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Harvard Case - Lime: Not So Fast! The Impact of Lime's Strategic Choice Between "Asking for Permission or Begging for Forgiveness" in Madrid (A)

"Lime: Not So Fast! The Impact of Lime's Strategic Choice Between "Asking for Permission or Begging for Forgiveness" in Madrid (A)" Harvard business case study is written by Fernando Monge. It deals with the challenges in the field of Entrepreneurship. The case study is 4 page(s) long and it was first published on : Jan 7, 2020

At Fern Fort University, we recommend that Lime reconsider its ?ask for forgiveness? strategy in Madrid and instead adopt a more collaborative approach with the city government. This involves engaging in open dialogue, understanding the city?s concerns, and working together to develop a mutually beneficial framework for e-scooter operations.

2. Background

The case study focuses on Lime, a leading e-scooter sharing company, facing a critical decision in Madrid: whether to launch its service with or without official permission from the city government. The company?s ?ask for forgiveness? approach, characterized by rapid expansion and a focus on market penetration, has yielded significant success in other cities. However, Madrid presents a unique challenge due to its complex regulatory landscape, public safety concerns, and historical resistance to disruptive technologies.

The main protagonists are Lime?s leadership team, grappling with the potential benefits of a quick launch versus the risks of regulatory backlash and public disapproval. The case also highlights the role of Madrid?s city government, which is tasked with balancing the needs of its citizens with the potential economic and social benefits of new technologies.

3. Analysis of the Case Study

This case study presents a classic dilemma faced by many startups: the tension between rapid growth and sustainable market entry. Lime?s ?ask for forgiveness? strategy, while successful in some contexts, can be detrimental in environments with strong regulatory frameworks and public sentiment.

Using the Porter?s Five Forces framework, we can analyze the competitive landscape:

  • Threat of new entrants: The e-scooter sharing market is attracting significant investment, indicating a high threat of new entrants. Lime?s ?ask for forgiveness? approach could create a precedent for competitors to follow, potentially leading to a chaotic market with limited regulatory oversight.
  • Bargaining power of buyers: Customers in Madrid have limited bargaining power as they are dependent on Lime?s service. However, public sentiment towards the company could quickly shift if safety concerns or regulatory issues arise.
  • Bargaining power of suppliers: Lime?s reliance on third-party manufacturers and suppliers gives them moderate bargaining power. However, the company?s rapid expansion could strain supply chains and lead to quality issues.
  • Threat of substitutes: Traditional transportation modes like bikes and public transport pose a significant threat to e-scooters. Lime?s strategy needs to address these alternatives and demonstrate the unique value proposition of its service.
  • Competitive rivalry: The e-scooter sharing market is becoming increasingly competitive, with companies like Bird, Voi, and Tier entering the fray. Lime?s ?ask for forgiveness? strategy could trigger a price war and undermine the long-term sustainability of the market.

Beyond the competitive landscape, Lime?s strategy also needs to consider:

  • Regulatory landscape: Madrid?s strict regulations regarding personal mobility devices create significant hurdles for e-scooter companies. The ?ask for forgiveness? approach risks incurring hefty fines and legal challenges.
  • Public perception: Public safety concerns and potential negative impacts on pedestrian traffic could lead to public backlash and resistance to Lime?s service.
  • Sustainability: Lime?s business model relies on rapid expansion and a high turnover of scooters, raising concerns about environmental sustainability and the potential for e-waste.

4. Recommendations

Lime should adopt a collaborative approach with the Madrid city government by:

  1. Engaging in open dialogue: Lime should proactively engage with city officials to understand their concerns and identify potential solutions. This includes addressing safety issues, parking regulations, and the integration of e-scooters into the existing transportation infrastructure.
  2. Developing a pilot program: Lime should propose a pilot program with a limited number of scooters and designated operating areas. This allows the company to gather data, demonstrate its commitment to responsible operations, and build trust with the city government.
  3. Focusing on responsible operations: Lime should implement a comprehensive strategy for responsible operations, including:
    • Strict adherence to traffic laws and regulations.
    • Clear communication with users about safety protocols.
    • Regular maintenance and inspection of scooters.
    • Data collection and analysis to monitor usage patterns and identify potential risks.
  4. Investing in public education and outreach: Lime should invest in public education campaigns to raise awareness about the benefits of e-scooters and address public concerns. This could involve partnerships with community organizations, local businesses, and media outlets.

5. Basis of Recommendations

This recommendation considers:

  • Core competencies and consistency with mission: Lime?s core competency lies in its technology and operational expertise. A collaborative approach allows the company to leverage these strengths while demonstrating its commitment to responsible operations.
  • External customers and internal clients: This approach addresses the concerns of both external customers (citizens) and internal clients (the city government).
  • Competitors: By working with the city government, Lime can establish a more favorable regulatory environment, potentially deterring competitors from entering the market.
  • Attractiveness ? quantitative measures: While difficult to quantify, a collaborative approach has the potential for higher long-term profitability by reducing regulatory risks, fostering public acceptance, and establishing a sustainable market presence.

6. Conclusion

Lime?s ?ask for forgiveness? strategy, while successful in some contexts, is not a viable approach in Madrid. The city?s regulatory landscape, public sentiment, and potential for negative externalities necessitate a more collaborative and responsible approach. By working with the city government, Lime can establish a sustainable market presence, build trust with stakeholders, and contribute to the development of a more sustainable and efficient urban transportation system.

7. Discussion

Alternative options not selected:

  • Ignoring regulations: This approach carries significant risks, including fines, legal challenges, and damage to the company?s reputation.
  • Aggressive lobbying: While lobbying efforts can be effective, they are time-consuming and resource-intensive.

Risks and key assumptions:

  • Risk of regulatory delays: The collaborative approach may lead to delays in launching the service.
  • Assumption of good faith: The city government may not be receptive to Lime?s proposals.
  • Assumption of public acceptance: Public sentiment towards e-scooters could shift negatively even with a collaborative approach.

8. Next Steps

  1. Within 30 days: Lime should initiate dialogue with Madrid city officials to establish a formal working relationship.
  2. Within 60 days: Lime should develop a detailed proposal for a pilot program, outlining its operational procedures, safety protocols, and data collection methods.
  3. Within 90 days: Lime should launch the pilot program and begin collecting data on usage patterns, safety incidents, and public feedback.
  4. Within 180 days: Lime should use the data gathered during the pilot program to refine its operations and develop a long-term strategy for sustainable growth in Madrid.

By taking these steps, Lime can demonstrate its commitment to responsible operations and build a strong foundation for long-term success in Madrid.

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Case Description

The case describes Lime's (the startup of dockless electric scooter sharing services) arrival in Madrid, Spain. The case looks at the strategy of the company when it launched in the summer of 2018, until the City Hall of Madrid passed a Sustainable Mobility Ordinance in October of that year, regulating the operation of the company. This case features a "role play" with two main characters: Álvaro Salvat, general manager of Lime in Spain, and Francisco José López Carmona, director of traffic management and oversight in the City Hall of Madrid. This case illustrates the entrepreneurial dilemma of "asking for permission or begging for forgiveness" faced by all disruptive entrepreneurs. It also looks at the business implications of the different strategic approaches to regulation and engagement with city officials that entrepreneurs can take. Finally, it will delve deep into the micro-mobility sector, which like many other potentially disruptive technologies, can serve a big market but is also defined by uncertainty.

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