MIT Sloan Executive Education Blog

Can the cab industry innovate?

Those of us who work and/or live in Cambridge are quite familiar with the controversies stirred up by the wildly successful business, Uber Technologies, Inc. Uber considers itself a technology company, offering a mobile app that connects riders with drivers. The company has taken an innovative approach to making it easier to get from one point to another, eliminating the need to hail a cab on the street.

But most cab companies--from those here in Cambridge and Boston to those in London and Paris--view Uber as an unregulated, competing cab company. Recently, Cambridge License Commission proposed making Uber and other related services subject to the same regulations as taxi cabs; this proposal was met with outrage by locals. Back in May, taxis and taxi drivers from Boston, Cambridge, Somerville, and Brookline staged a protest outside of Uber's local headquarters. Cab drivers have also protested in London, Madrid, France, Berlin, and other cities in Europe.

The issue, as stated succinctly by the Wall Street Journal, is that Uber has "upended one of the world’s most regulated industries." This dynamic is essentially pitting local governments against innovation, in order to protect the status quo. And, as of today, that's protecting the status quo in more than 70 cities worldwide.

This scenario poses an interesting question: Why don't cab companies and governments embrace their own innovation to take advantage of the popularity of using an app to summon transportation? Why can't the "industry" in general offer some copy-cat services, instead of simply trying to regulate Uber out of existence?

As Bill Fischer, MIT Sloan Executive Education faculty member and Professor of Technology Management at IMD wrote in a Forbes column, "Becoming More Innovative in 2014," "Organizations don’t innovate, people do. Organizations that are admired for being especially innovative don't hire genetically different people than are available to the rest of us, they just make different managerial choices that allow their people to be more innovative."

An elitist could easily say, "That's great, but how many innovators are among our fleet of cab drivers?" Instead, perhaps the "anti-Uber" crowd should consider the resources they have at hand. Who best knows the opportunities and the challenges of the cab industry better than the drivers themselves?

Eric von Hippel, Professor of Management of Innovation and Engineering Systems at MIT Sloan School of Management, spoke about "Harnessing the Power of Extreme Consumerism" with the Financial Times. He recommended "seeking out those whose enthusiasm for, or frustration with, existing products is greatest. Not only might their take on improvements be better articulated, but they may have improvised a solution."

There's a reason why Uber is such a threat to taxi companies--the service is popular, well liked, and becoming the transportation option of choice for many people. Perhaps the response from cab companies and governments should not be just to simply regulate, but to instead innovate.

Bill Fischer is a Professor of Technology Management at IMD. He teaches in the Driving Strategic Innovation: Achieving High Performance Throughout the Value Chain program, which is offered twice yearly; once in Switzerland and again at MIT Sloan Executive Education in Cambridge, MA.

Eric von Hippel is Faculty Director for MIT Sloan Executive Education’s Building, Leading, and Sustaining the Innovative Organization program and teaches in Driving Strategic Innovation: Achieving High Performance Throughout the Value Chain and in the Global Executive Academy. He is a Professor of Management of Innovation and Engineering Systems, the T. Wilson (1953) Professor in Management, and a founder of the Entrepreneurship Program at MIT. His most recent book is Democratizing Innovation.


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