JOSH LEVINE, AUG 19, 2019: Lyft has gone IPO. The difference between the ride-share provider with the pink mustache and Uber is a significant investment in what is quickly becoming Lyft’s key competitive differentiator: company culture.
Post-IPO, the difference between the pink ‘stache ride-share provider and Uber is an investment in Lyft’s key competitive differentiator: company culture. (AP Photo/Ringo H.W. Chiu) photo credit: ASSOCIATED PRESS
In the Beginning
Since day one, the battlefront of the ride-share wars has been scale. VCs and MBAs alike, sticking closely to the start-up playbook, predict the winner will be the first company to have the majority of drivers in the majority of cities. But this battle ends in a stalemate when every driver can work for both companies, as rear windows emblazoned with duel decals can attest.
Drivers, the humans making this multi-billion dollar endeavor move, aren’t just pawns that can be paid off with short-term incentives and finally it appears LYFT sees the writing on the curb.
Put Culture In Your Tank
With a stellar reputation, Lyft has happily watched Uber suffer through many, many , many culture-driven scandals. Lyft even turned its differentiated “uplifting” company culture into an external feature with their campaign “it matters how you get there.” And now it seems, leaders are turning up the volume. On the day of the filing, Lyft co-founders wrote in a letter that “Focusing on purpose and people isn’t just the right thing to do, it provides a lasting competitive advantage”.
With a notably stellar reputation, the company even turned this internal philosophy into an external feature with their campaign “it matters how you get there.”
With a notably stellar reputation, the company even turned this internal philosophy into an external feature with their campaign “it matters how you get there.”
During their pre-IPO ramp up, LYFT announced two new perks for drivers: the first is company-run vehicle repair shops called “driver centers” that offer significant discounts on oil changes and fixes; the second is a free, company-sponsored bank account with immediate deposits and a cash-back debit card (hello, 4% on eating out). But this suite of benefits is more than just perks; it is a significant investment in supporting the people who are the center-point of their business model, their drivers.
Yes, Uber has offered similar benefits since 2016 like discounted phone bills and car maintenance, and even a similar checking product. And yes, Lyft Driver Services, what the company calls their new benefits, is intended to woo and keep drivers by providing more cash in hand. But, what Uber and most business pundits don’t realize is that the strategy behind these perks is treating drivers well (financially and otherwise) so they treat riders well. It is this mindset that will drive the decisions that will make all the difference.
Need proof? You can already read about how their new service centers offer more than a quick oil change. In addition to support and car rentals, Lyft is “also adding community space for driver education, driver meet-ups, and those sorts of things , ” writes Jon McNeill, Lyft’s chief operating officer on Medium.
While both Lyft’s fix-it shops and bank accounts offer convenience and savings, it is the thinking behind these perks that will ultimately create the kind of driver loyalty, and sustainable competitive advantage Uber will one day wish for.
Update: A few readers have noted that the effective take-home rate for drivers, particularly Lyft drivers, is below minimum wage. In order for the system to work long-term, this needs to increase. That said, an industry overhaul of this scale will take a while to equalize — and it will most likely be the government that will force this equalization. But that is the government’s job: to guard the boundaries that the free market wants to cross. The question now is how much time will it take to get to fair pay, because people should be paid a living wage, and only then will we actually be able to see if the ride-share business model is viable.