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There exists a latent demand for consumers getting what they want, when they want it. To stay competitive in the growing on-demand economy, companies need to deliver near-instant gratification to consumers across increasingly crowded verticals.
What does it take to rise above the noise? VentureBeat’s recent webinar, “The Uber of Everything,” offers essential insights into harnessing unprecedented opportunities to develop the next killer app.
Moderator Terry Angelos, Co-founder and CEO of TrialPay, was joined by Sean Behr, founder and CEO of Zirx, Jared Simon, COO and co-founder of Hotel Tonight, and Dave Frankel, managing partner of Founder Collective. This panel of on-demand experts shared their insights on opening up innovative new spaces, transforming customer experiences, and becoming indispensible.
Consumer-led economy
The panel kicked off by addressing the great “chicken or egg” debate: did desire for instant delivery already exist, leading to a push to develop the technology? Or was it the technology that allowed for on-demand that created the desire for more?
“Instant gratification is a fundamental human demand,” Simon says. “Consumers are increasingly aware that the technology exists to give them what they want, when they want it, and entrepreneurs are better-positioned than ever to capitalize on that desire.”
However, while the technology does address the demand, it is also driving it forward.
Behr notes, “Entrepreneurs have never had as easy a time launching an app. The platforms [that Google and Apple] have provided give access to millions of people by developing a single piece of technology. That enables you to not only deliver that technology, but tap that demand” for convenience, immediacy, and timesaving.
Uncovering opportunities for disruption
The panelists agreed that disruption is the holy grail of the on-demand economy, and it all comes down to changing consumer behavior. Once you change consumer behavior — for instance, when you start ordering an instant car service and stop taking taxis — that’s disruption.
“Regardless of what industry you’re in,” commented Simon, “to the extent that there’s a way to improve it — and the incumbents are not recognizing that, or they’re too lazy to do anything about it — then there’s room for disruption. And if you improve it, then you’ve disrupted. Especially if [consumers] start to catch on and it becomes a widespread demand.”
But a successful app needs to go far beyond dressing up an old business with on-demand functionality. Frankel warns that it’s essential to look at the economic margins of the underlying business, offering Warby Parker, an online prescription eyewear service, as an example.
While it’s an e-commerce company, Frankel noted that Warby’s approach offers essential insights for the on-demand market. It entered the prescription glasses market, which has been run by a monopoly charging a 300 percent markup, with the necessary logistics in place to slash costs for consumers and still turn a significant profit. The same principle applies to any would-be on-demand entrepreneur – you better make sure the margins are there for you to be successful.
Challenges across the board
Once you’ve identified a service ripe for disruption, you have to understand the challenges that go with it.
To date, most on-demand services tend to be geared to more affluent customers. While that has provided some success, it’s still a limited customer base. To stay ahead of the pack, Uber had to move quickly to expand their service beyond high-end luxury vehicle pickups. Zirx, which offers full-service on-demand valet parking, appeals to a higher income demographic, but Behr notes that their business model also required lower-priced convenience options, such as pick-ups and drop-offs.
Each industry and its specific dynamics present their own challenges. For Hotel Tonight, for example, their main competitors are established incumbents who have staked their claim by doing all things in hospitality pretty well. The way Hotel Tonight has pushed back is by doing one thing extremely well: the ability to snag a last-minute reservation in exactly the right hotel for their users, addressing a specific and relevant need as it arises.
Logistical complexity is another huge stumbling block. Behr cautions that there’s a real cost to innovation. When you branch out into on-demand service, the logistical complexity goes up significantly. In the world of on-demand, scaling supply and demand can crush you if you don’t have the infrastructure you need in place.
Gaining traction
Apart from logistical challenges, the biggest question for any business is how to snag the most eyeballs at the best ROI. Angelos offered up some surprising data on app ecosystem penetration — namely, that on-demand consumers tend to only interact with a single app. In other words, familiarity with one on-demand service does not equate to a deep dive into the full on-demand world.
Stickiness appears to be an issue, too.
But the panelists agreed after reviewing the data that retention rates are impressive compared to most consumer products. More importantly, the on-demand world is not dominated by monolithic companies, leaving plenty of room for energetic startups to take advantage of the growth opportunities.
Fundamentally, when company awareness is low, it means that the number of people you can attract is high. To break out, get above the noise level, and get into users’ hands, you need to be creative about finding more ways to get in front of more eyeballs profitably.
The panelists advised that one way to do this is for entrepreneurs to stay on top of the increasing number of opportunities to inject products into other services. Third-party APIs help companies tie together best-of-breed services for seamless customer experiences and expanded visibility.
Trends for 2016 and beyond
“We don’t know what the killer app of 2016 is, or the killer app of 2017,” Frankel says, “but we know one thing for sure: There will be a killer app of 2016.”
The panelists agreed that, as always, customer dropoff will continue to separate the wheat from the chaff, but it’s sustainability as a business that investors will be keeping a keen eye on.
As Simon says, “Much more rationality will prevail,” as entrepreneurs increasingly realize they need to focus on creating a business that both makes money for investors and provides the kind of excellent service for customers that disrupts an industry.
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