Transport innovation hit by roadblocks of convention – The Hindu BusinessLine

Pioneering firms face many challenges. If they can convince the customer of the benefits they offer and establish themselves, strategists will say that they can derive first-mover benefits. These include access to technology and other resources, the ability to gain scale advantages, and establish a brand. Of course, they will have to work hard to be sustainable in the face of challenges.

Electric scooter firms like Bird and Lime have made an entry in major cities like London, San Francisco and Berlin. You can use your smartphone and pick them up and drop them off whenever, wherever, paying by the minute. Commuters using metros love these scooters and use them to get to work or home. Tourists zoom around. Independent contractors are used to maintaining the scooters, rounding them at night and charging them, and putting them back where they would be used. But they also attract vandals who seem to delight in dumping them into a nearby river or lake. Cities are responding. Paris is banning their use on sidewalks and double-riding, environmental groups are complaining about the dirty scooters fished out of water. The companies are trying to respond by instructing riders about safety while working to keep depreciation low.

Ride-hailing firms like Uber and Lyft have run into rough weather with regulation in California. The very term for their industry, ‘ride-hailing’ is to show that they are different from a conventional taxi company. This business is to help you hail a taxi using the conveniences of a smartphone and the GPS system to make sure you get a taxi, rather than standing at the curb, looking up and down the street. To make that work, their innovation was to rope in plenty of drivers who wanted to make some extra money using their assets of time and a car, at their convenience. They could sign-on and drop-out from being a service provider at their convenience. I have spoken to many Uber and Lyft drivers in many cities around the world, who rated this as one of their important considerations for joining the company. Interestingly, even conventional taxi drivers who switched to these companies mentioned that as an important advantage.

Yet, the US state of California (often derided as the ‘nanny state’ for thinking it knows better than the people about what they want) has decided to force-fit this innovative service into a conventional company straight-jacket. A law passed in the state requires the companies to treat the drivers as employees rather than as independent contractors. This would significantly raise their costs of operation, salary and benefits, and so on. Some manager sitting in an office far away will now schedule their shifts, and say they cannot be doing this along with another job. Exit all students who were trying to make some extra money.

To argue for those who were missing benefits and job protection, this law must be welcome. And therein lies the challenge of innovation to find a niche product or service that is seemingly missing or can be introduced in the market.

Both scooters and ride-hailing companies are trying to offer something new. They are early entrants in a market of their creation. They have to educate their customers about their service by staying focussed on what they are providing. Conventional competitors who find their turf threatened will use all means, including prodding regulators, to cut these pioneers to size. Remember the Segway personal transporter, a forerunner to the electric scooter? It was early in the game, with customers and regulators needing to be convinced. After much promise, it could not face societal barriers to its use and is now relegated to fringe markets like tourism and mall security.

The writer is a professor at Suffolk University, Boston