When Disruptive Plays Don’t Mean a Better Outcome

When Disruptive Plays Don’t Mean a Better Outcome

uber-surge-pricing-taxiI am pleased to present Bill Geist as a guest blogger here at The Gems.  Bill and I met a few years ago at the first SoMeT conference in Northern Virginia, where I was lucky enough to share a ride with him to the opening reception.  I am grateful that Bill accepted my invitation to do a guest post here. – GR

It’s been fascinating to watch the evolution of disruptive technologies over the past 20 years…all brought on by that damned Internet thing.

Online Travel Agencies destroyed the traditional model of choosing travel experiences by removing the need for human Travel Agents. Amazon destroyed the small town bookstore. Apple destroyed the record business. Netflix destroyed the video rental industry.

Well, maybe not destroyed. But, it sure is different.

Aside from the Travel Agents, bookstores, record labels and video rental shops that adapted to their new world order and survived (and, in some cases thrived), a lot of people lost their jobs, their businesses and their ability to enhance their communities. But, unless it was you or someone you knew, did you care?

Is the travel planning process dramatically worse by using the Internet, review sites and OTAs to do what Travel Agents once did? Is book buying harder online than it was in a store that could only stock a few thousand titles? Do you miss buying an entire album to get one song? And, do you miss trudging out on a sloppy night to find that the movie you wanted to watch was out of stock?

No. You don’t.

But, this next round of disruptions doesn’t bring with it the same promise. Indeed, this round of disruption is designed to allow individuals to make money by providing a service without the investment that others in the space have made and are required by law to make.

Proponents cackle that this is just like when computers made typewriters obsolete. A better product replaces an inferior product.

But, in this case, it is not a better product…it’s simply a different version. And, it’s a version that threatens a version that we need.

The two industries now under attack are hotels and taxis. The former by Airbnb (and others), the latter by Lyft and Uber. These are services provided by regular, entrepreneurial people like you and me. They use their homes and cars to provide a service, facilitated by these websites for a cut of the action.

I’m all for making a little scratch on the side…and it’s not the entrepreneur with whom I have a problem.

My problem is with the web platforms that enable these entrepreneurs to offer their homes and cars to others that believe they don’t have to play by the rules.

AirbnbAirbnb (which is in discussions with private equity firms to raise next round funding that would value the company at $10 billion) is slowly beginning to realize its responsibility to the broader eco-system, as they are agreeing on the collection of appropriate taxes in a few cities such as New York, San Francisco and Portland. In time, the sharing economy in the hotel space may come to grips with reality. The taxi concept? Not yet.

As I watch the debate unfold here in Madison, Wisconsin, I’m intrigued as normally intelligent people vociferously defend the rights of others to become amateur cabbies.

nudetaxi

Except, here’s the thing. Beyond the fact that these citizen cabbies aren’t licensed, creating an uneven playing field, they also are not bound by City regulations that cab companies must service the entire city, not just the downtown, the campus and the airport.

This is a significant distinction…because amateur cabbies can pick off the primo fares without having to venture into the sketchier sections of town. And that jeopardizes the profitability of the four licensed companies. If even one of these companies slips into the red, it negatively impacts the quality of mobility for the entire community.

An online commenter to the recent op-ed piece by the Mayor of Madison’s defense of his opposition to amateur cabs posted that Uber and Lyft wouldn’t have entered the Madison market if the existing cab companies’ business model wasn’t flawed.

UberLyft_logo

That’s pure crap. Uber (now valued at $3.5 billion) and Lyft (which just raised $250 million in venture capital) don’t care about those people who live in underserved neighborhoods who will now have to wait two hours for a cab. They don’t care about the taxi drivers that could lose their jobs.

It’s often fashionable in cities like Madison to view businesses as evil and the sharing economy as a noble response in sticking it to “the man.” Unfortunately, there’s nothing noble about disrupting a traditional business model that has served those without easy access to mobility well.

BiBill Geistll Geist is the Chief Instigator at Zeitgeist Consulting, a firm specializing in strategic planning, governance, marketing and legislative issues for convention and visitor bureaus, tourism-focused chambers of commerce, economic development organizations and communities. Bill is the author of the acclaimed Destination Leadership for Boards and a contributor to Fundamentals in Destination Marketing.

He has provided consulting services to over 150 Destination Marketing Organizations since 1995 and is a popular speaker on marketing, trends and customer service across North America. He has also served as a guest lecturer on Internet Marketing at the University of Wisconsin’s Small Business Development Center.

Prior to forming Zeitgeist Consulting, Bill served as the President/CEO of the Greater Madison (WI) Convention & Visitors Bureau from 1990-1995. During his tenure, he was the lead spokesperson and co-strategist for the successful public referendum fight to build the Frank Lloyd Wright-designed Monona Terrace Convention Center. He also succeeded in doubling the Bureau’s sales and marketing budget and oversaw the launch of one of the Top 25 Marathons in the nation.

Be sure to subscribe to his daily blog!

One Response to When Disruptive Plays Don’t Mean a Better Outcome

  1. I’m staying in an Airbnb in San Francisco as I write this. Five of us are in a beautiful Cole Valley apartment (with WiFi faster than I’ve ever had in any hotel) at a daily rate less than the “special” rate for a tiny room for two charged by the SF Union Square Hilton (a fine hotel) that I was staying in last week. Even when SF Airbnb suppliers start paying the hotel tax later this year, this kind of accommodation can’t be found in this area at a comparable hotel/B&B price.

    I’m also Ubering (private cars) and Flywheeling (taxis + a $1 surcharge) around the city. Uber is typically about 70% of the taxi price for longer trips, the cars & drivers are in better shape, and Ubers generally are on the spot quicker. I haven’t had any problems getting Uber outside the city, but I obviously haven’t tried everywhere. I think the passenger/driver private service rating schemes will keep bad apples to a minimum, though there will always be some in both the private and taxi industries. Insurance for the private car services needs to be improved, but I expect that will happen.

    There will always be a need for licensed hospitality and transportation services, but I see few downsides to the new sharing economy models. I expect them to take a bite out of the revenues from the older industry business models, and hope that the latter’s operators will adjust their marketing and services to compete better.

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