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Cut the ceremony

Posted by Warwick Eade

Cut the ceremony - by DeskDirector

Software is eating the world. The world’s largest taxi company owns no cars. The largest provider of overnight accommodation owns no hotels. In 2017, two companies took a whopping $120 billion in advertising spend despite not owning a printing press or a TV network between them.

All these companies were founded as modest startups in the last 20 years. Many of the businesses they are displacing have been around for over a century. 10-year-old Uber has the same $60 billion valuation as 100-year-old General Motors.

How did this happen? It seems counter-intuitive that a company like Uber, which only owns software, is worth as much as GM, which owns 100s of huge factories and plants. How do small software startups founded with less than five employees ‘steal’ the markets from billion dollar incumbents?

Like all counter-intuitive truths, the answer lies in what we think we know and what is actually going on.

We are still 95% disorganized

We forget that the world is mostly disorganized and random. For 500 years, every generation in the Western world has seen an increase in knowledge and learning during their lifetime. Every generation has used the knowledge and learning of the previous one to create technology that brings order to our lives. Yet every generation mostly thinks their innovations are the final few. The job is done, now we have order. 

This is, of course, nonsense. Yet we think this way because of a feature of our brain called availability bias. We are drawn to trust information that is easily recalled (i.e., available) over better information that is harder to recall. Therefore, when we consider – “How well does the traditional taxi service work” it’s easier to recall what occurred in the last few taxi rides rather than what didn’t. It’s difficult to imagine tracking a taxi coming to pick you up if you have never done that. That is until you take your first Uber and that now is the new norm on organized travel.

We are way more disorganized than we can imagine. Huge gains are available when software is appropriated to bring order to even small elements of our lives. Uber is a $60-billion-dollar proof of that.

Uber’s organizing of information in the taxi market is worth $60B

Cut the ceremony - Uber example

Before Uber, to get a ride, I had to first choose a taxi company. I called them and explained where I was and where I was going. The taxi company chose an anonymous driver for me and dispatched that driver to their anonymous passenger. Then dead air until the taxi arrived 5 – 15 minutes later. I had to repeat to the driver where I wanted to go. I only found out what the fare would be at the end of the journey.  I then had to settle the payment before I could leave the cab. It was almost impossible to report a poor driver or pass on praise for a great driver. I was a regular taxi user in a large city so I repeated that process over a hundred times a year with the same taxi company.

With Uber, I get an estimate of the fare. I get to see the name and picture of the driver as soon as the booking is made. The driver gets to select my job. The driver already knows where I’m going. Adn we are in this together because we both have reputations on the system to maintain.

Software eats the world because it can organize large industries and markets that we never realized were disorganized.

We were disorganized. We didn’t know it. New tech came along and organized us. Job done. Not quite.

The technology is hard but not that hard

Uber’s technology is not their own. The Internet they communicate over, the smartphones they run on were all available to the taxi companies. So why didn’t they write Uber app? They already had the customers turning up daily? The core booking app could have been written for less than $1M. A working MVP could have been out for less than $100k.  It’s because like us, they saw the visible order they had created and not the invisible disorder they tolerated.

Just because you don’t see disorder doesn’t mean it’s not there. We have accommodations for the information gap & disorder we live in. These accommodations are seen in the ceremony and institutions of business. While new tech can alleviate the disorder, it does not to address the ceremony we are used to and the institutions built around the ceremony. 

Before Uber (and smartphones in particular), we had a ceremony where we phoned a taxi call center and verbally explained who we are, where we are, and where we wanted to go. That call center passed this information onto one of a pool of taxis they had organized to be on hand.

To maintain the ceremony, we built institutions. Taxi companies are an institution. A taxi company must have a pool of cars, a pool of drivers, and a call center.

With the smart apps, we no longer need the ceremony of the phone call. For many people that was hard to let go. Institutions are sentient. They know redundancy means extinction and they will fight the new technology.

For the non - tech incumbents, like taxi companies, creating technology is always a hard task. What makes it nearly impossible is that there is a compelling desire to take ceremony and institutions with us into the new tech regardless of the need. It’s the hill too far. It’s why the taxi companies have ceded their industry to Uber and the automobile companies the same.

It’s the story of the humans that is interesting. It is the humanity's response to technology and overcoming obstacles that allowed Uber to steal the industry.

People are the problem, again :-)

Why is this so hard? The first problem is that once people become accustomed to a particular ceremony, they develop trust in it. It’s difficult to change. Any new technology that removes ceremony has to be significantly more beneficial for the change to happen.

The best tech companies directly address this in their design by building in a faux ceremony to keep it familiar.

The second problem is even harder because institutions are sentient. While changing a ceremony is uncomfortable to people, removing an institution means its death. The institution is alive, knows it is at risk and will fight for its life.

Uber and AirBnb have beaten impossible odds to be adopted by customers as quickly as they have. Yet their biggest hurdles to date have been beating off legal challenges from the institutions they are killing off. It is a life and death struggle.

It is also not black and white. Uber does away with the need for taxi companies. But the labor protections provided by working for a taxy company are important. Some institutions are worth saving. But that’s a different essay. 

What should an MSP do?

Managed services are no different from taxi companies and hotel chains. There are ceremonies that exist that no longer add value. Institutions that don’t pay their way.

Innovation will be led by companies that look to technology to tear down institutions and remove ceremony.

We have become obsessed with using technology to speed up what we do rather than doing new things altogether. If we don’t change, we will be caught out and someone will steal our marketplace.

What should go?

I think there are some prime candidates. Legally documenting an IT project is a redundant ceremony. I would argue that it has been redundant from the very beginning. Trillions of emails later can you remember anyone that successfully enforced the legal disclaimers that pollute all our messages.

Physics envy should be abolished. The conceit that every project will complete successfully is one of the most wasteful we have. All project plans should have measurable milestones. If those milestones metrics are a fail, then there should be a previously agreed upon exit plan.

If the tech services marketplace had a robust reputation system would there be any need for an MSP at all? I wonder. We will fight that because the MSP, as an institution, does want to die.

More reading

These ideas are heavily influenced by the work of Clay Shirky who has been writing about this for more than ten years. I suggest you read and watch as much as you can. You could also argue that tearing down ceremony and institution is the business end of Disruptive innovation theory. Clay Christiansen and Tony Ulwick are great sources of truth.

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