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Managing disruptive businesses: Limiting the damage by innovative digital giants

Managing disruptive businesses: Limiting the damage by innovative digital giants

The emergence of app and online-based giants such as Uber and Airbnb may have revolutionised the process of hailing a taxi or booking a place to stay but they’ve also irrevocably altered their respective markets. As efforts to limit the impact of these types of firms begin to gather pace, Move Commercial examines whether it’s time our cities got to grips with disruptive businesses before their presence becomes damaging.

Words by Lawrence Saunders

 

Until Transport for London’s (TfL) unexpected decision not to renew Uber’s licence to operate in the capital, the rise of the controversial taxi app here in the UK had been swift and ostensibly irrepressible.

Whilst the judgment was welcomed by many hackney cab drivers, a petition from users urging TfL’s chairman Sadiq Khan to reverse the ruling garnered half a million signatures just 24 hours after going live.

Uber has since lodged an appeal but it remains to be seen whether TfL will renege on its verdict which branded the firm “not fit and proper” to do business in London.

> Related | Uber: The app’s impact in the North West

Although TfL’s decision was somewhat of a shock, the surge in popularity of app and online-based platforms such as Uber, Airbnb and Deliveroo hasn’t been without its controversy, with complaints from rival firms, employees, users and the locations they’ve impacted on abundant.

Whilst here in the North West there appears to be no immediate administrative threat to Uber – its licence to operate in Manchester and Liverpool runs until 2021 – a recent motion submitted by Liverpool City Council saw councillors call for increased regulation to combat homesharing businesses like digital giant, Airbnb.

The motion urged the Mayor of Liverpool Joe Anderson to appeal to the government for a cap on entire home listings to 90 nights per year in an attempt to reduce what they see as the “negative impact” of the online hospitality service in the city.

“We have to be very careful now because globally there has been a push for more regulation of app-driven businesses but you cannot interfere too much with the free market.”

According to the councillors, negative impacts can include anti-social behaviour from “irresponsible guests”, whilst current regulation is not “smart enough, comprehensive enough” and was introduced “before technologies that allow homesharing existed”.

The 90-night rule has been in place in London since January 2017, but the news that Liverpool could follow the capital’s lead was met with disappointment from the city’s Host-So-Simple – a management firm for users of homesharing sites like Airbnb – with the company’s co-owner Joe Davies saying the limit would be would be “detrimental to the city” and its tourism offer.

With the market disruption the likes of Airbnb and Uber have generated, and the subsequent consternation with what some see as heavy-handed attempts to curb their influence, is it time policymakers started taking a more pro-active and anticipatory approach with these firms when it comes to regulation?

“A little bit more regulation wouldn’t be a bad thing,” says Dr Ming Lim from the University of Liverpool Management School, who has been researching the gig economy and the impact of businesses like Uber, Deliveroo and Airbnb.

“But how little and what do I mean by a little bit? At the moment I think regulation is a little blunt but that’s the nature of regulation.

“Regulatory authorities have a different set of interests from consumers and obviously from the businesses themselves.

“We have to be very careful now because globally there has been a push for more regulation of app-driven businesses but you cannot interfere too much with the free market.”

 

Managing disruptive businesses: Limiting the damage of innovative digital giants

Left: Deliveroo drivers are becoming increasingly present in inner cities; Right: Many travellers have swapped hotels for homesharing apartments

 

Dr Lim believes the public needs to be better informed as to why companies like Uber and Airbnb are penalised or don’t have their licenses renewed.

“I can think of very few industries where you can just kill a business like [Uber],” she adds.

“Although I don’t disagree with the calls to keep an eye on these companies I think regulation is a blunt instrument.”

For others, the whole issue requires a more nuanced approach, broader thinking from existing businesses and not just a focus on the so-called disruptive companies.

“It’s very easy to get into ‘either-or’ thinking,” says Ian Finch, managing director of digital agency Mando Group, who spoke at the recent IoD (Institute of Directors) Liverpool ‘Tales from the frontline of digital disruption’ event.

“If we’re going to embrace the future and cope with disruption we need to get into ‘and’ thinking.

“Uber has a right to exist and deliver its service and we have to look after existing businesses and support them and the economy.

“I don’t think you look after existing other businesses simply be destroying Uber.

“It’s incumbent on existing businesses to evolve their business models to be more agile, to look at different ways of billing and to look at allowing passengers to have more choice.”

“It’s very easy to get into ‘either-or’ thinking. If we’re going to embrace the future and cope with disruption we need to get into ‘and’ thinking.”

With regards to the issue of Uber in the UK, Finch is of the opinion that the company simply focused too heavily on the customer side of the business before considering the more pertinent legal and technical factors of running such a vast organisation.

“Uber concentrated on the user journey and the customer experience and worried about getting the rest done later. It’s still catching up on the laws now but you’ve got to respect the thinking.

“Conversely if you are going to take on the world, you’ve got to get your house in order. You can’t be disruptive and then not train people, not keep people safe, not obey the law.

“I think there’s right and wrong on all sides but the answer has to be what can we do to ensure quality legislation and how can we turn it around in a more rapid way?”

> Related | Liverpool could follow London’s lead on Airbnb limit

It’s clear that online businesses aren’t going away any time soon and, according to Dr Lim, we’re going to see more and more of them in the future so “local authorities had best get used to them”.

Finch takes a slightly more alternative view on what lies ahead in the coming years for disruptive firms.

“The reality of it is that until several years after Brexit is over, nobody is going to care about anything apart from that,” he says.

“Business may be able to abuse the system because there won’t be enough civil servants to look after everything.

“It’s a really fascinating time to be living through and we could end up with a ‘Wild West’ type situation.”