by Zoe Zorka
It's the age of disruption. The most talked about businesses are the ones that are challenging the status quo. There has been a high flight of financial companies that are disrupting traditional banks with technology and customer-centric approaches. Think of companies that provide you with a bank account and bank card, but do not have any physical branches. Think of credit card processing for vape shops (just to mention another new booming business industry). Think of more convenient and quicker ways to manage your investment portfolio without the usual broker and middle person (and related costs).
The ability to solve sophisticated user needs with streamlined processes at the fingertips of the consumer has proven a very appealing prospect for both business investors and end-users. That's why the Fintech industry is booming, as people recognize that it isn't just a normal market fluctuation where products and expectations are being tweaked. It is truly a revolution where not only consumers' perceptions are being changed; it is fundamentally changing business models. And traditional banks have a hard time reacting in time, due to how their businesses are fixed to processes and capital expenditure (think buildings) but change they must.
As customers are asking more 'why' things are the way they are (or 'why' things are not the way they could be), having an alternative that does fit does expectations is killer. Why is creating multiple different savings pots so hard to do with a traditional bank, but it seems as easy as creating a folder on your computer with an online app-based bank? Or why do you jump through hoops and fill in loads of paperwork to get an additional bank card, let alone a loan? It seems like a herculean task with a traditional bank, but just a few clicks away with an app-based bank? Consumers are taking notice that things don't need to be as they always have been and especially millennials and Gen Z are flocking towards these new solutions.
In the same way, we see how traditional yellow or black (depending on where you live) taxis are dealing with the rise of ride-hailing apps. The very idea that with a few clicks you can get a ride to wherever you want to go, that it's transparent as you get an indication of costs upfront and that you don't even need to have cash on you; why did this seem like a pipedream 10 years ago? Now we can't think of taxi transportation in a different way. There isn't a single traditional taxi company (stand or call) that isn't already working on 'innovative' solutions or thinking about it. And innovative between quotes as it must be seen how much of a new solution they will bring to market. In most cases, it will be a copy of the app and the online payment process.
The whole ride-hailing saga has brought up some exciting dynamics; however, mostly a very aggressive stance from those competitors it was trying to supplant. There was some very aggressive activism by traditional taxi companies in various cities around the world. Where traditional banks most likely accept that they will need to adapt (notwithstanding any background lobbying), these protesting taxi companies chose a different route, one of forcing legislation and/or licenses. On the one hand, most, people would be sympathetic to the plight of these taxi drivers, and it has been widely reported that some of these ride-hailing services offer marginal earnings for the average driver. On the other hand, people will vote with their wallet. It's hard to imagine that people will stop using these services in such large numbers that it will stop being a thing. People still want to use a product that is more convenient, more transparent and comes at a reasonable price point. And especially the latter is vital, as millennials and Gen Z tends to own less but is more willing to pay for experiences.
As the ride-hailing example shows the backlash from traditional players in the industry, not all examples in disruptive business are action and reaction. Take the phenomenon of the gig economy. The idea is that people can join ride-hailing and food delivery services on a completely flexible contract and are paid based on utilization. Advocates of the gig-economy will argue that this suits modern life and especially those who seek to earn a little bit on the side and have the luxury of time. In most cases, they will bring up how beneficial a gig-economy is for students. Opponents of the gig-economy will argue that it’s a vehicle to pay less to those on the work floor and to absolve companies of responsibility that usually comes with having employees.
And just that word employees have been a focus of a lot of attention in the last few years. Most ride-hailing and food delivery services have stated that the people driving and delivering are contractors and not employees. This has legal implications in terms of obligations a company has, and which rules it must adhere to. Think termination of contract, sick pay, minimum wage, etc., changing from employee to contractor changes the game. Financially and legally speaking perhaps a smart move, but ethically may be debatable. That's why there have been a few legal proceedings around the world that have caught the attention of these disruptive companies, the competitors they are supplanting and business investors in general. The ride-hailing and food delivery businesses had some wins and losses so far. Either way, the gig-economy has started some much-needed discussions on how disruptive companies are a force of good, but potentially also bring unwanted elements along.
And that's the challenging part here. Is our measure of a good disruptive business one which only accounts for the needs and desires of the consumer? Should we ignore how it will bankrupt traditional competitors? It wouldn't be too surprised if most people would answer both questions in the affirmative. But what if the disruptive businesses we applaud start to impede of workers' rights? Do we still dare to stand in the way of progress? These are big questions that will divide opinions. The only certainty we have is that choices will have to be made.