When the disruptors are disrupted

The coronavirus pandemic has laid bare structural weaknesses in the sharing economy. Can the sector ever recover?

There was a time – just a few years ago – when you couldn’t move at tech get-togethers, or even speak to someone in the industry on the phone, without them mentioning Uber and Airbnb in glowing terms.

These were the disruptors. The future of tech and business. The heralds of the ‘sharing economy’.

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‘Optics’ problems, to put it euphemistically, had already started to put the dampers on this kind of rhetoric in recent times, particularly with regard to Uber. But whether you thought these types of organisations were shining examples of pioneering new business models or something more sinister, it’s doubtful you would have predicted a microbe is what could have brought them low. Yet, with the collapse of the tourism and travel industries caused by the coronavirus outbreak, that’s exactly what has happened.

As my colleague Bobby Hellard wrote last week, the coronavirus pandemic has seen a massive and potentially lasting shift to remote and flexible working. For cloud and digital services providers, this has been great news, but if your business is predicated on people wanting to move around (and being able to), this is a major problem.

The figures are stark. Airbnb is set to lay off a quarter of its workforce, which is to say nothing of the impact on hosts. In an emotional letter to employees, CEO Brian Chesky acknowledged that even if the company fully recovers, “the changes it will undergo are not temporary or short lived” and that the shape of the travel industry has potentially been changed forever.

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In the world of ride sharing, meanwhile, Lyft has already laid off 17% of its workforce – 982 individuals – with a further 5% being furloughed. Rival Uber has made a similar move, laying off about 14% of its workforce – 3,700 people – primarily in its customer support and recruitment divisions.

And these figures don’t even take into account all the drivers working for the businesses who often aren’t classed as employees – a longstanding point of contention between ridesharing apps and regulators that’s currently at the centre of a lawsuit in California.

While we are still waiting on Uber’s quarterly results as I write this, Lyft’s have been issued – and they don’t make for pretty reading.

“For the month of April, rideshare rides were down 75% year-over-year. Ride levels appear to have stabilised, seeming to have reached a bottom in the second week of April. We have since seen three consecutive weeks of week-on-week growth. But clearly, this is from a low absolute ride base, and rides last week were still down more than 70% year-on-year,” said CEO Logan Green on an earnings call transcribed by Seeking Alpha.

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“We cannot predict the trajectory or timing of the eventual recovery, but it is clear that macro trends will continue to negatively impact our business. Even as shelter-in-place (lockdown) orders and travel restrictions are modified or lifted, we anticipate that continued social distancing, altered consumer behaviour and expected corporate cost-cutting will be significant headwinds for Lyft. The strength and duration of these headwinds cannot presently be estimated. These are the hard truths we're facing,” he added, echoing Chesky’s comments.

As I said recently on the IT Pro Podcast, the coronavirus pandemic is, in my opinion, a black swan event and as such was impossible to prepare for (although the man behind the theory disagrees). Being as we’re still in the middle of the crisis, it’s also hard to draw any lessons from the experiences of these companies that were once the pinnacle of success in the so-called Fourth Industrial Revolution.

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But when the dust has settled, it will be in everyone’s interest to examine why these businesses have been on such a rollercoaster ride, what, if anything, could have been done to avert it, and what other organisations can take from the experience in order to make them more resilient to whatever disasters await us in the future

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