UBER-nomics: The New Holy Grail of Value Creation
UBER-nomics is emerging as the new Holy Grail of value creation. It is no longer just the domain of start-ups as Industrial Age companies like General Motors are starting to make strategic moves into this space, joining the growing ranks of companies like Amazon, LinkedIn, and Expedia. Although these companies have vastly different business models, they all have one thing in common: they recognize the exciting value creation potential of marketplace sharing platforms. I define UBER-nomics as the economics of abundance as it allows companies to defy traditional economic principles of scarcity in terms of both supply and demand:
· Long Tail of Supply — inventory growth is not limited by traditional time or capital constraints, as companies are able to access a long tail of latent/under-utilized assets, goods and expertise.
· Blue Ocean of Demand — revenue growth is not constrained by existing demand, as companies are able to attract new tiers of non-customers and access new blue ocean market demand, expanding their Total Addressable Market (TAM) beyond traditional categories.
It is exciting to imagine the endless possibilities as companies discover the Holy Grail of value creation already lies within them. Just as the democratization of content in the past decade led to structural disruption in media-related sectors (just ask the former executives of Blockbuster, Yellow Pages, Kodak!), the emerging democratization of physical and human capital will lead to a radical transformation of the corporate landscape. What I love about UBER-nomics is that it exposes what I call “the fallacy of the shareholder-centric business model” as it negates Milton Friedman’s traditional scarcity-based doctrine that: “There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game…” For UBER-nomics is about empowering, not exploiting, stakeholders, and changing from a mindset of scarcity to a mindset of abundance.
UBER-nomics is the Holy Grail of value creation as it enables companies to originate, extract, and capture value through their existing ecosystem by designing innovative ways to tap into the under-utilized and latent physical and human capital of their firm, employees, customers, suppliers, and partners. For example, as I previously discussed in my November 16th article “A Wake-Up Call for CEOs from Amazon, LinkedIn, and Expedia”, Amazon launched Amazon Flex, its new On-Demand delivery service for Amazon Prime, at the end of September and two weeks later, entered the Trades Services vertical with the launch of Handmade, a rival to Etsy. In mid-October, LinkedIn quietly launched LinkedIn ProFinder, its Professional Services platform. And in early November, online travel company, Expedia, entered the Sharing Economy with its $3.9 billion acquisition of HomeAway.
We are also starting to see century-old stalwart blue chips like General Motors (GM) embrace UBER-nomics. Yesterday GM announced it would be acquiring Sidecar, which shut down its ridesharing and delivery options at the end of 2015, after raising $40 million since its launch in January 2012. Interesting, this follows only weeks after GM invested $500 million in a strategic alliance with Lyft. I have a bit of knowledge on the auto industry as from 2000 to 2002, I covered the Big Three while I was working as an Associate Analyst for Deutsche Bank’s Global Auto Research Team in New York City. From my analyst perspective, the strategic alliance with Lyft is a brilliant move on GM’s part as in addition to providing it with a new distribution channel for its vehicles, it enhances its brand equity and gives it a seat at the table of a company trying to disrupt its vehicle sales business. And I’m guessing that GM bought Sidecar primarily for its 2002 ridesharing patent — it will be interesting to see how long it takes before GM deploys its army of lawyers to try to enforce this patent against Uber.
As I look back on my career path, it is amazing to think that it has been five years since I decided to quit my job as an Equity Analyst and leave the security and comforts of the corporate world. Feeling nostalgic, I dug up my old journals and notebooks and came across a journal entry I wrote back on February 2, 2010: “So I’m at a crossroads trying to figure out what to do. I fell the need or desire to create something. Add real value to the world rather than just work for a firm. I need to find something I can be totally passionate about that would fulfill my talents and strengths so I can get back in the flow. But the question is what? When people ask me what I’m doing and I tell them I resigned I think they are confused. But in my mind I need to create this gap so I can come up with the next big thing to carry my career/life forward in a meaningful way…” I wish I had known back then that this gap would take me on a five-year intellectual journey. But I am convinced that UBER-nomics is the “next best thing” and I feel fortunate to have earned the privilege to apply my analytical talents to help Sharing Economy founders, like Erik Eliason of Storefront, advance his company’s movement “to make retail space more accessible, empower store owners/merchants, and foster local economies”. And I’m excited to be co-hosting the first “Marketplace Meetup” for Sharing/On-Demand Economy founders with Joe Nigro on February 2nd.
I decided to re-read the thirty-plus research reports and articles I have written the past five years, and I realized they basically track the evolution of my thinking up the Abundance Economy Pyramid, leading to my current UBER-nomics thesis. I shared this with my husband and he recommended I look at Joseph Campbell’s “The Hero’s Journey”. As I started to research the different stages and archetypes in “The Hero’s Journey”, I was shocked to discover that my journey of discovery the past five years closely follows this storyline. I look forward to sharing my story in my upcoming book (currently titled) “UBER-nomics: The New Holy Grail of Value Creation” (that I have just started to write) that will hopefully bring together all the research reports and articles I have written in an entertaining and educative narrative. I should note that although I developed the economic thesis, I did not invent the term UBER-nomics as according to Google, there are 3,790 articles that mention that phrase. And there is actually a book called “UBERNOMICS” scheduled for publication this spring (that I am excited to read!) which according to its author, Jeremy Waite, the Head of Digital Strategy, EMEA @Salesforce Marketing Cloud, is a deep dive into the economics behind Uber.
Looking back, I realize the most influential players are the authors of the two-hundred plus business strategy books I have read over the past five years that contributed to the foundation of my intellectual asset base and the development of my UBER-nomics thesis. In the archetype sense, they served as Mentors by guiding me along the way with their knowledge and insights. And the players I continue to admire are the “rebel with a cause” founders of companies like lululemon, Starbucks, Whole Foods, Chipotle Mexican Grill, LinkedIn, and Zillow, Airbnb, and Uber, and other Sharing Economy companies that are creating movements, not just marketplaces. These are the Tricksters as they relish the disruption of the status quo and turn the Ordinary World into chaos by defying traditional economic principles of scarcity.