Tag: business

Jumping the queue

Reservation Hop illustrates all that is wrong with the current startup culture

Reservation Hop is a good example of many of the current breed of parasitic startups that want to create a new class of middleman.

The hospitality industry is tough work and something guaranteed to irritate restauranteurs are reservations that don’t show up.

One startup that seems almost certain to attract the ire of the restaurant industry is Reservation Hop – “We make reservations at the hottest restaurants in advance so you don’t have to.”

Reservation Hop makes table reservations at popular restaurants and then sells them through their website.

We book up restaurant reservations in advance. We only book prime-time restaurant reservations at the hottest local establishments, and we mostly list high-demand restaurants that are booked up on other platforms.

This is probably one of the worst examples of the middleman culture that dominates much of the current startup thinking.

Almost certainly there’s a market need for proxy queue jumpers – although one wonders how profitable it is when the transaction fees are under $10 – but this service will deeply irritate restaurant owners and diners who are crowded out by these ‘parasite’ services.

In many ways, Reservation Hop illustrates the problems with this phase of our current startup mania; the rise opportunistic businesses that are more akin to parasites than services that add value.

The Reservation Hop website assures patrons that there’s a 99% chance their booking will be honored by the restaurant on the night, we can expect establishments to start messing with that statistic as they wise up to the business.

Many in the startup sector speak about how new technology improves the world, services like Reservation hop illustrate that not every idea is a step forward.

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Living in a changing world

If we want to understand how to adapt to a rapidly changing world, we could learn from our great-grandparents.

“We’re looking at a future where every aspect of our lives could be utterly different to how it is now,” declared ABC Radio host Linda Mottram in our semi-regular technology spot on Monday.

Linda’s concern was based around our talk on 4D printing and the future of design and she’s absolutely right – life is going to be totally different by the end of this century.

We won’t be the first generation to experience such massive change to society and the economy, our great grandparents at the beginning of the Twentieth were born into a world without electricity, the motor car or antibiotics.

Those who survived the two world wars and lived to a ripe old age in the 1970s saw life expectancy soar, childhood mortality rates collapse and the western economies shift from being predominately agricultural to mainly industrial and service based.

From our position, it’s difficult to comprehend just how radically life changed in western countries during the Twentieth Century.

When we wonder where the jobs of the 21st Century will come from, it’s worth reflecting that many careers we take for granted today didn’t exist a hundred years ago and the same will be true in a hundred years time.

The technology we’re using may be new, but adapting to massive change isn’t.

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Limits of the black box business

Many of the leading tech companies hide beyond mysterious algorithms or impassive customer support. That may prove to be their weakness.

One of the paradoxes of the modern tech industry is that while its leaders preach openness and collaboration, their own businesses are mysterious unaccountable black boxes.

This website has often looked at how the Silicon Valley business model leaves users and partners exposed to arbitrary enforcement of vague policies and indifferent customer service.

A good example of the black box business model is eBay’s major security breach where it appears millions of users have had their personal and banking details compromised. Instead of informing customers immediately, the company’s management hid the problem and hoped stonewalling inquiries would make the problem go away.

Lacking accountability

In the black box business model, not being accountable is the key – we see it with Amazon’s bullying of book publishers, Google’s high handed identity policies and Facebook’s puritan censorship.

Those high handed attitudes to customers’ and users’ rights is born out of arrogance; all of these company’s managements, and the corporate bureaucrats who enforce the policies, believe their hundred billion dollar businesses are untouchable.

Such arrogance might though be ill-founded as each of these businesses is less than twenty years old and, while they themselves have deeply disrupted existing industry models, there is no reason why their own market dominance and huge cash flows can’t be usurped by new technologies or challengers.

In age where trust is the greatest currency, hiding beyond a block box of algorithms and impassive customer support may not turn out to be a successful management strategy.

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Solving a global capital crisis

Kiva and crowdfunding challenge the global small business funding crisis.

“We face a global capital crisis,” states Julia Hanna, the chair of crowdfunding platform Kiva.

In a story written with Kiva board member and LinkedIn founder Reid Hoffman, Hanna discusses how crowdfunding platforms are replacing banks as the source for businesses around the world.

Throughout world  banks have effectively stepped out of the small business market, despite the world being flooded with cash to keep the global economy afloat over the last five years. Hanna writes about the US experience;

big banks currently reject more than 8 out of 10 loan applicants, and small banks reject 5 out of 10. Some estimates suggest that investment in small businesses has dropped as much as 44 percent since the Great Recession in 2008.

While the Great Recession had a lot to do with the collapse in small business lending in the US and Europe, the decline in bank support for main street dates back to the first Basel Accords established in 1988.

Basel judged banks’ risks on the classification on their assets – government bonds were the safest and domestic property was the preferred private sector asset with small business lending being a long way down the risk.

Following the cues from regulators, banks favoured mortgages which they could them securitize and onsell to investors; this gave rise to the sub-prime lending markets, Collateral Debt Obligations and eventually the Great Recession itself.

Six years after the great recession started and despite massive amounts of capital being injected into the banking system, the small business sector is still being capital starved.

As Hanna and Hoffmann state in their article, crowdfunding sites like Kiva and community initiatives are changing the banking system and it could well be that today’s trading banks.

Having neglected their core purpose of funding business and industry, are now as vulnerable to disruption as other industries as small businesses, entrepreneurs and communities look elsewhere for their capital needs.

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Too far in front of the curve

Even the best technologies can fail if they are too far ahead of the marketplace

Today Telstra’s CEO David Thodey launched the company’s new public Wi-Fi network that the telco hopes to roll out to two million locations across Australia.

In using Telefonica’s Fon service, the idea is to equip customers on landline connections – ADSL, cable TV or Fibre – with a public wireless hotspot. The telco can then offer public Wi-Fi as a service.

With well over half the country’s Internet market, Telstra can deliver reasonably good coverage with such a network in the same way BT does with their Wi-Fi that’s already providing this service in the UK with the same technology.

Today’s announcement isn’t the first time Telstra has launched a municipal Wi-Fi service, five years ago they launched a product that quietly slipped into obscurity.

At today’s launch, David Thodey mentioned that previous service and put it down to the immaturity of the technology.

Several generations of Wi-Fi technology later, it may be the new product is more reliable and stable than the last failed attempt and sees far better take up rates.

Which leads us to a truism in the technology industry – everything old is new again.

In fact, most of the technology we talk about today such as cloud computing, social media and citywide Wi-Fi has been around for years under different names.

What makes say cloud computing today more successful than software as a service a decade a go is that the current technology makes the products more reliable and accessible.

That’s another affect of the Gartner hype cycle, that as one technology recovers from the trough of disillusionment it gets renamed and spawns the adoption of a bunch of other neglected concepts or ideas.

As with much in businesses, the adoption of technology is as much a matter of timing as it is expertise.

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Amazon’s death grip

Booksellers, and readers, are learning the consequences of Amazon’s domination of online book retailing

Hachette Book Group is the latest victim of Amazon throwing its weight around the bookselling industry reports the New York Times.

While it’s not the first time this has happened, Amazon’s willingness to bully suppliers – and disappoint customers – is a taste of what happens when one company controls a choke point in the distribution network.

In the early days of the internet we believed the web would eliminate the middleman, instead the net put the existing intermediatries out of business and gave us a new, global breed of gatekeepers.

The galling thing about Amazon is the company has barely made a profit in its 20 years of operation, one wonders how profitable it will be once should the operation manage to wrest control the entire bookselling industry.

In many ways, Amazon is a cautionary tale for everyone trading online; beware of allowing any one platform too much power over your business.

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Business as a commodity

Becoming a commodity business is not part of the Silicon Valley business model, but it’s the best most startups can hope to become.

What happens when your hot startup turns out to be in a commodity market?

According to Danny Crichton at TechCrunch two of the hottest startups of the last five years, Box and Square may be finding out.

You can make good profits out of a commodity operation – supermarkets around the world have shown you can earn good money from 2c profit on every can of baked beans you sell – but it’s hard work and it’s definitely not glamorous.

It’s also not particularly attractive for investors looking for the next big thing and commodity businesses struggle to justify the massive burn rates

The truth for most startup businesses is this is as good as it gets; no billion dollar buyout, no adulation from the tech press and no buying a yacht to rival Larry Ellison’s. Just a decent return from hard work.

While many of us blinded by the billion dollar success stories of Facebook, Google and Amazon, it’s worthwhile considering that most successful businesses are far more modest ventures.

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