“Companies like Uber and Airbnb are disrupting industries, while owning no assets. They take advantage of digital technologies and platforms to build relationships with customers quickly and at low cost. They’ve grown in value so quickly that in just a handful of years they now (in market terms) rival established corporations that have taken decades to grow.”
For the second time in just a handful of weeks I found myself at a CIO conference a few days back, and it seemed that every presentation – whether given by a CIO or by one of the event’s sponsors – included a reference like this to Uber and Airbnb.
It seems that Uber and Airbnb have become shorthand terms for digital disruption. But do conversations that focus only on Uber and Airbnb (or perhaps other outfits like them) mean that we’re missing out on a larger truth?
It’s important to realise that fundamentally, both Uber and Airbnb are successful not because they’re using cool digital technologies but because they’re using digital technologies to solve real market problems. Uber and Airbnb have become hugely popular because particularly in urban areas, demand for particular kinds of resources (passenger vehicles for hire, rooms/beds for hire) doesn’t always match how those things are supplied. Industries have grown up to manage places to stay and passenger vehicles to hire and control them in fixed, predictable ways and they’ve done that because for a very long time, people have valued consistency and quality, safety and security in these things. Transport and hospitality sectors are regulated for a reason!
However with this kind of fixed, predictable approach comes inflexibility and cost that some people don’t want to put up with. Uber and Airbnb take advantage of the fact that digital technologies lower the cost of making information available and enable more efficient access to (and distribution of) resources, and by doing this they create new ways of matching available resources to market needs.
Large, established corporations are right to pay attention to the market-disrupting things that Uber and Airbnb (and others) are doing. But there’s more to digital technologies and their value than market disruption.
When we fixate on Uber and Airbnb we’re fixating on how digital technologies enable small companies to grow fast and serve massive customer bases. The seductive reasoning that flows from there is that if established companies can only ‘digitally transform’, they too can ride powerful waves of growth, capturing new customers and scaling their services to yield profits without investing heavily in infrastructure, people or physical assets.
However there's an inverse force also in play. Just as digital technologies have helped some small companies become large very quickly and disrupt markets, so digital technologies can help large companies act small, at scale.
Well-run small businesses understand their customers and markets intimately, and are very good at ‘knowing what they know’ as well as being quickly able to understand how the mechanics of their businesses are working day-to-day. In comparison to large corporations they’re able to change direction quickly in response to changes in market conditions.
It’s easy to fixate on how digital technologies can more efficiently coordinate resources that are external to organisations (as Uber and Airbnb do); but the same holds true for internal resources.
As I’ve said before (not least in our Digital Enterprise Shift report) for well-estabished, large organisations a big part of the value of digital technologies comes from how in combination they can be used to co-ordinate internal resources (people, plant, machinery, infrastructure, goods, materials, knowledge) more efficiently. Digital technologies applied successfully can help large organisations start to regain some of the advantages they once had as smaller organisations, while retaining the strength and resilience that come from their balance sheets.
To find out more, take a look at our interviews with Eurostar, Hampshire County Council and Severn Trent Water (all of which are free to view). These are all examples of organisations that are using digital technologies to do really cool things (that aren’t about disrupting markets or industries).
So can we do better than “look at Uber and Airbnb”? I think we can, and I think we should. The challenge right now, I think, is that we lack a common vocabulary and understanding of what ‘going digital’ can mean in different contexts.
This article originally appeared at the MWD Advisors blog by Neil Ward-Dutton.