Yesterday, under pressure from investors, Travis Kalanick resigned as CEO of Uber. This will have been an incredibly difficult decision for everyone involved and it flies in the face of Silicon Valley’s whole ‘founder-first’ culture. How could it have come about?
On the surface, the reasons seem straightforward: allegations of sexual harassment, a lawsuit over self-driving car technology, a software program that was used to mislead regulators, and repeated instances of poor treatment of and relationships with drivers. But beneath these surface symptoms lies a deeper reality: in a world filled with change, it is often not the physical changes that people find difficult to cope with, but rather the emotional and psychological impacts that accompany change.
These emotional impacts are called transitions. They come in three stages. What has cost investors millions if not billions of dollars, and led Travis Kalanick to resign, is Uber’s inability to manage these emotional transitions.
Transitions come in three stages: Separation, Threshold, and Consolidation. These stages are important to anybody who is working to create something new and especially important for disruptive startups.
For example, we all know now how Amazon, Airbnb, and Uber work. But once upon a time all three were radical, untried new business models. As well as implementing the physical and contractual elements of the new businesses, founders had manage the emotional and psychological transitions of customers, employees, and investors: to encourage them to engage with the new ways of doing things.
Step by step they had to:
- Inspire people to Separate from the way they had previously bought books, hotel rooms, or taxis and try out a new approach
- Convince them to cross an emotional Threshold and stick with the new business as it grew
- Consolidate and align the different pieces of the emerging enterprise into the coherent and evolving brands that we know and love today.
For Amazon and Airbnb this process has worked well: we now understand how these once-strange business models work and we feel comfortable engaging with them. For Uber, the current crisis has come in the third, Consolidation, phase.
Success in this stage depends on building relationships with important stakeholders and aligning each part of the business into an integrated, coherent vision (much like one of those wooden puzzles). In various ways, with multiple stakeholders, this is what Uber has so far failed to do. Investors have asked Kalanick to go.
Lyft, meanwhile, is managing its Consolidation better. In particular, it is focusing on building good relationships with drivers. As a result Lyft is gaining market share, experiencing “explosive growth.”
Yes, ride-hailing profitability is driven by market share: more customers and drivers brings more rides and lower costs per ride. But what drives market share of drivers, riders, and investors is their emotions and transitions.