Sep 24, 2020
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Why Making Money In Transportation Services Is So Elusive, And What’s The True Value Of Disruption?

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Throughout recent history companies have tried to create profitable transportation service. [+] GETTY Throughout recent history companies have tried to create profitable transportation service businesses and run up against real-world challenges. Whether in air rail jitney streetcar taxi – or more recently ridehail. Some would say that all business is hard and transportation is like any other… but is it? Even in this digital age at some point the rubber has to literally hit the line and that’s where the challenges begin

 

The streetcar revolution of the early 20th century in the U. S. was driven by private sector entrepreneurs particularly developers who planned lines around real estate development including streetcar suburbs and newish electric utilities who needed a mechanism and a customer to build out the ability grid. These oft individually owned lines struggled to generate profit were forced to merge locally and were finally done in by the post World War II push by industry and government to mainstream the non-public automobile (and the industry behind more profitable bus manufacturing)

 

Two early impacts killed the streetcar: inefficiency from streets clogged with individual vehicles followed by the related ridership decline reducing farebox recovery and forcing insolvency. In the 21st century we’ve few profitable transit systems most notably Singapore and Hong Kong and these particular systems have a few striking differences from most others

 

They have tremendous coverage when it comes to Hong Kong 94% of citizens are within 1km of a station and their government applies disincentives to car ownership through high excise taxes which leads to high (profitable) transit ridership. Additionally land use and transit planning are importantly combined. Finally the authorities that build and operate the systems are public-private partnerships of varying types that can operate more like private companies with some level of government ownership and direct policy intervention

 

Zipcar on-street partnership with Washington DC in 2005. WIKIPEDIA At the end of 2002 I went to work at Zipcar as a VP and worked in one of the first next-gen sharing economy service companies. This was happening just as Gen-X ers and primary wave millennials were flocking back to cities with limited incomes

 

With a tremendous amount of initial boot-strapping instituting of lean processes for cost-discipline and a relative monopoly for sale (U. S. at least) it took 10+ years for Zipcar break even. A key tipping point for us was the facilitation of public-private-partnerships which I write about extensively in my book Start-Up City

 

When cities gave us spaces at the streets in transit lots and provided marketing and regulatory support the service took off. Now of course there’s a tremendous amount of use-case based competition in the space from a plethora of commercial models that were non-existent at the time and disruption is the word of the day

 

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Manuel Pastor And Amelia Ransom There are hundreds of examples of non-public transportation service businesses that have gone belly up or essentially been break even for decades. It s difficult to be profitable when substantial capital investment in transportation is had to operate a service. Even without this investment companies struggle as they invest in their platform-based marketplaces and must actively balance supply and demand

 

This is because the retail automobile model while still challenging is so tempting and tough to cut loose from for the automobile industry: they sell a vehicle pocket the profit and leave the operations maintenance and depreciation to the buyer. This of course leaves the landlord of the vehicle holding the proverbial bag

 

But with 1950 s+ U. S. land use patterns associated sprawl-inducing housing + parking policies (2 free spaces with your house!) and flight faraway from cities we were able to justify the individual capital investment and ongoing losses thanks to operation & maintenance. However as cities are repopulating jobs are relocating and the industrial energy of cities and towns is being felt around the globe it s exposing new problems and new opportunities

 

The very thing that drove people back to cities is at risk through safety sustainability and affordability crisis. The biggest warning call is the realization that the downstream 2nd and 3rd order impacts have never even been figured into the business models of any of the businesses in the ecosystem

 

From oil and gas providers to autos to curbside parking. If these impacts are factored in profitability is not even in the realm of possibility for most of these businesses. With this in mind in a global with increasing awareness of the relationship between climate catastrophe and CO2 emissions of equitable provision and cost for transport being crucial to cost-effective urban living and upward mobility and finally of the assorted generational impacts on people from poor land-use decisions around automobiles – we are in for much more of a central authority role vs

 

less. By contrast backdrop we are identifying in real-time how public private NGO s and citizens can work together. Pilots & permits have proliferated to give the non-public sector room to experiment and predictably we are now moving towards concessions with a smaller variety of good actors (proven through actions). If that doesn t work or P3s and the trust around them break down possible government operation particularly of commodity services may come back in vogue

 

The launch of the Divvy P3 in Chicago in 2013. GABE KLEIN From congestion pricing to micromobility mobility aggregation and payments – extending to the monetization and privacy protocols around data and beyond – we are in for a fascinating ride over the next decade as we try to stem climate catastrophe while elevating all citizens quality of life and identifying the future of work

 

What we do know is that the key is going to be co-creation collaboration and ultimately building trust – adversarial relationships won’t win the day. Those companies that can embody a triple or ideally quadruple base line method of their business will win the day. Why? Because if not the planet might not survive it

 

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