Disrupters create new landscape for companies and consumers

My ear has become attuned to a new ringtone on my iPhone and it is the sweet sound of disruption. The new updated WhatsApp, the pioneer in free data and  voice messaging, now allows me to make free voice calls  for substantially less – only a minimal data cost – rather than the extorbitantly high traditional per-second billed voice calls, and it delivers me more callers for a longer period per call, truly disrupting my day – a pleasing game changer that allows one to give a well-deserved finger to our rapacious mobile network operators.

It’s likely that in a few weeks I will be using this simple updated service as my preferred voice call service, even after close to 20 years of what has been not an altogether happy marriage with my mobile service provider. Most consumer industries are facing some form of 
disruption – from music to news, film, porn, travel, leisure and hospitality, and the incumbents, from retail to financial services, must necessarily innovate at the same pace as market disrupters simply to hold their own. 

A disruptive innovation helps create a new market and value network, upending an existing market and value network and displacing an earlier technology or process. For me this is thrilling: we are witnessing an inversion of the status quo and the creation of a new landscape for both businesses and consumers, usually in a brief time frame. In fact, disruption has become so pervasive in our digital, sharing, peer-to-peer economy that it has seemingly become the norm and is often confused with progress.

It’s the immense shifts and changes, the peaks and troughs, the wild successes and outright failures that enable quick learnings and mercurial prototypes to be unleashed on us, the promiscuous consumers, upending and redefining “normal”.  When we were younger we would spend hours perusing record stores and libraries in the hope of finding  something that would resonate. If you didn’t do your  time in these hallowed places then you simply didn’t have the cred to assert yourself in those earnest musical discussions. Consider the music industry. Digital music, including online streaming services such as Spotify and Pandora, represented 39% of the total music industry revenues in 2012, up from 21% in 2008 and next to nothing a decade ago.

If you wonder what the kid  wearing headphones and looking at their mobile screen is listening to, it is probably a new radio or mixed music streaming service. According to the British Phonographic Industry (BPI), Britons streamed 14.8bn tracks last year, almost double the 7.5bn of 2013, as internet connectivity improves and becomes cheaper. Compared to buying music downloads, streaming services deliver millions of tracks on demand where you can create and share playlists socially, discover new artists effortlessly and listen anywhere, anytime.

Having purchased the Beats brand for $3bn in May last year, Apple is expected to overwhelm its competitors, as will Google’s YouTube. Google, the world’s largest search engine, in November launched YouTube Music Key, a paid-for, ad-free music and video streaming service. Now, even the much-loved iPod has become obsolete, a dated hard drive made redundant by a raft of these on-demand music streaming services, making the search for music overwhelmingly easy to the point of saturation. 

Album art and lyrics are forsaken for video production values and “you may like this” recommendations, but the 
accessibility and choice are devastatingly disruptive, and you can more easily share your cred. Recently we had an intruder in the house, whom we later discovered had stolen our beloved old iPods. But while close to our hearts, they are really no longer the handy utility they once were, needing constant charging, updating and synching.

Most importantly, they lack the wireless capability and multi functionality of a phone, tablet or laptop so I now simply stream Spotify, Deezer, Mixcloud or Soundcloud instead. Just like banking did many years before and how  the news aggregators such as Vice, Quartz or Aeon deliver leading news stories up to the minute, how we search and book travel has also radically changed. From booking engines and OTAs, accommodation review sites and content plays, industry innovators are developing new ways to serve up alternative accommodation choices and experiences, creating entirely new forms of inventory.

“Rent unique places to stay from local hosts. Explore the World. Belong Anywhere.” Arguably one of the biggest disrupters in the accommodation 
industry is Airbnb, which affords incomparable efficiencies and convenience. In fact, Airbnb has crossed the threshold of being a consumer brand known around the world in a relatively short time and has created a new accommodation paradigm where homestays, a formerly niche travel option, are now moving upstream.

Founded in 2008 as AirBed and Breakfast and based San Francisco, California, Airbnb is a trusted community marketplace for people to list, discover and book unique accommodation around the world, online or from a cellphone or tablet. Whether an apartment for a night, a castle for a week, or a villa for a month, Airbnb connects people to unique travel experiences at any price point, in 34000 cities and 190 countries.

And with world-class customer service and a growing community of users, Airbnb is the easiest way for people to monetise their extra space and showcase it to an audience of millions. With a boilerplate like this, how do you compete? You don’t, you simply join them, which is why many hotels, guesthouses and lodges are also now found on Airbnb, where their target audience is searching.

It started out as an online service for a frugal place to crash in a city and quickly moved to a global startup success story with big implications on how cities are trying to deal with the “sharing economy”, and it’s increasing making inroads into the more professional hospitality sector. Peer-to-peer businesses are also changing how we perceive luxury. For so long, hotels were only available for the wealthy or business travellers,  both intentionally and unintentionally based on cost. 

Until now the hotel industry has largely dismissed the sharing economy but the numbers are telling. Between February and December 2014, Airbnb’s stock of available rooms expanded from about 300 000 to over one million. This puts it ahead of InterContinental Hotels Group (IHG), Hilton and Marriott as the world’s biggest provider of rooms.

Of course, Airbnb remains a relative minnow in terms of actual guest bookings but its inventory has the capacity to scale and grow at a pace that hotel development could never match, especially in places that are traditionally difficult or illegal to fund development, such as Cuba, where Airbnb has recently come online. A recent Barclays report estimates that Airbnb sold about 37 million room-nights last year; by contrast, IHG sold 177 million.

Yet Airbnb was only founded in summer 2008, while IHG traces its history back to as far back as 1777, which means that with a 343% growth in the number of unique visitors to Airbnb’s website between June 2012 and June 2014, it’s not difficult to see why, according to Quartz, “Airbnb will soon be booking more rooms than the world’s largest hotel chains”.

Not dissimilar to how Facebook spawned an entire Facebook developer universe or how Apple’s App store ruined our lives, Airbnb’s value chain has bred byproduct startups that support the principle transaction – making 
hosting easier and more lucrative by handling guest communication, key swaps and price automation.  Even locally we are starting to see these attendant 
service companies mushroom.

Arguably Airbnb isn’t a new idea, we’ve been sleeping at hostels and homes for centuries, but it’s technology that has enabled it to come of age so rapidly that it has changed the norm. And this same technology has created a knock-on effect with an ecosystem of startups looking to exploit the company’s success by offering services to its hosts and guests, both of whom are becoming more experienced in how they conduct their rentals. 

Andrew Black of newly formed Dale & Black rightly points out that short-term online rentals, through Airbnb and the like, have created an uncommon correlation between the size of your 
space and the monthly income it can generate. Designed and managed well, an old garden cottage can become a short-term studio turning over three or four times the rental on a two-bed apartment on a long-term lease. Of course, that level of spin demands far more care and attention but the former costs a small fraction of the latter. 

And just like in hotels, it is the experience that creates the difference, and the success and value of the experience depends on the level of service you provide. The beauty of Airbnb is in its simplicity – an elegant,  highly functional website that bridges supply and demand  for a nominal fee (3% versus an agent’s 20%-30%), and rewards excellent hosts with higher ratings and more exposure. These collaborative online platforms are placing control and cash back into homeowners’ hands, and the result is a very healthy disruption of the industry.

A local hospitality disrupter whose direct competition happens to be Airbnb is Helen and Dave Untiedt’s Perfect Hideaways (perfecthideaways.co.za). More a compelling portfolio of superb, privately owned, local homes than a technology play, it nevertheless fills a much-needed gap for local and international travellers looking for something local, classy and curated – yet still retaining 
the owners’ flourish.

Ten years ago they identified an opportunity in the right market for the right audience and for the past six years their growing inventory and standard of rentals has delivered 70% year-on-year revenue growth. They have moved from offering a range of mid priced local abodes to high-end designer homes at R50 000/night, have expanded into the UK under the same name and will soon launch an app which will  comprise a full service online booking process.

Now, getting to your Airbnb apartment in your favourite new foreign city couldn’t be easier. Recently I landed at Ataturk Airport in Istanbul and my driver and I, despite trying, couldn’t find a way to transact – he simply couldn’t read or understand English, nor I, despite my best efforts, Turkish. I should have used the new Skype translation tool. 

As most of us know firsthand from having used the service, Uber is a technology company that connects riders with drivers, through a free smartphone app. It is not a taxi or transportation company, does not employ any drivers or own any vehicles and its mission is “nothing less than a revolution in the way citizens of the world move, work and live”, and chatting to Alon Lits, Uber’s SA GM, I am convinced they are already well on their way to achieving that.

Lits describes the service as “aspiring to transform the way people connect with their communities and to bring reliability, convenience and opportunity to transport systems”, something I clearly needed on that muggy Friday afternoon in Istanbul after travelling for 19 hours. The Uber global network is now available in 300 cities in 60 countries spanning 6 continents, including six cities in Africa (Cape Town, Durban, Joburg, Pretoria, Nairobi and Lagos).

SA was actually the first country outside of the US to launch with three cities simultaneously. Lits explains: “It really is about ensuring cars are available 
when people want them, whenever and wherever they are.” Since Uber launched in Jozi in August 2013 it has reduced the average time of arrival of drivers from around 14 minutes to less than five minutes.

“That is how we  measure our success; when you are able to get a safe, reliable ride at the push of a button within just a few minutes, at any time and anywhere in the city. Our aim has always been to get the ‘estimated time of arrival’ to as little time as possible, and we are committed to reducing the average pick-up time even further.”

Lits explains that “not many of our drivers started with smartphones so we subsidise them with smartphones which they can only use for Uber riders”. “We are continually investing in our drivers through creating driver accessibility, training and technology.” Job creation is a big byproduct of disrupters. Having 
created 2000 jobs since launch in August 2013 and hoping for 15 000 in another two years, Uber has also pledged globally to create 1 million jobs for women by 2020.

Uber also happily partners with metered taxi drivers to harness existing on-the-road supply. Detailing how data can play an integral role in the accessibility for Uber drivers, Lits says aim is “to smooth 
driver accessibility and unlock a financing solution for partners.” Discussions are advanced in partnering with a  finance house to finance better deals at lower rates and  on better terms. “Better ratings and better data correlate directly to better earnings, which can unlock better finance deals for drivers.” 

Recently Uber partnered with Discovery Vitality to create UberHealth to deliver its members who live in selected areas in Johannesburg, Durban or Cape Town, a qualified Discovery-accredited nurse who arrives at their location to administer the flu vaccine for up to five patients a visit. Similarly, UberRELAX delivers a massage service on demand and locally; UberAssist launched in Cape Town where riders could request a car at no charge to collect various donations for the firefighters who recently battled the summer blazes in the Western Cape. 

Lits says the South African market has its own distinct challenges and idiosyncrasies. For example, regulation is lagging innovation, creating confusion in the market. Uber’s goal is to develop the industry and evolve the regulations – just as it did in the Philippines, who were the first to establish ride sharing. Change, iteration and disruption are synonymous with today’s business landscape. Modern competitive companies must adapt and innovate to survive and thrive.

If we define disruption as “interrupting the normal course of things”, then perhaps we need to redefine what “normal” is. While disruption was once a rarity, it is now a daily reality. Today, many companies are operating in a constant state of change. In the words of Winston Churchill: “To improve is to change. To be perfect is to change often.” Riding in my UberX to my Airbnb apartment in my favourite city, making a free international video call on WhatsApp, I let myself in with my August Smartlock and order a massage with UberRELAX while streaming some local jazz from Deezer. I must just be sure not to lose my iPhone.