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Uber in Lakshadweep

Problem Statement:

Uber plans to expand operations in Lakshadweep, aiming for a daily revenue of ₹1 crore with an average order value (AOV) of ₹100 and a minimum of 2 rides per driver daily. The challenge is to determine the optimal number of drivers to onboard in order to meet this revenue target, given the unique demographic and geographic constraints of Lakshadweep.
Options: Onboard 5000 drivers. Onboard 50,000 drivers. Onboard 100,000 drivers, Not feasible in Lakshadweep

Uber in Lakshadweep

While mathematically, onboarding 50,000 drivers seems like the solution, the feasibility of this plan in Lakshadweep must be considered:

Lakshadweep has a population of around 70,000 people.
The available market simply cannot support onboarding 50,000 drivers, as the demand for rides will be far lower than required for the projected revenue.

Thus, despite the calculated need for 50,000 drivers, to onboard that many in Lakshadweep due to its population and market size constraints.

When tackling business problems, it's tempting to rely solely on numbers to find quick solutions. However, there are instances where pure numerical calculations miss crucial context. This is where applying —breaking down a problem to its fundamental truths—becomes essential.

Applications in Other Industries

Several industries face similar constraints where supply—workers, resources, or assets—plays a crucial role.

Food Delivery: A food delivery company might project a certain number of deliveries per day based on demand. However, without considering the availability of delivery personnel, this projection can lead to service delays and customer dissatisfaction. Understanding the limitations of supply (number of drivers) is essential for realistic business planning.

E-commerce: An e-commerce company could forecast revenue based on orders but overlook the inventory constraints or warehouse space. Just because there is demand doesn’t mean the supply chain can fulfill it. A first-principles approach would question whether the warehouse capacity is sufficient to support projected sales growth.

Ride-Hailing: In the ride-hailing industry, it’s easy to predict rides based on demand during peak hours. However, without enough drivers on the road, the service quality degrades, leading to longer wait times and lower customer satisfaction. Ensuring a balance between rider demand and driver availability is crucial for operational success.

Lookalike Problems in Other Industries

Lyft: How many drivers will Lyft need if prices drop by 50%, leading to a 3x increase in ride requests? Amazon: How much warehouse space will an e-commerce company need if a flash sale results in a 5x increase in daily orders? Doordash: How many additional delivery drivers will be required if a food delivery platform reduces delivery fees, causing a 4x increase in order volume? Emirates: How many flights should an airline add if a fare reduction increases bookings by 2x, while maintaining the same airport capacity and flight schedules?

Takeaway

This example illustrates how relying on numbers alone can sometimes lead to flawed conclusions. The art of solving business problems often involves questioning assumptions, identifying constraints, and applying first principle thinking. Doing so forces us to look at the problem holistically, considering both numerical and non-numerical factors. Solving problems in this manner helps develop the mental agility required to tackle complex issues in real time, ultimately making decisions that align with business realities.

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