June 3, 2013
I recently heard my all-time favorite excuse for why you can’t disrupt yourself. It was in a session with 40 senior IT leaders of a Fortune 500 company including the CIO. Somebody brought up Uber and Airbnb, and most in the room nodded in agreement that a big company could learn a thing or two from these disruptors. That’s when someone dropped my new favorite excuse: "But we can’t imitate Uber and Airbnb because what they’re doing is illegal."
Sure, it would be nice to just avoid taking the fast and bumpy road of disruption in favor of staying in the smooth parking lot of denial. But that’s not really an option because the lessons of Uber, Airbnb, and other disruptors apply to everyone in every industry.
I don’t mean to sidestep the legal question, but I do mean to point out that it’s hardly the issue here. Uber and Airbnb are coming under fire because they’re using cheap technology and existing resources to make their customer’s lives dramatically better, one positive experience at a time. That’s the real issue here, and it’s the one companies of any size should focus on.
But let’s extend that to local governments. What would happen if they chose to focus on extending digital benefits to their citizens and guests? Talk about a win-win-win-win as Airbnb, the local government, the local merchants (hosts), and the customer all get more of what they want. For example, as was recently reported in Canada’s The Globe and Mail, in Quebec, when Airbnb hosts rent-out rooms for fewer than 31 days, they are supposed to register and pay a $250 fee. Apparently none of them do. It’s my guess that most of them were unaware of the idea that the city would have a say in who they let sleep over at their house. The fee isn’t totally superfluous. By registering their intention to serve as mini-hotels, citizens support a basic mechanism for ensuring the safety and security of the town, its inhabitants, and its welcome guests.
If Quebec were smart about it, rather than enforce an outdated law, it would recognize the boon that Airbnb provides and move to quickly find a way to give hosts a more sensible way to pay a lower fee — even post facto in the case of those who don’t realize that there is such a fee. For example, the same report indicated that today about 100 people pay the fee, generating $25,000 in fee revenue. But it is estimated that there are at least 3,000 who do not. Imagine if you lowered the fee to $25, created a simple digital process for registering as a host (I bet Airbnb would be happy to build that registration site and link to it), and achieved even 50% compliance. That would be 1,500 people each paying $25 for a total of $37,500, an increase of 50% in revenue, and a significantly improved registration database that can help the local government achieve its stated goals of creating a safe environment for guests. (Oh, and smart bed and breakfasts, those most threatened by Airbnb’s success, should not lobby regulators but instead should list themselves on Airbnb to reach more potential customers and have immediate feedback on their pricing and hospitality features.)
All of this is clearly where Airbnb will land, once the petty bureaucrats finally realize that digital is a positive expanding force rather than a threatening ominous one (just as people in large companies will gradually do as well). But in the meantime, Airbnb will suffer some slings and arrows and possibly some fines. I, for one, hope it persists. I am an occasional guest of the service, especially in cases where I have failed, again, to book a hotel in a convention city with enough advance notice such that the only hotel rooms left cost $900 a night. When I have used it, I can assure you that the money I spent to stay with my hosts contributed to the local economy, generated goodwill, and gave me an appreciation of the local culture that I did not have previously.
The Uber case carries even more personal interest because I have become an addict. Thanks to constant book promotion travel, I am on the road four out of five days. I have to arrange transportation in multiple cities a week, and in many cases, cabs are neither plentiful nor pleasant. I don’t always have cash and some cabs hassle you when you introduce a credit card (thanks to another digital disruptor, Square, for resolving that problem more than a few times). With Uber, I hit my app as I’m walking off the plane, it tells me a car will meet me at the curb in 5 minutes, I get a picture of the car, as well as the name and number of the driver, and within minutes, I’m having a pleasant ride to my destination with a driver who speaks the local language well and is eager to earn a five-star rating.
I also derive one side benefit: I get to interview them. From New York to Los Angeles to Seattle, I ask my drivers how they feel about Uber. Here is a representative slice of their responses: "I love Uber," "Uber is the best," and "If they could, all these cabbies out here would switch over to Uber." Uber gives them more revenue opportunities while putting the power to earn that money directly in their own hands. They just have to push the button that says they’re available, and Uber begins sending them customers.
Uber provides an ideal case study in the power of digital disruption: It creates a better customer experience while generating new sources of revenue and ultimately expanding the category. And it does all this at lower cost. By exploiting the existing infrastructure of drivers who are occasionally idle, Uber has invested nothing in drivers, vehicles, or dispatchers. It just uses disruptive thinking to employ off-the-shelf technology (an iPhone per driver) and ends up providing a better experience to customers.
You can see, of course, why this would upset local municipalities.
The real question to ask about Uber and Airbnb is not whether what they’re doing is legal or illegal. The real questions to ask are: How do I do what they do, how do I use these lowest-cost digital resources to build the kind of relationship that they have built with channel partners and end customers, and how do I use that relationship to build my business?
There is a lot more to learn from these companies, and I’m pleased to say that I’ll get the chance to explore more of those lessons to be learned when I interview Travis Kalanick of Uber and Nathan Blecharczyk of Airbnb at an upcoming breakfast event sponsored by the Churchill Club in Silicon Valley. We’ll also have Eric Migicovsky of Pebble and David Barrett of Expensify on the stage. They will all be there to talk about what it means to be a digital disruptor, and I dare say, they’re a dream team of digital disruptors whose stories and advice I can’t wait to jump into. Join us if you can.