BRIAN KENNY: Welcome to Chilly Name, the podcast the place we delve deep into the tales behind groundbreaking Harvard Enterprise Faculty case research.
It’s fairly uncommon for an trade to go from zero to Mach velocity in only a few years, however that’s precisely the way it’s gone for rideshare companies. Because the first peer-to-peer rideshare service launched in 2012, nicely over a billion folks have climbed aboard. Right now we’ll dive deep into this phenomenon with a case about Lyft, lengthy the challenger within the ridesharing trade. They confronted a alternative: double down on product innovation, reinvest in a uncared for model, or just shore up operations after years of disaster. With a brand new chief on the wheel, the agency was at a crossroad that referred to as for daring, decisive management. Right now we’ll unpack the case, talk about how boldness shapes company technique and management, and discover what it takes to show braveness right into a aggressive benefit.
Right now on Chilly Name, we welcome Professor Ranjay Gulati to debate the case “Lyft 2023: Roads to Progress and Differentiation.” I’m your host Brian Kenny, and also you’re listening to Chilly Name on the HBR Podcast Community.
Ranjay Gulati’s work explores management and strategic challenges for constructing high-growth organizations in turbulent markets. His new ebook, Methods to Be Daring: The Shocking Science of On a regular basis Braveness explores how people and organizations can domesticate braveness, reframe worry, and act boldly within the face of uncertainty. In some ways, Lyft’s story offers a wealthy backdrop to check these concepts in motion. And he’s additionally a fellow podcaster. Ranjay, welcome.
RANJAY GULATI: Thanks very a lot, Brian. Nice to be right here.
BRIAN KENNY: You’re on the opposite aspect of the mic as we speak. So, Ranjay hosts a present referred to as Deep Function. You’ll find that on Apple or Spotify or wherever you pay attention, and it’s good to have you ever again on the present. It’s been too lengthy.
RANJAY GULATI: I do know, Brian, it was nice enjoyable final time. I’m delighted to be again.
BRIAN KENNY: It is a nice case. I imply, we’ve all climbed into the again of a Lyft or an Uber, and people are the 2 main gamers, however certainly not the one gamers on this area. So, the case truly is available in a bit of bit into their development interval the place they’re dealing with some actual important challenges, and our protagonist is taking the helm there, and we’ll discuss all of that. So why don’t we simply dive proper in. I’m going to ask you to inform us what drew you to jot down about Lyft. Why did you assume this might be an excellent case for the classroom, and what’s your chilly name if you begin the dialogue?
RANJAY GULATI: So, it’s fascinating, if you write a case, you might begin with one factor, and you might find yourself utterly someplace else. So, that is a type of tales the place I began with a speculation about what the case was going to be about. It was actually one other illustration of an organization that had a function as a founding precept and the way they have been making an attempt to reside by it. And the aim was to not construct a rideshare enterprise. The aim was to attach communities in locations like Los Angeles, the place the 2 founders have been residing. And so the concept was that lots of people who don’t have entry to a car or parking or no matter are unable to attach, and it feels a fragmented, alienated life over there. So, this might be a solution to convey folks nearer collectively. So, I used to be intrigued by how that sort of kernel of an concept grew to become the premise of their technique of how they have been going to develop their enterprise, about who they wished to be.
However then as I discovered extra, quick ahead, what you uncover is that for quite a lot of causes, Uber comes into the image, takes off, dominates, and instantly now you’re a one-third, two-third duopoly. Now, they’ve tried to distinguish and create some differentiation with their drivers and issues like that, however even that’s going away quick as a result of the riders overlap throughout Uber and Lyft, so that they’re not distinctive drivers anymore. Prospects, you say, okay, I’m going to create stickiness for patrons. All people has Uber and Lyft on their telephone. They’re procuring throughout and selecting whoever’s the bottom value. Speak about commodity hell. So now what do you do? So, instantly the case advanced from a research about simply function to 1 about competing in commoditizing duopoly markets the place the opposite competitor is larger than you, has a extra numerous income stream, can select to make this a loss-leader.
Now, how do you compete on this market? However then they grew to become a 3rd factor into the image, which was now you could have a brand new CEO. By the best way, occurs to be one in every of our alums, and he’s received to determine, the founders are stepping away. Now you could have this awkward transition the place when founders set a step apart, skilled administration is available in they usually received to determine what do you do.
BRIAN KENNY: What’s your chilly name to begin that dialogue?
RANJAY GULATI: I soar proper into the case as a result of I’ve had David Risher at school after I educate the case. So, I begin by saying, “You’re David Risher. You’ve come into this enterprise. What’s your plan? What are you going to do within the first hundred days? What are you going to do within the first 300 days?”
BRIAN KENNY: Wow.
RANJAY GULATI: “And I would like each plans nailed down, now.”
BRIAN KENNY: That’s a brutal chilly name. I wouldn’t need to be on the receiving finish of that. So, David is the HBS alum that you just talked about. He’s the protagonist within the case. He’s the one who stepped in to this management function in 2023. How would you characterize among the dilemmas that he was dealing with? What was he up in opposition to?
RANJAY GULATI: He was up in opposition to fairly important headwinds as a result of they’d come by way of a very brutal COVID as a result of they fully rely on rideshare, which primarily got here to a grinding halt and took a very long time to get better again. In the meantime, Uber had Uber Eats, which was truly a dramatic development enterprise in COVID. So, right here you could have a competitor who’s actually gained within the earlier interval, and you might be coming from a spot of weak point, from a spot the place you don’t have reserves to go and spend money on one thing large. And so restricted sources, layoffs, morale. So, you’re coming by way of the shadow of darkness over right here, whereas these guys have simply rode the wave by way of, and now you’ve received to discover a means. And commoditization has actually taken off, as a result of drivers, you could have two prospects, proper? The drivers who are actually agnostic between Lyft and Uber, not at all times the case earlier than.
BRIAN KENNY: So, David Risher comes right into a tradition that already exists. The founders of Lyft had a reasonably particular imaginative and prescient for what they wished to do, and any chief getting into that function goes to face the problem of the legacy but additionally making an attempt to drive the tradition ahead. What have been among the issues that David tried to do?
RANJAY GULATI: One of many first issues David needed to do was overcome inner inertia. And I feel in some way typically organizations which have an awesome concept and execute on the concept; they have been extra profitable past their wildest of goals. Regardless that Uber was even greater, and Uber has gone world and completed all these items, Lyft was very profitable. And what does success do to some? Not all, is it makes them fall into what I loosely name the success lure. And the success lure is now you turn out to be so afraid of dropping what you could have, you cease making an attempt to win. And if you do this, you might be caught in a vicious cycle of lack of ability to attempt to experiment, study, fail, develop. And so, you’re caught in a market that’s stagnating, homogenizing, and you might be unable to innovate your means into one thing new.
David’s opening letter, what he mentioned about himself, his self-introduction, can also be crucial as a result of that offers you a kernel of the place he’s making an attempt to go. His first level, he says, “Hear, I’ve labored in three organizations. I labored at Microsoft, Amazon, and at this nonprofit.” And he says, “The three issues I’ve discovered is at Microsoft, I discovered concerning the energy of innovation. Innovation is what lets you be aggressive within the market.” He mentioned, “From Amazon, I discovered the significance of buyer obsession, which you could’t simply be customer-centric, you bought to be obsessed. It’s an emotional factor, not only a rational factor.” And he mentioned, “From my nonprofit days, I discovered the ability and significance of frugality, doing extra with much less. How do you get issues completed with restricted sources?” So, he was going to convey these three views into Lyft.
BRIAN KENNY: What have been among the issues that got here out of that? What have been among the initiatives that he actually centered on early on?
RANJAY GULATI: So, one of many initiatives that truly was on the playing cards, they’d already debated and mentioned it. It wasn’t even David’s authentic thought, however they’d set it apart for no matter purpose was this concept of matching feminine passengers to feminine drivers. And this was going to be mutually helpful as a result of many feminine passengers want a feminine driver.
BRIAN KENNY: Yeah, that is smart.
RANJAY GULATI: Given all of the, in actual fact, latest tragic tales we’ve been listening to about assaults on passengers. In order that was one. However even for the drivers, turned out that many feminine drivers wouldn’t drive rideshare, and they’d as an alternative do meals supply, despite the fact that you earn much less in meals supply than in rideshare. However they felt it was much less secure.
BRIAN KENNY: I see.
RANJAY GULATI: So, they have been going to draw these drivers who have been doing meals share, meals deliveries into rideshare saying, we are going to assure solely feminine passengers. It was an concept they already had however for some purpose hadn’t executed it. It jogged my memory of Anne Mulcahy story. Anne Mulcahy was the previous CEO of Xerox, which legendarily owned Xerox, PARC and had all these improvements that Apple ran off with, which was the graphical person interface on the mouse. And she or he mentioned in my class one time, “We didn’t launch merchandise. They escaped from us.” And I don’t know why in some organizations you see that the place the concepts could also be there, they percolate round, folks discuss them, they debate them, then the naysayers kick in, and in some way they get shelved.
BRIAN KENNY: Proper. Proper. But it surely takes some daring management to truly revive that and push it by way of in an present tradition. How was David in a position to measurement up what he wanted to do and transfer folks in the identical route? Did he face opposition?
RANJAY GULATI: In school, he’s talked about that. Sure, he did. However not less than to jumpstart the method, leaders have to personal it: OK, that is on me. This one’s on me, not on you. I’m not going in charge anyone else. This one’s on me. I personal it. And that encourages others to then take possession. And I feel this willingness to step, you’re not going to turn out to be an autocrat and drive it continually high down solely. Finally you’re going to construct that confidence. I feel folks typically lose confidence. After which you’ll want to enhance up that confidence. And when you get them going, you’re then in a position to see the method unfold. And for those who quick ahead and see what Lyft has completed within the final 12 months and a half, you’ll see the optimistic outcomes, the growth into Europe, the now doing most popular driver selections, there’s quite a lot of new issues instantly popping out of this firm that truly was stagnating.
BRIAN KENNY: Yeah, yeah. Let’s discuss your new ebook as a result of after I invited you to return on the present, I mentioned, Is there a case that you just assume will assist us to convey the concepts of your ebook to the floor? And also you instantly landed on the Lyft case. Why does this case do an excellent job representing among the large themes in your ebook? And possibly you possibly can describe a few of these themes to us.
RANJAY GULATI: So, the ebook known as, Methods to Be Daring: The Science of On a regular basis Braveness. The ebook is now concerning the particular person stage, two-thirds of the ebook about particular person braveness. And the final third is about organizational braveness. However after I first started scripting this ebook, it was about organizational braveness. It was all about, How do you create braveness? Now, when you concentrate on the phrase “braveness,” what’s braveness? Braveness isn’t the absence of worry. Braveness is taking motion within the face of worry. So, let’s get that out of the best way.
BRIAN KENNY: Yeah, I like that.
RANJAY GULATI: The second factor is now if it’s about motion within the face of worry, worry is a primal human emotion that’s hardwired within the reptilian mind. It’s a survival emotion: Get out of right here, save your self. Now the query is, what prompts that? It turns on the market’s nice analysis exhibiting that what prompts worry is the situational context of uncertainty. Once we encounter uncertainty, it immediately prompts worry.
Now, let me return, unpeel the onion another. What’s uncertainty? There was a really well-known essay by Frank Knight, the economist, on the excellence between threat and uncertainty. Threat is the place you recognize the distribution of outcomes and you’ll put some possibilities on these outcomes. Uncertainty is, I don’t know. And for those who take a look at current day and time, we’re in an period of unprecedented uncertainty. In actual fact, in a latest article, someone analyzed earnings calls by CEOs and located that within the final quarter, CEOs talked about the phrase “uncertainty” thrice as typically as they did within the earlier quarter. So, the phrase is on the market; all of us feeling it. Once we expertise uncertainty, the pure regular human response is one in every of worry. Now, the query then is, will we let worry take over? As a result of worry left to its personal gadgets hijacks the amygdala and the prefrontal cortex. And the everyday response is one in every of freeze or flight.
Now, for those who take a look at Lyft again then, I didn’t interview them again then, so I don’t know what it was precisely like, however my speculation is that it had a freeze response. They have been caught and unable to do a lot about it. You’re in a market that’s quickly commoditizing. You have got a competitor who is far greater than you, who has diversified their earnings streams, and so isn’t completely reliant on this one enterprise, which is the US ridesharing enterprise. What are you going to do? So, to know this strategic lock or freeze, you bought to actually perceive organizations too have collective emotion, and worry turns into a paralyzing emotion until you’re keen to face it.
BRIAN KENNY: So, how does a frontrunner go in and get folks to have collective braveness? You discuss collective braveness within the case. It comes up within the ebook, I’m certain. How do you stoke that inside a corporation?
RANJAY GULATI: So, let me offer you an instance from sports activities. One of many visitors I had in my class a few years in the past now was Sir Alex Ferguson, the coach of Manchester United, the previous legendary coach of Manchester United, for individuals who don’t know who he’s. And one of many issues he feedback he made at school was that one of many hardest issues he has to do as a coach is to take a profitable staff and make them come again and need to win once more. So, someone mentioned, what do you imply? Are they lazy and complacent now they’ve gained a championship? As a result of he gained a number of. And that’s why in all sports activities, basketball, soccer, it’s very laborious to see back-to-back championship. And he mentioned, no, you recognize what occurs is as an alternative of enjoying to win, they begin to play to not lose. They’re so afraid of dropping. In sports activities phrases, they’ll have the ball possession, however they’ll maintain it of their half. They’ll defend greater than play offense. And so that you go into this defensive posture. So how do you unlock the group to play offense, to search for alternatives for development, to take calculated bets, to even stroll into uncertainty as a result of it’s scary to do issues that may not work, proper? We need to de-risk it. We educate that stuff. Threat mitigation, threat administration, we’re all about threat. Most of enterprise is about threat.
BRIAN KENNY: However again to your level about uncertainty, threat brings uncertainty.
RANJAY GULATI: However they’re separate concepts additionally. They’re adjoining, however separate concepts. How will we as leaders create the capability in a corporation to face uncertainty, to deal with the worry that may be a pure correlate of that uncertainty and put the group on a enjoying to win posture? That’s the chief’s problem. How do you get them considering upbeat? I’ll offer you one other instance. I’m simply ending a case proper now on a completely totally different firm. It’s referred to as Boston Scientific.
BRIAN KENNY: In fact, yeah.
RANJAY GULATI: Boston Scientific, in 2010, 11-odd, had completed the second worst acquisition ever. They’d acquired after AOL, Time Warner. Their acquisition of Guidant was the second worst acquisition, a $27 billion firm. They’d acquired Guidant for $28 billion. And the 2 collectively in a matter of some years can be value $4 or $5 billion. Large destruction of worth. So, in comes one other CEO, and what’s his tagline when he takes over? Successful spirit. Received to begin to win once more. And when you begin to win once more, profitable is addictive. Individuals need to win. Individuals need to be on a profitable staff. You simply received to offer them a style for what profitable is. How do you soar begin that? Sure, you want a superb technique. Sure, you’ll want to focus. Sure, you’ll want to take into consideration adjacencies for development. Sure, you’ll want to be buyer obsessed. Sure, you bought to determine what are progressive methods to model your self available in the market. However there’s an undercurrent beneath all that, which is that this profitable spirit. How do you get that going?
BRIAN KENNY: And also you talked about that Lyft has seen some wins over the previous couple of years. So, profitable begets extra profitable, proper? Successful offers you confidence. It makes you’re feeling like you are able to do it. In case you take a look at David Risher and what he did, are there examples in your ebook which you could level to that illustrate among the issues that David was in a position to do, examples of braveness or infusing this profitable spirit?
RANJAY GULATI: So, you talked about the phrase “confidence,” and there’s a really well-known Stanford psychologist named Albert Bandura who studied one thing, an adjoining concept referred to as self-efficacy, which pertains to confidence. And it seems that this concept of efficacy and confidence is available in two flavors. One is area particular. We all know our trade, we all know our enterprise, we all know what we have to do. Now let’s simply go do it, proper?
BRIAN KENNY: Yeah.
RANJAY GULATI: And David noticed loads of that in spades, I’m certain. However beneath that’s one other generalized type of self-efficacy. It’s a can-do mindset. It doesn’t matter what comes our means, it doesn’t matter what curve balls come our means, irrespective of what number of setbacks we’ve, we received it. We are able to do it. And that can-do mindset, which is that this generalized type of self-efficacy, which is, for those who bear in mind Apollo 13, Eugene Kranz tells his staff, they don’t have any textbook for this. There’s no manuals for the state of affairs. Oxygen tanks have blown up. And now you could have your command module, the LEM, the lunar entry module floating in the direction of the moon. You’re going to make use of it as a life raft and slingshot their means again to earth. Nobody even simulated that concept. What does he say in his first assembly? Failure isn’t an choice. As a result of persons are like, oh my God, can’t do it, not possible, hopeless. So, how do you as a frontrunner imbue in your staff? Failure isn’t an choice. We’ll have setbacks. We’ll make errors.
BRIAN KENNY: However let me ask you this. Whenever you say failure isn’t an choice, one of many issues we’ve talked about many instances on Chilly Name with totally different instances is that it’s a must to permit for failure. It’s a must to create a tradition the place failure is appropriate in order that persons are keen to take an opportunity to innovate ultimately.
RANJAY GULATI: Completely. Nice commentary. And so, you’re proper, concept right here is final failure isn’t an choice.
BRIAN KENNY: Received it.
RANJAY GULATI: However alongside the best way, and also you’re proper, as we learn about making it secure to fail and studying from that failure is important to the journey of braveness. And what’s fascinating about this, I’ll offer you a nuanced concept that I additionally discuss within the ebook, is for those who take a look at a few of these leaders, together with David Risher, I’d think about, how do you not solely make it secure to fail, however how do you additionally take care of success? As a result of success itself will be complacency inducing.
BRIAN KENNY: Proper.
RANJAY GULATI: So, I feel that’s the problem David goes to have now, now that they’ve some wins beneath their belt. That’s why you could have individuals who fade away as athletes, only a style of success they usually’re like, OK, I’m completed. And you recognize after I discovered that was truly, I wrote a case and I discuss him within the ebook is Nick Saban, who’s the legendary coach of the College of Alabama soccer staff.
BRIAN KENNY: In fact, yeah.
RANJAY GULATI: For many who don’t know him, this man was unprecedented by way of his document, every thing else. And he has this mannequin he referred to as the method. It’s truly very Japanese religious in some methods. He wouldn’t say that. However as a result of the concept is concentrated on the method, not on the end result. And he discovered that when he was coach at Michigan State and he was about to play Ohio State, which was a lot better staff than theirs. And he went up and met a psychologist within the psych division and mentioned, “I need to know the way can I coach my staff?” And the gentleman informed him, he mentioned, “Hear, simply make them concentrate on every play, not on the rating.” At halftime, they have been means behind. At halftime, he referred to as the staff and mentioned, “Don’t overlook what I mentioned to you. Don’t take a look at the rating.” Miraculous turnaround, got here and beat Ohio State. In order that stayed with him. Dropping and profitable can confuse and distract you. So, at one stage, you might be intensely centered on profitable, at one other, you’re not letting it cloud your considering. And I’ll share a small different instance is Scottie Scheffler, golfer, you’ll know.
BRIAN KENNY: Yeah.
RANJAY GULATI: He was paired up with Tiger Woods on the Masters. On the twelfth gap, which is the par three, Tiger hit a ten. He had two balls within the water. It’s one of many lowest scores ever on that gap. He was instantly out of competition of the match, and Scheffler was shocked. However the subsequent 5 holes, Tiger birdied them. It was like nothing had ever occurred. Nothing had occurred. So how do you withstand failure? How do you withstand worry? I feel athletics, sports activities, there’s loads of metaphor and actual visible tales about that.
BRIAN KENNY: Proper, in fact.
RANJAY GULATI: I feel for David coming into the job, I feel earlier than you get to technique, he had this one concept. He put it on the market and mentioned, jumpstart guys, we are able to do it. Construct up some confidence, self-confidence. We are able to do it. I feel the toughest factor was to assist them come out of this malaise the place they have been simply misplaced. However having a one-off concept isn’t going to do it. Then you definately’ve received to construct a technique. So, for him, the subsequent factor or piece of the puzzle was, what’s going to be our technique? Everybody desires to have clear route. Then how do you construct conviction round that route? On the similar time, you’re doing all this you’re making an attempt to jumpstart and revive your tradition to be extra efficiency and outcomes and end result centered. Whilst you’re doing this together with your, you’re making an attempt to additionally focus in your model and take into consideration prospects. How do prospects expertise you?
A whole lot of instances firms, his concept of buyer obsession can also be an necessary piece of the puzzle to consider. To me, what’s stunning from an earlier period of analysis I had completed on customer-centric organizations, it’s fascinating how shortly firms, organizations, overlook about their buyer. Prospects turn out to be an abstraction, a knowledge level, a quantity, a market phase. You’re not considering tangibly about prospects. And within the case of a two-sided market, which is what Lyft is, their prospects are each the drivers and the passengers, they usually don’t each at all times need the identical factor.
BRIAN KENNY: In fact, yeah. Yeah.
RANJAY GULATI: So how do you actually construct a buyer obsession? So, your technique, your tradition, your actions, your profitable is all linked to this thought technique of buyer obsession. So, I discussed to you three issues that David mentioned he dropped at the desk. First was innovation, received to get the innovation engine going with a profitable spirit. Second was buyer obsession. Begin excited about our prospects, either side of them. After which the third one was frugality. In a market that’s getting commoditized quick, and also you don’t have scale benefit, which is what Uber has over them, you bought to discover a solution to be frugal.
BRIAN KENNY: Proper.
RANJAY GULATI: Organizations battle to subtract. And I feel his frugality considering is a solution to perceive that the place ought to Lyft subtract in order that they’ll add additionally. So, you’re enjoying addition, subtraction. How do you undertake each concurrently?
BRIAN KENNY: Yeah. I’d think about the overarching state of affairs that any chief faces getting into that sort of a task is how laborious do I push? How do I stability all of the issues we’re making an attempt to take action that the group can stand up to what we’re doing?
RANJAY GULATI: Pacing change is one other, you’ve now-
BRIAN KENNY: You might write an entire ebook about that.
RANJAY GULATI: Yeah, that’s an entire totally different subject, however I feel it’s such a important one. So, I feel it’s actually necessary to take into account that pacing change is the opposite piece of the puzzle. Constructing capability to enact these adjustments. You may’t push it too quick, however you possibly can’t push it too sluggish. So how do you tempo that change coming in turns into very, crucial. That you must construct momentum, and this optimistic momentum turns into one other key a part of the puzzle.
BRIAN KENNY: Yeah, yeah. Ranjay, this has been an awesome, you’ve given me loads to consider, nice dialog as I knew it will be. I’ve received one query for you earlier than we finish our dialog, which is solely, for those who’d like our listeners to recollect one factor concerning the Lyft case and about David Risher, what wouldn’t it be?
RANJAY GULATI: Braveness is a supply of aggressive benefit. It’s going to be the forex in instances of uncertainty, as a result of braveness lets you lean into that uncertainty and the worry that comes with it. It permits us to turn out to be comfy with uncertainty. It permits us to, as you’ve heard many instances from me in our dialog earlier than, it’s okay with being scared. How will we study to reside with worry and make it a accomplice and a supply of power reasonably than need to freeze up?
BRIAN KENNY: Yeah. I like that. Ranjay, your new ebook is, Methods to Be Daring: The Shocking Science of On a regular basis Braveness. Thanks for becoming a member of me.
RANJAY GULATI: Thanks very a lot, Brian. As at all times, it was pretty to speak to you. Thanks for that.
BRIAN KENNY: In case you take pleasure in Chilly Name, you may like our different podcasts: Local weather Rising, Teaching Actual Leaders, IdeaCast, Managing the Way forward for Work, Skydeck, and Assume Large, Purchase Small. Discover them wherever you get your podcasts.
If in case you have any recommendations or simply need to say whats up, we need to hear from you. E-mail us at coldcall@hbs.edu. Thanks once more for becoming a member of us. I’m your host Brian Kenny, and also you’ve been listening to Chilly Name, an official podcast of Harvard Enterprise Faculty and a part of the HBR Podcast Community.
