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The share economy: The Disintermediation trap

Yet another darling of the so called share economy has called it quits, home services startup homejoy has announced they will be shutting down operations.

This gets to a truth about the marketplace disinter-mediation that is all the rage these days a concept that is core to the very reason I started working on the AgilEntity framework back in 2001. I realized then that technology enabling the removal of various types of middle men coupled with the elimination of mobility requirements for getting work done would lead to a much more flexible workforce.

After I'd built the framework I teased these ideas in an email from 2006 which I later transcribed into a blog post on the coming "telepresent workforce".

In this post I predicted a future of offices as flexible work locations (what we see has emerged in the form of co-working office startups) but more change will come as companies become fully distributed in nature, allowing their existing employees to work more flexibly...particularly as knowledge work continues to eat up the majority of jobs in the workforce.

Earlier this year I followed up on that posting and predict a future of interesting upheaval of the real estate market in large cities where telepresent workers free from having to commute to offices leave companies without reason to keep tall buildings on their books. This will lead to a drop in real estate prices that will allow conversion of many of these buildings to living apartments and condominiums.

This change will be precipitated by businesses that are leveraging fully action oriented workflow based foundations that allow leveraging fully emancipated workers who almost never need to come to any physical "office" to do their work.

Still for the companies that have emerged to use technology to disintermediate exchange between a provider and a potential customer in the physical or virtual world a danger remains, the disintermediation trap is this danger and homejoy has fallen right into it.

"Homejoy cofounder and CEO Adora Cheung told Re/code that the “deciding factor” was the four lawsuits it faced from cleaners who claimed they were misclassified as independent contractors. That’s likely true — the liabilities and legal costs associated with the suits were no joke. But there’s more to Homejoy’s demise: its customer acquisition model simply didn’t pencil out, former employees and industry sources said.

Former employees tell FORBES that Cheung and the startup pushed relentlessly for high growth numbers instead of fixing its poor retention rates, which persisted both because Homejoy relied too heavily on deal sites like Groupon for new customers and failed to improve its core service because it couldn’t train its independent contractor cleaners."

 The problem with retention rates for any business in the space of marketplace disintermediation will be quite present since as a thin layer middle man the digital service is no longer needed once it has connected customers with working agents who they find are good for recurrent business.

This is why taskrabbit is having a hard time.

This is why elance, 99designs and many other such companies are going to have a tougher time than they expect.

Services that parsel out sub tasks are likely to do better as the creation of a rapport doesn't return a benefit to the client in the same way it does for services that require humans to be mobile ...for example, amazon's mechanical turk.

Uber interestingly is mostly isolated from this effect since Uber drivers do not become married by service to their customers as there is a high level of randomness involved in how customers use the service and place is a dynamic dimension that is static for the other types of services (the customer and the taskrabbits/elance have fixed locations they live from and once they establish a rapport what need for taskrabbit?)

This is why at WorkNetz (​ in stealth) the focus has been on harnessing a companies *existing* employee base first to emancipate them in critical ways that can radically improve business performance. (Contracting reach out from this basis is enabled easily)

Emancipating an existing workforce has several key advantages:

1) Company technical and process dna stays locked up, existing workflows aren't automatically leaked into a random contractor soup. Preventing the regression to the mean with other companies providing similar services that also use disintermediation technology.

2) Cultural dna stays locked up...a big part of where people work is working with others that feel the same about things that they do, that exists already in many companies and switching over to all contractors as employees loses a great deal of that character giving no contractor any feeling of place or loyalty.

3)  the service doesn't have to deal with the legal problems of contractors attrition since by default all your workers are already de facto employees, you are just leveraging the services provided by worknetz to maximize the value landscape you can derive from them while also "emancipating" them of the restriction of hegemony of time** and place that plague traditional employees forced to commute to specific places at specific times to be magically productive.

It is clear why the AgilEntity framework  which implements the action oriented workflow paradigm developed by 2005,  is the perfect middle ground for market place disintermediate based also explains why it was important to create a generalized solution for workflow management that worked on any type of vertical...not a purpose built disintermediating tool as all the above were designed to be....that focus enabled them to build services relatively quickly but left them horribly vulnerable to the dynamism of the customer base indicated above under a new contractor heavy business model.

The 34 slides give the 10,000 foot view in a few minutes:


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