Years ago I read the story of a German student who, in the early 20th century went to the U.S. to study how the U.S. economy operated. He made following statement, “Enterprises will only exist as long as it is cheaper to do business between enterprises than with individuals.” Despite extensive googling, I could not find more details about this individual, but it got me thinking about the “Uber” economy.
The Uber Economy: Is There a Trend?
The Uber economy is a business environment where service providers and service consumers are matched through the use of technology. This concept is not new. Back in the early 21st century, during the dot-com boom, marketplaces popped up all over the place. (At one point in time I counted around 700.) Their objective was exactly the same, but geared at enterprises. And most of them did not last. Why? Often it was because they did not have a proper business model.
The Uber economy is different because the company owning the technology also serves as the financial clearing house, and takes a percentage along the way. Individuals are paying since the service is cheaper than traditional alternatives. In the case of Uber itself, people will argue that the company is not compliant with local regulations and that this is the reason why the can be cheaper. Maybe. Or Maybe not.
When you talk to people using the service, they will speak about the price, but also about the service. And this is where things become interesting. Indeed, you can rate your driver and he can rate you. That pushes people to strive for quality and respect. The same cannot always be said of traditional services.
What Has Changed Since the Dot-com Boom?
My objective here is not to discuss the Uber situation itself, but rather to look at why such services pop up now, and analyze the disruption they bring to existing business models. Why are such services appearing now? I believe there are four, closely interlinked, reasons:
- The drive to mobile and continuous connectivity provides an ideal platform for the service consumer to request the service anytime, anywhere. There is no time left for reflection. Today, a need has to be fulfilled immediately. Hence the appearance of services with immediate response.
- The growth of social media. Being online, sharing information, and rating services has become a second nature. Read the press, listen to the radio, you’re asked to like a Facebook page, to download and rate an application etc. We vote with stars and likes. And we make choices after consulting these votes. It’s actually fascinating. Being able to rate a service makes that service attractive.
- Increased digital awareness. As the world increasingly becomes digital, we expect our needs to be addressed in such way. How often do you still go to your bank agency? I go about three to four times per year. Everything else I do digitally. The millennium generation is there. They grew up with the digital technology. So it’s not foreign to them—it’s part of their life. They often ask me, “How could you live without a mobile phone?” It’s good question.
- Smart connected devices. These days you can track every-one of your activities and, if you wish, share them with others. This can serve as a trigger for delivering you information and services. Healthcare monitoring when on the go, suggestions of good restaurants or other service providers based on your location, remote monitoring of your house, car or other property are all examples where smart devices interact on your behalf and provide you services you could not dream of previously.
Technology has evolved dramatically over the last 15 years and created a fundamental divide in the population between the digitally aware and the others. Life is difficult for the latter.
These changes generate new enterprises, new opportunities, and many start-ups take advantage of that. Will they all have a future? Definitely not, but some will become the key enterprises of tomorrow.
What about existing enterprises? Some see those walking to their death, and lately there have been several articles arguing the death of technology companies. What if they wish to re-invent themselves? Why would they be worse than start-ups? The argument comes back to a lack of flexibility and responsiveness to the marketplace. The argument would be correct if everything remains equal. But this is where the world is changing!
Are you ready to learn some quick tricks?
If you want to be part of the “Uber” economy, you need to change quickly. And that change addresses a number of aspects:
- Your organization is no longer the limit of your enterprise. Increasingly you should work with employees and service providers alike. Build around your organization a team of individuals you can call in when there is work. They become your flexible capacity, they allow you to address demand regardless. Some companies are resisting because they feel such people will not be loyal to the enterprise. Frankly if you give them work, they’ll be loyal to you, and often more than some employees.
- Build an information technology environment that is capable of handling an evolving workforce, and allows them to quickly deliver. That implies the use of cloud computing, agile development methodologies, DevOps, and all that IT is talking about today.
- Ensure you have a good understanding of your market so you plan correctly. Just because you have a flex-force doesn’t mean you don’t need to plan. Particularly in the services industry, and that is where most of the business is going moving forward, one key process seems to be lacking. It’s called sales and operations planning (S&OP). How do we ensure we can deliver what the customer asks and sell him what we can deliver? For that we need to understand what his wishes are. This is where big data and business analytics come in.
While there is clearly a technology aspect, it is really about a change in mentality: Transform your operations to address the needs and the wishes of your clients.
To enable such change, I’m seeing in some companies is called “intrapreneurship”. This provides your employees the opportunity to create a start-up within the environment of the larger company. Establish an environment where ideas can bubble up. Have senior leaders, together with venture capitalists and people knowledgeable about the market review their proposals. Take the most promising ones and give them the seed money to get started. Obviously, you retain a stake in the start-up as you fund it. It may actually become your business in the future.
One thing to remember about entrepreneurship: plan for failure but allow your employees to fail along the way, otherwise they will not take the risk to try new ideas. We all know that for one success story, there were probably at least five failures. That will happen in your environment also, but the success will likely pay for the failures several times over. A failure does not in and of itself define an employee as a failure. They may succeed next time, having learned a lot from setbacks along the way. Failure is part of tapping into the creativity of your own employees – and preparing your company for the future.
Are We in a Crisis or a Metamorphosis?
For the last seven years, the media has told us we are in an economic crisis. We give names to this crisis. It started with the sub-prime crises, then the Euro-crisis and Greece crisis, now we seem to be heading towards the China crisis. But are we really in a crisis situation, or is the world around us transforming? Is business and the economy evolving?
Have you looked at the Caring Economics described by scientists, economists, and the Dalai Lama? It talks about allowing people to work when they wish, how much they wish, at their own rhythm. It’s about having an “Uber” type economy at the service of the people and not the people at the service of the economy. We need an environment in which service providers and consumers can easily meet. And yes, all parties should be appropriately rewarded, but the objective should be service, not money, in my mind. Isn’t that a valuable alternative to our current economic models whose only driver seems to be money?
This blog entry was originally published in the CloudSource blog in October 2015.