uber representatives, a declaration was made arguing the company was willing to suspend its low-cost shared service relying on nonprofessional drivers. It is the journalist Sam Schenchner who, in his

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article for The Wall Street Journal66, better resumes what came next and more specifically what was the initial reaction from the government officials.

Mark MacGann, Uber’s public policy chief for Europe, was behind the declaration in question, and the condition he tried to set in exchange for Uber to suspend the service was that “the French government also should loosen rules on how to become a licensed driver for Uber’s other services. The immediate reaction from French Minister Bernard Cazeneuve was that “there [could] be no conditions whatsoever. There was simply the law to respect.” Uber still decided they would suspend the service, but its representatives also made the resolution they would contest the government’s position in France’s higher constitutional courts. Schenchner describes what is already common practice for the San Francisco startup, valued at more than US50 billion but locked in disputes in several cities around the world.

French culture and institutions has nonetheless made Uber experience more difficult and yet the city represents one of the top ten sources of revenue and growth to the startup, besides it is out of question for the company’s directors to leave the market to the nascent competitors that could one day aspire to disrupt them. Kodakization is not an option for Uber.

Bruno Lasserre, the head of France’s competition authority quoted in the article, confirms that “new models are challenging the power of state. [Models that] say: let’s win some time, let’s start legal appeals, and when all is said and done, it will be too late, and we’ll be too big to shut down.” As a result from this, two of the high profiles from Uber France, Pierre-Dimitri Gore-Coty, chief of Western Europe, and Thibaud Simphal (that I was able to interview in November), general manager of France, were set to go to trial on September, risking prison for two years. Pierre declares to Schencher what will be a commonplace argument from entrepreneurs and, whose objections will be presented here after, that “Uber offers far better service, creates jobs and positions cities for a future where people no longer need to own cars.” He adds: “instead of trying to calm down taxis by claiming Uberpop is illegal, the government should be pushing new regulations that deal with the underlying demand for this service.” The head of the influential G7, Nicolas Rousselet, son of the major ally of former French President Mitterrand, André Ruosselet, obviously disagrees with these declarations. He demonized what he believes is “a libertarian fantasy, where all we have is the law of the jungle”. It’s been said he personally asked Mr. Cazeneuve to intervene and use his authority to deter Uber directives from even more aggressive investment in French market.

66 http://www.wsj.com/articles/uber-meets-its-match-in-france-1442592333

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A possible consequence of this intervention was that, tells us Schenchner, is that in spite of the fact that most of Uber drivers had car-service licenses, Groupe 7 strategy to claim unfair competition and demand a crackdown in the beginning of 2014, actually worked, or at least for some time. The French government imposed a 15-minute delay for drivers as a minimum time to pick up passengers who had hailed the car through an application service.

But this time Uber was not alone: other car-hailing companies joined the appeal against the resolution and eventually won. However Uber fought back the government’s initial attack by launching what we now know as Uberpop, for which professional drivers were not required given that Uber’s directives decided to categorize the new service within the car-sharing segment. And here is where the battle actually starts between the French government and the defiant startup, continues Schenchner: the country’s consumer protection authority referred Uber to French prosecutors for falsely claiming the company’s service being legal. Then Uber strikes back by authorizing expansion of the business to Lyon, France’s third most populated city.

The rest of the story is already known, Uber expressed willingness shut down its car-sharing business but some key members from the government opposed any resolution that would imply a concession in favor of the company. There was even a meeting arranged between the recently appointed Manuel Macron, French Economy Minister, and Uber’s CEO Travis Kalanick as well as other members of the parliament and executives in which the startup directives declared they were even ready to disclose drivers’ earnings to tax authorities for regularization in exchange of fair treatment from the part of the government. Schenchner quotes Mr. Kalanick saying the was no intention from the company run from regulators, as long as it was a fair regulation that applies for all the players equally. Even though Mr. Macron openly criticizes the old policies and regulations as not being adequate in a fast-growing sharing economy in which a country like Frances is expected to play a more and more important role, he has no actual power over the decisions that could make change in the taxi industry. The sector is in full charge of Mr. Cazeneuve who officially halted Uberpop on the 3rd July of 2015, a service that at the time was employing around 10,000 drivers or about the same as the licensed Uber drivers from the traditional Uber service, and just 3,000 less than the licensed drivers working for G7.

在文檔中 經濟體Uber化與Uber化經濟、起源、演進與勞動市場的後果:對法國的整體影響效果 - 政大學術集成 (頁 48-88)