A handful of these on-demand businesses have gone from start-up novelties to the status quo in only the past five years."

It seems like only yesterday we were content to wait 30 minutes for a taxi to take us out for dinner and a movie. Now we control our own fleet of vehicles, ready to be instantly dispatched to our door at a moment’s notice.
That’s if we decide to even leave the house.

With a team of personal chefs on hand to prepare any cuisine our hearts desire and instant access to the latest films in ultra-high definition, leaving the lounge room suddenly seems like a fool’s errand.

Our newfound omnipotence as consumers is causing a major rethink across every industry, as we question the rationale behind everything from supermarkets to hotels and even the way we work. This seismic shift towards what’s been called the on-demand economy is quickly reshaping 20th-century consumption models, with economists and entrepreneurs frantically trying to predict which industry will be next to face the disruption gallows.

A handful of these on-demand businesses have gone from start-up novelties to the status quo in only the past five years, with the likes of Uber now so ubiquitous they’re more verbs than brands, as we “Uber” from A to B. So how did we arrive at this revolutionary point in industrial history and what are the driving factors behind our rapid adoption of on-demand businesses?

Couch commerce
Braintree A5.2.
Klas Bäck, Braintree’s general manager of International and Payment Strategy, has an intimate understanding of the inner workings of these new innovators. Braintree is the next-generation payment system that powers the transactions behind some of the largest on-demand brands, from Uber to Airbnb. While there’s no silver bullet formula for successfully disrupting an established industry, Klas believes a key ingredient for any potential on-demand business is convenience.

“It’s all about the click of a button in terms of making it easier for people to access more products and services than they could previously,” Bäck says.

For more than 20 years, the internet has brought the world of information to our fingertips, but Bäck believes the transition of the web from desktop computers to our pockets is a key driver in the success of the modern economy.

“With all of us carrying around a mobile phone wherever we go, businesses now can know exactly who we are and where we are, as we have that information stored securely within each app on our phone.”

Who would have thought the epoch of a new economy would be triggered simply by giving us internet access on the couch? “Palm-purchasing” has become big business, with 71% of Australians using their mobile phones to pay for goods and services, according to PayPal research. On average, we make about $300 worth of purchases each month on our mobile phone, with 82% of those buying decisions made while we’re relaxing at home or watching TV.

The runaway success of the on-demand business model can’t be solely attributed to our laziness as consumers. By allowing customers to control their buying experience, on-demand businesses can offer improved experiences in marketplaces that had become so complacent they were almost begging to be disrupted. Years of poor service in taxis and an abundance of overpriced, generic hotels created opportunities for disrupters such as Uber and Airbnb to take over, and consumers have embraced these new options. This begs the question: which industries are next and how will the next wave of disrupters impact your business?While many entrepreneurs would love to believe untold riches are only an app launch away, the success of Uber (conservatively valued at $70 billion) and Airbnb ($30 billion) is due to both economic modelling and technological innovation. While Uber famously doesn’t own a single car and Airbnb doesn’t own any property, they’ve created digital marketplaces that allow the seamless interaction between buyers and sellers.

An estimated 20% of working-age adults across much of the developed world are now engaging in some form of independent work, with some experts predicting that 50% of US workers will be freelancers by 2020."

Side hustle
Braintree - A5.3

“The real innovation is in facilitating access to excess inventories or capacity in a much more simplified way than any business in these industries had previously,” Bäck says. “They’ve found a way to round up the excess capacity in each of these scenarios and distribute that to people who need it, when they need it. It’s about creating models and marketplaces where buyers and sellers can find each other more efficiently.”

Viewed this way, it appears the on-demand model is as contingent on creating opportunities for people to earn money as it is simply offering them the chance to buy. By developing these new ecosystems, on-demand businesses are circumventing the traditional retail model and inviting individuals to start viewing their own assets, be it a spare room or the family car, as a means for generating income.

Playing into the hands of on-demand businesses is the constant flux in employment conditions and new economic realities across the developed world, which have encouraged many people to start looking for additional income streams. An estimated 20% of working-age adults across much of the developed world are now engaging in some form of independent work, with some experts predicting that 50% of US workers will be freelancers by 2020. On-demand businesses dedicated to what’s been called the “gig economy”, such as Taskrabbit and Airtasker, even offer individuals the opportunity to complete an infinite array of tasks, ranging in complexity from assembling Ikea furniture through to plumbing and electrical work.

While there are an endless number of products and services that could be provided via an on-demand model, Bäck points out that not every niche idea will have what it takes to transform an industry.

“If you’re attempting to start a hamster daycare business, for example, there may not be a big enough market to sustain a company at the right scale. Frequency is also important as I can use Uber five times in one day but if I only buy something every five years, I’m going to struggle to remember which company it was from.”

Global revenues from the on-demand economy were estimated at $15 billion in 2016 and experts say that figure could rise northwards of $300 billion by 2025."

A crowd attracts a crowd
Braintree A5.4.4 Another crucial factor for competing in the on-demand world is gaining enough early users on a platform for what’s known as critical mass. In interactive innovations such as a social network or an on-demand marketplace, the value of the service increases exponentially as more users sign up, as in the case of the global domination of Facebook. As people leave the technology, it loses value just as quickly, a fate demonstrated by the demise of Myspace.

Like anything involving digital technology, a focus on user experience is essential for attracting the early adopters that will ultimately make or break the platform.

“When you look at the most successful platforms, there’s always something that delights the consumers and makes them think, ‘Wow that’s really cool’,” says Bäck. “In the early days, it’s all about how elegant, simple and delightful you make that experience so that people will go and tell their friends. Word-of-mouth is a must-have for this industry but you ultimately have to make it a lot better than whatever the alternative was before.”

The move to mobile commerce has played a key role in energising the on-demand experience through the ability to tokenise payment information such as credit card details within a mobile app. Bäck says removing the need to enter personal details during each transaction has been a make-or-break factor in determining the early winners and losers in this burgeoning field.

“The most successful on-demand businesses have trained millions of consumers to expect frictionless transactions. At the press of a button, they need to be able to summon the service or the product they desire, without a lot of steps and without unnecessary complexity. This is absolutely critical as otherwise people aren’t going to change their behaviour and will stick to the traditional model of purchasing, whether that’s calling a taxi, booking a hotel or driving to the supermarket.”

The early success of the on-demand economy is set to continue unabated for the foreseeable future. Global revenues from the on-demand economy were estimated at $15 billion in 2016 and experts say that figure could rise northwards of $300 billion by 2025. Regardless of the industry, every business needs to be viewing their current business model through the eyes of a potential disruptor and asking themselves how they can innovate to provide better value for both buyers and sellers. Above all, though, it’s about understanding people and our need to live easier, more comfortable lives, hopefully without ever having to leave the couch again.

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