Tag Archives: Uber

…Accessible Via Interfaces…

The street finds its own uses for things — uses the manufacturer never intended…
— William Gibson

A growing number of frameworks have been put to work to create markets for services and products where none existed before. While it’s necessary to have that framework in place, a framework alone does not guarantee that a market will form. The framework has to be accessible. People need to be able to use it. Often the framework becomes the backbone of an app or a website. Uber, for example, uses its smartphone apps to present two different views into its transportation framework, one suitable for drivers, the other for passengers.

Though apps can create markets, they also limit the potential of that market. An app is a highly specific view into a market which rigidly restricts possibilities. To order up a limousine from Uber, you must launch the app. But the service – a driver, on-demand – is broadly useful. It could be used by people in ways Uber never imagined, ways that have nothing to do with a smartphone app. Uber aggregated drivers and passengers using their apps, but those apps become a cage that limits growth.

One company that understood the limitations of apps is the messaging service Twitter. Twitter began as a service for sending short messages – ‘tweets’ – to everyone interested in your activities. This service provided a framework for communication between Twitter’s hundreds of millions of members. Additionally, Twitter released an ‘Application Programming Interface’ – or API – providing similar functionality to that found on the website. The API specifies a series of commands – ‘send a tweet’, ‘read a tweet’, and so forth – that everyone must use to interact with Twitter, including Twitter itself.

This API makes it possible for anyone to use Twitter for their own purposes. Major news organizations, like the New York Times, publicise their stories on Twitter: as a story goes live, computers at the Times use Twitter’s API to send out an automatically-generated tweet. Many systems now embed Twitter in their architecture – Apple’s own iOS, the operating system for its iPhones and iPads, has Twitter built into its basic components, so any iOS app can send tweets.

This open interface to Twitter created a lot of competition for the best interface to Twitter. In fact, there is no one right interface – different people and different industries have different needs. A profusion of interfaces means that everyone gets exactly the Twitter experience they can best benefit from. Twitter gets more users – half a billion and counting – without having to cater to the needs of each user – the users themselves see to that.

Twitter gets used in many applications its creators never envisaged. When a computer program experiences an error in its operations, it can send a Tweet to alert a human to the problem. Computers can even talk to one another, using Twitter as a sort of post office or central dispatcher. One individual even created a belt to be worn by heavily pregnant women – every time the baby kicks, the belt sends a tweet!

Interfaces greatly amplify the utility of any service. Twitter would still be a tiny messaging service, dwarfed by Facebook and ignored by everyone else, if not for the million and a half applications that use its API. Instead, Twitter has become an essential utility, used by journalists, politicians, and businesses around the world, precisely because of all of those applications. The firm’s success is built atop the efforts of hundreds of thousands of developers who used Twitter’s API to solve their own problems.

Imagine what might happen if Uber created an API to its service, encouraging others to use it in their own businesses. Anyone would be able to provide an on-demand limousine service. A nightclub might offer that service to tipsy patrons through a specially-branded app. A restaurant could add it into their reservations system, as could a hotel, or airline, or car rental company. As the opportunities to use Uber multiplied, Uber’s business would grow dramatically. Uber would become the default solution for transportation.

Interfaces benefit every hyperbusiness framework. Postmates has recently launched a San Francisco-based delivery service, ferrying items (generally restaurant and cafe orders, but it can be pretty much anything) from one point to another in less than an hour. The service is proving successful, but currently is only accessible through a smartphone app. (Sound familiar?) If Postmates offered an API, any business in San Francisco that wants to offer a delivery service could use that API to provide a delivery service for their customers. When that happens – and it surely will – Postmates will suddenly become the most obvious way to deliver something. Everyone will be doing it.

Product-oriented business also benefit from interfaces; in many cases there’s no reason to go through a human to order something. Amazon.com doesn’t have any human order-takers, but they’re now one of the largest retailers in the world. The interface is the new sales channel, whether you’re selling a product or a service. Now that markets are everywhere, aggregating everything, interfaces are the glue between frameworks and the people who want to participate in a market. Interfaces marry demand to opportunity, because an interface creates more possibilities for the market to become pervasively accessible – like Twitter.

This is the first law of hyperbusiness: Create an interface to your framework, or face irrelevance. People gravitate to the best interfaces: one of the reasons MySpace lost out to Facebook was that Facebook created a powerful API that fostered the creation of an ‘ecosystem’ of Facebook Apps. Using that API, companies like Zynga built themselves into huge businesses, within Facebook. MySpace did finally offer an API, but far too late, long after it had lost its commanding lead over Facebook. MySpace provided no space for anyone else, and hyperbusiness moved on.

…Into Vertical Specializations…

Fly into an airport in Australia or the United States, and you’ll see a number of well-dressed men loitering near the luggage carousels. Some of them will approach you, offering you a ride to wherever you need to go. Given that this isn’t strictly legal, most often they wait for you to approach them and open negotiations. After you’ve agreed a price, they lead you out to the parking lot, where a newish black limousine (generally a Lincoln Town Car) awaits. You pop in, and head out. Although neither the airport authorities nor taxi drivers care for this practice, it is widespread. Wherever passengers congregate, you will find drivers.

Informal and only quasi-legal, this transaction carries some risks. The driver might not be insured – what if there’s an accident? Pick the wrong driver, and problems could follow. These fears (which very rarely eventuate) have become the ammunition in a terror campaign by taxi companies as they fight to keep these ‘unlicensed’ drivers away from a reliable and profitable stream of passengers. Yet these limousine drivers do work for legitimate agencies; it’s quite easy to make a call and book a pickup. Once there’s a booking, the transaction has become wholly legal, and no taxi company can do a thing to block it.

The booking serves as a legal fig-leaf. You could be staring at a driver – conveniently holding a sign with a phone number printed on it – call the number on your mobile, and get the driver’s services, right there on the spot. That would be perfectly legal, even though the real-world differences between making the call and a personal approach are barely more than semantic.

Toward the end of 2010, a group of San Francisco-based entrepreneurs recognized the potential of an on-the-fly connection between limousine drivers and passengers. Rather than establishing a centralized switchboard and dispatching center, they developed two applications for Apple’s iPhone. One app uses the handset’s onboard GPS capability to automatically locate a passenger, transmitting those coordinates to any drivers who have marked themselves as available to carry passengers. Limousine drivers run another app, allowing them to review and accept pickup requests.

With little more than two smartphone apps, this firm – Uber – has created a powerful new competitor in taxi markets across North America. Limousine drivers use Uber to add jobs to their schedule, filling their downtime and doubling their income. Some drivers cannily run the passenger app as well, so they can see all the other limousines around them, avoiding areas oversupplied by available cars. Passengers, no longer at the mercy of undependable taxi companies, have flocked to the service, even though Uber charges a 40% premium over an equivalent taxi fare.

Uber did all this without building a fleet of vehicles. Capitalization requirements were minimal. Uber takes an existing resource – limousine drivers – and deploys that resource with the efficiencies available because everyone is directly connected. Aggregating connected drivers creates a virtual fleet. Aggregating passengers creates market demand. Marrying the two creates a new market, and a business model that has no expensive infrastructure, no overhead, and very low scaling costs. Bringing Uber to another city is almost as simple as distributing the two smartphone apps to drivers and passengers.

Working within a transportation framework, Uber found it easy to aggregate drivers and passengers into a marketplace; Zaarly and AirTasker, which aggregate generic labour for generic tasks, have found it much tougher going – because they lack Uber’s specificity. This doesn’t meant that either company will fail, simply that they need to be all things to all people. This has bad and good aspects. It can be bad, because trying to create so many markets means that the same approach must be taken with all of them. The AirTasker app could get you someone willing to drive you around town – but it’s not well suited for it. It’s not well-suited for anything in particular, and that’s its essential weakness.

Yet going wide creates unique opportunities. Careful analysis of the kinds of labour sought can lead to insights which can form the frameworks for new vertical specializations. If a lot of people want their dry cleaning dropped off or picked up, that means there’s room for a service to fulfil that need – a service that both Zaarly and AirTasker could easily offer. It would be as simple as writing a custom app.

If these hyperbusinesses develop the correct listening and analysis skills, they will become ‘app factories’, spinning out a continuing series of apps, each with its own framework creating its own market. Every task that is sufficiently common that it can benefit from this type of app-based-aggregation will find a home in its own market.

This process is not limited to labour aggregation. It extends across the entire business ecosystem. Just as employers and labourers can aggregate and create a market, the same can now happen with buyers and sellers. eBay became a success because it provided connected market aggregation, but eBay suffers from the same breadth-over-depth issues as Zaarly and AirTasker, and has not taken the opportunity to create vertical specializations. That’s the reason eBay has lost the craft crowd to Etsy, a business that could have been theirs, had they been watching their users. Horizontal hyperbusinesses are difficult and often unrewarding, unless they’re regularly harvested for vertical opportunities.

eBay could be ten thousand verticals, each with its own app, its own marketplace, its own highly loyal buyers and sellers. Instead – by its own actions – it will be progressively locked out of every vertical, as competitors leap into the gap created by the auction site’s diffidence. The future is vertical, because markets are everywhere, buyers and sellers are everywhere, and they all want a framework that enables them to connect and do business.

Everything we buy and sell in large quantities – cars, light bulbs, even things like electricity and petrol – will spin into its own vertical specialization, as the thousands-to-billions who want to trade find a framework that allows them to form a market. The economy as a whole is becoming an ‘app economy’.