The problem with on-demand

On-demand networks have been on the rise and on-trend since Uber and Airbnb proved it could be done.

Photo by Andrew Neel

Once consumers bought in to the rush of having whatever they want at a moments notice, they began demanding on-demand for everything. Groceries, doctors, cleaning services, chefs, restaurants.

Many are trying but the margins are slim

The consumer excitement is infectious. Every opportunistic entrepreneur decided to spin their favorite industry the “on-demand” way. Why? “Because it seems like where the world is going. Every industry is going 1099, remote, and on-demand.”

In a very real way, the freelance/sharing economy is growing rapidly and devouring traditional businesses. Although, many have glossed over the dramatic implications of having a business supported by a freelance workforce. The biggest issue being: quality.

Check any network out there. They’ll either tout their speed or their top talent. Top 1% Xers in the world! Book house cleaning in minutes!

The on-demand craze is futile. Uber has convinced us that we can flip any business into an on-demand model that’s FASTER, CHEAPER, and BETTER!

But, that’s not possible. Perhaps, you can do this with computer chip speeds, capabilities, and price, but you can’t do this with a real life workforce!

Most networks try to convince a consumer that they can find a better professional, pay him less (while taking their own cut), and do it faster? Wait-also better?

The economics don’t work out. Even at scale, this isn’t possible. Yet, many networks assume they can push people harder, pay them less, and get a better result in the end-ha!

Even for giants like Amazon, working out the economics of a $20 meal deliver with no delivery fee (but a suggested tip) is difficult. They even have a order minimum but struggle to deliver on time. And who knows if they’d make any money even if they did deliver it.

Good talent is scarce, but they won’t tell you that!

One of the greatest issues with on-demand networks is that of scarcity and focus. Say you have ten marbles that represent a business’s resources: time and money. If you choose to spread your marbles out in a single horizontal line, you’ll have a wide offering but no depth.

If you choose to spread your marbles vertically, 10 deep and 1 wide, you’ll have a very specialized, deep offering, but no breadth.

What networks don’t get, whether deceiving themselves or just consumers, is that you can’t both offer a wide range of services while offering highly specialized ones.

For instance, you may have heard of a service called Thumbtack — a network that connects you with a professional to complete almost any task. From finding someone to paint your house to a DJ to play at your wedding.

They have the most diverse network of professionals in the world, yet they have less depth than industry-specific networks. If you need someone as highly skilled as a tenured photographer or designer, you better go to a photo-based service, not a catch-all.

Surely a network dedicated to photography will connect you with a better photographer better than Thumbtack — who has not personally vetted each person on their network. Most importantly, the best photographers in the world will not even create an account for services like these.

It’s foolish to assume that thumbtack can both offer the utmost diversity of talent while simultaneously offering the most vetted, high-quality talent. The business structure dictates doing one or the other: breadth or depth.

Thumbtack is either “find a pro for literally everything” or “find the best painter in LA,” but it can never be both.

On another note, the best designers in the world don’t spend their time submitting proposals on a design network. They’re busy giving speeches, starting companies, and building. They often have massive followings on Dribbble or Twitter or are working full-time at places like Intercom. People come to them and they’re constantly busy.

The truth is, no top 3% designer will ever be pitching for jobs on a design network. They don’t need to.

But, if you glance at the websites of Upwork and Toptal, you’ll see them proudly state the “top 3% of designers” are on their network. Perhaps they only allow 3% of their applicants on the network, but certainly their applicants don‘t accurately represent the entire design industry.

Company success before customer success

Another issue with on-demand networks is misaligned incentives.

Most networks, especially in highly-skilled industries like design, are not imminently concerned with quality but with pumping up revenue by on-boarding unqualified talent.

Design Inc, which has a similar model to Thumbtack, generates revenue as designers pay to bid on a project. Consequently, they’re only responsible for the connection process, the rest is left up to the designer and client to hash out.

Thus, Design Inc has no direct incentive to the end-quality of the project — at least not monetarily.

The more designers that are on the network, the more bids that are made, the more money they make —divorced from the quality of work! They’re actually incentivized to dilute their own network to increase revenue instead of creating greater value for their customers.

This is all too familiar, 99Designs has long been regarded as a place to find cheap designers willing to do endless revisions. Rarely is a long-lasting logo created because the majority of the network is underpaid and under-experienced. The same goes for Odesk, Remote, Upwork, and Fivver. Huge networks filled with sub-par talent.

As of yet, very few professional networks put quality first, even if that means staying smaller than the competition. However, we’re aiming todo this!

If a company’s goal is anything but adding direct value to the actual user, they’ll end up neglecting the customer to increase revenue. They’ll sabotage the quality of their network by letting unqualified professionals on the service.

The solution

In my next post, I’ll propose the best way to combat these problems based on past my failures and success with DesignCue.

In short, obsess over quality, keep things small if you have to, and own a niche!

Catch the following post next week. You can find more info on DesignCue here: www.designcue.io