12/17/2014 05:44 EST | Updated 02/16/2015 05:59 EST

Uber Needs to Learn it Can Follow the Rules and Disrupt

QUIQUE GARCIA via Getty Images
The Uber app is seen on a smartphone past a cab waiting for clients near the Sagrada Familia in Barcelona, on December 9, 2014. A judge on December 9, 2014 banned the popular smartphone taxi service Uber from operating in Spain, court officials said, following similar prohibition action in several other countries. AFP PHOTO/ QUIQUE GARCIA (Photo credit should read QUIQUE GARCIA/AFP/Getty Images)

Uber, Inc., the start-up darling recently earning a $40 billion valuation has found itself embroiled in a high-stakes regulatory and public relations battle over its disruptive business model.

Uber has a lot going for it: a profitable business model with substantial demand backed by revolutionary technology with the ability to transform every on-demand service. It's genius and about time the taxi industry is given a shake-up. So why is everyone ganging up on them? No, it's not a media-biased conspiracy as some would have you believe. It is hubris and an underestimation of the politicized stakeholder environment in which it operates.

The fundamental strategic decision of "ask for forgiveness rather than permission" has lead to additional legal and regulatory risks that are certain to delay expansion and capital raising plans while having a substantial drag on valuation. Whether Uber is morally right in its pursuit for more choice and convenient options for consumers has little relevance when it's being outlawed at lightning speed.

The Netherlands, France, Spain, Thailand, Vietnam, Singapore, Nevada and New Delhi have all banned Uber. Other notable North American jurisdictions such as San Francisco, Los Angeles and Portland have commenced legal proceedings against the corporation. In Ontario, Progressive Conservative Lisa MacLeod and Liberal John Fraser, two provincial legislators, argued about whose idea it was to introduce an "anti-Uber" bill. British Columbia's Minister of Transportation endorsed undercover sting operations against Uber to catch it breaking the rules. The mayor of Montreal believes Uber is illegal.

In Toronto, when Uber knew it was facing problems with city councillors and officials over its flagship offering that utilizes existing taxi cab drivers, what did it do? Uber, likely pushed by San Francisco leadership, went all-in by introducing uberX, a service that utilizes non-licensed taxi drivers. It effectively called the bluff of local officials and begged to be sanctioned. Behind each regulatory body and city council are real people. People who don't appreciate having rules blatantly defied in ways that goad them to act.

Just yesterday Ian Black, head of Uber Toronto, acknowledged the missteps that created an acrimonious atmosphere with regulators and some of the public. It's refreshing to see this mea culpa. Black's acknowledgement is the first step for forgiveness and should be applauded, not ridiculed. His tone should be emulated throughout the organization as it unique from the approach seemingly driven out of Uber's headquarters.

Uber isn't alone in its indifference to regulators. Recall the CRTC's recent run-in with Google and Netflix. Others, however, have learned to adapt. When faced with threats of being shut-out of key markets, Airbnb decided it couldn't afford that risk. It recently endorsed new regulations in San Francisco that allowed it to keep operating legally.

Disruptive technology companies need to learn that, sometimes in order to change the world for the better, an inclusive stakeholder strategy ought to go hand in hand with the technology disruption. Merely relying on consumer demand is fraught with risks. Initial investors are likely warning Uber CEO, Travis Kalanick, about those risks right now.

Legislators and regulators will continue to make Uber's life difficult if it is politically expedient to do so. It's time for Uber to focus on cultivating champions from within the system and it's change of tone in Toronto should be welcomed. Otherwise, it risks becoming a footnote to the technological revolution and we will be forced to continue waiting in the cold for a taxi.

Adam Chambers is the former director of policy to Canada's Minister of Finance and holds a JD/MBA from Western University. The views expressed are his own.


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