Object Orientation – Ride-sharing

Productive Thinking

Object Orientation – Ride-sharing

Following the birth of Amazon, many entrepreneurs implicitly adopted the OO model of enterprise design. Typically, they did not call it OO design, but the outcome is a linking of existing digital objects via electronic messaging to create a new value proposition. Ride-sharing is a prominent example.

Key thoughts

  • OO design is a common feature of many disruptive start-ups.
  • An OO alternative to an existing business model can devastate the Cʹ of a traditional business.
  • The capital creation system continually evolves to create new businesses by combining existing capital creating entities in new ways to fashion compelling value propositions.

Ride-sharing as an OO business

A ride-sharing service, such as Uber, is built upon connecting key existing objects: drivers, cars, riders, and a mapping service. It electronically coordinates their interaction. Drivers, people with access to a suitable vehicle, and riders, those needing transport, are existing objects. They can be dynamically linked through smart phones by message passing. Credit card processors can process an exchange of funds.

Similarly, third-party mapping services can be accessed from a ride-sharing app to provide a route to the driver for customer pickup and delivery. The same mapping service can show the pickup location and the driver’s progress toward this point. The entire OO design is supported by another object, a mobile phone company, that facilitates message passing between objects.

The OO design of ride-sharing

OO Ride Share

A ride-sharing service is based on human capital (drivers) having economic capital (cars) that they are willing to use to drive a rider for economic capital (fares). Economic capital (investment funding) is needed to create symbolic capital (branding and advertising) to recruit drivers and inform potential riders of the service and its value proposition. Economic capital is also required to develop organisational capital, mainly systems and procedures, to implement the capital creation model. This organisational capital supports the operations of the coordinating object of the ride-sharing service, the central object of a ride-sharing business. Primarily, it includes apps enabling drivers and riders to connect for a trip.

The ride-sharing OO model described previously can be extended to show the capital creation system.

The OO design of ride-sharing

The next step is to add systems to the ride-sharing model. Drivers must be recruited (a system of engagement) and trained (a system of production). For each driver, personal data and details of their recruitment and training are captured in a system of record. A system of engagement, mainly advertising and incentives, is used to develop awareness among potential riders. Again, there will be a system of record to capture the actions and outcomes of various systems of engagement actions. To create a trip, the generator of economic capital, a system of engagement, must match a rider and driver. For riders, a publicly available app indicates the details of a pickup and trip. A corresponding driver app matches a driver to the rider. Collecting riders and taking them to their destinations is the production system. Finally, there are systems of engagement for rating and tipping the driver and for the driver to rate the rider.

The impact of OO on incumbents

An OO replacement for a traditional industry can devastate those it supersedes. Their capital rapidly loses value, so they lack the means to reinvent their business. For example, retailers found their stores less valuable because the revenue per square meter declined. Hotels similarly suffered if their occupancy rate dropped because of AirBnB competition.

Before ride-sharing arrived in New York City, its taxi industry was lucrative. Cab owners were required to have a permit or taxi medallion, and because of the sector’s profitability, medallions were trading for over USD 1 million. Today, taxi medallions sell for about USD 100,000.

New capital creation systems

The capital creation system continuously creates new objects that provide novel products and services. Furthermore, new technologies emerge for connecting objects more efficiently in more places. The Internet, for instance, was a significant shift in enabling object connectivity. Amazon was among the first to exploit this opportunity and illustrate the power of OO thinking. It was able to use an OO business model to leverage significantly its small starting capital.

The OO approach demonstrates the accumulating power of the global capital creation system and the accelerating effect of information and communication technologies. It illustrates that creating a new organisation is about identifying how to connect existing objects in a novel way to create a new capital creation method. Most of the objects for creating a new organisation already exist in advanced capital creation systems. Entrepreneurs find innovative ways to combine objects to deliver existing services better, such as ride-sharing compared to taxis or new services, such as route scheduling that dynamically adjusts for traffic congestion.

Critical reflections

  • How do you introduce OO thinking into your strategic planning?
  • How would you create an OO alternative to your business, and should you?
  • Which of your capital is most vulnerable to an OO attack? Typically, this will be your most valuable economic capital.

Rick Watson

Research Director

Digital Frontier Partners

Regents Professor & J. Rex Fuqua

Distinguished Chair for Internet Strategy

Emeritus, University of Georgia

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Comments and conversations are welcome.

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