This article was taken from the April 2015 issue of WIRED magazine. Be the first to read WIRED's articles in print before they're posted online, and get your hands on loads of additional content by subscribing online.
Preet Anand, the CEO of a tech company in the Bay Area, flies at least once a week. Checking in online is a hassle and a distraction, so the 27-year-old gets someone else to do it for him. That isn't an individual he knows, but an on-demand virtual worker elsewhere in the US who is part of a network managed by the startup Fancy Hands. Customers send requests -- dealt with in real time -- via voice or email, and pay $30 (£20) for up to five tasks per month, or $150 for 50 requests. In one recent month, Anand exercised his allocation of tasks by having a Fancy Hands service provider figure out when he could schedule a series of archery lessons. "It's like having an on-call admin assistant that can help you with smaller tasks," Anand says. "For me, I'm a startup CEO so time is super valuable."
Anand, who runs a company called BlueLight -- its app of the same name connects users to public and private emergency services, allowing first responders to see the caller's location within 18 metres -- estimates that he has four tasks ongoing at any time. The former lead product manager of gaming company Zynga is also a user of other services that offer him immediate results: the grocery-delivery network Instacart, courier service Shyp and taxi company Uber. "Uber and Fancy Hands are the two that I couldn't have my lifestyle without," Anand says. "I think that all of us who grew up in tech underestimate how big a deal it is -- now on-demand services affect how you eat, how you navigate the world, how you conduct your work, how you get help in an emergency."
The vision of online companies providing products and services that can be accessed quickly and efficiently isn't new. During the late 90s internet boom, delivery startups such as Kozmo and Urbanfetch raised hundreds of millions in venture capital for one-hour point-to-point delivery of items including food, DVDs and books. There was just one problem: both lost fortunes. They were, however, operating in an entirely different environment to today's marketplace -- one without constantly connected consumers, expanding mobile commerce platforms, frictionless payments, geolocated devices, efficient operating models and higher consumer expectation.
Take car rental. Vehicle hire once involved phoning an agency, making a booking, giving the agent your credit-card details, trying to fathom whether you needed any of the opaquely explained insurance add-ons, then queuing with other disgruntled customers at an airport counter for an inordinate amount of time before getting an uninviting vehicle available only in units of 24 hours.
Then, in the early part of this century, a new service called Zipcar became available. You gave it your information and credit-card details. It sent you a membership card. You booked online - in hourly segments; showed up at a car park near you; pressed the membership card to a sensor on the windscreen; and drove away. It wasn't a perfect service -- cars were often booked months ahead, people showed up late to hand over, vehicles could be left in a poor state -- but it was infinitely better than dealing with the likes of Hertz or Avis and worked out cheaper. (Zipcar was bought by Avis Budget for $500 million in 2013.)
Zipcar was a classic disruptive business: it made customer experience better and friction-free in an era when web services were enabling us to have DVDs sent to our homes rather than traipse to Blockbuster, pay our bills from our desks rather than spend our lunchtimes at HSBC and order groceries to be delivered when we got home from work rather than visit Tesco. Then on July 10, 2008, Apple opened the App Store. Three months later, Google launched Android Market (now known as Google Play). Others followed. These events -- tech companies allowing third-party developers to build specific services that could be downloaded and used on their platforms -- altered not only the mobile-software economy but, arguably, led to a fundamental shift in the way that goods and services are supplied and precipitated a sea change in consumer behaviour.
Within six years, apps had moved from a welcome distraction or practical helper to being something akin to a remote control for life: geolocated applications downloadable on to smartphones altered our ability to access taxis, find a dog walker or engineer a no-strings meeting with a sexual partner. Simple interfaces and seamless payment systems have made interactions that were once time-consuming and painful as simple as tapping a screen two or three times. And those applications are a walled garden -- you are interfacing with the internet but not going on the web. The interaction and, crucially, the data they generate is the developer's alone.
Now, an increasing array of apps on our mobile devices supply goods and services not tomorrow or the next day, but today -- or right now. Uber's silver-and-black lozenge sits on the smartphones of residents of cities from Santiago to Shenzhen and is clearly the unassailable exemplar of what has been termed the on-demand economy. According to a group representing those in the space (the industry organisation calls itself The On-Demand Economy), $4.8 billion of capital has been invested thus far in on-demand companies across transportation, payments, delivery, health and beauty, household services and entertainment. In November 2014, research by Steve Schlafman of RRE Ventures in New York City suggested the total amount of funding raised by on-demand companies in the first three quarters of 2014 was $1.37 billion. That excludes Uber's $1.2 billion round in June 2014.
Uber's business strategy is simple: it leverages mobile to aggregate demand. The company doesn't own any vehicles; rather it harnesses assets -- cars and telecommunications networks -- in order to bring together consumer demand for transportation via its platform. Large numbers of car owners with private-hire licences are available to drive customers. None of these drivers needs to have experience of the road system, carry cash or know where to find business: the Uber algorithm does this for them. On-demand services rely not just on customers being constantly connected, but service providers too. "It's been 14 years from the start of the company that became Google Maps to the iPhone and navigation [tech] to Uber," says Semil Shah, a San Francisco-based investor in on-demand services such as grocery-delivery firm Instacart and DoorDash, which supplies food. "The maps sit on top of the iPhone and Uber sits on top of the map. So within 14 years what has taken people years and years to amass as human knowledge has turned it into distributed knowledge."
In his book Makers: The New Industrial Revolution, former WIRED US editor-in-chief Chris Anderson argues that, if the first ten years of the web were about finding new social and innovation models online, the next ten will be spent applying these reforms to the real world. Wearables and the internet of things are part of this, but both are emerging technologies that have yet to have an impact on the way we go about our lives -- no one's behaviour has changed because of a Pebble Smartwatch. But smartphones allied to apps are influencing how we consume, and are changing our expectations about how and when goods and services are supplied. The buttons we tap on our devices have, for the first time, added a digital layer to real-world services. "With a smartphone in your hand you just expect everything now -- that's just the nature of moving away from desktops and PCs. Today you load up an app and it's there," says Rohan Sinclair Luvaglio, founder of Bizzby, an on-demand services company focused on tradespeople. Based in Shoreditch, it has raised $10 million in venture money.
Overslept, the kitchen is a disaster and you've got a project to work on that just can't wait? Bizzby will have a cleaner to your door within 30 minutes. Nothing in the fridge and you've promised to cook? Shuttlecook will deliver ingredients for two meals to your office before you leave for home at a cost of £10. Need some Nurofen, a tube of Colgate and some toilet roll? Try Jinn, a startup that describes itself as "an urban logistics and delivery platform that allows users to order anything they want from local stores and restaurants". (Words that would accurately describe both Kozmo and Urbanfetch.)
These services, which are based on access and efficiency, remove the middleman by shortening the value chain, minimising friction and speeding up consumer gratification in the way that you might be able to instantly read a book with a Kindle or listen to a piece of music via iTunes. "It creates a closed-loop experience by collapsing the value chain, including discovery, order, payments, fulfilment and then confirmation," says Schlafman. By matching service providers and customers, they create a customised experience that -- via ratings -- is, in theory, transparent, self-regulating and operates at scale. If we accept Uber as the ultimate on-demand service, it also means ignoring regulation.
"Uber really is on-demand, in the sense of the car only being sent when you demand it -- you can't schedule it," Shah says. "Postmates, which you can call a distributed courier company, is also on-demand -- you don't schedule when you want something. Other companies like Instacart and DoorDash are a little more scheduled versus purely on-demand. There's a distinction between truly demanding something and then having it supplied versus scheduling."
This distinction between "pure" on-demand companies and services that provide an instant solution while factoring in time until delivery is one that those involved in the space are keen to parse. The consensus appears to be that a service completed within an hour is "pure" on-demand. Yet this definition disregards the inherent obstacles faced by some services. For instance, Washbox, a London-based laundry service which promises to return your items within 24 hours, considers itself an on-demand service as it collects customers' laundry within an hour, if required. However, the nature of the service means that it can't wash and dry within an hour -- laundry is returned the following day during an agreed hourly time slot. "Lots of things can go wrong with laundry," says Danny Vaughton, cofounder of Washbox. "If you slightly shrink something. If it's late by ten minutes. A lost sock."
To combat these challenges, once an order is completed, Washbox users rate their driver and the launderette -- both of which are identified. Like most on-demand services, Washbox functions as a marketplace or interface: one side is the consumer, the other is the service provider. If the latter provides a good customer experience it doesn't just act as an asset in terms of reputation, it acts as marketing. "You don't see ads for these companies," says Jack Hidary an entrepreneur, investor, trustee of XPRIZE and the chairman of Primary Insight, a research service for investors. "They're doing it via word of mouth, they're doing it via great customer service."
On-demand platforms, like all service providers, have as a fundamental requirement a reliable, trustworthy workforce. In response to this, companies are springing up to offer background checks and verification of potential workers. Checkr is a San Francisco-based startup that began life in summer 2014 at Y Combinator, the seed accelerator based in Mountain View, and has raised $9 million from, among others, Accel Partners, Google Ventures and Khosla Ventures. Its API enables on-demand companies to check basic information about potential service suppliers, such as social-security numbers, driver records, address history and whether the applicant is on the Sex Offender Registry, or a terrorist watch-list. A standard search costs $25. Trulioo, a verification company based in Vancouver, detects fake social profiles by aggregating global identity information across the web. By doing this, it enables clients such as Verizon to identify whether social accounts are genuine, machine generated or fraudulent.
Building a network of reliable workers is the biggest challenge on-demand services face when scaling. Sinclair Luvaglio says his service has an average response time of 30 minutes as the company is currently focused on inner London. To grow, Bizzby -- which, like all on-demand companies, is effectively creating the supply -- will need to look beyond private individuals to other businesses. "We're not only curating everybody manually, we have a system in place to curate small businesses," he says. "You can think of it as we're building a very intelligent sort of Experian or Equifax system where we will say [to third-party companies] 'We are going to check your Twitter, we're going to check to see if you file your accounts properly, we're going to check if you've got good reviews everywhere...' That's the way we're going to be able to scale."
And the benefits of these reputation networks can be significant for growth. "In mathematics we call it a self-annealing process," Hidary says. "It's a system of getting better and better every day, because of the feedback loop. Feedback from customers means that you're giving a better and better customer experience every day because the bad guys are being cut out of the system."
Sinclair Luvaglio, who claims that Bizzby has 100,000 users, 5,000 service professionals and is fulfilling 5,000 transactions per week, makes the point that some on-demand services such as cleaning will see attrition in their supply of service providers: consumers will get to know the cleaner they're matched with and the market will settle on a deal that's cheaper for the consumer and more profitable for the cleaner, having removed the middleman. "We don't see that because a lot of people want to book on-demand, so it's more complex," he says. "We send the message [to the cleaner] and wait for the response -- are you free now, or not?"
Tom Allason runs Shutl, a London-based delivery startup that was bought last year by eBay Now, the online retailer's one-hour delivery service that's being trialled in Brooklyn. "Only 0.1 per cent of consumers in the UK or US have had a one-day delivery -- it's tiny," he says. "So consumers aren't expecting it. The impact of these companies playing in this space is going to change the number of people that have had one of these experiences and at the same time change consumer expectations -- and expectations only ever go one way." "We let you order basically anything," says Mario Navarro, the cofounder of Jinn, an on-demand delivery service in London. "A huge percentage of that -- 90 per cent -- is food. And I believe the reason for that is it's the only thing [consumers] have been used to getting delivered within an hour."
After entering their payment details, Jinn users can browse through the app and see a number of recommended retailers and featured restaurants with menus, which allows them to order directly from the restaurants. There's also a button that reads "Get anything": the consumer details what he or she wants and one of the 60 couriers who work for the company is dispatched to make the purchase. "We'll deliver it in under one hour," says Navarro, who claims the company processed more than £1,000,000 in transactions between its launch in April 2014 and January 2015. "We recommend certain places that we change, depending on popularity, but if you want to order stuff that isn't on the list of places featured on the app you still can."
The company delivers in London's ritzier neighbourhoods, such as Kensington, Mayfair, Notting Hill and St John's Wood, where it tends to be solving first-world problems: one user tweeted in January that she had cinema popcorn delivered to her door within 30 minutes -- hardly a necessity, but on-demand services are skewed towards those willing, and with the resources, to pay a premium. Jinn charges £5.95, plus ten per cent of the purchase price, although Navarro says that the aim of the company is to lower the fee. "We want to add partnerships with retailers -- we can charge the consumer less because we'll charge the retailer as well," he says.
Hidary argues that many on-demand services are in customer-acquisition mode, which explains, say, Instacart's $3.99 charge for a delivery. Once there is a large enough volume to the customer base, delivery services can leverage the customer relationship. "They are trying to get critical mass," Schlafman says. "They'll find ways to monetise down the road -- right now it's purely a land grab." "This is what we're going to see in the next two or three years," Hidary says. "These companies will begin to offer services that are not dependent on a retailer. So, for instance, Instacart could buy Good Eggs [an on-demand grocery company that buys directly from farmers]. If Instacart does that, suddenly they're getting supplied directly from the farm -- there's no Whole Foods in the mix. Guess what! Margins just went up tremendously."
Schlafman makes the point that New York-based online grocery service Fresh Direct, founded in 2002, took a while to become profitable, that Amazon Fresh charges a delivery fee in addition to Prime membership and that Good Eggs has just laid off 15 per cent of its staff in what's historically a low-margin business. "The jury is still out on whether these can be profitable ventures," he says.
Establishing a scalable delivery infrastructure is the ultimate aim of on-demand; it will enable whichever company achieves it the opportunity to release an API which other companies can then access and run their services through. Vaughton describes a company such as Uber or Postmates achieving this as comparable to Amazon -- on one hand the company has a huge consumer-facing business supplying competitively priced goods delivered rapidly, on the other an estimated ten per cent of its business comes from Amazon Web Services, a B2B service that allows other companies to scale using the Amazon platform. Indeed, the enterprise sector is also witnessing the rise of on-demand: Managed By Q is an office-servicing platform offering cleaning, maintenance and office supplies.
On-demand is speeding up a trend that's been noticeable in the retail sector for some time: the difference between commoditised, non-experiential retail like, say, office supplies, and the highly customised experienced at, for instance, an Apple Store. "Why are you going into an office-supplies store?" Hidary asks. "There's no experience or value there whatsoever to get folders or a ream of paper."
Increasingly, he argues, these kinds of standardised purchases will shift solely to digital channels, which means retailers handing over their most valuable asset -- customers -- to delivery services and other on-demand companies. "These [on-demand] companies took over the consumer relationship," Shah says. "I buy my groceries from Instacart, I think less about Whole Foods and Safeway. Instacart could snap their fingers and almost assume what I want to have in my fridge."
Shah points out that although Amazon is a data company that seeks to know everything about consumers and target them accordingly, one of the things it doesn't know is a customer's precise location -- just home addresses. "Google knows, [but] they do not know what we eat, which Instacart knows -- and Instacart doesn't know where we go to eat out, which other companies know."
These fractured data sets might, Shah suggests, mean that there will be some consolidation in the marketplace and that eBay, Google and Amazon will start purchasing on-demand businesses in certain territories. Since 2013 each has been trialling one-hour delivery in selected US cities via, respectively, eBay Now, Google Now and Prime Now. Geographic fragmentation will mean that there's room for the largest on-demand laundry service in, say, Edinburgh, to be different from the largest in Munich. Drones, too, may play a role: Amazon is testing them in Cambridge as part of its Amazon Prime Air project; Deutsche Post DHL is examining the viability of drones to deliver medicine. But in the coming struggle what will count -- in every territory -- are assets on the ground. In November 2014, Amazon announced that it had rented 44,000m<sup>2</sup> of space in the middle of Manhattan. The following month, it announced Prime Now, its one-hour delivery service. Deliveries within the hour cost $7.99 a month and two-hour deliveries are free. "Where is DHL? Where is TNT? FedEx? UPS?" Hidary asks. "Are these companies aware that this is happening? I believe that these companies need to begin to think about acquisitions in this space."
The digital layer being applied to real-world services means that most on-demand platforms -- Google, Amazon and iTunes -- have a clear goal: leveraging consumer data. "It's having the big data to know the 500 most-bought items by people in a particular zip code," Hidary says. "Once they know that they can then make a business data-driven decision to say, 'We are now going to offer those products from a cheaper source. We're not going to Whole Foods for the items, we're going to XYZ.'" "We want to give [retailers] access to our analytics and data about their customers, and since we're a technology company we are well prepared to do that," Navarro says. "Once we start partnering with those restaurants they're going to get valuable information and they'll be able to increase their volume even more since we're going to lower delivery fees."
Radio 4's Today programme ran an item on January 8, debating the news that waiting times in hospitals in England were at their longest for more than a decade -- seven hospitals were having such difficulties that they had assumed the status of "major incident". Examining the surge in demand over Christmas, Keith Willett, director for acute episodes of care, NHS England, pointed out that the relentless increase in demand for urgent care wasn't just down to a lack of funding. "It's almost like there's been a behavioural change in the way people use urgent care in the NHS," he said. "I think we have a 'right now' society - people are used to getting an immediate response to what they need. And within the emergency-care system that means dialling 999 or going to A&E."
This shift in expectation, argues Kit Yarrow, a professor of psychology and marketing at Golden Gate University in San Francisco and author of Decoding the New Consumer Mind, is down to the malleability of the brain. "The more you use technology, the more impatient you are going to be, because our brains have adapted to technology and expect things to be fast and easy and abundant," she says.
Yarrow makes the point that, as well as being evangelical about the upside of their products, developers shouldn't underestimate the power of simplification -- removing the unpredictability and lack of control that many consumers avoid. "Taking bad things out of people's lives is just as important as adding good things," she says. On-demand services do exactly that and the winners will be companies that not only provide a great customer experience, but can see over the horizon and anticipate consumer needs. "3D printing, deliveries... whatever it is," Sinclair Luvaglio says, "I think people are growing up with smartphones in their hand thinking and believing and expecting -- you tap a button, you get something in minutes." Greg Williams is deputy editor at WIRED. He wrote about Pussy Riot in 03.15
This article was originally published by WIRED UK
