Taxi services must be ready to embrace change

Friday February 5 2016


The action by the government to resolve a row between taxi drivers and the new entrant, Uber, is intended to ensure there is no violence or potential loss of life and property.

The traditional taxis had issued a seven-day ultimatum to the government to act or ready itself for mass protests. So the government acted.

Although Uber just came into Kenya a couple of months ago, it has disrupted the taxi business as we know it and caused panic and elicited bitter protests from traditional taxis.

This is not unique. The same has happened in many other cities where Uber, an American company, launched its services, including London, Berlin and Paris.

Uber’s business plan is simple. The company does not own any car; it relies on volunteers who subscribe to its mobile app and get connected to clients, who are charged on a metred-cost basis.

The company and the vehicle owners incur minimum costs and therefore are able to charge modest fees, hence the attraction for travellers.

And that strikes at the heart of the panic and dismay in the traditional taxi camp.

In Nairobi and throughout the country, taxis are stationary and only wait for walk-in customers.

Sometimes a taxi only gets one customer in a day and since they have a lot of overheads, including loan repayment, their fees are inevitably high.

What is happening is the harsh reality of market dynamics. Disruptive technologies enter business cycles and demolishes existing structures in a painful and dramatic way.

Mobile phones just did that to the traditional landline phones. M-Pesa did the same to the banks and other financial institutions.

Rather than fight and engage in violent protests, the traditional taxis ought to seek more market-driven strategies for their business.

For, example, metred-billing system is the way to go. Change is inevitable. Technology is irreversible.