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Mobile app drives digital disruption for London taxi company

Tom Kaneshige | March 12, 2013
Mobile transportation apps like Hailo and others have forced traditional taxi companies to pull a strategic u-turn. Here's the story of how 60-year-old Radio Taxis Group of London has gone digital and mobile to catch up to Hailo's disruptive powers.

"Down the road, some massive percentage of transportation requests are going to come through a digital channel," says Forrester's McQuivey. "This has to be the way it goes."

When Digital Disruptors Hit a Wall: Regulations

Ironically, Radio Taxis Group was the Hailo of its day, only with radio instead of a mobile app. In the early days, Radio Taxis Group lashed aluminum ladders to buildings as transmitter antennas. Electronic dispatch replaced analog in 1990. GPS, or global positioning system, arrived eight years later.

Radio Taxis Group also made a strong push to provide transportation services to corporate accounts, which helps insulate it somewhat from digital disrupters like Hailo that target consumers. In addition to taxi driver subscription fees, Radio Taxis Group made money on the backend with corporate passenger booking fees. Radio Taxis CEO Riesel says the consumer side, known in the industry as "street work," only represents 15 percent of Radio Taxis Group's business.

However, corporate accounts mean added costs-and risk.

Radio Taxis Group has had to invest in server-side technology for an account management system, record keeping, automatic billing and other processing tasks. Radio Taxis Group also employs a fleet of account managers and customer service reps. This infrastructure weighs heavy on the balance sheet.

Moreover, a sudden slowdown of corporate business can be devastating. The economic downturn of the past few years hit London companies particularly hard, and Radio Taxis Group's annual revenue plummeted from $75 million in 2009 to $48 million last year.

Now the company is making moves to right the ship. In addition to expanding transportation services in other areas, such as transportation for public authorities, Radio Taxis Group is making a big bet to grow its street work. This is where the new mobile app is expected to play a critical role. But is it too late?

In regulated industries such as transportation services, entrenched companies do have a temporary advantage-that is, red tape often trips up digital disrupters. Hailo is awaiting regulatory compliance before it can launch operations fully in New York, Tokyo, Madrid and Barcelona. Uber, which connects passengers to drivers using town cars and SUVs instead of traditional taxi cabs, has been riddled with lawsuits in the United States.

"Digital people can't compete as aggressively as they'd like because they run afoul of the law," McQuivey says. "In heavily regulated industries, there's some air cover for existing players to figure out their response. You can stay in this even though the digital guys got the jump on you."

Don't Make Technology the Master

Still, it's easy to fault Radio Taxis Group for waiting too long. Mobile apps are a no-brainer, right?


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