At the touch of a button, you can request a ride, get groceries or dinner delivered to your door, or have your Amazon order delivered in two hours or less. It’s safe to say a new era is here — we are living in an increasingly on-demand world.
With every three out of 10 American workers employed by the gig economy and new on-demand services appearing daily, there’s no denying the world is trending toward increased convenience, autonomy and flexibility. More than 22.4 million consumers use on-demand services, netting $57.6 billion in spending annually. Online shopping currently leads the on-demand revolution with $36 billion spent, with transportation coming in a not-so-close second at $5.6 billion, followed by food and grocery delivery at $4.6 billion. And the result of this impressive growth in spending? Researchers believe by 2020, almost one in five U.S. workers — the equivalent of 31 million people — will rely on the gig economy for employment. Is the ecosystem ready to support life on-demand?
The future is here. Now what?
The gig economy, and every company born out of it, has propelled consumers to become accustomed to a vast array of services like ride-sharing and food service on-demand — but it doesn’t end there. In addition to what is already available, we can expect an explosion of additional services being offered on-demand.
Imagine a world where healthcare is available on-demand. Doctors and nurses will come to your doorstep (at home or your office), a veterinarian will come to your home to care for your beloved pet instead of having to take your dog to a scary office. In terms of beauty services, stylists will come to you for hair appointments and manicures instead of requiring you to go to the salon. By the way, on-demand doesn’t mean the services have to come to you. It could also mean that you could go to a service location but not have to wait in line because the schedule will be created automatically based on your movements. A nearly unimaginable on-demand world of convenience will be available at the touch of an app — until we hit an inevitable tipping point.
Hitting the on-demand tipping point
Entrepreneurs looking to enter the market and established companies will continue to take advantage of consumers’ infatuation with real-time on-demand services. However, the economy will eventually reach a point where it can no longer support the growing inefficiencies caused by an outdated and weak back-end infrastructure. The inefficiencies are created by companies and industries implementing services with the fastest and most convenient outcome to capture market share, as opposed to the most efficient and effective method to operate the service.
The cost of on-demand: Nearly $58 billion and inefficiency
As growth accelerates, we need to look at the cost. Society, including the consumers using these on-demand services and the companies providing them, need to ensure this trend does not create little-discussed but very impactful side effects — massive waste and inefficiency. The average consumer does not always think about what is happening behind the scenes to provide their products and services on-demand. To get a ride within minutes from a company that only uses contract drivers, there are often more vehicles idling around the area than necessary causing congestion, pollution and overall inefficiencies within the ecosystem.
If we are going to continue ordering rides on-demand, we need to cut the number of cars on the road and ensure they are working intelligently together. If we are buying in real time with a delivery to our front door, let’s make sure companies plan efficiently to decrease the number of delivery trucks on the road. The advantages and conveniences of the on-demand economy require companies to ensure back-end operations are just as efficient and convenient as the services they provide. Data does not show that happening.
When convenience outpaces infrastructure
In order to fully realize life on-demand, gig companies must optimize the systems currently in place instead of simply adding even more unnecessary capacity. Although it will be difficult at first, companies will need to shift their focus and put as much emphasis on back-end and operations execution as they currently do on the front-end, consumer-facing aspects of the business.
When planning or contemplating a new on-demand service, companies and governments must take into consideration the resources needed to fulfill that demand and ensure it is not exceeded solely to increase convenience at the cost of efficiency. The answer: restructure current “gig-based” models (i.e., using contractors who choose their own job) into resource-directed models (i.e., controlled and actively scheduled resources that work based on a schedule provided by the company). Companies using contractors such as Uber, Lyft and Postmates are prime examples of achieving growth through over-capacity versus operational efficiency.
So what’s the difference with these models? Resource-directed models ensure on-demand services are operated efficiently through dynamic optimized scheduling. This means that when you click your ride app, the one most applicable driver will be notified to pick you up instead of a bunch of drivers getting your request (and only knowing your pick-up location and not your destination). The system will take into account your preferences, the drivers’ preferences and the company’s goals, creating an efficient schedule for all in real time and with less waste.
If you take that to the next step, you could actually optimize between networks, creating a coordinated efficient fabric of resources. While there may be more than a few companies that offer deliveries to your home or workplace, these services will be coordinated through a few efficient scheduling networks that make sure resources are used efficiently for the good of society and the consumer — not just the company operating them. This is not to make for a feel-good, “kumbaya” world, but one where we simply allow sophisticated technology to help us be intelligent in our decisions to the betterment of us all.
The future of on-demand is in your hands
In order to reach this on-demand utopia, companies, governments and cities will need to recognize and address the looming inherent risks in IoT, smart cities and on-demand services. However, it will be the will of the consumers that has the final say. The on-demand economy was created by consumers’ desire for convenience and control, and until they demand improvements, things will continue as is.
Take airlines for example. Consumers continue to complain about cancelled flights, poor service and other issues, but planes are still full. United will not be persuaded to provide better customer service unless people actually start boycotting its flights. Uber won’t improve its internal issues until consumers stop using it and the company feels it financially. We won’t see improvements to the on-demand model until consumers demand increased efficiency and accountability from their beloved Lyfts and Amazons. Actions speak louder than words, and $57.6 billion spent by consumers for on-demand services is saying a lot.