21 October 2016
Instead of complaining about competition, taxi drivers should try harder to win customers. Photo: Bloomberg
Instead of complaining about competition, taxi drivers should try harder to win customers. Photo: Bloomberg

HK can use more Uber-like disruptive innovation

Hong Kong taxi drivers recently demonstrated against mobile apps like Uber that allow people to book a ride through parallel cab-style car or van services.

The cab drivers claim they are losing business to the car-hailing services, which lack the correct permits and insurance to operate legally and safely.

The protesting drivers organized a slow drive on Hong Kong Island and assembled outside the Legislative Council.

Being in the insurance business, I can confirm that these app-based ride-hailing services do raise important questions about the lack of third-party insurance, which could leave passengers uncovered in the event of an accident.

The Hong Kong Federation of Insurers has issued a statement on this.

However, in jurisdictions where services like Uber and Lyft have become established, the companies concerned have made insurance arrangements mandatory for drivers.

So the insurance issue can be solved.

The taxi drivers’ real objection is, of course, competition.

They are feeling the results of “disruptive innovation”.

This means an innovation that changes not a technology (though it could be technological) but a market.

For example, the digital camera did not just make photography quicker and cheaper – it made the huge film and photo-developer industries largely redundant.

By “industries” we do not just mean corporate entities like Kodak facing bankruptcy but large numbers of employees losing their jobs.

The Hong Kong taxi drivers’ complaints are in many ways understandable.

Some politicians have sided with them – basically out of a desire to protect a relatively low-earning and less-skilled group of workers.

But as we all know, there are no free lunches in life, and competition is what moves the economy forward.

If consumers prefer app-based rides, they should be allowed to have them (subject to insurance and safety considerations).

The online response from the public has not been sympathetic.

I would guess that the sort of people who comment on websites are the same kind of people who download apps.

Essentially, people are saying that traditional taxis offer poor service – refusing to go to particular destinations or putting prices up during bad weather.

They claim that Uber and similar services are simply better.

If this is true, the message to taxi drivers should be to try harder to win customers.

Transport and Housing Secretary Anthony Cheung Bing-leung was quoted in EJ Insight as pointing out that unlicensed commercial pick-up services are against the law but that such services are a global trend.

Looking at it practically, Uber and similar apps are indeed going to serve as a disruptive innovation.

In the long run, the taxi industry in Hong Kong – and elsewhere in the world – will have to adapt.

In fact, it has already started to do so.

I myself sometimes use the Kuaidi app, which hails licensed taxis far more conveniently than other methods.

We could probably use some disruptive innovation in other sectors in Hong Kong.

Some aspects of the retail market have certainly been changed by online services.

Start-ups like Shopline allow all sorts of merchants to launch online stores.

Various providers of goods and services now remove the middleman and sell items like organic foods or baby products directly to customers online.

But these are generally niche activities.

Wouldn’t it be wonderful if some new ideas came along to break open a monopoly-style trade like funeral services?

This is an industry with very few providers and very little current chance of new players – largely because finding space for such an unpopular trade is extremely difficult.

To get really ambitious, what about some change in use of materials or space that delivered affordable housing?

The rewards for truly original, game-changing innovators are limitless.

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Executive Council member and former legislator; Hong Kong delegate to the National People’s Congress

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