Nonmarket Strategies: How Uber Sustained Its Business Model Success

When it comes to disruptive strategy, people considered Uber as a classic example. It was the paragon of a disruptive platform par excellence. But many observers had little understanding of its aggressive and sometimes questionable nonmarket strategies. Gradually, though, its strategies were exposed. For example, a 2014 article in The Verge revealed that Uber’s infantry of more than 150 lobbyists squashed regulators. It did that by aggressively increasing its special-interest budget by spending north of $395 million on buying influence in less than 6 months in California’s state capital.

In addition, it used its nonmarket muscles to pressure the city of New York in 2015 through well-coordinated grassroots and communication campaigns on the Internet and by galvanizing an army of prominent activists across the state to strengthen its business footprint in NYC by crushing any resistance — even from the city mayor (Vilensky, 2016). Furthermore, on June 24, 2015, Bloomberg Businessweek revealed that the 6-year-old platform had surpassed the 53-year-old retail titan Walmart regarding the number of registered special interest advocates across the United States.

So, before its troubles began a couple of years later, many of Uber’s dubious practices were praised by commentators as the model of the digital platform du jour — a company that had mastered the art and science of winning in the new robots world. However, the chaos that ensued from its questionable cultural practices regarding what is acceptable rejected, tolerated, and punished at Uber to its software for evading regulatory authorities to secret payment of hundreds of thousands of dollars to dangerous hackers, etc., resulted in a damaged reputation. As such, within weeks, the platform went from famous to notorious. Panic reverberated across other similar digital platforms‘ boardrooms across the globe, specifically, those trying to copy Uber’s early but flawed and specious success (under Kalanick).

To be sure, like tax planning and other corporate legal schemes, when nonmarket strategies are pushed beyond their limits — ethical lines are crossed — and legal and regulatory breaches occur. These can be damaging and costly to a coveted corporate reputation that may have taken years to build. There is a fine line between proactive nonmarket strategies and pushing things too far into ethical lapses. As an analogy, an excellent nonmarket strategy is assertive. However, when it crosses the assertive line to become woefully aggressive, an organization’s aggressiveness can become highly visible, resulting in close scrutiny of its business practices and a loss of reputation in the public eye.