Tag Archives: travis kalanick

Time to Rethink Silicon Valley?

The downfall of Travis Kalanick should show the world of would-be tech entrepreneurs that they need better role models, that they need to stop looking up to the spoiled brats who lead some of Silicon Valley’s most hyped companies and the investors who fund their misbehavior.

Travis Kalanick’s ouster from Uber is literally a watershed for the Valley, something that is capable of shaking up its entrepreneurs and venture capitalists alike. For too long, the elite have gotten away with sexism, ageism and, to coin a word, unethicalism. The cult of the entrepreneur idolized arrogant male founders who plundered money and even sank companies; the more money they raised (and often lost), the higher the valuations their companies received and the more respect they gained. Corporate governance and social responsibility were treated as foreign concepts.

Uber was not the worst offender in the tech industry; it was just the most visible and the one that got caught. Its investors have been rightly humiliated for having their heads in the sand. This is because it has for so long been clear that Uber needs management that is more responsible — to its employees, its drivers and its customers.

The trouble first surfaced in 2013, when complaints about male drivers’ assaulting female passengers met with denials of responsibility by the company. Then followed sexist “boober” comments by Kalanick; ads in France that pitched attractive female drivers; suggestions by an Uber executive that he would dig up dirt on a journalist; and the rape of a woman passenger in New Delhi partly caused by a lax screening of drivers.

See also: What to Learn From Uber’s Recent Troubles  

But through all of this, Uber investors supported the company and accepted the ethical lapses as if they hadn’t happened. All that seemed to matter was that valuations were rising; the business, expanding. Who cared that a top Uber executive had secured a copy of the medical report of the Delhi rape victim and shared it with other company executives, including Travis Kalanick, in an attempt to discredit her? The company was growing; investors were valuing it in the billions!

Things finally reached a boiling point with a series of allegations by a woman employee about rampant sexism and sexual assault at Uber headquarters. And, fortuitously, a board member illustrated the root of the problem by making a sexist remark at a meeting about eliminating sexism. The board was finally compelled to do something it should have done years ago: force Kalanick out and clean up its act.

To be fair, there are many technology companies that are, in this regard, exemplary, including Salesforce, Microsoft and Facebook. They are going to extremes to correct problems that they had found in their ranks. I know from discussions with executives such as Microsoft CEO Satya Nadella that they have been working hard and sincerely. But too many Silicon Valley stars are like Uber.

With the help of Arianna Huffington and Eric Holder, the company is at last working on reforming itself. And maybe the downfall of Kalanick will provide not only valuable but lasting lessons for the hotshots of Silicon Valley, and of tech cultures worldwide. If Uber can do it, so can the rest of the Boys Club. They have to realize that press releases won’t suffice, that real change is necessary.

Who are “they”? To begin with, the people who fund the offenders, the venture capitalists. They have not been held accountable, and they need to be.

The Diana Project at Babson College documented that, as of 2014, 85% of all venture capital-funded businesses had no women on the executive team, and only 2.7% had a woman CEO. The proportion of women partners in venture capital firms had also declined to 6% from 10% in 1999. And this is part of the problem for an obvious reason: Women don’t tolerate boys-will-be-boys behavior, because they aren’t boys. Moreover, as any number of studies have documented, diversity in companies yields a broader range of perspectives on the business itself and, often, better bottom-line results. And, as I have pointed out, high-tech women who are measurably better than men have been consistently discriminated against.

Venture capitalists are susceptible to business pressure. The money that they invest is not their own. It is raised from pension funds, universities and state governments. They must require venture capital firms to provide public disclosures about the diversity of the companies they invest in — including the gender and age of the executives. They must have a diverse set of investment partners, without sugarcoating the numbers using inflated titles for junior associates.

Next are the boards. Venture capitalists demand seats on boards as a condition for their investment but don’t usually fulfill their fiduciary duty to all shareholders and employees — they always put the interests of their own funds ahead of those of the company. They must take responsibility for the employees as well as for the success of the company, as board members are supposed to do. And startups must have diverse boards that provide balance and broad perspective, not chummy boys clubs dominated by venture capitalists.

Finally, all tech companies must take heed of the report that was put together by former Attorney General Eric Holder for Uber. There are obvious procedures to employ in making diversity a priority: such things as blind resume reviews; interviewing at least one woman and one minority candidate for each open position; limiting alcohol at work events and in the office and banning employee-manager relationships.

In most industries, discriminating on the basis of gender, race or age would be considered illegal. Yet, in the tech industry, venture capitalists brag about their “pattern recognition” capabilities. They say they can recognize a successful entrepreneur when they see one. The pattern always resembles Mark Zuckerberg, Bill Gates, Jeff Bezos a nerdy male. Women, blacks and Latinos need not apply. Venture capitalists openly admit that they only fund young entrepreneurs because, they claim, older people can’t innovate.

See also: A Trip Through Silicon Valley  

Silicon Valley got a free pass when computers were just for nerds and hobbyists. Few cared about its arrogance and insularity, because its companies were building products for people who looked just like their founders. And these child geniuses inspired so much awe that their frat-boy behavior was a topic of amusement. But now technology is everywhere; it is the underpinning of our economic growth. What is more, the public is investing billions of dollars in tech companies and expects professionalism, maturity and corporate social responsibility.

There is no free pass for the tech industry anymore. It must grow up and clean house.

Innovation, Community and Timelessness

“A thing of beauty is a joy forever.”

This is the opening line of the very famous poem called Endymion by John Keats, published in the early 1800s.

While this line is intended to set up a beautiful story about timeless romance, the line itself in popular culture has been used in literature, movies, ads and general conversation to describe everything from nature to art to science and more.

Why? Because Keats did an awesome job of extracting the nuance of something that everyone can relate to — not just love, not just beauty, but timelessness. It’s human nature to want timelessness and sometimes even take it for granted.

Good innovators know when something is going to fail the timelessness test. However, great innovators look at what’s failed or failing and, like a priceless painting unrecognizable from years of dust, extract what’s timeless and work hard to put it into a modern context.

Let’s look at some of the most famous modern innovators and put a label on what timeless element they extracted and modernized.

  • Steve Jobs (Apple): 24/7 connection to what’s important
  • Mark Zuckerberg (Facebook): Social exchange and acceptance
  • Jeff Bezos (Amazon): Convenience and time-saving
  • Travis Kalanick (Uber): Anything on demand, including a job

Any company that is constantly looking at its products and their applicability to new consumers is practicing good innovation. However, those that can define the nugget of timelessness have a greater advantage.

See also: Innovation Challenge for Commercial Lines  

Recently, my colleagues and I have had the privilege of working with the American Fraternal Alliance, and we’re in the midst of an inspiring innovation initiative for what could be considered a dusty corner of the life insurance industry.

1. Why is it dusty?

For background, fraternal benefit societies are organizations of people who usually share a common ethnic, religious or vocational affiliation and may provide insurance to members, primarily life insurance. While this model dates back hundreds of years, the dustiness doesn’t come just from age. For starters, the practices and language used by these societies can conjure up outdated or inaccurate images because connotations of words and phrases change over time. More important, for some, there is a decline or weakening of the common bond that drew the group together in the first place, requiring it to be updated.

2. Why is it inspiring?

The insurance industry provides a valuable utility to the public, yet consumers today have a negative impression of the industry. Recent developments in healthcare don’t help that impression. Fraternals are a special kind of insurance organization that is required to give profits back to their communities; thereby, done right, they shift the focus naturally from what they offer to why they offer it.

3. What do they want to accomplish?

The American Fraternal Alliance members want to reposition the fraternal model into the modern day and help more consumers understand it. However, it’s not an exercise of logos and fonts or sexy models selling something. It’s about finding and extracting what’s timeless and then communicating that in the right way.

4. How did they start?

This group started with a small investment, to determine if there was an opportunity in the first place. What was found was very encouraging. While the awareness levels in the market were quite low as a starting point, when consumers intending to buy life insurance in the next two years were provided with a simple description of a fraternal, the overall impression was very positive. Then, when fraternals were described in a new way, overall positive impression went up by another 23 percentage points. Further, the interest level in buying from a fraternal was 70% when prospects were exposed to a new positioning message.

This is further validated by signals in the market. We see younger consumers favoring brands that give back to communities all around the world. In addition, the disruptors in insurance are leveraging new definitions of community as a selling point for peer-to-peer models.

See also: Examining Potential of Peer-to-Peer Insurers  

That’s not to say there isn’t a lot of work still to be done. However, the innovation lesson here for the life insurance industry may be that community is timeless, and modernizing it may mean more to the future of insurance than modernizing insurance itself. Extracting what community really means and working hard to deliver on that value is what will ultimately move the needle in a meaningful way. Fraternals, dustiness aside, are in a great position to do that.

Is Uber Already in the Crosshairs?

The CEO of a large insurance company once confided to me that the toughest innovation challenge he faced was that, “Every time we try to innovate, the agents turn around and kick us in the nuts.”

The dance between Uber and Google around drone taxis reminds me of that conversation. Google invested in Uber in 2013 but has recently distanced itself from Uber amid indications that it is considering offering its own ride-hailing service using driverless cars. While such a service might make sense for Google and might be the way of the future, imagine how Uber’s drivers will react if Uber attempts the transition to driverless cars.

Both the insurance CEO and his agents knew that the most innovative thing his company could do was to eliminate the agents as middlemen between him and his customers. This insurer was paying about 15% of its premiums to agents in commissions and bonuses. Eliminating agents would have translated into lower expenses for the insurer and lower premiums for customers. GEICO, for example, pays no agent commissions. It takes advantage of its structural cost advantage to out-market and out-price its agent-based competitors.

The problem was that this insurer depended on its agents. Going from agent-mediated sales to no agents was fraught with danger.

Sometime in the future, whether five, 10 or 15 years from now, Uber will confront a similar predicament as it confronts the adoption of drone taxis.

Fully autonomous cars will enable Uber-quality service at much lower prices — and at a fraction of the cost of car ownership. The only difference is that there will be no human drivers.

Drone taxis are an opportunity that Uber has long foreseen. It was likely a part of the calculation for accepting Google’s $258 million investment in 2013Travis Kalanick, Uber’s CEO, was clear about the opportunity when he told a technology conference in 2014 that:
“The Uber experience is expensive because it’s not just the car but the other dude in the car. When there’s no other dude in the car, the cost [of taking an Uber] gets cheaper than owning a vehicle.”

And, as I discussed I a recent column, Uber just put a lot of money behind that vision. So, by the time driverless cars become viable, Uber will have had a hand in its development for a long time.

But here’s the rub. By that time, Uber will no longer be a feisty startup with nothing to protect. It will most likely be a highly profitable and richly valued public company. It will be servicing millions of customers in thousands of cities across hundreds of countries all around the world. And its success will depend on the allegiance of hundreds of thousands of independent human drivers.

As with insurance agents’ power over the aforementioned CEO, drivers will have tremendous leverage over Uber. Will Uber drivers accept a drone option on the Uber app? No.

It is easy to imagine work stoppages and mass defections to competitors that promise not to offer drones. It is also easy to imagine intense campaigns by drivers and third parties to save drivers’ jobs and livelihoods. Uber will find itself at the very uncomfortable heart of the technology vs. jobs debate.

Will Uber management have the audacity to risk changing Uber’s business model? Could Uber weather the bad publicity and potential disruption to its revenue and profits? Would its board and investors allow management to put the company at risk?

Uber will be in much the same position that Kodak found itself with digital photography. Kodak had the foresight to invest in research that yielded many of the core inventions enabling digital photography. Yet it struggled for decades to capitalize on those inventions — even as digital photography inexorably replaced film-based photography.

Kodak failed even though it had immense resources, technical expertise and management talent. It failed because it could never negotiate the business model transition to digital photography. If you had a very profitable and dominant film, chemical and paper business, when would you choose to accelerate its demise? Kodak management stuck with film until the company’s early advantages in digital photography no longer mattered.

The iconic “Kodak moment” used to conjure up images of heart-warming pictures. It now symbolizes companies grappling with complete and utter technology disruption.

Uber will no doubt have all the prerequisite resources, technical expertise and management talent to fully comprehend the strategic implications of driverless cars. Like Kodak, it will have a very long time to prepare.

Do you think it will survive its Kodak moment?

New Way to Insure the ‘Sharing Economy’

Disruptive influencers are surrounding the insurance industry. Speed and intensity are increasing, challenging industry practices, assumptions and business models.

According to a Forbes article in January 2013, the revenue flowing through the shared economy directly into peoples’ wallets in 2013 would surpass $3.5 billion, with growth exceeding 25%. At this rate, peer-to-peer sharing was moving from an income boost to becoming a disruptive economic force.

Just look at a recent profile by Silicon Valley Business Journal, where Uber Technologies CEO Travis Kalanick confirmed that Uber raised another $1.2 billion following a record year of growth in which it expanded the number of cities it serves by more than 400%, to 250 cities in 50 countries. Astonishingly, Uber, founded just four years ago, had a “post-money” valuation of $18.2 billion after a round of financing in June; today’s post-money valuation is about $41.2 billion. Now that is a disruptive economic force!

The shared economy is empowering individuals and businesses to access specialized skills, resources, goods or services from anyone, anywhere and at any time based on a need for point in time. It is disrupting existing business and industries while spawning new business models, leveraging the combination of crowdsourcing, open innovation and technology to create companies like Uber, Lyft, Airbnb and many others across different industries. Traditional companies  (including insurers) and their brands cannot afford to be left out of the shared economy.

Insurers must reorient their business practices from product development to services aimed at meeting the needs of this new market segment and creating more value and a deeper customer experience. For a recent report, we asked insurers to think about key questions and issues: How will shared-services business models redefine risk or identify new risk? What new products and services can you develop for these emerging new businesses? For your customers who are less interested in ownership and more attracted to access, rental, reuse or subscription, how can you personalize products and services for them? Most importantly, how could the shared economy concept be used to create a new type of insurance company, challenging the traditional view?

One CEO of a start-up who had just received another round of funding and was preparing to launch his business, shared this frustration:

“I just wanted to let you know that I have found the hardest problem to solve as the CEO, is that after talking with 12 different insurance companies, I am still stuck on finding someone to write a policy for me! I am not sure you can overstate the tsunami of change that insurers are trying to avoid. It is frustrating to me as a CEO trying to get my company going.”

His statement says it all. Insurers either can’t or won’t see the influencers and levers of change, and in failing to do so are closing their eyes to the impact to their businesses in terms of revenue and customers. Meanwhile, they are leaving the door open for competitors to fill the need, especially those from outside the industry.

One company, Erie Insurance, did announce that it is offering what it believed to be a first-of-its-kind coverage to protect drivers who use ride-sharing services like Uber and Lyft. Erie initially offered the insurance in two states and would make it available in others states, depending on consumer response. The new insurance coverage is designed to solve a problem for drivers in the ride-sharing economy by eliminating confusion over what’s covered and when it’s covered. While encouraging, the announcement seems rather late in the game, given that companies like Uber have been around for four years. And the coverage does not address the growing set of other business models.

But a new company has stepped forward to meet the need! In the Dec. 4, 2014, Silicon Valley Business Journal, it was reported that Peers  is developing products and services for workers in the “sharing economy.” Peers was founded and funded with money from a number of founders of “sharing economy” companies and has a membership of 250,000 in just a year. Peers has rolled out its first two offerings, including a home rental liability insurance policy, which works for any short-term rental platform. The policy provides as much as $1 million for personal injury or damage to property sustained by a renter and includes compensation for lost income up to $5,000 as a result of damage to a home by a renter or their invitee. The policy costs $36 a month, can be purchased for a single month, is available nationwide from insurance broker Porter & Curtis and is underwritten by United Specialty Insurance.

Shelby Clark, the CEO of Peers, said in the article, “While sharing economy workers are finding new ways to fill their income gaps, they are also encountering challenges they’ve never had to deal with before, such as an inability to find the financial products they need or concern over the stability of their income. By combining the collective purchasing power of the Peers community, Peers is able to pioneer innovative solutions to new problems. Sharing economy workers are not alone, and they shouldn’t feel that they need to navigate these issues alone.”

For insurers, the Peers announcement should be a wake-up call on many fronts, from the lack of seeing and responding quickly to new market needs to seeing the emergence of a new competitor in Peers. While Peers is partnering with an insurer to underwrite the products, it has a growing customer base for which it is meeting insurance needs with innovative products and the services. In the process, it is gaining customer loyalty and potentially owning the customer in a fast-growing, new market segment, one that may be replacing existing segments.

The overriding and most critical question for insurers is not if, but how, they will embrace the shared economy, crowdsourcing and open innovation – first to get in the game, then to influence change and ultimately to win. Well, one insurer is in the game. And one new competitor with a large and growing customer base is now in the game.

This outside-in move by Peers is a game changer. What will your next move be?