Not Every Industry Can Be UBER-ized
An interesting recent article written by Farhad Manjoo for the New York Times (See http://www.nytimes.com/2016/03/24/technology/the-uber-model-it-turns-out-doesnt-translate.html?_r=0 ) argued that the UBER model doesn’t translate very well to other cases and that it can’t be reliably applied to explain or justify the existences of the thousands of businesses which have rapidly appeared in virtually every industry claiming to be the “UBER” of whatever. He thinks these companies are being started and run by people who are either irrational or sadly deluded and that a massive shakeout is on its way if not already underway. He says there’s one UBER and that’s UBER - end of story. He’s not entirely wrong, but his view is too simplistic.
Now, of course, to hear tell from the “right now” industry mavens, no old-line business today is safe from aggressive and disruptive innovators planning to mobilize the masses to do the biddings of others on demand and – albeit over time – they’ll be working for a relative pittance. Manjoo notes the inconvenient fact that, in some of the most visible cases, the soaring costs of delivering these small-scale, bespoke services on a hyper-local basis with quickly growing volume has in fact already brought about price increases – not savings - for the end users. He argues that it’s pretty clear, if you can’t fairly rapidly achieve mass consumer pricing, your EON (Economy of Now) business on its best days will be a niche nicety for the folks with more money than time or brains and never break out of that box. (See http://www.inc.com/howard-tullman/four-rules-of-the-now-economy.html ).
But judging by the conventional wisdom in too much of the current media, many people still believe that these EON guys have got a better plan. And, in the time-honored tradition of cockeyed optimists around the world, their plan (which they feel should be painfully obvious - at least to the uninitiated) is to make up the per-unit losses on the soon-to-be-realized, just around the corner, and miraculously scalable volume. Sales and volume will cure everything over time. Just ignore the hemorrhaging losses for now and let us keep spending that readily-available VC cash while the spigot’s still wide open. And, to date, the venture capitalists – a depressingly “me-too” crowd of sheep and fashionable followers if ever there was one – have been more than happy to pile on and be energetic enablers of this idiocy. It looks like they’ll keep funding clones, copies, competitors and even some clowns until there’s so much noise and confusion in the marketplace that the whole construct comes tumbling down.
To Manjoo, it looks like the first cracks are already appearing in the pipe dreams that are barely holding these stories together. The time of reckoning may be a lot nearer than these folks think. Too many of the also-ran players are already stuck in the proof point pudding (moving sideways instead of forward) and finding that they can no longer sell the same old “just wait and see” story as easily to the guys that totally fell for it the last time. Fool me once, shame on you; fool me twice, shame on me.
Businesses that continue to lose money on every transaction are ultimately not businesses at all – their continued revenue growth with no bottom line is simply profitless prosperity. UBER benefitted by taking advantage of the unique circumstances in the cab industry and Manjoo claims that there are virtually no other major industries where those same characteristics (crappy customer experience; high, regulator-protected prices; oligopolistic markets; huge numbers of daily users; lack of viable alternatives; etc.) apply – ergo no more UBERs. But this is too narrow a view.
The fact is that there are a number of other industries and opportunities which have completely different conditions and attributes than the cab business, but where the circumstances and the underlying motivators which drive rapid adoption and growth are nonetheless such that they will also support the same type of solution that UBER offered for commuters. You just need to know where to look and what to look for. It’s not a matter of a bad or non-extensible model; it’s all about finding the right services to offer to the right customers in the right markets.
Let’s just take one case and apply some alternative criteria to look ahead. I would argue that not one of these five statements describes the pre-UBER cab industry in any material way.
(1) The individuals supplying the service are highly skilled, hard to find and specialized.
(2) There is unmet/growing demand in every business and marketplace.
(3) There is no single supplier (of any size) presently able to meet the new demands.
(4) When you need the service, you need it now and there are very few alternatives.
(5) Price is almost completely immaterial and controlled entirely by the seller.
Now let’s find an emerging problem of immense proportions for millions of businesses on a daily basis that needs a solution. There are plenty – here’s one of the most obvious: IT. An UBER-ized solution for IT professionals is inevitable and just around the corner and here’s why:
(1) Unlike cab drivers, IT professionals are highly-skilled technicians and not easy to find or hire. But the much more critical concern is that increasingly, of necessity, they need to be area and product specialists just to stay up with the technologies which are of the most immediate relevance and concern to their current positions. The truth is that there’s no such thing as an IT generalist any longer. And, in addition, because outages are sporadic and unpredictable, these expensive experts are both bored and under-utilized most of the time if they are full-time employees of a single organization or worse because they’re being used for tasks and support services that are a waste of their training and expertise. A solution that let them become freelance, independent providers and which provided enough demand for their services to fill and fully utilize their talents by engaging them on demand to address the varying needs of multiple businesses is clearly the smart way to go.
(2) And, at the same time, from the perspective of millions of businesses, almost every one of which cannot possibly afford a multi-person IT staff with the capabilities to support and repair the dozen or so different technologies being used in a typical business today, there is a growing exposure and risk that they are simply unprepared to respond in any timely fashion to major problems or system interruptions which may occur in any of a number of mission-critical parts of their overall business operations. And, here again, this concern doesn’t even begin to consider the exposure presented by malicious or criminal cyberattacks and other forms of industrial and corporate espionage which increase in frequency and severity every day. An interesting question – and one that will plague many companies in the next few years – is what level of unpreparedness will be deemed in hindsight to have been sufficiently negligent to invalidate your business interruption insurance even assuming that you have been conscientious about buying and maintaining such coverage? Assuring that your business has ready access to 24/7, on call and on demand, IT support across all of the necessary technical areas is going to quickly look like a very prudent form of insurance and risk abatement.
(3) While some of the major consulting and accounting firms and a few software operations are starting to make some noise about the need for additional levels of business protection and support, the fact is that, as of now, there’s simply no viable supplier or solution – regardless of what a business might be able to afford to pay – which can support all of the diverse IT support needs that continue to grow and to grow more complex and more broadly distributed throughout entire organizations. Even more to the point, none of the big guys can actually afford to build teams of these professionals and employ and pay them full-time while they sit on the bench waiting for the next fire alarm to ring. Realistically, only an on demand, distributed marketplace of technical professionals can really solve the problem in an economic fashion so long as the market can be constructed in a way that efficiently allocates opportunities and optimizes the time and talent available from each individual. The big consulting firms are much more likely to help engineer the marketplace solution than they are to hire and provide the underlying personnel and other resources to support it. A perfect void and an amazing opportunity for a new player.
(4) Who ya gonna call? Killer IT pros are scarcer than plumbers when you really need them and, when you need them, you need them right now because increasingly if your computer systems are down, your business is down as well. Your in-house team can help somewhat, but – as often as not – the thing that’s busted is something they’ve built in the first place and have been bandaging rather than rebuilding for years – (See http://www.inc.com/howard-tullman/build-a-bridge-over-your-old-code-not-another-band-aid-.html ). And it’s going to become quickly apparent that they’re going to need some outside help and some specialists to really get things up and running as soon as possible and to minimize the damage not only to your business, but to the businesses of all of your customers who are also dependent on your systems. Here again, the pros are the ones who are likely to avoid the quick fixes that end up costing you ten times more in the long run because no one remembered that resetting this particular program also wiped out the year-to-date billing data for the last year or two. But the real pros are never the ones who are on your day-to-day payroll because you can’t afford them.
(5) When your business is burning down, no one gets bothers looking for a bargain. Just like your heat or hot water in the winter or the AC on a hot summer day, you don’t know how much you’ll miss it until it’s gone and you’ll pay pretty much anything to get it back as soon as possible. Price is simply no object in cases like this.
So there you have it. I can’t tell you when for sure, but I can tell you for sure that there will be UBER-like providers of outsourced IT support for companies of every size and shape because the explosion of diverse technologies in every industry and our businesses’ complete and utter dependence upon these tools means that there’s simply no choice and realistically no other viable solution.
And who wouldn’t like to serve a huge market connecting millions of customers having urgent technical needs, limited alternatives, and little concern about price with millions of highly skilled professionals who would love to be their own bosses, fill their days with challenging and diverse problems instead of bullshit make-work jobs, and have countless opportunities served up to them on a regular basis which they can pick and choose as they wish. Sounds like IT heaven to me. And a lot like UBER as well.
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