The Price of Failed Culture

By Bobbie Wasserman

In March, after watching the value of Uber decline, I wrote a blog titled “The Gig Economy: Culture Counts” which focused on the role that company culture plays in the long-term definition of the brand and ultimately the brand’s profitability―for better or worse. That article helped to quantify the importance of company culture and demonstrate that culture is driven from the executive ranks and mirrored throughout the organization. This article is somewhat of a postmortem of an aggressive “take no prisoners” culture outshone by the basic business model and vision of one of the world’s most noted start-ups―Uber.

Only three months have passed since the “Culture Counts” blog, and Travis Kalanick, the bad-boy former CEO and culture leader of Uber, has taken his walk of shame into the sunset with the financial community beginning to speculate on the true value of the Company he co-founded in 2009. Now investors, employees, independent contractors, and customers are left with the question: does the business model make sense less the hype and salesmanship of Kalanick. Did the hype fuel the culture?

Eroding Valuations

The value of Uber was estimated at nearly $70 billion as of February 2017 from Equidate, an online trading platform for large private technology companies. In April, CNBC estimated that Uber’s value and had dropped to around $50 billion in the private secondary market. In May, the Principal Large Cap Growth Fund I, operated by Principal Financial Group, reduced the fair value of Uber stock by “about 5%” according to Fortune Magazine, based on a similar decision by T. Rowe Price.

The devaluations took place before Kalanick resigned and focused on the increasingly seriousness of the Company’s negative publicity―Kalanick berating an Uber driver, sexual discrimination allegations, software that was developed to obstruct law enforcement, and charges of stealing Google’s self-driving car technology―all proof points to a “win at all costs” culture. It was that drive for “world domination” that investors bet on. And the formula looked solid―a technology play coupled by employing gig economy workers to disrupt an industry. Yet, how the Company would succeed―a global taxi quasi-monopoly―remained dubious. The aggressive strategies might be good for short-term substantial market gain, but could those strategies maintain long-term revenue growth and sustain the Company?

A Complicit Press

The taxi industry and its various forms of transportation have been around for centuries. Not much has changed other than the types of transportation hailed. Uber disrupted the industry―and mesmerized the public―creating the perception of a better service at lower cost. The proposition also captivated the media, which covered the Company with less focus on the actual business model (and substantial and sustained losses), possibly assuming that the technology play would lead to robust profits in a short time. There was a lack of financially skeptical articles or challenges to the business model.

Hubert Horan summarizes it best:

“Journalists depict Uber’s unstoppable march to industry dominance as established truth, although the basis for their certainty about Uber’s overwhelming Go to the full article.

Source:: Business 2 Community

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