Uber and Lyft are at war. One has gone global, announcing a merger this week with Chinese rival Didi Chuxing that ends an expensive price war, while the other has focused on the US.
But rather than a war between two ride-sharing platforms, is it really a war between a jerk and a nice guy? More importantly, could the nice guy win?
Logan Green, Co-Founder and CEO of Lyft, certainly thinks so. On stage with Startup Grind’s Derek Anderson, Green explains how playing ‘the nice guy’ helped Lyft to grow both users and revenue 5x in 12 months, advising that “it can be tough not being a jerk but it goes really far in building a culture”.
The Social (Ride-Sharing) Network
Uber’s dominance may lead you to believe that speed of execution is more important than perfecting company culture. But consider the impact this has over the long term.
According to Green, when Lyft introduced "Lyft Line" - its ride pooling service - there was an immediate explosion of interest. The group ride service now makes up over a third of all Lyft rides in San Francisco. This, he explains, speaks to the very genesis of the company: the vision has always been to “replace car ownership rather than just create a better taxi”.
Considering Americans spend $2 trillion on cars annually, and levy an even bigger cost on traffic and the environment after purchase, it makes sense.
But with heavily funded competition coming from Uber Pool, how will Lyft Line survive?
The answer, according to Green, is culture. His team surveyed users shortly after both companies launched their pooling services; Lyft users loved getting matched with others, while Uber users hated it, corroborating Green's claim that Lyft has done more to create “a culture around being open and seeking social interaction”.
If car pooling is part of our future, will this social culture be the game-changer? Does it still work if the only reason for sharing cars is saving money? Only time will tell.
Raising Money when You’re “Too Nice”
In response to rumors that Lyft struggled to raise money because the team was “too nice,” Green explains that he eventually convinced investors by presenting Lyft’s culture as the “asset that it is”.
This is a culture that challenges the status quo. Green believes that “the default interaction when taking a cab is not to be friendly or nice”, adding that after “seeing how rough the default was, we put energy into building a culture and brand around Lyft”.
As a consequence “when 2 people get in a car, there’s [now] an expectation of being nice” and “every driver prefers driving for Lyft because passengers treat them better”.
“It can be tough not being a jerk but it goes really far in building culture”
A New Perspective on Regulation
User experience isn’t the only area where being nice is helping Lyft.
The sharing economy has led to a wave of tricky regulatory issues. In response, Uber hires former politicians like David Plouffe - best known for running the presidential campaign that put Obama in office - to lead policy negotiations.
They are certainly not the only company to employ this tactic, but perhaps there is another solution...
Rather than opposing regulation, Lyft’s team has taken a friendly approach, collaborating with regulators to work out how best to oversee this changing industry. There is currently a finite number of ‘medallions’ that drivers have to buy in order to be an official cab driver; a “government-mandated monopoly” that doesn’t make sense for customers and “knows its days are numbered”, according to Green.
Results from the nice guy approach are impressive, having led to “updated regulations in 29 different jurisdictions”. Other companies in the space “have left a bad taste in regulators’ mouths [and] we’ve gone further in being able to change regulations with this approach”, he claims.
Winning Market Share
You might think ride-sharing is a winner takes all market and the "fluffy" cultural stuff is futile.
But whilst Uber might want us to believe this, Green disagrees, revealing that Lyft is gaining market share. Interestingly they made the biggest gains in San Francisco, the city best acquainted with both companies. “There is no international network effect like Airbnb or Facebook - only a modest national network effect in each city.”
The important thing is that you “need to operate at scale so you have fast pickup times” but once you have “approximately a 3-minute pickup time, there is no benefit to having additional scale as far as user experience or strength of the business is concerned”.
Instead, it is more effective “to compete on brand and what the company stands for - areas where Lyft is winning and taking market share.”
But more than just market share, 2014 was also a big year for Lyft’s team: the company grew from 80 people to 400, and brought on a CFO, CMO, VP of Partnerships, and VP of Product.
With promising user engagement, a reinforced team and $500 million from GM to introduce autonomous vehicles into their offering, could Lyft be on the cusp of dealing Uber a major blow?
Maybe being the nice guy pays off after all.