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AP Photo/Saurabh Das
Startups create jobs and wealth.

The biggest mistakes companies like Uber make in India

Ravi Venkatesan
By Ravi Venkatesan

One of the overlooked lessons of the Uber fiasco is how governments the world over are finding it even more difficult to keep up with technology-driven business model innovation.

A lot of innovations today are not incremental but game-changing and downright disruptive. New business models devour existing businesses and new technologies not only have the potential for doing good but also causing harm.

E-commerce is disrupting traditional distribution. New taxi services like Uber and Ola are upending traditional black and yellow taxis and even autorickshaws. Airbnb has the hotel industry up in arms. What’s on the horizon is even more amazing. The cost of sophisticated drones is plummeting and already Amazon and DHL are testing package delivery using drones. Should this be allowed? Wouldn’t driverless cars be a boon in our traffic-clogged cities? It is already possible to “print” a working pistol using downloadable designs and a commercial 3-D printer; how do you control the proliferation of guns in this scenario? Simply ban 3-D printers? What are the moral implications and hazards of inexpensive genetic testing? How should regulators view new currencies like Bitcoin, which are key to enabling the flow of work across countries but can also be used by terrorists? Should software driven “robotic” doctors be welcomed or banned in a country with an acute shortage of doctors?

Better, faster, cheaper

These are complex questions that defy easy answers. On one hand, these new innovations and business models are the future. The startups pioneering these approaches create wealth and jobs. Moreover, they are pro-consumer; the very reason they are disruptive is because they are dramatically better, faster, cheaper and more convenient than existing offerings and therefore consumers love them. For all its flaws, Uber is cheaper and safer than most existing taxi services.  On the other hand such innovators put huge pressure on traditional incumbent businesses. Unable to innovate or compete, they turn to regulators and lawmakers to slow the pace of adoption. Some of these new businesses have very innovative revenue models that pose a challenge to the tax authorities. Sometimes, new technologies are “dual use” with great capability for both good and bad. Genetic engineering, artificial intelligence are good examples of this. So some sensible regulation is necessary.

A ban is not a solution

The instinctive tendency of legislators and regulators everywhere is to shackle innovation to preserve the status quo. This is particularly true in a country like India where the distrust of businesses in general and of foreign companies in particular is high. The visceral reaction of governments is to ban the problem. Of course, all that results is in consumers suffering and making these businesses operate on the fringes of the law. Take the retail industry for instance; majority foreign ownership in multi-brand retail is not allowed in India. But tell that to Amazon; of course they are a marketplace not a retailer! But then that is the point. It is impossible to stop or ban a compelling new idea; as Victor Hugo said, “Nothing is more powerful than an idea whose time has come.”

We are on the cusp of an unstoppable explosion of innovation powered by advances in science, technology, venture capital and entrepreneurship. And therefore the gap between new innovations and policy and legislation on the other hand will continue to grow exponentially.

Embrace disruptive innovations

So how should law makers and regulators respond? First, governments should recognise their inability to stop the adoption of many of these disruptive innovations. It is better to embrace and shape their adoption rather than deny their existence and ban them. Human nature will always find a way around. Second, open and public dialogue must precede any intervention. All stakeholders including innovators, experts, civil society and media should be invited to the debate not just incumbents and “nationalists.” The responses of other countries must be studied and the evidence examined. Finally, when regulatory intervention is unavoidable then the remedies should be as light and narrow as possible with a willingness to modify regulations based on experience.

Don’t operate stealthily

Equally, disruptors should help their cause by behaving responsibly. Much of Uber’s woes in India may be self-inflicted. India is the second largest market for Uber yet it has no senior person or country manager in India. It operated stealthily; even the police had to hail a cab and ask the driver to take them to an Uber facility because office locations and contact information were unavailable. On every matter, be it payment of service tax or compliance with RBI regulations on use of credit cards, the company complied grudgingly and when faced with no choice. Equally its apology, when it came, felt to many as grudging and lacking conviction.

Tips for Uber

Stealth, disengagement and grudging compliance do not build trust nor help shape public understanding and opinion, both of which are crucial for a disruptive innovator to succeed. If India is important to the company, a better approach would have been to hire a senior person and constitute an advisory board with eminent people who could help it navigate its many regulator challenges.

Even where the company has been on a strong wicket it has remained silent; it isn’t well known but becoming an Uber driver is one of the fastest ways to raise your income if you are poor. Rather than stay silent, Uber ought to run a communications campaign on the good it does in India.

Finally, Uber could be more imaginative in adapting itself to the market. For example, in a country where women’s safety is a burning issue, giving customers the option of asking for a woman driver might go a long way to alleviating safety concerns.

The march of disruptive technologies and innovation is relentless. The well-being of our society depends on sensibly embracing these advances and managing the risks rather than banning them. This requires a more open, informed and progressive dialogue on the policy and regulatory environment that governs us.