What do Uber, Airbnb, and Facebook have in common?
By zero I don’t mean “nothing.” Far from it. Zero means everything.
Uber is the world’s largest taxi/transportation company. But it owns zero cars. Airbnb is the world’s largest accommodation provider. It owns zero real estate. Facebook is the world’s largest media company. It owns zero content.
Yet the market value of all these zeroes is actually US$ 400 billion (give or take a few billion, depending on the fluctuations of the stock market).
What’s behind the value of those zeroes? All these companies use automated services, rather than products, to engage with their customers at any time and at any touch point. That lets them create experiences that reach far beyond the segmented interactions that most companies and customers have today. Indeed, these companies are creating broad ecosystems of services that aim to capture entire categories of customer experiences rather than mere slices of them.
Facebook, for example, began as a way to discover the best-looking kids at Harvard. Now it aspires to own the complete online relationship between people all over the world by creating a vast ecosystem of technology-based services. And it is using data from those services—everything from instant messaging to videos to financial transactions—to enhance the experience and drive loyalty to its brand. Service-based ecosystems are the future for all companies, whether they are internet startups or 100-year-old business-to-business industrial behemoths.
Engagement Beyond Products
I’m not saying that companies will stop making products. But automated services must become inseparable companions to those products if companies are to build direct engagement with their customers. In many cases, customers will purchase the functionality of a product through a service rather than own the product itself. Uber’s customers, for example, want to purchase mobility, not a car.
The shift from products to services could make customers less brand loyal. When it comes to transportation, they may care less about who delivers it than getting to where they want to go in the most convenient way possible, whether that be an Uber car, a rental car, a bus, a train, or, in the future, a self-driving vehicle.
This is why companies must not only develop services around their products, they must also build, buy, or partner with others to create an ecosystem of services that engages customers in a complete experience. Uber may be putting taxis out of business, but cash-strapped urbanites will still choose the subway over Uber if they can accomplish their mobility goals that way instead.
Companies must think about the larger experience that their customers want to have rather than the segmented product or service-based interactions that define most customer relationships today. Sports apparel maker Under Armour is a great example of a service-based ecosystem. Under Armour no longer thinks of its business as selling apparel. Its business model is now built around an ecosystem focused on the overall exercise experience. The company has a plethora of different mobile apps that let customers track their performance across a range of exercises, such as running and cycling. Participants can compare themselves with others and create communities.
By engaging in this ecosystem, you can meet up with fellow runners all over the globe as you travel. You can segment who you want to run with by performance level and how far you want to run. You can get recommendations from locals in the places you visit about what to wear during your run to suit the weather. (Under Armour can, of course, supply you with whatever you need before you go.)
All companies need to figure out how to build and participate in ecosystems that emerge in their industries and beyond them.
While Under Armour still sells physical products, it’s clear that the ecosystem is now driving the distribution of those products. Athletes create data-rich personas and help sell Under Armour products through their recommendations to fellow athletes. The company has become more than a sporting apparel provider: it’s a data company.
Ecosystems like this are not necessarily going to be limited by traditional industry boundaries. In recent meetings with executives from major utility companies in Europe, I got only one question: how do we transform our product into a transportation service? They had realized that younger generations are no longer interested in getting driver’s licenses; they are interested in transportation as a service—and that service could just as likely be powered by electricity as gasoline in the future. So utility executives, like their peers in other industries, are looking beyond their traditional business models.
All companies need to figure out how to build and participate in ecosystems that emerge in their industries and beyond them. Success for companies within these ecosystems will depend on their ability to directly engage with customers through value-added services, as Under Armour has done by offering fitness tracking and online communities.
It is through this kind of direct engagement that companies can gather the data they need to understand the true intention of their customers—in real time and at the right time. Perhaps customers’ intentions will be revealed by using analytics to develop a predictive demand pattern. Or better, the data could come from perfect customer profiles that customers happily fill out themselves so that they can be part of an enticing ecosystem that connects them with like-minded peers.
Create an Agile Foundation
There’s something else that Uber, Airbnb, and Facebook have in common besides zero. The software services that form the core of their ecosystems can be easily configured to create customer experiences and engagement anywhere and anytime. The challenge for all businesses is to develop the ability to churn out agile services to keep pace with the ecosystems that develop in and around their industries.
Business leaders should be working with their CIOs and vendor partners to develop a services architecture based on very small units of software called microservices that can easily be combined into larger, more complex services. This is how ecosystem-based companies like Facebook remain nimble and can constantly roll out new services to enable direct engagement with customers. Direct engagement is the key to the future survival of your business.
It’s time for every company to start adding up the zeroes. D!