Uber's Costly Fail in Germany is Symptomatic of an Age-Old Problem in Big Companies

By Adam Siegel on January 11, 2016

I read with interest the recent article in the New York Times about Uber's retreat from the German market - a journey which surely cost millions and calls in to question the inevitability of Uber's proliferation - and their entire new market growth strategy. It is incredible that a company of this size, with the experience they have entering new markets is still having these kinds of colossal failures. But Uber is certainly not alone in costly missteps like this.

Let's revisit 2015 for a moment. The VW emissions fiasco will cost hundreds of billions to rectify. Chipotle's mishandling of a norovirus and E.Coli outbreak has cost them market value and brand integrity that will take years to restore. A Budweiser marketing slogan sounded like it was promoting rape "The perfect beer for removing 'no' from your vocabulary…" which surely caused any woman (and those that love them) to question "what the hell were they thinking?"

These are some of the most admired and talented companies in the world. They all have very smart people running them and tens of millions of dollars to get it right, and yet they regularly trip over themselves.

This year will be no different. Product launches that bomb. Projects that run months late and are drastically over budget. Scandals. Mergers and acquisitions that leave people scratching their heads. No one will ever have a perfect track record, but I believe the number and size of fails is indicative of an increasingly troubling problem almost every large organization suffers from: the drastic under-utilization of the collective knowledge, experience, and intuition already employed by the organization that could call in to question these issues long before they become million or billion dollar headaches.

I will offer up what I think, in part, is the solution. But first, my fly on the wall hypothesis of what went down at Uber.

…

We're Uber and we're growing rapidly in dozens of countries. We also have several hundred million burning a hole in our pocket and well-funded competition in practically every market we're entering. Now it's time to tackle Germany. So we:

• Do a market study with an outside firm or my internal "scout" team.
  
• Ask a team to lead the charge. I throw lots of money at them and convince them and their families to move to Germany or work a ton of hours. "You're the tip of the Uber spear. These are exciting times for Uber. Get it done."
  
• Do lots of predictive modeling using historical data from other rollouts. How well can I expect to do with this set of assumptions? What are the different scenarios the model shows me that will influence our strategy?
  
• Armed with my market study, models, and a timeline set by the company leadership, I define my rollout strategy. How are we going to introduce the concept of Uber? How are we going to market? How are we going to price? What does the first 100 days look like? First year?
  

At Uber, aggressive proliferation is part of the core strategy. It's part of the company's DNA to go big or go home. All the company leadership: the Board, the CEO, the investors, all believe Germany is a foregone conclusion. It's the largest economy in Europe. We have to be the leader there.

...

In this culture, what would happen if a lower level field office team member stands up at an all-hands meeting in her office and says "competition is stronger than we first thought," or "I think we should slow this down," or "I think there are serious issues with our strategy in Germany because of X."

At a consulting firm I used to work at, we called this a "Career Limiting Move."

Corporate culture dictates you do not get in front of the moving train that is a supposed path to new revenue and growth. So instead, that train just continues. But unofficially, it's highly likely some people at Uber, perhaps people in other European offices who were familiar with German culture, its regulatory environment, and its transportation system, were strenuously questioning the execution of the strategy. They already knew derailment was imminent. They were just talking about it at lunch instead of talking about it in an official capacity.

No large organization I'm aware of has a formal, ongoing, structured outlet for the entire company to safely inform, question, and iterate strategy and execution of that strategy. There are attempts: feedback email addresses, town halls, listening campaigns, surveys, and other earnest "employee outreach strategies," but I'm talking 24/7/365 input at scale that serves as a gut check by everyone working there.

Because here's the problem with NOT having that outlet:

• Leadership is often years removed from being "on the ground." They don't regularly talk to customers. They aren't in to the details of product development. Their perspective changes based on their higher station.
  
• Experts, whom we would consider leadership and management consultants to be, are often the worst predictors because they're so biased. Yet it's these predictions driving the company's strategy! See Tetlock, Kahneman, et al. for proof of this.
  
• Management consultants hired by the company to help with strategy have conflicting incentives. They want to do the right thing, but they also make their money by sticking around. In that relationship, do you want to defy the person paying you?
  

I'm not arguing for everyone to sit around all day and ruminate on strategy. I'm not arguing for more meetings, retreats, or innovation sessions, and I'm not even advocating for Holacracy. I'm simply calling attention to the fact that there is a vastly underutilized resource that could be saving companies billions of dollars and creating new economic value. And that resource is the thousands of years worth of collective knowledge and experience of the people you're already paying to be your employees.

...

Here's an alternative approach Uber could have taken:

We're Uber and we're growing like crazy in dozens of countries. We also have several hundred million burning a hole in our pocket and well-funded competition in almost every market we're entering. Now it's time to tackle Germany. So we:

• Invite the entire company to quantify their beliefs about external events that will impact an Uber Germany rollout, alongside a series of conditional statements: "If Uber does X in Germany, what will happen?" and encourage both individual input and peer discussion for a distinct period of time. We aggregate that input and look for crowd-based signals.
  
• Recruit existing taxi drivers, likely Uber consumers, and former government officials to go through the same exercise. There should be no concerns about confidentiality here - everyone knows Uber is coming;
  
• Use crowdsourced forecasting to augment or inform some of the assumptions we're making in my data models;
  
• Crowdsource the scenario planning of how we're going to invest our time and money in the first 6 months;
  
• Regularly communicate the input from these tasks to our leadership (including its Board); and most importantly:
  
• Encourage leadership to acknowledge the input and have a dialogue about why or why not the path forward will change.
  

Creating this new working relationship from the Board of Directors to the C-suite, and all the way down to the summer intern means we're using the wisdom of our crowd(s) to put a check on the strategy we're pursuing and how we're implementing it that was once exclusively the domain of our leadership to weigh in on. We're identifying potential roadblocks early enough they can be more easily addressed, and we're potentially saving ourselves huge amounts of money in opportunity cost, damage to our brand, and a drop in our valuation.

The good news is much of the technology a company might leverage to create this internal feedback loop, like prediction markets, Q&A discussions, expert finders, and other collective intelligence / crowdsourcing capabilities already exist. But ultimately solving this problem will be about a willingness to change culturally. A leader must be humble enough to acknowledge they are biased, don't have all the answers, and need the input. And employees must commit to giving it on a regular basis.

Not every company is ready to work this way, but those that are willing to evolve will be thankful they did.   

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change management disruptive leadership crowdsourced forecasting