Expectations are Rising in the Age of UberI grabbed my iPhone and dialed 911 as I watched in panic while my 15-month old baby lay convulsing in my husband’s arms. As I breathlessly repeated my address for the third time, my heart racing, I thought to myself “why can’t I just push a button and call for an ambulance”. And as we stood waiting helplessly for the ambulance to arrive with tears in our eyes, as our baby lay limp and pale, I thought to myself “why can’t I just look at my iPhone and track the ambulance to see how far away it is”. For six months before this, we had travelled with our baby to New York City and experienced the magic of Uber for the first time. And ever since then, I resolved never to set foot in a taxi again and I found myself growing more and more impatient with how archaic the rest of the world seemed to operate.

Why can’t all service providers provide such a seamless, enjoyable, and convenient customer experience as Uber? As my husband will attest to, I recently got into a heated debate with our moving company when I called them the morning of our move and was informed the crew would arrive between “7am and 10am”, depending upon traffic. “Seriously? Can you not just use Google Maps or Waze to give me a closer estimate of your arrival time?” And as we waited impatiently for the moving truck to pull up in front of our house, I kept thinking to myself “why can’t I track the moving truck on an app?” and “why do I have to deal with their annoying impersonal dispatch person in Florida instead of just communicating directly to the guys in the truck?” And weeks later, once we were settled in our new house, I found myself getting increasingly irritated with the annoyance of being put on hold while trying to get a hold of the utility companies and then having to wait around all morning for them to arrive.

The good news is that more and more entrepreneurs are starting to step up to this challenge, dreaming of how they can leverage advances in technology (i.e. smartphones, apps, social networks, user-generated reviews, online marketplaces, cashless payment systems, cloud computing) to create the next “Uber of X to offer a superior functional value proposition to sellers and buyers of its products and/or services. And with Uber, which was founded only 6 years ago, now valued at $51 billion, this new On-Demand world is turning into an elusive hunting ground for unicorns with venture capitalists investing over $9 billion in this space, with $6.7 billion being invested since last summer (albeit, with Uber accounting for $5.4 billion and Lyft for $680 million). This is leading to an explosion in On-Demand companies catering to consumers’ every whim at just the push of a button. Need a private driver? Do you want someone to go grocery shopping for you and deliver it to your house? How about your laundry? Are you looking for a housecleaner, babysitter, personal task assistant, dogsitter? We are also seeing the emergence of Specialized Services companies that provide platforms to empower professionals and tradespeople to monetize their differentiated expertise and skills. We calculate an additional $1.4 billion has been invested in this space, with nearly $850 million invested in the Professional Services vertical and over $550 million in the Tradespeople Services vertical.

As evidence of the value acceleration potential of companies operating under the new laws of “Copianomics”, we highlight that since last summer, Uber’s valuation has skyrocketed by over 180%, from $18 billion to $51 billion. And since last summer, Uber has entered into 12 new countries and started operating in 104 new cities, a growth of over 50%, bringing its operating base to 309 cities in 57 countries. And these companies are scaling quickly. And the rest of the On-Demand companies have been able to scale their supply base by creating opportunities for people to easily monetize their under-utilized human capital by performing other types of gigs such as delivery, caregiving, and housecleaning. And for the workers, these platforms are empowering from the sense that they provide people with the freedom to work where and when they want using their own assets (i.e. car, bike, tools). Under the new laws of “Copianomics”, which we define as “the science of choice under abundance”, the following economic forces act as growth catalysts:

  • Long Tail of Supply[1] – inventory is not constrained by traditional time or capital constraints as the companies are accessing a “long tail” of latent/under-utilized unskilled human capital.
  • Blue Ocean of Demand[2] – revenue growth is not constrained by existing demand constraints as the companies are accessing new “blue ocean” market demand through providing on-demand convenience.

As an Equity Analyst, I can’t help but wonder how Legacy Service companies will be able to compete in the new On-Demand era? Will they end up like the Maytag Man – sitting idly by their phone waiting for it to ring? But their challenge is that people no longer want to pick up their phone to only have to be put on hold with a company’s seemingly faceless Service Department or Dispatch Call Center only to then find out they are not available to come until the next week. In the age of Uber, people just want to push a button and have the Maytag guy magically arrive the next hour at their doorstep, with a smile on his face.

The incumbents have a competitive advantage to the On-Demand start-ups in the sense that they already have the two sides of the equation in place – a highly trained and experienced supply base of workers as well as a base of customers. They just need to figure out how to leverage the new advances in technology to better utilize their employee base and provide an improved customer experience. And the good news for the Legacy Service companies is that we are starting to see an increased level of scrutiny from government, regulators, and the workers themselves who are starting to question the potential exploitative power of companies that are building their supply base on the back of human capital. As these workers are like a commodity, there is a risk that this could lead to a slippery slope down to the lowest common denominator if there are no protections for the workers put in place, as there is no minimum wage, job security, insurance, or benefits.

So how does a company become more Uber-like? I see three strategic options:

  1. Partner with an On-Demand Start-Up
  2. Build Proprietary On-Demand Platform
  3. Partner with On-Demand SAAS Platform Provider
  1.  Partner with an On-Demand Start-Up. This makes sense for a company looking for a cost-effective and timely solution to provide an On-Demand experience for its customers. For example, back in September, Whole Foods Market announced it was partnering with Instacart to “offer its customers the convenience of delivery without having to handle the logistics themselves”. However, as Frank Eliason, advises in “@YourService[3]”, “In the new world of @YourService, everyone who is in contact with your Customer impacts your brand.” So companies who are looking for a technology solution to deliver a good or service that involves an interaction with their customers might be better off to explore other options. And even if there is no customer interaction, companies like Whole Foods still face the risk of potential disintermediation if they allow an On-Demand start-up like Instacart to manage the customer relationship for them.
  2. Build Proprietary On-Demand Platform. This makes sense for a company with a technology DNA that views On-Demand as part of its core offering. However, the disadvantage is that building a proprietary technology platform can be a risky and expensive project as in addition to the high upfront costs of building the technology platform itself, the company will face an ongoing capital commitment to keep upgrading it.
  3. Partner with an On-Demand SAAS Platform Provider. This seems to make the most sense for companies looking to join the On-Demand economy without the operational and brand risk of partnering with a start-up, or the capital and technology risk of trying to build their own platform. To be honest, this option did not occur to me until back in November when I came across an article on LinkedIn written by Avi Goldberg, the Co-Founder & CEO of Dispatch Inc., titled “The Arrival of Dispatch”. In the article, Avi relates how he was inspired for the idea of Dispatch, a SAAS platform to “Power the On-Demand Economy” by Uberfying legacy businesses, after the frustrating experience of trying to get his washing machine fixed. By providing companies with a workforce management platform that is customizable, modular and seamlessly integrates into their existing infrastructure, Dispatch is looking to help companies bridge the communication gap between three key stakeholders in the “last mile” of the service delivery process: company, technician, and homeowner with the inspiring vision of being “Salesforce for the last mile.”

In the age of Uber, customers are going to become only more and more demanding – so the question is not IF legacy companies will join the On-Demand Economy, but WHEN.

 

[1] The Long Tail: Why the Future of Business is Selling Less of More, Chris Anderson, Hyperion, July 2006

[2] Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant, W. Chan Kim & Renee Mauborgne, Harvard Business Review Press, February 2005

[3] @YourService: How to Attract New Customers, Increase Sales, and Grow Your Business Using Simple Customer Service Techniques, Wiley, April 2012