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Travis Kalanick is Uber's biggest asset, and now its biggest liability

He wasn't the one to come up with the idea for it or even its first CEO. But there's no doubt that Kalanick was the one to take the company from a seed of an idea for a car service and to craft it into the most valuable private technology "startup" - if you can even call it that - that it is today.

Often, that meant springing into battle against whatever stood in the company's way, whether it was the "a**hole named taxi," as Kalanick once referred to his foes in the taxi industry, or the city regulators that have tried to block his business at every turn.

Kalanick's aggression, dedication, and scrappiness built Uber. But now those same traits threaten to tear it down.

In the last week alone, Uber was the subject of a former engineer's high-profile allegations of sexual harassment and a subsequent New York Times investigationdetailing a litany of ugly behavior. The company was publicly rebuked by one of its most famous investors, and then accused of using stolen technology, and sued, by another big investor.

That's a bad week for any company, but for Uber the string of challenges has exposed a dangerous reality that threatens to derail the $69 billion company's path to an IPO: The company no longer enjoys the benefit of the doubt from many of its customers, the media or the general public.

"If I were on the board, I would find a way to get rid of him," said Michael Barnett, a business and management professor at Rutgers University. That may not be a realistic scenario in the eyes of many industry insiders, but it's clear that the company has to make some kind of change if it wants to regain the credibility it needs for the business to continue to thrive.

A compounding crisis
This isn't the first time Uber's faced a string of corporate public relations disasters, but it's the first time it's brought the company to a tipping point.

Twice in the last month the company has had to update the automated messages it sends users when they delete their accounts, appending special entreaties asking for forgiveness. The first was during the #DeleteUber movement when more than 200,000 people deleted their accounts in a weekend - an uptick so dramatic that Uber had to build an entirely new system to handle it. This past week, Uber had to update the message again to tell users just how badly it was hurting in wake of the accusations of a sexist work culture at the company.

For a company to be in a crisis the situation needs to fit three criteria, according to NYU professor Irving Schenkler, who specializes in corporate reputation:

  1. It has to be occupying senior management to the detriment of the rest of the business.
  2. It may have financial implications for the company.
  3. It may affect the company's reputation in the eyes of important stakeholders.
Uber has checked off all three boxes - more than once.

The current season of crises kicked off in December when Uber brashly opted to put its self-driving cars on San Francisco streets without the proper permits and was forced to back down by California regulators.

The showdown with the California DMV represented the first to dent Uber's carefully rebuilt image that centered around "celebrating" the cities it operates in. The #DeleteUber campaign - an unexpected and viral backlash to Kalanick's involvement with the Trump administration - further bruised customer trust of the company and showed that the backlash could actually take a toll on the business.

Now, the sexism scandal is internally affecting all levels of the organization as the company tries to rebuild trust with its own employees. It also lost the public support of some of its earliest investors. In a public blog post, Mitch and Freada Kapor, early investors in the company, publicly shamed Uber for allowing a "toxic" culture in the workplace and questioned whether Uber's pledged investigation into the incidents was actually independent enough.

Arianna Huffington, an Uber board member, pledged to hold the company's "feet to the fire" as it investigates claims of sexism in the workplace.Dimitrios Kambouris/Getty Images

Then Google, another one of its investors, sued Uber for intellectual property theft and patent violations over its self-driving cars.

It fits into a pattern Schenkler has seen during company turmoil. "Companies with reputational risks or vulnerabilities will often encounter heightened scrutiny and compounding problems when a crisis surfaces," he told Business Insider.

"The heightened glare directed at the company and the CEO may well augur a change in the C-Suite. Given the fractured state of the company's reputation, this could well be the tipping point, and an opportunity to head off consumer departures in favor of competitor."

Big moves, or a big axe
Uber is now facing a reputational crisis the likes of which it hasn't seen since 2014. Back then, Uber could manage its way out of it with less harm to the business.

That was the year of the infamous interview with GQ where Kalanick called the service "boob-er" since it helped attract women, and a French office ran an ad campaign to pair riders with "hot chick drivers." During the same period, Uber was investigated for privacy violations after it used the service's controversial "God View" feature to track the whereabouts of a BuzzFeed reporter and an Uber exec suggested digging up dirt on critical journalists. On the business side, a leaked playbook showed just how far the company had gone to sabotage Lyft. Meanwhile, hundreds of angry drivers protested in the streets against the company's treatment.

None of these ordeals slowed Uber as its business and valuation continued to expand at a breathtaking pace.

But Uber is not the only game in town anymore, with Lyft's rival ride-hailing service now a viable substitute for Uber customers, says Barnett.

"People will start to switch over. Once they go over to Lyft, there's no good reason for them to come back to Uber," he said.

Barnett compared it to Walmart trying to right its workers pay issues after Target came along. Companies can get away with it when they're the only option, but not when there's a comparable service.

That's why the trust deficit Uber has built-up over the years is especially problematic.

When news broke on Friday that someone was attempting to run a smear campaign against the Uber engineer who wrote the tell-all about sex harassment, Uber had to issue a statement to say it wasn't behind it. Many people had jumped to the conclusion that big bad Uber was at it again.

"He's definitely working from a hole, Barnett, the Rutgers professor, said of Kalanick. "He doesn't have capital to burn."

Fingers in the business

People close to Kalanick say he has softened. In interviews, he's more light-hearted than aggressive, diplomatic rather than name-calling. On a recent Saturday night, he was found working late in the Uber office and going out to dinner with employees on a whim.

"I think the board is going to say 'Look, you [Kalanick] need to fix this and you're going to need to evolve'," this venture capitalist said. "The current situation is not stable. Unless there is ownership of what's gone wrong here, a publicly articulated pathway to change, this will hang around for a while."

But now Uber needs another hit as big as that to fix the workplace issues that could stem its growth. The question remains whether Kalanick can make a big enough personal statement to convince the world that the company has changed, or whether an exit by Kalanick to a different role within Uber is the statement the company needs to send to win back customers, drivers, investors, and its own employees.

"Is he still believable in this role or does he have to go to make these big statements?" Barnett asks. "Since there are other services now that can do what Uber does and people have the ability to chose, they do need to make a bold statement."
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