Developing a Business Model for the Sharing Economy is Easy, But Executing It is More Difficult to Get Right

This blog was first published on Linkedin 

I did a TV interview on BBC’s Talking Business with Aaron Heslehurst.  His questions focused on Uber’s business model and its social responsibilities.  Most of Uber’s recent problems were related to its bad behaviours, such as overlooking issues about passenger safety, sexual harassment, gender discrimination and infringement of Google’s IP rights, and use Greyball software to deceive authorities in areas ride hailing is not allowed.  None of these problems are the results of its business model.

In fact, the business models for the sharing economy, be it Uber, Didi Chunxing, Airbnb or TaskRabbit, are very simple.  These firms use the power and convenience of the internet to efficiently match people with asset, labour or both with people who need them, when they need them, and charge a fee for the matching.  There is clear scale economy with the business model, deriving mainly from the network effect.  The more people use the platform, the cheaper and more convenient it becomes, which in turn attracts even more people. This business model has inspired a large number of other tech start-ups across different industries throughout the world to disrupt incumbents in regulated markets, with significant benefits for consumers.

Despite the simplicity of the business model, however, the execution is really hard to get right, which directly affects the experience of both providers and users.  I use Uber frequently, both in the UK and when I visit other countries.  By and large, the services I received have been good, and I enjoy the convenience and simplicity it offers – and usually but not always the lower price.  The experience from Airbnb is very similar. 

Unfortunately, the same cannot be said about many other aspiring sharing economy firms. I recently bought a new flat.  The central heating somehow stopped working, and with my work schedule, who could be better than BIZZBY, the London based on demand services provider, to arrange a gas engineer to get it working again?  Some of my friends have been using BIZZBY to organise cleaners for their flats and they are quite complementary of the services even though the price is more expensive than the market going rates.  However, for the convenience, the extra is worth it.

This is when my trouble started.  I left work early and asked BIZZBY to send me a gas engineer and it promptly did so, at £99 per hour (Ouch!).  I selected the Come Now option, and it said the engineer was coming within 20 minutes. When I pressed Go Ahead, the time magically changed to 42 minutes which was still ok.  However, 42 minutes later even though the app said the engineer was arriving, only that he wasn’t.  Then, after a while, the app changed the time to delayed.  I waited for a further 20 minutes and nobody came, so I called the engineer. He casually informed me without any remorse that he could not come for another two hours, and he could not even be bothered to tell me that and neither did BIZZBY while I was patiently waiting for his arrival.

I emailed BIZZBY about this (couldn’t find a number to call), and a few minutes later, they emailed back and said they were sending someone else.  Unfortunately, the new engineer would need over one hour to get to my flat.  Worse still, the new engineer called me shortly after and explained that he would not be able to arrive at the specified time and it would be another further hour’s delay.  By then it would be even later than the first engineer.  At least he was honest about it.

Needless to say, one hour passed and the app changed the waiting time to delayed.  However, the first engineer for some reason was not informed of the rescheduling and arrived at my flat, called me angrily for cancelling his job without telling him! I said BIZZYBY rescheduled the job and shouldn’t they tell him about it?  He hung up without saying goodbye.  

The second engineer arrived after two hours and he identified the problem promptly – the wireless temperature control is broken and a new one needed is needed.  He fixed it temporarily and left within 20 minutes (the minimum charge is still one hour).  To fit a new one, he would need to come back again on another day, and charge me another £140 for the component and £80 to install it. Ouch!  

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The business model for the sharing economy is very simple, but executing it is much harder to get right.  Digital technologies are enabling new start-ups to disrupt incumbents across different industries throughout the world. When they get it right, it benefits consumers and providers, as well as itself and its shareholders.  More often than not, this is where many firms get it wrong.  We should give credit where it is due - to Uber, Didi Chuxing, Airbnb and others - who by and large gets the execution right.  BIZZBY, however, really disappointed me on this occasion.  If I could work out what the engineers were doing to cheat the system and mislead consumers with just one job, surely the company knows what is going on.  With this kind of attitude, it might not be a busy bee for much longer.