Wednesday, March 1, 2017

"Travis Kalanick is Uber's biggest asset, and now its biggest liability"

A piece at FT Alphaville today reminded me that the wider media is beginning to take notice of what Ms. Kaminska was writing about two-three years ago. Here she is again.
From FT Alphaville:

When life imitates art, Uber CEO edition
Travis Kalanick, the adversarial CEO of Uber who sees every day as a fight for survival that justifies mercenary corporate tactics, has had to issue a company-circulated apology. It follows a dash-cam video taken by one of his drivers revealing him to be insensitive and patronising, and out of touch with the reality of the failings of his own business model.

In the video, Kalanick is seen lecturing an Uber driver about the driver’s inability to meet financial commitments, which the driver blames on Uber not allowing drivers to charge high enough fees to cover basic costs like car loan payments, and which falsely lured them into taking these commitments on the notion they would be earning as much as $20 per hour.

“Some people don’t like to take responsibility for their own shit. They blame everything in their life on somebody else. Good luck!” he tells the driver.

This after noting (quelle surprise) that:...MUCH MORE
And from Business Insider via Yahoo Finance:
Uber would not exist without Travis Kalanick.

He wasn't the one to come up with the idea for it or even its first CEO. But there's no doubt that Kalanick was the one to take the company from a seed of an idea for a car service and to craft it into the most valuable private technology "startup" — if you can even call it that — that it is today.

Often, that meant springing into battle against whatever stood in the company's way, whether it was the "a**hole named taxi," as Kalanick once referred to his foes in the taxi industry, or the city regulators that have tried to block his business at every turn.

Kalanick's aggression, dedication, and scrappiness built Uber. But now those same traits threaten to tear it down.

In the last week alone, Uber was the subject of a former engineer's high-profile allegations of sexual harassment and a subsequent New York Times investigation detailing a litany of ugly behavior. The company was publicly rebuked by one of its most famous investors, and then accused of using stolen technology, and sued, by another big investor.

That's a bad week for any company, but for Uber the string of challenges has exposed a dangerous reality that threatens to derail the $69 billion company's path to an IPO: The company no longer enjoys the benefit of the doubt from many of its customers, the media or the general public. 
Given the fractured state of the company's reputation, this could well be the tipping point
A big reason for that is because of the reputation it's earned over the years under Kalanick's leadership, and some observers now believe any resolution to Uber's current crisis will have to involve a change with the 40-year-old Kalanick.

"If I were on the board, I would find a way to get rid of him," said Michael Barnett, a business and management professor at Rutgers University. That may not be a realistic scenario in the eyes of many industry insiders, but it's clear that the company has to make some kind of change if it wants to regain the credibility it needs for the business to continue to thrive.

A compounding crisisThis isn't the first time Uber's faced a string of corporate public relations disasters, but it's the first time it's brought the company to a tipping point.

Twice in the last month the company has had to update the automated messages it sends users when they delete their accounts, appending special entreaties asking for forgiveness. The first was during the #DeleteUber movement when more than 200,000 people deleted their accounts in a weekend — an uptick so dramatic that Uber had to build an entirely new system to handle it. This past week, Uber had to update the message again to tell users just how badly it was hurting in wake of the accusations of a sexist work culture at the company.

For a company to be in a crisis the situation needs to fit three criteria, according to NYU professor Irving Schenkler, who specializes in corporate reputation:
  1. It has to be occupying senior management to the detriment of the rest of the business.
  1. It may have financial implications for the company.
  1. It may affect the company's reputation in the eyes of important stakeholders. 
Uber has checked off all three boxes — more than once.

The current season of crises kicked off in December when Uber brashly opted to put its self-driving cars on San Francisco streets without the proper permits and was forced to back down by California regulators.

The showdown with the California DMV represented the first to dent Uber's carefully rebuilt image that centered around "celebrating" the cities it operates in. The #DeleteUber campaign — an unexpected and viral backlash to Kalanick's involvement with the Trump administration — further bruised customer trust of the company and showed that the backlash could actually take a toll on the business.

Now, the sexism scandal is internally affecting all levels of the organization as the company tries to rebuild trust with its own employees. It also lost the public support of some of its earliest investors. In a public blog post, Mitch and Freada Kapor, early investors in the company, publicly shamed Uber for allowing a "toxic" culture in the workplace and questioned whether Uber's pledged investigation into the incidents was actually independent enough.

Arianna Huffington, an Uber board member, pledged to hold the company's "feet to the fire" as it investigates claims of sexism in the workplace.
Then Google, another one of its investors, sued Uber for intellectual property theft and patent violations over its self-driving cars.

It fits into a pattern Schenkler has seen during company turmoil. "Companies with reputational risks or vulnerabilities will often encounter heightened scrutiny and compounding problems when a crisis surfaces," he told Business Insider.

"Uber's cascade of accusations reminds me of the sequence in Orson Wells' film, The Lady from Shanghai, where toward the send, at every turn, Wells' character sees his reflection in an unending set of mirrors," Schenkler said.

"The heightened glare directed at the company and the CEO may well augur a change in the C-Suite. Given the fractured state of the company's reputation, this could well be the tipping point, and an opportunity to head off consumer departures in favor of competitor."

Big moves, or a big axeUber is now facing a reputational crisis the likes of which it hasn't seen since 2014. Back then, Uber could manage its way out of it with less harm to the business.

That was the year of the infamous interview with GQ where Kalanick called the service "boob-er" since it helped attract women, and a French office ran an ad campaign to pair riders with "hot chick drivers." During the same period, Uber was  investigated for privacy violations after it used the service's controversial "God View" feature to track the whereabouts of a BuzzFeed reporter and an Uber exec suggested digging up dirt on critical journalists. On the business side, a leaked playbook showed just how far the company had gone to sabotage Lyft. Meanwhile, hundreds of angry drivers protested in the streets against the company's treatment.

None of these ordeals slowed Uber as its business and valuation continued to expand at a breathtaking pace.

But Uber is not the only game in town anymore, with Lyft's rival ride-hailing service now a viable substitute for Uber customers, says Barnett.

"People will start to switch over. Once they go over to Lyft, there’s no good reason for them to come back to Uber," he said.

Barnett compared it to Walmart trying to right its workers pay issues after Target came along. Companies can get away with it when they're the only option, but not when there's a comparable service.

That's why the trust deficit Uber has built-up over the years is especially problematic....MORE