For every startup’s investment dollar, it is key to reach the highest ROI consistently to satisfy the early stage investors. And when many investors are attracted by a business model that seems bullet proof, the startup should be able to deliver on that expectation. That was the original expectation for Uber. With its substantial restructuring of its policy/communications department, Uber evidences an internal retrenchment and, possibly, later, a rebuilding of a critical department on its taxi service deployments. Now it seems to be breaking apart through the seams just as I predicted in my earlier blogs from all of its legal and regulatory battles. http://www.nytimes.com/2015/12/12/business/uber-is-said-to-be-shaking-up-policy-and-communications-team.html?_r=0. Yet, I doubt that even bringing in a Google executive will resolve those problems. The fast, reckless expansion worldwide has to take a toll on the personnel handling all battles at all fronts at the same time. The exploding costs are not only financial from the millions being spent on lobbying efforts throughout the its global operations, but also legal with the expansion of the class actions by drivers. https://reason.com/blog/2015/12/11/the-dire-implications-of-class-action-su.
When I handled similar legal and regulatory strategies in telecommunications, I noted that startups face huge expenses in controversial markets while needing every cent for expansion – to deal with legal and regulatory matters. And, when I was appointed head of such a program with international operations in over 40 countries, I had no choice but to establish a systemic approach of where one undertake which battles. In my case, I determined it to be where the substantial economic loss would be greatest – the largest markets. Then I would whittle down all the way to the smallest. I would also balance the value of brand and IP, as any technology company’s superior assets are the intellectual properties.
But Uber decided to attack every market simultaneously – of course, building a war chest to cover that explosive expansion. On the other hand, history has shown that this tactic fails – Napoleon and Hitler learned that the hard way. http://fortune.com/2015/08/24/uber-and-lyft-are-spending-big-bucks-on-lobbying-in-california/ Then one faces team members leaving the fold when it realizes the futility of the efforts. http://www.ft.com/cms/s/0/7423841e-8950-11e5-9f8c-a8d619fa707c.html#axzz3u8lkmEqs.
And I am perplexed by this strategy. If I am accepting investor’s money, I would rather allocate that capital to business development, R&D, and sales – not into the expensive pockets of attorneys and lobbyists. I am guessing that the capital being thrown at this controversial handling must be many times what companies such as Verizon or Citibank (2014 over $2.4 billion) has spent. As CEO or CFO, one has to be concerned on where is capital being applied, since sooner or later, it must show the return expectation by the investors. Given the amount of private investment, it must be close to double digits. With the simple Uber business model obtaining a fee for every dollar being charged that would normally shouldn’t be that difficult. But now that might be difficult to assess given the turmoil in their lobbying/regulatory group. It must be by product of not delivering what is expected and costing much more than anticipated. Otherwise, why would Uber be restructuring its communications office?