How Lyft’s CEO Got the Company Moving Again

BRIAN KENNY: Welcome to Cold Call, the podcast where we delve deep into the stories behind groundbreaking Harvard Business School case studies.

It’s pretty rare for an industry to go from zero to Mach speed in just a few years, but that’s exactly how it’s gone for rideshare services. Since the first peer-to-peer rideshare service launched in 2012, well over a billion people have climbed aboard. Today we’ll dive deep into this phenomenon with a case about Lyft, long the challenger in the ridesharing industry. They faced a choice: double down on product innovation, reinvest in a neglected brand, or simply shore up operations after years of crisis. With a new leader at the wheel, the firm was at a crossroad that called for bold, decisive leadership. Today we’ll unpack the case, discuss how boldness shapes corporate strategy and leadership, and explore what it takes to turn courage into a competitive advantage.

Today on Cold Call, we welcome Professor Ranjay Gulati to discuss the case “Lyft 2023: Roads to Growth and Differentiation.” I’m your host Brian Kenny, and you’re listening to Cold Call on the HBR Podcast Network.

Ranjay Gulati’s work explores leadership and strategic challenges for building high-growth organizations in turbulent markets. His new book, How to Be Bold: The Surprising Science of Everyday Courage explores how individuals and organizations can cultivate courage, reframe fear, and act boldly in the face of uncertainty. In many ways, Lyft’s story provides a rich backdrop to test these ideas in action. And he’s also a fellow podcaster. Ranjay, welcome.

RANJAY GULATI: Thank you very much, Brian. Great to be here.

BRIAN KENNY: You’re on the other side of the mic today. So, Ranjay hosts a show called Deep Purpose. You can find that on Apple or Spotify or wherever you listen, and it’s good to have you back on the show. It’s been too long.

RANJAY GULATI: I know, Brian, it was great fun last time. I’m delighted to be back.

BRIAN KENNY: This is a great case. I mean, we’ve all climbed into the back of a Lyft or an Uber, and those are the two major players, but by no means the only players in this space. So, the case actually comes in a little bit into their growth period where they’re facing some real significant challenges, and our protagonist is taking the helm there, and we’ll talk about all of that. So why don’t we just dive right in. I’m going to ask you to tell us what drew you to write about Lyft. Why did you think this would be a good case for the classroom, and what’s your cold call when you start the discussion?

RANJAY GULATI: So, it’s interesting, when you write a case, you may start with one thing, and you may end up completely somewhere else. So, this is one of those stories where I started with a hypothesis about what the case was going to be about. It was really another illustration of a company that had a purpose as a founding principle and how they were trying to live by it. And the purpose was not to build a rideshare business. The purpose was to connect communities in places like Los Angeles, where the two founders were living. And so the idea was that a lot of people who don’t have access to a vehicle or parking or whatever are unable to connect, and it feels a fragmented, alienated life over there. So, this would be a way to bring people closer together. So, I was intrigued by how that kind of kernel of an idea became the basis of their strategy of how they were going to grow their business, about who they wanted to be.

But then as I learned more, fast forward, what you discover is that for a variety of reasons, Uber comes into the picture, takes off, dominates, and suddenly now you are a one-third, two-third duopoly. Now, they’ve tried to differentiate and create some differentiation with their drivers and things like that, but even that is going away fast because the riders overlap across Uber and Lyft, so they’re not unique drivers anymore. Customers, you say, okay, I’m going to create stickiness for customers. Everybody has Uber and Lyft on their phone. They’re shopping across and choosing whoever’s the lowest price. Talk about commodity hell. So now what do you do? So, suddenly the case evolved from a study about just purpose to one about competing in commoditizing duopoly markets where the other competitor is bigger than you, has a more diverse revenue stream, can choose to make this a loss-leader.

Now, how do you compete in this market? But then they became a third thing into the picture, which was now you have a new CEO. By the way, happens to be one of our alums, and he’s got to figure out, the founders are stepping away. Now you have this awkward transition where when founders set a step aside, professional management comes in and they got to figure out what do you do.

BRIAN KENNY: What’s your cold call to start that discussion?

RANJAY GULATI: I jump right into the case because I’ve had David Risher in class when I teach the case. So, I start by saying, “You’re David Risher. You’ve come into this business. What is your plan? What are you going to do in the first hundred days? What are you going to do in the first 300 days?”

BRIAN KENNY: Wow.

RANJAY GULATI: “And I want both plans nailed down, now.”

BRIAN KENNY: That’s a brutal cold call. I wouldn’t want to be on the receiving end of that. So, David is the HBS alum that you mentioned. He’s the protagonist in the case. He’s the one who stepped in to this leadership role in 2023. How would you characterize some of the dilemmas that he was facing? What was he up against?

RANJAY GULATI: He was up against pretty significant headwinds because they had come through a particularly brutal COVID because they entirely depend on rideshare, which essentially came to a grinding halt and took a long time to recover back. Meanwhile, Uber had Uber Eats, which was actually a dramatic growth business in COVID. So, here you have a competitor who’s really gained in the previous period, and you are coming from a place of weakness, from a place where you don’t have reserves to go and invest in something big. And so limited resources, layoffs, morale. So, you’re coming through the shadow of darkness over here, while those guys have just rode the wave through, and now you’ve got to find a way. And commoditization has really taken off, because drivers, you have two customers, right? The drivers who are now agnostic between Lyft and Uber, not always the case before.

BRIAN KENNY: So, David Risher comes into a culture that already exists. The founders of Lyft had a pretty specific vision for what they wanted to do, and any leader stepping into that role is going to face the challenge of the legacy but also trying to drive the culture forward. What were some of the things that David tried to do?

RANJAY GULATI: One of the first things David had to do was overcome internal inertia. And I think somehow sometimes organizations that have a great idea and execute on the idea; they were more successful beyond their wildest of dreams. Even though Uber was even bigger, and Uber has gone global and done all these things, Lyft was very successful. And what does success do to some? Not all, is it makes them fall into what I loosely call the success trap. And the success trap is now you become so fearful of losing what you have, you stop trying to win. And when you do that, you are caught in a vicious cycle of inability to try and experiment, learn, fail, grow. And so, you’re caught in a market that is stagnating, homogenizing, and you are unable to innovate your way into something new.

David’s opening letter, what he said about himself, his self-introduction, is also very important because that gives you a kernel of where he’s trying to go. His first point, he says, “Listen, I’ve worked in three organizations. I worked at Microsoft, Amazon, and at this nonprofit.” And he says, “The three things I’ve learned is at Microsoft, I learned about the power of innovation. Innovation is what allows you to be competitive in the marketplace.” He said, “From Amazon, I learned the importance of customer obsession, that you can’t just be customer-centric, you got to be obsessed. It’s an emotional thing, not just a rational thing.” And he said, “From my nonprofit days, I learned the power and importance of frugality, doing more with less. How do you get things done with limited resources?” So, he was going to bring these three perspectives into Lyft.

BRIAN KENNY: What were some of the things that came out of that? What were some of the initiatives that he really focused on early on?

RANJAY GULATI: So, one of the initiatives that actually was on the cards, they had already debated and discussed it. It wasn’t even David’s original thought, but they had set it aside for whatever reason was this idea of matching female passengers to female drivers. And this was going to be mutually beneficial because many female passengers prefer a female driver.

BRIAN KENNY: Yeah, that makes sense.

RANJAY GULATI: Given all the, in fact, recent tragic stories we’ve been hearing about attacks on passengers. So that was one. But even for the drivers, turned out that many female drivers would not drive rideshare, and they would instead do food delivery, even though you earn less in food delivery than in rideshare. But they felt it was less safe.

BRIAN KENNY: I see.

RANJAY GULATI: So, they were going to attract these drivers who were doing food share, food deliveries into rideshare saying, we will guarantee only female passengers. It was an idea they already had but for some reason hadn’t executed it. It reminded me of Anne Mulcahy story. Anne Mulcahy was the former CEO of Xerox, which legendarily owned Xerox, PARC and had all these innovations that Apple ran off with, which was the graphical user interface on the mouse. And she said in my class one time, “We didn’t launch products. They escaped from us.” And I don’t know why in some organizations you see that where the ideas may be there, they percolate around, people talk about them, they debate them, then the naysayers kick in, and somehow they get shelved.

BRIAN KENNY: Right. Right. But it takes some bold leadership to actually revive that and push it through in an existing culture. How was David able to size up what he needed to do and move people in the same direction? Did he face opposition?

RANJAY GULATI: In class, he’s talked about that. Yes, he did. But at least to jumpstart the process, leaders need to own it: OK, this is on me. This one’s on me, not on you. I’m not going to blame anybody else. This one’s on me. I own it. And that encourages others to then take ownership. And I think this willingness to step, you’re not going to become an autocrat and drive it constantly top down only. Eventually you’re going to build that confidence. I think people sometimes lose confidence. And then you need to boost up that confidence. And once you get them going, you’re then able to see the process unfold. And if you fast forward and see what Lyft has done in the last year and a half, you’ll see the positive results, the expansion into Europe, the now doing preferred driver choices, there’s a number of new things suddenly coming out of this company that actually was stagnating.

BRIAN KENNY: Yeah, yeah. Let’s talk about your new book because when I invited you to come on the show, I said, Is there a case that you think will help us to bring the ideas of your book to the surface? And you immediately landed on the Lyft case. Why does this case do a good job representing some of the big themes in your book? And maybe you can describe some of those themes to us.

RANJAY GULATI: So, the book is called, How to Be Bold: The Science of Everyday Courage. The book is now about the individual level, two-thirds of the book about individual courage. And the last third is about organizational courage. But when I first began writing this book, it was about organizational courage. It was all about, How do you create courage? Now, when you think about the word “courage,” what is courage? Courage is not the absence of fear. Courage is taking action in the face of fear. So, let’s get that out of the way.

BRIAN KENNY: Yeah, I like that.

RANJAY GULATI: The second thing is now if it’s about action in the face of fear, fear is a primal human emotion that is hardwired in the reptilian brain. It’s a survival emotion: Get out of here, save yourself. Now the question is, what activates that? It turns out there’s great research showing that what activates fear is the situational context of uncertainty. When we encounter uncertainty, it instantly activates fear.

Now, let me go back, unpeel the onion one more. What is uncertainty? There was a very famous essay by Frank Knight, the economist, on the distinction between risk and uncertainty. Risk is where you know the distribution of outcomes and you can put some probabilities on those outcomes. Uncertainty is, I don’t know. And if you look at present day and time, we are in an era of unprecedented uncertainty. In fact, in a recent article, somebody analyzed earnings calls by CEOs and found that in the last quarter, CEOs mentioned the word “uncertainty” three times as often as they did in the previous quarter. So, the word is out there; we all feeling it. When we experience uncertainty, the natural normal human response is one of fear. Now, the question then is, do we let fear take over? Because fear left to its own devices hijacks the amygdala and the prefrontal cortex. And the typical response is one of freeze or flight.

Now, if you look at Lyft back then, I didn’t interview them back then, so I don’t know what it was exactly like, but my hypothesis is that it had a freeze response. They were stuck and unable to do much about it. You’re in a market that is rapidly commoditizing. You have a competitor who is much bigger than you, who has diversified their income streams, and so is not totally reliant on this one business, which is the US ridesharing business. What are you going to do? So, to understand this strategic lock or freeze, you got to really understand organizations too have collective emotion, and fear becomes a paralyzing emotion unless you’re willing to face it.

BRIAN KENNY: So, how does a leader go in and get people to have collective courage? You talk about collective courage in the case. It comes up in the book, I’m sure. How do you stoke that within an organization?

RANJAY GULATI: So, let me give you an example from sports. One of the guests I had in my class many years ago now was Sir Alex Ferguson, the coach of Manchester United, the former legendary coach of Manchester United, for those who don’t know who he is. And one of the things he comments he made in class was that one of the hardest things he has to do as a coach is to take a winning team and make them come back and want to win again. So, somebody said, what do you mean? Are they lazy and complacent now they’ve won a championship? Because he won several. And that’s why in all sports, basketball, football, it’s very hard to see back-to-back championship. And he said, no, you know what happens is instead of playing to win, they start to play not to lose. They’re so fearful of losing. In sports terms, they’ll have the ball possession, but they’ll hold it in their half. They’ll defend more than play offense. And so you go into this defensive posture. So how do you unlock the organization to play offense, to look for opportunities for growth, to take calculated bets, to even walk into uncertainty because it is scary to do things that might not work, right? We want to de-risk it. We teach that stuff. Risk mitigation, risk management, we’re all about risk. Most of business is about risk.

BRIAN KENNY: But back to your point about uncertainty, risk brings uncertainty.

RANJAY GULATI: But they are separate ideas also. They’re adjacent, but separate ideas. How do we as leaders create the capacity in an organization to face uncertainty, to tackle the fear that is a natural correlate of that uncertainty and put the organization on a playing to win posture? That’s the leader’s challenge. How do you get them thinking upbeat? I’ll give you another example. I’m just finishing a case right now on a totally different company. It’s called Boston Scientific.

BRIAN KENNY: Of course, yeah.

RANJAY GULATI: Boston Scientific, in 2010, 11-odd, had done the second worst acquisition ever. They had acquired after AOL, Time Warner. Their acquisition of Guidant was the second worst acquisition, a $27 billion company. They had acquired Guidant for $28 billion. And the two together in a matter of a few years would be worth $4 or $5 billion. Massive destruction of value. So, in comes another CEO, and what is his tagline when he takes over? Winning spirit. Got to start to win again. And once you start to win again, winning is addictive. People want to win. People want to be on a winning team. You just got to give them a taste for what winning is. How do you jump start that? Yes, you need a brilliant strategy. Yes, you need to focus. Yes, you need to think about adjacencies for growth. Yes, you need to be customer obsessed. Yes, you got to figure out what are innovative ways to brand yourself in the market. But there’s an undercurrent beneath all that, which is this winning spirit. How do you get that going?

BRIAN KENNY: And you mentioned that Lyft has seen some wins over the last few years. So, winning begets more winning, right? Winning gives you confidence. It makes you feel like you can do it. If you look at David Risher and what he did, are there examples in your book that you can point to that illustrate some of the things that David was able to do, examples of courage or infusing this winning spirit?

RANJAY GULATI: So, you mentioned the word “confidence,” and there’s a very famous Stanford psychologist named Albert Bandura who studied something, an adjacent idea called self-efficacy, which relates to confidence. And it turns out that this idea of efficacy and confidence comes in two flavors. One is domain specific. We know our industry, we know our business, we know what we need to do. Now let’s just go do it, right?

BRIAN KENNY: Yeah.

RANJAY GULATI: And David saw plenty of that in spades, I’m sure. But beneath that is another generalized form of self-efficacy. It’s a can-do mindset. No matter what comes our way, no matter what curve balls come our way, no matter how many setbacks we have, we got it. We can do it. And that can-do mindset, which is this generalized form of self-efficacy, which is, if you remember Apollo 13, Eugene Kranz tells his team, they have no textbook for this. There’s no manuals for the situation. Oxygen tanks have blown up. And now you have your command module, the LEM, the lunar entry module floating towards the moon. You’re going to use it as a life raft and slingshot their way back to earth. No one even simulated that idea. What does he say in his first meeting? Failure is not an option. Because people are like, oh my God, can’t do it, impossible, hopeless. So, how do you as a leader imbue in your team? Failure is not an option. We’ll have setbacks. We’ll make mistakes.

BRIAN KENNY: But let me ask you this. When you say failure is not an option, one of the things we’ve talked about many times on Cold Call with different cases is that you have to allow for failure. You have to create a culture where failure is acceptable so that people are willing to take a chance to innovate in some way.

RANJAY GULATI: Absolutely. Great observation. And so, you’re right, idea here is ultimate failure is not an option.

BRIAN KENNY: Got it.

RANJAY GULATI: But along the way, and you’re right, as we know about making it safe to fail and learning from that failure is critical to the journey of courage. And what is interesting about this, I’ll give you a nuanced idea that I also talk about in the book, is if you look at some of these leaders, including David Risher, I would imagine, how do you not only make it safe to fail, but how do you also deal with success? Because success itself can be complacency inducing.

BRIAN KENNY: Right.

RANJAY GULATI: So, I think that is the challenge David is going to have now, now that they have some wins under their belt. That’s why you have people who fade away as athletes, just a taste of success and they’re like, OK, I’m done. And you know when I learned that was actually, I wrote a case and I talk about him in the book is Nick Saban, who’s the legendary coach of the University of Alabama football team.

BRIAN KENNY: Of course, yeah.

RANJAY GULATI: For those who don’t know him, this guy was unprecedented in terms of his record, everything else. And he has this model he called the process. It’s actually very Eastern spiritual in some ways. He wouldn’t say that. But because the idea is focused on the process, not on the outcome. And he learned that when he was coach at Michigan State and he was about to play Ohio State, which was much better team than theirs. And he went up and met a psychologist in the psych department and said, “I want to know how can I coach my team?” And the gentleman told him, he said, “Listen, just make them focus on each play, not on the score.” At halftime, they were way behind. At halftime, he called the team and said, “Don’t forget what I said to you. Don’t look at the score.” Miraculous turnaround, came and beat Ohio State. So that stayed with him. Losing and winning can confuse and distract you. So, at one level, you are intensely focused on winning, at another, you’re not letting it cloud your thinking. And I’ll share a small other example is Scottie Scheffler, golfer, you would know.

BRIAN KENNY: Yeah.

RANJAY GULATI: He was paired up with Tiger Woods at the Masters. On the 12th hole, which is the par three, Tiger hit a 10. He had two balls in the water. It’s one of the lowest scores ever on that hole. He was immediately out of contention of the tournament, and Scheffler was shocked. But the next five holes, Tiger birdied them. It was like nothing had ever happened. Nothing had happened. So how do you face up to failure? How do you face up to fear? I think athletics, sports, there’s a lot of metaphor and real visual stories about that.

BRIAN KENNY: Right, of course.

RANJAY GULATI: I think for David coming into the job, I think before you get to strategy, he had this one idea. He put it out there and said, jumpstart guys, we can do it. Build up some confidence, self-confidence. We can do it. I think the hardest thing was to help them come out of this malaise where they were just lost. But having a one-off idea is not going to do it. Then you’ve got to build a strategy. So, for him, the next thing or piece of the puzzle was, what’s going to be our strategy? Everyone wants to have clear direction. Then how do you build conviction around that direction? At the same time, you’re doing all this you’re trying to jumpstart and revive your culture to be more performance and results and outcome focused. While you’re doing this with your, you’re trying to also focus on your brand and think about customers. How do customers experience you?

A lot of times companies, his idea of customer obsession is also an important piece of the puzzle to think about. To me, what’s surprising from an earlier era of research I had done on customer-centric organizations, it’s fascinating how quickly companies, organizations, forget about their customer. Customers become an abstraction, a data point, a number, a market segment. You’re not thinking tangibly about customers. And in the case of a two-sided marketplace, which is what Lyft is, their customers are both the drivers and the passengers, and they don’t both always want the same thing.

BRIAN KENNY: Of course, yeah. Yeah.

RANJAY GULATI: So how do you really build a customer obsession? So, your strategy, your culture, your actions, your winning is all connected to this thought process of customer obsession. So, I mentioned to you three things that David said he brought to the table. First was innovation, got to get the innovation engine going with a winning spirit. Second was customer obsession. Start thinking about our customers, both sides of them. And then the third one was frugality. In a market that is getting commoditized fast, and you don’t have scale advantage, which is what Uber has over them, you got to find a way to be frugal.

BRIAN KENNY: Right.

RANJAY GULATI: Organizations struggle to subtract. And I think his frugality thinking is a way to understand that where should Lyft subtract so that they can add also. So, you’re playing addition, subtraction. How do you undertake both simultaneously?

BRIAN KENNY: Yeah. I would imagine the overarching situation that any leader faces stepping into that kind of a role is how hard do I push? How do I balance all the things we’re trying to do so that the organization can withstand what we’re doing?

RANJAY GULATI: Pacing change is another, you’ve now-

BRIAN KENNY: You could write a whole book about that.

RANJAY GULATI: Yeah, that’s a whole different topic, but I think it’s such a critical one. So, I think it’s really important to keep in mind that pacing change is the other piece of the puzzle. Building capacity to enact those changes. You can’t push it too fast, but you can’t push it too slow. So how do you pace that change coming in becomes very, very important. You need to build momentum, and this positive momentum becomes another key part of the puzzle.

BRIAN KENNY: Yeah, yeah. Ranjay, this has been a great, you’ve given me a lot to think about, great conversation as I knew it would be. I’ve got one question for you before we end our conversation, which is simply, if you’d like our listeners to remember one thing about the Lyft case and about David Risher, what would it be?

RANJAY GULATI: Courage is a source of competitive advantage. It is going to be the currency in times of uncertainty, because courage allows you to lean into that uncertainty and the fear that comes with it. It allows us to become comfortable with uncertainty. It allows us to, as you’ve heard many times from me in our conversation before, it’s okay with being scared. How do we learn to live with fear and make it a partner and a source of energy rather than want to freeze up?

BRIAN KENNY: Yeah. I love that. Ranjay, your new book is, How to Be Bold: The Surprising Science of Everyday Courage. Thanks for joining me.

RANJAY GULATI: Thank you very much, Brian. As always, it was lovely to talk to you. Thank you for that.

BRIAN KENNY: If you enjoy Cold Call, you might like our other podcasts: Climate Rising, Coaching Real Leaders, IdeaCast, Managing the Future of Work, Skydeck, and Think Big, Buy Small. Find them wherever you get your podcasts.

If you have any suggestions or just want to say hello, we want to hear from you. Email us at coldcall@hbs.edu. Thanks again for joining us. I’m your host Brian Kenny, and you’ve been listening to Cold Call, an official podcast of Harvard Business School and part of the HBR Podcast Network.