Dear Reader,
I don’t often write about the planet, even though it is a subject that I am deeply passionate about. I have been vegan for about sixteen months now, and have run a vegan company for nine months. But I don’t speak about the environment often because I am a big believer in “Show, don’t tell”; this is the idea that to encourage change you should show people how easy it is to embody that behavior, so that they ask you questions about it, rather than you telling them to change.
Today I’m breaking this rule of mine to tell you not to eat fish. This is a divergence from the common narrative of “don’t eat ruminant meat because it produces methane and carbon dioxide”, but it is an important point. I say this because I just watched Seaspiracy, a new Netflix documentary about the enormous damage that fishing does to the worlds oceans. As much as we talk about the Amazon as the Earth’s lungs, the ocean actually produces 50-80% of the world’s oxygen. Protecting the delicate balance of the ocean’s ecology is essential to our survival on this planet. The best thing we can do to protect it? Stop eating fish.
Anyway, that’s my rant over. I hope you watch the documentary, and cut down or cut out fish, and I hope you enjoy the short piece below.
Have a boss week,
Callum
Sticky Business
I often think about business models in terms of how sticky they are. “Stickyness” is term for how easy it is to get an equivalent good or service from an alternative supplier. If you can’t get an equivalent good or service then the company’s business model is sticky.
For simple products and services this is a pretty simple concept. A really good product, that is blindingly better than the alternatives, is pretty sticky, but not as sticky as a subscription model for that item. For example, Nescafe have a pretty sticky business model – they sell you the machine for cheap and hook you in with selling proprietary capsules that you can’t get from anywhere else.
For network companies this equation becomes more complicated, but still very useful. Uber isn’t very sticky for riders because they can get an equivalent service from Lyft or from a taxi company. Equally, Uber is a network company, connecting riders and drivers – if Uber was sticky for drivers then all the drivers that ever drove for Uber would want to come back a drive for them again, making it harder for Lyft to get a foothold in the ridesharing market.
But Uber isn’t sticky for drivers, as it doesn’t offer them anything extra over Lyft or any other new ridesharing app that might raise enough capital to market to riders and drivers. I’ve seen Uber drivers flip between Uber and Lyft to see which next ride would give them the best price. As a result, ride sharing apps are stuck in the middle of a race to the lowest cost to riders and a race to the highest wage to drivers.
On the other hand, AirBnb has built a network that is sticky. People go to AirBnb because they know that they will probably be able to find a good homestay there. People don’t tend to look at other websites because other homestay sites don’t have as much choice as AirBnb. On the other side of the equation, property owners list their homes on AirBnb because they know that their potential visitors use the site, and if their home was on a different site, they would be less likely to be able to rent out their property. Sticky.
The obvious difference here is between a full marketplace where everything on the market has individual value (AirBnb) and a commodified service portal, where there is one thing you can buy (maybe multiple when you count Uber X and Uber XL). Commodities can be directly compared which causes a price race to the bottom – full assets have more complex value propositions, making comparison difficult.
But the idea of stickyness is even more complex when we think about food delivery apps as there are three players in the network. The restaurant part of the value chain is a full asset, but the driver part is a commodity. This mix creates a complex navigation of trying to get the best restaurants on the app, as well as paying drivers enough to get them to want to deliver, while keeping prices down for customers. But are these apps sticky?
So far it seems not – I have three food delivery apps installed on my phone, and will flick between them until I find something I like. But it might be possible to make these apps sticky. Restaurants, like Uber drivers, will put their menu on multiple food delivery services to maximise their chance of being bought from – app fees will just be factored into the prices they charge. But the drivers’ experience can be changed to make it sticky. I propose the following three changes to make food delivery more sticky:
- Incentivize the drivers to stick with the app – you could give a bonus to drivers who accept >90% of requests within a 4 hour period to disincentives app switching.
- Reward extra value – what customers care about is speed of delivery, so you could reward drivers that deliver more quickly. (Though this will likely cause drivers to take unnecessary risks while driving. As with all of these, someone needs to think through the unintended consequences.)
- Build a better experience for drivers – allow drivers to track their distance cycled, allow them to plan breaks in their day, and possibly allow drivers to meet up with other drivers in a central location, and plan this wait with their friends into the routing software (more time with friends, less time waiting outside a restaurant).
Each of these factors would make the app sticky for drivers. If drivers get a better experience from delivering for one company, they will try to spend more time delivering for them, and less time delivering for another. To make up for an inferior experience, the second company will have to pay the driver more, and will have to pass that cost onto the customer eventually, causing the customer to be less likely to pick the second company in the first place, accelerating the cycle of collapse for the second company.
In traditional business lingo, this idea is often called the barrier to entry – but in the world of network applications, I think sticky is a better term.
The higher up an identity is in your identity stack, the more likely you are to act in line with that identity.
Longreads
First up is a very interesting read, if you are are a nerdy psychologist like me, about a Baysian theory of willpower. Second is a neat short read about three types of burnout. Finally, a heart warming story about a man who ended in Maine when he thought he was in San Francisco.
Have a great week!
Callum Macdonald 