What is a taxi?
Taxi's are a means of transportation for communters who wish to reach a destination conveniently. Under this definition, taxis face competition from alternative transportation. To differentiate from the competition, taxi's must focus on its competitve advantage: convenience.
Differentiated service
Trains, buses, planes require a fixed asset, such as bus stops, stations and airports, for passengers to gather. The vehicles are also built for the general population, leaving little room for personalization. Taxi companies, given sufficient time, can tailor each vehicle according to each customer's specific purpose and provide service from the customer's door step. From spacious cabs for heavy luggage passengers to high end limos for business passengers, based on each customer's anticipated needs taxi cabs have the flexibility to tailor directly to the customers needs.
4 Innovation areas
For taxi companies to achieve competitive advantage, 4 areas of innovation are crucial: compensation structure, investment in data gathering, employee development, asset maintenance
Compensation Structure
Taxi companies will tend to underpay drivers regardless of hours worked. Such practices deteriorate morale and service quality. Taxi companies must redesign compensation practices so that drivers have an incentive to deliver quality service and understand which activities contribute to the company's growth and personal growth. Uber's rating program is not perfect but an early step. If a rating program executed sufficiently, drivers should recieve extra pay for quality service.
Investment in data gathering
Taxi companies must invest in data and software to understand customers and predict which areas have potential. From time price differentiation to adding customary services such as wi-fi, concierge, translation services, taxi companies must invest in data gathering in order to provide superior service and target customer segments to increase revenue.
Employee development
To maintain quality, delegating employee training to labor unions is insufficient. Employees must be well prepared and continuously trained to prepare for unexpected incidents when interacting with customers. Multi-language abiltities, CPR training, dealing with on-road accidents are a short list of the abilities drivers need to be prepared for. Successful execution of unexpected events are good stories in which customers share on-line and increase brand value. Furthermore, internal departments that deal with driver's emotional stress must be established to maintain refreshed drivers.
Asset Maintenance
When cabs have complex devices tailored to each target customer, the cost of maintenance is inevitable. Annual contracts for maintenance, guarantee agreements with manufacturers are a few ways to solve this problem. However, fundamentally, vehicles have to be assembled as modules so that parts are interchangeabe, and malfunctioning parts can be inspected without opportunity loss.
Taxis are a commodity in this day of age. It is the reason why Uber and other companies have been able to innovate while incumbents were rejecting change. Current taxi companies must start to innovate their business model to survive and prepare for change.
Originally written at Wordpress on April 25, 2017.
Relocated and updated February 18, 2018. January 20, 2020
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