Five Lessons from the App-Driven Economy

By Scott Kirsner |  December 1, 2014

What’s something your company does — or something you need done right now — that you’d like to happen with the click of your smartphone screen, and no additional effort?

Whatever your answer, it’s likely that there’s a startup already doing it. You can get a manicure in your office, have someone swing by for your dry cleaning, have your hair cut in your hotel room, or ask a bike messenger to pick up ten copies of a business book for your team and deliver them to your off-site.

Here’s the list of home services, for example, offered by the startup Handy, which has raised $45 million in venture capital funding since it was founded less than two years ago.

So what do innovation executives need to understand about the push to app-enable any service you can imagine?

1. Almost All of These Services are Creating Networks of Contractors

Startups like Handy or Uber offer a customer’s job request to a network of contractors, and the first to accept it gets it. “It’s not an employment relationship,” says Handy CEO Oisin Hanrahan. “If they like it, they can take it.” Keeping the contractors happy with sufficient work at good rates is obviously a challenge, but the contractor relationship allows the startups to avoid the costs of full-time and part-time employees. (Lawsuits have been cropping up, however, contending that these workers should be classified as employees.)

2. Customers Don’t Want to Talk to the Call Center. They Want to Schedule on the Web or with an App.

Customers hate to wait on hold to schedule services, and every inbound call to a call center rep is expensive. Check out how simple Handy makes it to schedule a home cleaning.

And Hanrahan says that customers increasingly want a service performed within 24 hours. “When we started, the average booking was three days away,” he says. “Now it’s less than 24 hours away, and we’re not going to see that number go up. We’re seeing consumers become more and more demanding. Next day is where it’s at — and we can do same day in some ZIP codes in New York,” where the company is based.

3. The Four-Hour Window will Kill You.

Who likes to spend half a day at home, waiting for a service professional who may or may not show up? Services like Washio let customers specify a half-hour window when their laundry and dry cleaning will be picked up or dropped off. And most of these apps offer “countdown clocks” and maps showing you when the person will arrive at your doorstep. (See image at right, from Dispatch, a startup that makes software to support on-demand service delivery.)

“People want certainty and convenience and they’re happy to pay for it,” says Hanrahan. (Meanwhile, Comcast has just begun testing a “Track Your Tech” feature in its mobile app — in a single market. The feature is designed to give customers a 30-minute “heads up” within the two-hour service window they’ve been given.)

4. Feedback is Built-In.

Rather than sending you a survey six weeks later, most of these startups make feedback a central part of their app. Every time you get out of a vehicle, Uber asks you to rate the driver. Since these companies are relying on contractors — and trying to build loyalty after that first sample — it’s important for them to weed out bad apples quickly. With Uber, if a driver drops below 4.5 stars on the company’s five-star rating scale, he or she is at risk of being cut off from future work.

5. Customer Experience Produces Positive Word-of-Mouth.

To understand how these on-demand services startups sand away the rough edges and deliver a customer experience that you’ll feel compelled to tell your friends about, you’ve got to try them. Check out services like Uber, Postmates, or Handy to see where the bar is being set.

Not every company will want to build its own technology to compete in the world of app-driven services. Startups like Dispatch, Trak, and Breezeworks offer different kinds of software to help manage networks of service professionals or delivery people.

“We’re seeing an evolution of customer expectations as startups create the Uber for this and the Uber for that,” says Avi Goldberg, CEO of Dispatch. “Everything is about customer satisfaction right now.”

A Remote Control for Real Life

The venture capitalist Matt Cohler of Benchmark Capital, one of Uber’s investors, has a fantastic saying: “Great mobile apps act like remote controls for real life.”

What would change about your business if you — or a rival — built an app that put your customers in control?