on-demand business model

What do you consider to be the most talked about and controversial tech companies today?

I’m guessing one of your answers was Uber, Airbnb, or even Instacart.

Why these three companies, and what is the commonality between them?

The answer is that they are all on-demand businesses which are disrupting traditional business sectors. Businesses like Uber focus on increased convenience for consumers while utilizing assets that people already have, like cars or extra bedrooms. However, despite that most on-demand businesses are hardly 5 years old, they have seen investments over $4.8 billion in capital.

 

On-Demand Investments

This new model is giving rise to a unique economic framework called the “on-demand economy”. On-demand business models are powerful because they are catering to the changes in customer behavior; Millennials and Gen-C have an appetite for greater convenience, speed, and simplicity that an on-demand business model takes care of perfectly, especially when combined with an excellent app which has great user experience and API.

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The Perfect Example: Uber

Uber is undoubtedly one of the most successful on-demand services. With drivers now located in over 60 countries, their success is a sign of things to come.

But how did Uber achieve such success? Let’s take a look at their business model:

Uber Business Model

Uber was born of industry inefficiency; Third-party transportation has never been user friendly.

You stand on the road side, wave your hand, and hope a taxi would stop. Yes, it is as bad as it feels. Then once you get into a cab, you don’t know what it will cost you until you get to your destination. On top of that, you have no idea who the driver is, leading to fearfulness of passengers as to their personal safety

This is a very different business model compared to Uber.

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Now, in most cities across the globe, you can get an Uber whenever you want one. You don’t have to stand on the road side, wave your hand, and wait for a while. You no longer have to guess what it will cost you. You can see who your driver is beforehand. No, now transportation, its costs, and your driver’s rating are simply a click of the app away.

So why does this work? At the heart of all this is the on-demand business model.

There are a lot of people who simply don’t own a car and who’s transportation needs would suffice with a cab. Then there are those who can’t drive themselves: kids, elderly, etc. There are also those who don’t want to drive.

Uber has grabbed this opportunity with both hands and executed their strategy brilliantly through an aggressive marketing and sales model. Even with the cab companies arguing their business is suffering, the verdict is out: Passengers prefer the convenience of Uber.

But…what exactly is an on-demand business model?

To put it simply, it’s Uber for (Blank).

More specifically, it is a business model in which you fulfill customer demand via the immediate provisioning of goods and services. You can read this article by Mike Jaconi, co-founder of Button, to know more. The on-demand business model apps also tend to meet most of the commonly help best aspects and practices of app design, no matter the platform.

On-Demand Business Model

Companies who are nailing it with on-demand business model

#1 Jugnoo: Uber for Auto-rickshaws

In India, auto rickshaws are the most common way of commuting in tier I and tier II cities. Daily, over 200 million travel in autos and the number is expected to reach around 500 million by 2031.

Jugnoo used this data to create Uber for autos. With Ola Cabs and Uber capturing on-demand taxi market, Jugnoo ventured to capture on-demand auto-rickshaw segment. They call it Uber for the masses.

Jugnoo Rick Shaw

Their value proposition is offering affordable rates and easy booking via the Jugnoo app. On the other side of the business, the auto drivers earn more.

The company has expanded in the recent years with Jugnoo Meals (a food ordering service) and Jugnoo Fatafat (hyper local grocery delivery).

#2 Laundrapp: Uber for laundry

Laundrapp On-Demand

Based in London, Laundrapp is an on-demand laundry service backed by £1.5 million of seed funding from Rupert Hambros and serial entrepreneur Dominic Perks. They offers free collection and delivery and pricing options starting from £2.

#3 Urban Clap: Uber for local services

Urban Clap is a leader in helping people out find local services. Although its business model is still in the development phase, it is operating somewhere in the landscape of on-demand business model.

UrbanClap On-Demand

Urban Clap helps one find and order all kinds of services ranging from beauticians, cleaners, nutritionists, tutors, freelancers, trainer, and anyone else you need to get an immediate task done.

They’ve raised $10 million in series A funding in June 2015, and now offers on-demand services across 40 categories.

#4 Bite Kite: Uber for meals

Bite Kite On-Demand

Bite Kite delivers on-demand meal delivery at your doorstep within 5 to 25 minutes making it the quickest meal delivery service in the market. It currently operates in Cambridge and Somerville Massachusetts, USA. With plans to expand to other US cities.

Bite Kite makes it simpler to order [and even deliver] food by standardizing menu options. There are three meal options and one drink option reducing the time of reviewing menu options.

Moreover, to make delivery efficient, all delivery personnel are assigned locations based on an algorithm. With this technology, they have also cut the delivery time by 50% and personnel don’t have to make multiple trips for food delivery.

The future of on-demand economy

People are always skeptical of disruptive technologies and business models. The on-demand economy model, which has grown by leaps and bounds in past five years, is a big part of that.

Is it just hype? Is it a bubble? Is it a passing trend that won’t last more than a decade?

Even though such questions are relevant, data is equivocally in the support of on-demand models.

One of the most amazing thing about on-demand business models is that there are so many early adopters and great ideas floating around out there. Even in growing economies like Brazil, India, South Africa, and China, people do not shy away from using technological infrastructure that drives on-demand businesses. In fact, Uber has one of its biggest markets in China and India.

On-demand businesses are revolutionizing sectors which were historically the last ones to innovate: grocery, restaurants, laundry, home services, etc.

There are also speculations that legacy companies including the Fortune 500 will try to partner or acquire disruptive on-demand businesses. Amex has already partnered with Uber. Jeff Bezos has shown his interest in several businesses. A survey conducted by The On-Demand Economy of 18 high-profile industry suggests that grocery, home services, and local events are going to see explosive growth in the next three years.

With all this, for now, there’s no doubt that the future of on-demand businesses is bright.





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