Beyond The Great Unbundling: Preparing for Back Office Battles
“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.” – Tom Goodwin, Senior Vice President of Strategy & Innovation at Havas Media
That something is what I like to refer to as the Great Unbundling: the disassembling of traditional business models into decentralized networks of demand-driven access. If you’re not, familiar with this concept, go read Tom’s TechCrunch article that I reference above. In it, he explains that today’s marketplaces, the Ubers and Instacarts of the new economy, are interface owners, or unbundled “layers that sit on top of vast supply systems (where the costs are) and interface with a huge number of people (where the money is).” The value of these companies is in their software and the connectivity it enables, not the products or services they connect us with.
The Hidden Reality of Rapid Growth
Now, a few weeks back, Paul Singh, former Partner at 500 Startups and head of Results Junkies, gave a keynote address at Vancouver Startup Week (if you missed it, check out my post for some of the highlights). At one point during his address, he loosely referenced Goodwin’s article, noting that interface-owning companies are especially attractive to investors because they have the unique ability to grow rapidly without having to expand their employee base.
Which is technically true. Companies like Airbnb and Uber have lean corporate offices, but let’s not beat around the bush here: these billion dollar unicorns are able to stay small because they rely on millions of third party hosts and drivers to use their platforms.
Of course, we can argue all day about whether those workers should or shouldn’t be considered employees, but I’d rather leave that to the courts. For me, the bigger question is, who should be responsible for ensuring the success of these workers? Should interface owners take it upon themselves to empower their workers with support tools to manage things like cash flow, taxes, and expenses? Or is this responsibility best left to the worker themselves?
Curious to hear what he thought on the topic, I shot Paul a few questions following his keynote. His responses provide some interesting insights into what could potentially be the next big tech disruption…
CM: You stated in your keynote that you felt it was the function of government to retrain workers for success in the new economy. What kind of training do you envision governments offering?
PS: Well, government services are always up for debate. At the very least, governments should enable these workers to go back to school more easily (e.g., cheap student loans) and/or should incentivize companies to hire workers that might need a little more upfront training.
CM: Sure, but let’s not kid ourselves; governments move slowly. Workers in the new economy are struggling to meet the challenges of owning and operating their own businesses right now. While they’re waiting for government to get involved, what can tech companies do to keep their workers happy and active on their platforms?
PS: Governments move slowly, but that’s probably not a bad thing. My view is that companies should be nimble because they’re taking advantage of new markets, new opportunities, etc. Government, on the other hand, is in the business of protecting citizens—you don’t want a government moving too quickly on that sort of thing. The balance between companies and government is a delicate dance that will happen forever.'The balance between companies and government is a delicate dance.' - @paulsingh Click To Tweet
That being said, companies can do a number of things in the meantime to keep workers happy. For example, one of the things that I’ve heard many Uber drivers happy about is that Uber pays out each Friday. From a cash flow standpoint, this is much, much, much better than what the drivers were previously getting from the “standard” credit card processors out there.
CM: Even so, do these workers have a sufficient understanding of their cash flow? While new economy companies are creating easy access to a seemingly endless collection of work opportunities, it’s becoming increasingly clear that many of these workers aren’t ready for the responsibilities that come with these opportunities (i.e. reporting taxable income, predicting cash flow, expense management, etc.) and that’s preventing on-demand platforms from gaining traction. How can tech companies address this issue?
PS: Two thoughts on how tech companies can handle the knowledge gap:
- The tech companies themselves should have some sort of FAQ/manual/suggestions for where the workers can go to learn more about various taxes, reporting, and all the other obligations they’ll need to meet to deal with local/state governments.
- More likely, a new layer of tech companies will emerge—these companies will provide all the “back office” stuff that these independent workers will need to stay compliant with the laws/filings, maximize any write-offs they can get, etc.
Tom Goodwin rightly noted in his TechCrunch piece that the tech platforms of today are battling for the best interface: Uber vs. Lyft, TaskRabbit vs. Thumbtack, Upwork vs. Guru—the matchups go on and on. Exciting stuff, for sure. But in the tech industry, all anyone wants to know is: what comes next?
As Paul points out above, the Great Unbundling has only just begun; the next battleground will be fought in the back office by a new wave of tech companies. Companies like Hyperwallet. Remember those Uber drivers that get paid every Friday? Well, what if those same drivers could get paid in real-time after every fare. Better yet, what if those drivers could then turn around and use those earnings to pay for gas using a branded Uber prepaid card that automatically logs transactions and exports them to an integrated expense management system? Sounds nifty, eh?What if #ondemand drivers could get paid in real-time after every fare? Hyperwallet can do that. Click To Tweet
That’s what we’re building.
Let the battles begin.