The opportunity

The micro-mobility rental sector is currently attracting a significant amount of investment as it grows from being an ESG friendly short journey/last mile product to becoming an increasingly integral part of the Mobility as a Service (MaaS) solutions that allow users to plan, book and pay for complete journeys across multiple transport types.

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The focus on the creation of new and innovative digital solutions runs the risk of missing issues with the hardware that will leave customers frustrated and will undermine the overall product.  

Micro-mobility rentals using e-scooters, e-bikes and e-mopeds provide a short journey solution that has been seen to replace 25-50% of car journeys in cities. MaaS extends this to include the first and last stages of a journey, such as a commute, which includes multiple forms of transport such as trams or trains.

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The use case is compelling for cities like Berlin and London to reduce the number of private cars on the roads, but the combination of zero emissions and low user costs makes this a ubiquitous solution across many global locations – less a case of whether it will disrupt each region, more a case of by how much.

MaaS and short journey rentals represent a reversal in traditional thinking about transportation. The brand or type of car, bike or scooter to purchase was a key consumer decision. These products have now been relegated to the status of being the hardware that supports a digital product; users will be broadly neutral to the make or even the type of transport allocated. Product differentiation will be made by the app interface and the pricing.

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Until the hardware fails.

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The challenges with hardware

During a recent trial in London one company registered over 300,000 successful rides, however one national newspaper ran an article calling for the scheme to end after “shocking tyre faults”. The companies involved in the scheme responded against the relatively low number of faults to explain that the scooters had been immediately isolated and repaired. These responses were almost a postscript to a page of photos of damaged scooters and details of accidents, including deaths, involving riders of scooters - despite these appearing to be privately owned and having been ridden illegally.

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Trustpilot reviews of the major rental companies are overwhelming negative with faults in the bikes and scooters being a recurring theme.

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The segment is attracting high levels of investment but beyond purely digital development, companies must decide how best to use this momentum to prepare for the future. The industry is undergoing significant consolidation and the competitive landscape is likely to be very different in the next five years.

E-mopeds have the highest barriers to entry of the three main product types for a new entrant to overcome. There are some very mature companies already in this space that are forming partnerships such as a collaboration between Honda, Suzuki and Yamaha for swappable batteries.

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E-scooters are currently attracting the most controversy with concerns being raised against their safety: they have a difficult time fitting in with existing infrastructure, being light and vulnerable to other road users but too fast for use on pavements. This is in addition to the disruption caused by their being left in inconvenient locations. The next evolution will include features such as camera positioning and advanced assistance systems to mitigate for these but there is development still to mature for these to be effective. A further challenge is that the threshold of rent vs buy can be crossed in as little as a month of typical commuting for a product that is reasonably portable on public transport. It’s cost effective to own a scooter and it’s not a great inconvenience for the rider to take it with them.

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The e-bike appears to be the most addressable of the product types: infrastructure exists for bikes; they are attractive across age groups and have widely accepted acceptable parking areas alongside regular bicycles.

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Rental e-bikes as a product class challenge

The e-bike may be the easiest product type to develop, but that does not mean that it will be easy. There are some significant differences between the use cases for purchased vs rented e-bikes.

Purchased e-bikes are relatively expensive and customers are reasonably educated, either having researched or sought guidance from sellers to ensure that they purchase a bike that is appropriate to their needs. They know how to care for it and are incentivised to do so. They are less likely to leave their bikes in conditions where they would be exposed to poor weather or vandalism.

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A rental e-bike will typically be kept outside in all weathers and its users are less likely to be concerned with poor treatment of the bike such as bumping up and down kerbs or attending to or reporting any damage. They will be less careful about the location that the bike is left in at the end of their ride.

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Unlike the rental car sector, there is no guarantee of inspection between users.

 

As is seen in reviews and news reports, damaged bikes are unlikely to be blamed solely on the previous renter, with a greater attribution of blame being made on the maintenance and inspection discipline of the renting company.

The rental e-bike should be considered a product class distinct from traditional e-bikes that requires a level of robust product engineering that is more typical of the automotive sector.

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Automotive robustness processes take thousands of engineer hours and are based on a long history of recording and responding to faults across various market. This is clearly not practical for a start-up with small engineering teams and little legacy knowledge.

The solution is to strip the processes back to their core elements.

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The solution – 3 focus points

Understand the product requirements

The key to being able to focus development efforts is to have a clear idea of what is actually required of the product. Each requirement must be described clearly enough to enable specific confirmation that they have been met.

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There are four stages: what are the requirements, how to confirm that they have been met, mitigation of factors that will prevent meeting them and an understanding of how they should be tracked as an ongoing process.

The first step to define the requirements is to identify the stakeholders who own them. This will start with the customers and an understanding of the segmentation of the market but will also include less obvious owners such as manufacturing teams, suppliers or the CFO.

There may be essential requirements that are explicitly stated such as regulatory or safety standards. Others may require some iterative work to define: a targeted availability of each bike implies a quick turnaround repair process which will in turn drive serviceability requirements. It may be that these do not have explicit targets so may be referenced to being as good as a benchmark competitor.

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The next step is to understand the conditions under which the product could fail to meet these requirements, examples are manufacturing variation, degradation and wear, environment, customer interactions and abuse

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The goal of this approach is to be able to write clear specifications that will control each element of the product based on the make vs buy level defined.

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Understand specification and the make vs buy decision

Make vs Buy decisions are often made with close attention to commercial considerations such as cost and lead time. For a new product category such as this it is important to put a higher significance on specification and relationships with suppliers.

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Product teams will need to focus their attention on those factors that are new, difficult or unique to their product; this means leveraging supplier knowledge as far as possible for everything else. This is facilitated and controlled by having a clear expectation of the supplier based on the clarity of the specifications issued. If there is a gap, this must either be resolved with further requirements iteration to reach to the level of the supplier’s capability or the make vs buy interaction may be raised to a system supplier or third-party manufacturing service that will be able to control to the required level.

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There is a high likelihood of early life failures with any new product, particularly if it is in a new application. The ability to respond to these failures will be highly dependent on whether a two-way dialogue is possible with suppliers to ensure that solutions can be identified without either side being defensive about attribution of liability

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Emphasise rapid and robust responses to problems

New brands and segments are often expected by their customers to face early life problems. Negative sentiment is more often based on the speed and robustness of the response. The entire organisation and its suppliers must be ready to respond to any issues as quickly and thoroughly as possible.

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The first step is to communicate clearly about taking ownership of any issue regardless of cause.

It may be a clear product failure, in which case there is a technical investigation and resolution to deploy. It may be inadvertent customer misuse; this indicates a shortfall in customer communication and education. If it is a clear customer abuse, a solution must be deployed to ensure that it cannot be repeated.

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There are many issue resolution processes available, one feature they all share is that they start out expensive: if there is no easily identified single cause, the immediate action is to address all possible causes while a long-term solution is investigated and deployed.

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The company will need to be financially prepared for issues. There will not be time to barter budgets so an allocation must be made prior to need to ensure readiness to own the communication, investigation and resolution.

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The amount to allocate will be based on the work described above to identify possible failures. Each will have an estimated number of occurrences as a percentage of sales volume and an estimated cost for repair and communication. This can be given a confidence level that it will not happen based on number of hours the products have accrued. A high initial budget will be set aside, but this can be released back into the business as increasing confidence horizons have been met.

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The hardware may not be the focus of attention for winning customers, but the right amount of focus will prevent it from being the focus of attention for losing them.