Multi-Stakeholder Reality of Smart Mobility: What Is Best Approach for Startup Entry?
By: Evgeny Klochikhin
Tags: Mobility, Smart Cities, Smart Mobility, Startup, Transportation

As the world fights against COVID-19 pandemic, transportation is one of the worst hit industries. Yet, the industry itself is not going anywhere — people will continue to move once they are out of their homes and goods will continue to flow, same as before.

So, nothing seems to change the prime premises: transportation needs disruption. That’s where smart mobility comes in.

Smart mobility is the key driver of transportation innovation.

Implementing smart mobility solutions poses numerous challenges for startups seeking to enter the market. Transportation is, rightfully, highly regulated by cities. In most cases, you can’t just show up and start selling a new service. Sooner or later, there is going to be pushback.

And because our transportation system is so complex, changing laws is oftentimes an uphill battle. Many startups are designed to serve only one segment of the market. But city governments need to make decisions that work for everyone.

Any given city has a diverse array of stakeholders: drivers, pedestrians, ride-sharing users, bikers, public transportation users, and more. Cities are faced with the challenge of creating policy that balances different needs and demands. They can’t just cater to more privileged people who use ride-sharing services. Other people in the city won’t stand for it if their own transportation gets too disrupted.

This means that strategy is key for transportation startups seeking to enter the market.

Generally, startups have opted for one of these three strategies:

Option 1: Brute force

Mobility startups like Uber and Lyft have tried to enter the market through brute force. Many scooter companies, like Lime and Bird, have also attempted this tactic.

Here’s how it works. The company identifies a segment of the market in need of a new solution. They bring the product to market on a wide scale — in most major cities across the entire globe. When these companies first enter the market, there are few if any regulations limiting them. These innovators believe that by acquiring a large customer base, they can become so important that cities have no choice but to give them favorable terms when imposing regulations.

However, this strategy doesn’t usually work. Uber and Lyft have been hit with regulations across major cities. New York City, for example, has limited the number of ride-sharing vehicle licenses that the city issues. The limitation has only expanded over the last month.

Many scooter companies are in trouble because they often disregarded safety and needs of wider population.

Scooter companies have also been hit. Lime was recently forced to withdraw from seven cities in the U.S., Europe, and Latin America. Many cities, including San Francisco, are now trying to limit the number of scooter companies that can operate. They want to impose stricter requirements in terms of safety and providing accessibility for low-income users.

The failure of this strategy is one reason why the disruptive mobility giants have thus far failed to achieve profitability.

When we think about it, this makes sense. Startups come in primarily concerned about gaining customers. However, entering the market in this way can cause widespread disruption. Ride-sharing has contributed to congestion and reduced the number of people using public transportation. It’s also significantly harmed the politically powerful taxi industry. Scooters have clogged up the streets for pedestrians.

City councils make decisions that are for the good of all, not simply startups and their users. This tactic has by and large failed to convince cities to give concessions to smart mobility startups. It certainly hasn’t been profitable.

Option 2: Start small

So, going big has its pitfalls. That’s why many startups have opted for a very different approach. Instead of trying to open in a dozen different cities at once, the startup focuses on one or two cities. They move slowly, trying to get favorable regulations before entering the market.

The problem with this approach is that in some cities, the forces of opposition are so entrenched that it’s hard to get traction. Uber, which began its life as UberCab in 2011, tried this before going for the brute-force strategy. But complaints from the cab industry forced it to abandon the name and rebrand. Starting small did not necessarily make cities more amenable to its disruption.

Fortunately, there is another option.

Option 3: Form partnerships

It’s the right move to try and work with cities rather than massively disrupt them and then make demands. However, this strategy needs to include forming genuine partnerships.

The fact of the matter is, most city governments are overwhelmed with stakeholders trying to influence regulations. In most cases, cities don’t have any particular reason to grant favors to one startup over another.

That’s why it’s critical to form real partnerships with local enterprises and groups that already have influence. By working with partners, new players can gain the influence they need and work with cities to create a regulatory environment favorable for innovation.

It is very possible to innovate with smart transportation. But we need a smart strategy that works with, rather than against, city governments and existing stakeholders.