This week’s podcast is about ownership vs. access business models. It’s a good framework for thinking about digital disruptors such as Airbnb, Uber and Mobike.

You can listen to this podcast here, which has the slides and graphics mentioned. Also available at iTunes and Google Podcasts.

Here is the link to the TechMoat Consulting.

Cheers, Jeff

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Related articles:

• AutoGPT and Other Tech I Am Super Excited About (Tech Strategy – Podcast 162)
• AutoGPT: The Rise of Digital Agents and Non-Human Platforms & Business Models (Tech Strategy – Podcast 163)
• The Winners and Losers in ChatGPT (Tech Strategy – Daily Article)

From the Concept Library, concepts for this article are:

• Access vs. Ownership

From the Company Library, companies for this article are:

• Uber
• Didi
• Mobike
• Airbnb
• Ofo

——–transcription below

Welcome, welcome everybody. My name is Jeff Towson and this is the Tech Strategy podcast from Techmoat Consulting and the topic for today, why you should forget about the sharing economy and what you want to do is watch for disrupters in access versus ownership businesses. So that’s really the topic for today is this simple little question of, is this an access or an ownership business? It’s a really helpful little question. I use it all the time. It explains a lot of stuff. And then a lot of what’s going on in digital is companies that are very good at disrupting one or the other, and access or an ownership business. That’s a lot of what we’re seeing over Airbnb, DD, a lot of that. Anyways, so this is going to be a bit of a short lecture just on this one little framework, which I find helpful. Anyways, that will be the topic for today. Now, I don’t have any real housekeeping stuff today, so let’s just do the standard disclaimer. I had nothing in this podcast from my writing or website as investment advice. The numbers and information from me and any guests may be incorrect. The views and opinions expressed may no longer be relevant or accurate. Overall, investing is risky. This is not investment legal or tax advice. Do your own research. And with that, let’s get into the topic. Now, the concept for today is ownership versus access businesses, which you can find under the concept library. And I mean, this was five years ago, everybody started talking about the sharing economy. Kind of a big deal. Airbnb was kind of the prototypical example. Look, you know, these businesses, you’re really sharing things. One group is sharing their apartment with another person. Uber was kind of a sharing economy business. I mean, it was kind of a topic you heard everywhere. They had new professorships at business schools. I’m the professor of sharing and blah, blah, blah. And I mean, it was one of these half-baked concepts that doesn’t really make any sense. And this happens on a regular basis when something new comes along, that people come up with a framework that does kind of half works, it half doesn’t. And you know, and then it falls away over time because a better explanation emerges. And that’s really, I mean, that’s like 70% of what I do is looking at a situation, a company, a business, a disruption or whatever. And it’s about asking the right question. If you ask the right question, it’s like cutting through the knot, right? You get right to the heart of what really matters. But the precursor to asking the right question is, do you have the right vocabulary? And if you have fuzzy half-baked concepts, it doesn’t work. It gets all confused. So if you say, you know, like, is this an innovator in the sharing economies, you’ll find that it’s not going to get you anywhere, because the term is too fuzzy. A lot of people, when they talk about data, I think the same thing, you’ll hear these questions like, does data create a proprietary competitive advantage in this company? That would be a very sharp question to ask. Except data doesn’t really mean anything. So the question’s good but you’ve used vocabulary. Try and define data. It’s almost impossible. It sounds good but really it’s this fuzz everything is data everything. I mean it’s so you got to get the vocabulary then you try and get the sharpest question, whether you’re doing a digital project, a transformation, or making an investment. And my investment process is really a series of questions that I have sort of crystallized and refined over maybe 10 years now. That’s literally all it is. It’s a list. Okay, so share economy was kind of like this. There’s been some other terms like this, like people used to talk about the bandwagon effect in 2002, 2005 of when a company gets going, you get a bandwagon. Everyone jumps on the bandwagon. No one talks about that anymore. Now we talk about platform business models, which are a better description of what was going on. People talk about Metcalf’s Law, as you probably know, I think that’s totally stupid and wrong. Lifetime value of customers, I find not to be a terribly useful concept. I mean, there’s a bunch of these. Anyways, sharing economy was one of them, and I mean, it’s very easy to sort of take that idea apart when you think about it like, which is okay, we have Airbnb. I have a condo, I’m going to put it on the market, I’m going to sell it by Airbnb. I am sharing my asset with another user, a renter. Okay, person to person, when people were talking, sharing what they were really talking about was P2P transactions, person to person. Okay, what if I buy five condos, and I put them all on, is that still person to person sharing? Or am I just a small business renting? Am I just a small hotel? Kind of. You know, what if it’s 10? What if I have a fleet of ubers that I rent out to people and then use? I mean, it just becomes useless as a concept. So when I was looking into this like five years ago, I came across some discussion by Michael Porter, the Harvard Competition Guru, and he would just say, look, this is all about access versus ownership. That’s the way to think about this. If you think about it that way, this all becomes pretty simple, actually. It kind of cuts through the whole thing. And the basic idea is, a business serving a need, I need somewhere to stay. I need a hotel. I need a home. I need to be a long-term rental, short-term rental. That is one consumer need, a job to be done. You can answer that in two very different ways. One would be an access business and one would be an ownership business. Now, if you are saying to me, I’m a hotel, I am giving you access to this asset for a period of time. Okay, that is one way to answer that question. And the consumer can say, okay, that’s interesting. Maybe I will rent this hotel for a night. Access. I’m getting access to the access. Maybe I’m renting it for a month. Long stay hotel. Still access. Maybe I’m renting for a year. Kind of access. Maybe it’s a long term lease because you live in Thailand and you want to have a house and you can’t own houses in Thailand. All you can do is do a, you know, 30 year lease that’s registered with the land office. Okay, now we’re kind of getting into ownership that the consumer views that very differently. So the things they care about and the factors that would make you sick, you’re going to compete on very different factors, whether you’re offering ownership or access. If I come up to you and say, would you like to buy a bicycle? Okay, that’s an ownership decision. What do people care about when they buy a bicycle or a car? Let’s say car that’s more logical, common. But we would care about the overall cost of ownership, the upfront, the maintenance, the insurance, we’d care about that. We’d care about how well it runs, it’s going to break down is it high quality, we’d care about the design. Is it cool? Do I like it? Is this good for me? We’d probably care somewhat about brand if you’re buying a higher-end car or something like that. There’s quite a few factors you’re going to take into account if you’re going to own the car. And if you are a business selling cars, a retailer, dealership, or a manufacturer, you are going to build your business to compete against those dimensions like design brand building Overall performance over time cost of maintenance overall and you can hear people like Tesla or companies like Tesla talking about this all the time This new Tesla is under $30,000. I mean they’re pitching the price of ownership, right? Now if you’re just gonna rent a car for a day, your Hertz or whatever, the consumer doesn’t care about any of those things. In fact, if it’s an access business for that, usually the consumer only cares about two things. They care about price and convenience. Pretty much it. Outside of those two factors, it has to be an acceptable level of quality. It can’t be a piece of junk, but it’s just got to kind of be a baseline acceptable level of quality. After that, it’s pretty much price and convenience. I want to… what’s the price for renting this standard economy car at Hertz for a week on my trip to Texas? And what’s the price of Hertz versus budget versus Avis or whatever? I’m looking at price first. And then second, okay, convenience is kind of a factor, which is, you know, can I pick it up at the airport? Do I have to go across town to get it? That would be the pickup. How difficult is it to rent this? Am I gonna have to sign some crazy contract with a credit check and leave a huge deposit? All of those sort of friction factors. The more convenient it is, the better. Right? And outside of that, that’s most of it. So if you’re building a business in this area, Hertz is not thinking about any of this. They’re just trying to get big fleets of acceptable quality cars at a good price. And then they’re focused on locations. And they’re focused on having a good app. And getting the airport location is really important. So you can kind of break it down between ownership and access. And when I sort of run my checklist for various companies, before I get into the competitive strengths and business models and economics, my first question is always about the customer experience. What does the customer care about and what is the customer process for buying and usage? That’s like literally question 1a and 1b on my list. So question 1a I would look at the top factors quality design brand if it’s Tesla and question 2 would be the process how did I hear about the car how do I rent the car how do I the car? How do I rent the car? How do I use the car? How do I return the car? And you can see very quickly, if you’re talking about access versus ownership, the answers to those questions, you’re gonna build a completely different business model based on whether it’s an access or an ownership business and it could be hotel. There are high-end hotels, but most hotels are, “Is the room clean and fine? I’m going to Toledo for a business week.” Okay, four-star hotel in Toledo, the room’s fine, acceptable level of quality. I got a pretty good price. It was easy to book it, reserve it, check in was quick. You know, but that’s very different than a long term, two year rental or let alone buying. So anyways, when you look at homes, a lot of these asset type businesses, housing, residential, office space, cars, airplanes, even bicycles, these are all assets. And I’m all trying to get access or ownership. That’s how I kind of take up our question one, then question two, I get into the business model. How does Hertz compete with AVIS? How does Tesla compete with BYD? But very different businesses. Okay. So why am I talking about this? That brings us back to the sharing economy. So many of these digital businesses that everyone was talking about, Airbnb, Uber, DD, in China, it was all these bike sharing companies, right? It was literally called ride sharing and bike sharing, right? The word sharing was in the title for a while. Now everyone calls them platform business models, except for the bike ones, which they’re just standard service businesses. They’re not even platforms. But everyone started to talk about these sharing businesses. And what really was going on is we were seeing a wave of digital disruption in access businesses. If you looked at it that way, all of this made total sense. It was really easy to understand. The bike sharing. I think now people sort of poo pooed all the bike sharing businesses of China and then they expanded to to Mexico and Southeast Asia and Birmingham and a couple of places in the US. And they sort of faded in most places. I actually went to the opening of Mobike in Mexico. If you ever look at the launch of Mobike in Mexico, I was sort of riding around with the management team. Same with Thailand actually. There was a big opening, you know, they did a deal with AIS in Thailand, I was for that. Most of that’s fallen away. Turns out it’s too hot to ride bicycles in Thailand for the most part, and most of Southeast Asia. Mexico is still all right. Certain places are all right. We saw the next wave of these sort of businesses that were like electric scooters that you can stand on. These lime bikes, lime scooters, which are, they’re just the worst idea ever from a safety standpoint. You know, these little scooters you stand on that are like, it’s like sitting on a little skateboard with a handlebar that sticks up and they have these tiny little wheels. I mean they are just the the worst devices for safety because they’re so easy to fall off of. Like the wheels are tiny. If you hit anything on one of those little scooters, you hit a rock, you hit a speed bump, you’re going over. I mean, at least if you’re on a moped, you can go over things or a bicycle. One of those little stand up ones. No, no, you’re going down. There’s a huge number of people that that wipe out on those. Anyways, but it’s the same basic business model as the bike sharing. And people thought, Oh, it’s sharing. It’s not sharing. And it’s not a platform business model. What it really is, is it’s a very clever digital disruptor in an access business. If you want to rent a bicycle in a city, you can rent bicycles in a lot of cities. They have city run programs like CityBike in New York City, or they have the one in Rio. And those are access businesses. You put in your credit card, you swipe it, you take it from the dock, you write it around, you take it to another dock, you click it in. Or there’s regular bike rentals where you can go to a little stand and sign a contract and show them your license and you have to sign some paperwork and then you can ride a bicycle in the park for two hours, right? Very inconvenient, total pain to use. But what these little bicycle businesses where you could just walk up with your phone, download the app, scan the QR code, the bike unlocks, you hop on, you ride for 20 minutes, you step off, kick the stand, turn it off, you walk away. It was super convenient. That’s how they disrupted these businesses. They came in and they pulled the two levers I just talked about, they made it incredibly convenient to rent a bicycle in Beijing. Any street you can walk out of the subway, there’s a bicycle you hop on, click your cell phone, write it for four blocks to your house, leave it, you’re done. So super convenient, and then also it was cheap. Kind of because they subsidized it for the first couple of years, it was crazy. But even now it’s pretty cheap. I mean that’s an access business based on convenience and price. Kind of what I was just saying. Just like the rental car. And then the bikes had to be acceptable quality. But that was pretty much it. And the line bikes and all these other ones, they’re pretty much the same thing. That’s an easy way to think about it. People have tried the same thing with car sharing, where you know, in Germany, in places where you can hop into these little cars that are charging and drive them around and drop them off, they haven’t worked as well. There were some other sort of disruptors where you can to, let’s say the subway, Beijing, Shanghai, they have these. And when you get out of the subway, there’s little racks of umbrellas. And if it’s raining, you scan it, you unlock an umbrella, you take it home, you take it, you don’t get wet, then you click it in somewhere else and leave it. Same as the bicycles, but it turns out carrying an umbrella the whole day when you leave and go to work and come home. It’s kind of a pain, you know, but it might rain so you got to do it. Well, this is super convenient. That’s what they did. They made using an umbrella, super super convenient and it was cheap they even had ones where like if you went to the basket ball court in Beijing and you wanted to play with your buddies you had to carry the basketball probably from your office or from school and it was a total pain well they had lockers and you could walk up scan open a locker take a basketball rent it for two hours play basketball click it back in walk away price and convenience so most of these up, scan, open a locker, take a basketball, rent it for two hours, play basketball, click it back in, walk away. Price and convenience. So most of these businesses were people using new digital tools, smartphones, mobile payment, GPS, smart locks, whether they’re on bikes or whether they’re on lockers, using those fairly basic tools to have a very compelling new offering in an access business. That’s really what it was. And I think that explains most of what was going on. And to some degree, they also disrupted ownership businesses as well. It got a lot harder to sell a bicycle When there was this super convenient option Wait, if I own a bicycle I got to put it in my apartment or I got to keep it downstairs and I have to have a lock and I have to go buy a pump And then I got to take it to work and lock it up And then I got to take it home and you know a bike that I can just hop on and hop off and leave you know why would I own a bicycle anymore unless I’m a serious bike guy who likes to ride for hours why would I do that you know so it also impacts the ownership businesses and there’s been these ideas for a while that robo taxis are in Uber to a lesser degree. Both of these are disruptors in the access business for transportation that both of these are going to disrupt car ownership and taxis for sure. But people won’t need to buy cars anymore. I think I’ve made my point. That’s a decent way to think about Airbnb, Uber, DED, Uber, all these sort of new disruptors that come up. OK, let me make one last point on this. For those of you who are subscribers, I sent you today an email that basically has a checklist for this. I mean, it’s just five questions that sort of– I worked on this years ago and I updated every now and I use it in my own checklist. Just sort of how I assess businesses when I think about ownership versus access. And I basically sent you that with some graphics that show it in a little bit more detail. It’s not complicated, but I think it’s pretty solid. And it’s a good way to sort of assess disruption. Well, at least I’ve found it to be good way to sort of assess disruption. Well at least I found it to be. I’ve used it for years. Okay. Sort of last point I wanted to make. So that’s an interesting question. Is this an ownership or an access business? Is it being disrupted by? It’s usually not a new digital tool like GPS wasn’t some big breakthrough. It was someone took some pretty standard digital tools and came up with a very innovative business model. You know, these bike sharing companies were very clever business models as disruptors. But the tech they were they were using was nothing. Smart phone, mobile payment GPS. That’s it. So it wasn’t some big tech breakthrough. Now maybe robo taxis will be more so. But another way to think about this is, okay, we’re seeing digital disruption in an access or an ownership business. We’re mostly talking about access. We can also subdivide that and say, are we seeing disruption happening on the demand side or the supply side? Now, most of the examples I gave you were disruption on the demand side, that using a new digital tool in an access business allows you to dramatically improve convenience and or reduce the price. Ideally both. Airbnb isn’t really much more convenient than checking into a hotel. It’s kind of the same. Airbnb in the United States and in Europe is dramatically cheaper. Now if you looked at the bicycle examples, OK, price was part of it, but it was much more about convenience. So on the demand side, you can shift on convenience versus price. Now if you think about the supply side, we can see the same disruption, but it’s usually different. Usually what you’re going to see is one of two things. You are going to see a digital disrupt making the supply available in much smaller increments. So for example, if we look at Airbnb in let’s say Uganda, now Airbnb in Uganda is not really a disruptor on the demand side. It’s not that much more convenient than a hotel and it’s not cheaper than staying in hotels. What it is, is it’s a disruptor on the supply side. It is dramatically increasing the options on the market. You can stay anywhere. You can stay in private apartments. You can stay in big houses out in farmland I used to stay in a cottage that I rented on the lake In lake Victoria just sort of you know, I used to write books there It’s uncovering latent supply look there’s a lot of supply that’s already in this market. It’s not being used That’s what digital disruptors are good at, bringing that latent supply into the market. And you can see this all the time, like bicycles didn’t really do that. This was when the bike business started, it was supposed to be about uncovering latent supply, where people were going to be able to take the bicycles they don’t use, have them sort of retrofitted for this, and then you could give your bike to this company and they would rent it for you. It never happened. The company just started buying their own bikes like vending machines. But we could see it in things like the one you hear a lot, I’ve heard about for a long time is, this idea of renting people’s parking spaces, because most people own homes have parking spaces and nobody uses them. So when you take your car to work, you could rent your parking space to someone else. That would be uncovering a latent supply or you know there’s one that’s I mean cloud kitchens would be latent supply. There’s a lot of that under the latent supply side but Airbnb is probably the best example. The other way you can sort of disrupt on the supply side is you can take an existing capacity and make it available at much smaller increments. You can, you know, if you want to start an app, okay, you got to build your mobile app or whatever, and then you got to buy a server. That was always how it was done. And, you know, your average mobile app startup always needed the first one to two million. A lot of that went to building out the server. But then once cloud services came, you didn’t need to do that anymore. Instead of spending one to two million on servers, you could just rent server space as much as you needed or as little as you needed. It made server as a capacity as a supply available in little bitty increments. Now you could argue that we were kind of tried to do the same thing by making office space available in very little increments. You could literally buy just one desk for a month, which I’ve done. You could buy five desks or 10 desks for six months or a year for your little office. And then when you get bigger, maybe you at that point move in and get your own office. So on the supply side that’s mostly what we see, latent supply gets uncovered or you sort of take it down into smaller increments. And a lot of this thinking comes from McKinsey. They were writing about this years ago that that part’s not really mine. Anyways, I think that’s kind of a simple way to think about it. There’s a couple other questions you want to think about, competitive advantage, the economics, things like that. I sent those to the, if you’re a subscriber, I sent you those in pretty good detail. There’s some pretty detailed graphics there. You can literally just use Oz Checklist. So that’s there pretty detailed graphics there. You can literally just use Oz Checklist. So that’s there if you’re curious. But that’s kind of what I wanted to say today. Just sort of one concept fleshed out. And if you want to know more about this, go over to the digital concept, which are the concept library. There’s not a huge number of articles about this, but there’s a handful. And I find it helpful. Anyways, that is it for me for today. I hope that’s helpful and I will talk to you next week. Bye-bye!

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I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.

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Note: This content (articles, podcasts, website info) is not investment advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. Investing is risky. Do your own research.