Why is there a need for innovation in urban mobility?
Urban Mobility is an industry with a long history, but it is also one of the most dynamic industries in recent years. Many new businesses have emerged, some with rather innovative business concepts and others without. The market is changing and has to evolve since the bulk of mobility occurs in cities and most towns are growing in population, which necessitates mobility, particularly flexible mobility.
For sustainable systems, hypermobility, flexibility, and even movement are becoming increasingly important. New business models and technological advancements have enormous promise for creating long-term, seamless mobility alternatives and variants. Mobility providers and decision-makers must adapt to new demands, be more flexible, and focus on customer-centric needs.
The connection between new mobility and business models
One of the most significant obstacles in the evolution of urban mobility has been the emergence of a sustainable business model that could reconcile the necessity for single-person mobility with the higher upfront expenditures of transport services. For this reason, we can see a stronger emphasis on the development of new, innovative business models, particularly in the Integrated Mobility phase, to better meet the increasingly diverse needs of urban commuters.
Three main human needs have been identified that have to be fulfilled in the urban mobility market. These are the need to have permanently a vehicle to be independent, the second one is the need to be driven in a particular place and the last one is the desire to have a vehicle on-demand. The first two human needs have been solved before the 2000s with the identification of three main business models that are clearly defined in our recently published whitepaper.
Within the urban mobility sector, we are now seeing changes resulting in five new business models. Let’s have a look at them one by one in the next section.
Five newly emerged business models
D2C distribution
This strategy is opposed to traditional retail models. The D2C brand sells or leases vehicles directly to private customers through retail locations or webshops. This business strategy does not rely anymore on retailers or other distributors, as the aim is to lower the costs for the OEMs meaning lower prices for customers or higher margins for the company such as Tesla or NIO.
Full vehicle solution providers
This strategy provides customers with direct access to vehicles as well as related insurance and repair services. This option is open up to people who are not interested or cannot buy a vehicle, but they still want to drive themselves independently. The advantage is to have a monthly payment for the product-service mix. Some examples of the companies could be SIXT or CLUNO as full vehicle solution providers.
Ride pooling
The term "ride pooling" refers to the grouping of transportation requests such as MOIA or Clever Shuttle. Typically, this principle is used for on-demand services. Instead of transporting passengers individually, ride pooling combines trips with similar routes. Customers are transported in a vehicle together and travel a portion of the route together. They not only share a car, but also the fare, allowing for more mobility while reducing traffic congestion.
Ride hailing
Ride-hailing is when a consumer books a personalized ride online, usually through a smartphone app. It's basically the same concept as a taxi company. The consumer requests a ride using a ride-hailing platform, which operates as a mediator between the driver and the passenger. Uber and Bolt are the most well-known intermediaries acting as platforms.
A similar practical example of the application of this business model is the Kollibri project by PostAuto. Together with the Swiss mobility provider we collaborated to innovate transportation for rural areas in Switzerland. If you want to learn more, read the case study here.
Vehicle sharing
Organisations such as Lime or TIER provide users with on-demand access to vehicles for personal transportation. It is an option tailored for locals or tourists who demands an extension to public transportation or a fun way to explore the city. It is literally on-demand, with the ability to leave the vehicle at the desired destination.
Trends in the mobility of the future
The future of mobility is affected by our choices and that’s why those of us who drive a car everyday need to adjust their habits. There are four significant mobility trends developing now:
Plural - Using many modes of transportation to travel more efficiently
Smart - Data to make travelling easier
Share - Carpooling, floating, and self-catering
Electric - A safe, quiet, and readily refilled mode of transportation
To optimize automobile use, abandoning the private car concept in favor of a model of shared automobiles on demand looks to be a logical and desired move. The concept of urban mobility itself has to be reconsidered. Alternative modes of mobility must be prioritized in the face of congested streets and overburdened public transit networks in big cities. Several additional variables, such as community savings, have aided the development toward a so-called "soft" urban mobility. The problem is that cities will continue to grow in size in the future, and experts predict that more and more of us will be able to buy a car for our daily commutes. However, the original car will not be the best option anymore, but it will be replaced more and more by alternative modes of transportation.
“With a viable business model and the enabling/framing role of public players, services can move out of the pilot phase and be integrated into the mobility ecosystem.”
Five hypotheses that will guide the development of innovative future business models
There is no “best” asset structure, but operators need to be aware of the strengths & weaknesses
Here, we have to consider the asset light companies which can scale more easily and replicate their success and the heavy mobility providers who can make their business model more sustainable. Indeed, in both cases, we have to analyse the strengths and the weaknesses of the markets to have a better outlook to progress.
The price to win is the best leveraging power to bargain with public authorities for mobility budget
Gaining trust of public authorities is very important for a mobility operator, as close and transparent public-private partnerships have proven to be a success factor. It is key that public stakeholders have trust in specific mobility companies which seems still to be difficult for the platform providers such as Uber.
Perforce improvisation can uncover innovation potential
During a crisis, companies need to be flexible and adapt to the new market shocks meaning that they will have to adjust the existing infrastructure for new and different purposes. This leads companies to uncover potential new ways to do business and consequently offering new services without the need of substantial investments.
A systemic change can be a chance to increase efficiency
There is a need to use the assets and infrastructure in a more efficient way in the mobility sector. This can be reached by incentivizing people to use mobility services during non-peak times that would relieve a mobility provider’s asset structure and enable better maintenance and utilization. The keys for success will be the stakeholder management and transparency of decision making.
Current and future mobility options will be delivered to the consumer through a single touchpoint
Nowadays there are several mobility providers, platforms developers and other players which are exploring the mobility sector in all dimensions to cater all mobility needs of a consumer. However, from the current super apps that provide consumers with a single touchpoint there is not yet a dominant position due to the missed consolidation of the mobility as a service.
Business models for the future
Most new business models have been developed in the new era, while true radical innovation was rare over the past many decades. That’s why the next big goal of any mobility provider is to either be the central touchpoint of the riders’ mobility or participate in the right ecosystem. Furthermore, staying flexible and having the ability to improvise and thinking of new ways to make money is key. The future for mobility offerings can be definitely bright, if operators play their cards well.
Getting more in-depth views on this topic? Read our whitepaper.
Author
Georg von der Ropp
CEO of BMI Lab