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Sep 26, 2017

Not Uber alles: IR lessons as the ride-hailing firm tries to stem fall from grace

Reputation is what others say about you when you have left the room
The shareholders own the company and a CEO serves at their pleasure
Jeff Bezos

Twelve months ago, Travis Kalanick had the world at his feet. Uber, the company he founded in 2009, had operations in 662 cities in 82 countries, a valuation of more than $62 bn, 12,000 employees and millions of customers. Incumbent taxi operators seemed powerless to stop Uber, and the company’s business model, while yet to achieve consistent profitability, is the stuff of business school case studies. 

But Kalanick ‘stepped down’ as CEO in June, other senior executives have resigned and the board is in turmoil. While former Expedia CEO Dara Khosrowshahi was appointed to succeed Kalanick on August 30, an estimated $10 bn has been wiped off Uber’s valuation and the company’s reputation is seriously tarnished. Now it is battling a decision by the Transport for London regulator not to renew its license because of concerns that it is not a ‘fit and proper’ operator.

So what are the lessons for private and public companies from Uber’s spectacular fall from grace? There are four key takeaways for organizations and leaders: 

Market reputations are hard to win – and easy to lose

Jeff Bezos once said ‘reputation is what others say about you when you have left the room’. Similarly, corporate culture has been defined as ‘what companies do when the regulator isn’t looking’. The point is that market reputation is defined by others, not by you. It is a reflection of how others perceive what you do and how you do it, not what you say. So Uber can be loved by its customers while suffering immense reputational damage. 

Investors cannot be taken for granted

News reports say it was large investors in Uber that lobbied for Kalanick to go. This goes directly counter to the prevailing Silicon Valley wisdom that the founder is critical to the success of the start-up. In this case, the founder was seen to be a liability, and the owners of the company – the investors – will argue that they have done the right thing in forcing him out. And this is because…

No one is indispensable

No individual is bigger than the organization. Kalanick’s error – among many others – was to dismiss investor concerns and to assume that, as founder, he could behave as he pleased. In this, he was wrong, and his hubris has resulted in his removal. He forgot that the shareholders own the company and a CEO serves at their pleasure. History shows that when the true company owners are ignored, conflict and management change soon follow. It’s just a matter of time.

Brand, corporation and individual personalities are all contributing factors

Many aspects make up a company’s valuation, including the personality of the management, the actions of the company and the overall image the company presents to the world. If one of these becomes toxic, the others will swiftly be infected. A holistic view of valuation drivers is the best way to get your stakeholders to sing your praises. 

Yesterday, Khosrowshahi published a letter to Londoners in which he said: ‘On behalf of everyone at Uber globally, I apologize for the mistakes we’ve made.’ This is a gear-shift from the threatening tone of the founder, and is perhaps an early indicator of how the new CEO plans to get the company back on track. 

Oliver Schutzmann is CEO of Iridium Advisors, an IR consulting and technology firm, and former chairman of the Middle East Investor Relations Association.

Oliver Schutzmann

Oliver Schutzmann is CEO of Iridium Advisors