Trust has been a scarce commodity in the autonomous vehicle (AV) industry. In August, one of the industry’s most sought-after technologists, Anthony Levandowski, was charged with stealing trade secrets from Waymo and passing them to Uber. But Levandowski’s alleged misdeed, which ultimately resulted in the breakdown of the highest profile alliance in the industry to date, is far from the only one. Tesla and Apple have also accused former employees of taking proprietary files to other companies.

It’s understandable why many of the companies vying for a piece of the autonomous ride-hailing market are eyeing each other warily, yet these companies actually have much to gain in forging meaningful partnerships with one another. So far, many AV tech companies have announced partnerships with ride-hailing networks like Uber and Lyft, but too many of them are partnerships in name only—either consisting of vague promises of ongoing cooperation, or outlining tests that are limited in scope and still keep the partners at arms’ length. Even the partnership between Aptiv and Lyft is limited in scope, confined to a small number of vehicles on the Las Vegas strip.

Despite of the inherent risks, AV players have much to gain in forging partnerships that leverage the strengths of each player. In particular, partnerships will be vital for AV tech companies like Waymo and Cruise, who are vulnerable as long as they work in silos. Regardless of their funding or the state of their technology, they must understand that they’re the underdogs in the AV game since AVs will strengthen the value proposition of their primary competition—Uber and Lyft.

AV tech is what we call a sustaining innovation; it reinforces and improves upon the business model of the industry leaders. In this case, Uber and Lyft can leverage the technology to improve the safety of their service and lower the cost of providing rides, since they’ll no longer need to compensate human drivers. Because they are able to adopt and benefit from the new technology, they’ll continue to have the upper hand. AV tech entrants will struggle to replicate all of the advantages Uber and Lyft naturally have, from brand equity to customers and assets. If entrants attempt to break into the ride-hailing space on their own, it will likely prompt an intense and costly price war that will drag down all participants, but especially the challengers.

At the same time, Uber and Lyft shouldn’t assume they’ll maintain their dominant positions in the market if they go it alone. Both of their in-house AV tech efforts are widely seen as lagging behind industry leaders like Waymo, yet they continue to spend hundreds of millions of dollars per year developing the tech at a time when they are struggling to reach profitability.

If AV tech companies do manage to launch a ride-hailing network in key cities—however costly that might be—they might be able to undercut Uber and Lyft on pricing and take away market share if the ride-hailing leaders are unable to offer autonomous rides. So long as their technology continues to lag, Uber and Lyft are also vulnerable.

So, what are some concrete steps AV players could take to cooperate more?


AV tech companies like Waymo and Cruise should become technology providers to ride-hailing networks

AV tech companies should avoid competing with Uber and Lyft by launching their own ride-hailing networks and instead develop working partnerships with the existing ride-hailing networks. The ride-hailing industry to date has been characterized by intense price competition for customers, high incentives to gain drivers, and barrels of red ink. A smarter approach would be to leave these activities to the incumbent ride-hailing networks and focus on being technology providers to them.

Waymo, Cruise, Aurora, and their kind have the opportunity to emerge as the Microsoft or Intel of the autonomous vehicle. As with PCs, enormous value may flow to the owners of the operating systems of AVs. Whether they monetize their operating systems by developing fleets of cars to “drive” for ride-hailing networks, or by licensing their technology to others, the road to success for these firms lies in cooperation with ride-hailing firms, not in competition against them.


Ride-hailing networks should open their platforms across AV tech companies

Conversely, Uber and Lyft could become truly open platforms for AV tech companies, which requires relatively minor technical changes. Rather, the hold-up so far has been a lack of clarity around the economics that will be available for AVs driving on ride-hailing networks. If the ride-hailing networks provide economic terms that AV companies can count on, they will speed up the development process as companies can tailor their business models to those terms.

In addition, by welcoming AV tech companies, Uber and Lyft can save themselves the enormous expense they are incurring to develop their own AV tech. Right now this is a necessary expense to make sure they aren’t shut out of autonomous ride-hailing altogether. But as soon as they can secure access to the tech from at least one good partner, they won’t need to own the tech themselves. And what better way to attract partners than to provide access to a huge customer base with economic terms that are fair and transparent?

Trust among companies in the AV ecosystem will take time to restore, but that shouldn’t stop companies from working together through meaningful partnerships centered around their respective strengths. In this way, autonomous ride-hailing can become a reality more quickly and all parties, including consumers, can reap the benefits.

You can read more from the researchers in their thought paper, “The Race for Autonomous Ride-Hailing: Developing a Strategy for Success,” at the Clayton Christensen Institute website: