Solving The On-Demand Service Industry’s Biggest Problem

May 12, 2016

8:00 pm

The second wave of on-demand companies may be headed towards a big problem.

First-wave unicorns have dominated headlines for years, serving as role models for other up-and-coming on-demand companies. Second-wave service platforms have modeled themselves after these tech giants, trying to navigate the same regulatory tightropes by taking a hands-off approach. Instead, these platforms function as layers of technology that facilitate connections between different groups of people. At least, that’s how the argument goes.

The trouble is that not everyone gets to be a unicorn, and many of these second-wave platforms are struggling to make the economics of the on-demand model work. This goes beyond striking after the opportune moment has passed – these second-wave companies have been unable to reconcile the nature of on-demand model with the expectations of the service sector. Let’s examine how this is.

Hands-Off Training

Fast Company’s Sarah Kessler took the on-demand model to task in March, highlighting the difficulty of training your customer-facing employees when, technically, you don’t have any. Kessler writes of failed on-demand cleaning company Homejoy:

“Because all of the cleaners were classified as contractors rather than employees, and Homejoy was just playing matchmaker, [the company] wasn’t legally allowed to provide much training or guidance.”

To their credit, many on-demand platforms provide their contractors with some kind of orientation: an introductory guide or training videos. But as Kessler illustrates in her article, the on-demand model hinges on a philosophy of keeping contractors at arm’s length – which can result in inadequate worker education, support, and a less-than-stellar customer service experience.

Recently, a number of on-demand platforms have pivoted their businesses, aiming to improve the quality of their services by taking a more involved approach. For some, that means converting their independent contractors into full employees. But this approach may not work for everyone – namely direct selling companies.

Educating & Supporting Your Workers

Even with this information, direct selling companies haven’t let the distinction between employee and contractor stop them from providing their independent business owners (IBOs) with superior training and support.

Take Cabi, a clothing and accessory company operating under a direct sales model. Founded in 2001, the company has merged fashion with ‘social selling,’ empowering its global network of independent stylists with a comprehensive training and support system. Cabi holds weekly training calls, and representatives are expected to attend bi-annual launch events for the latest product collections. The company provides online home office support, personalized websites, and a wide range of training materials and promotional tools.

Importantly, Cabi recognizes that training is key to delivering stellar customer experiences. Cabi CEO Lynne Coté, discussing the company’s recent success: “Our training is unlike anyone else in the industry, and our women are given all the tools [they need] to launch a successful business.” That training equips Cabi stylists to provide expert-level fashion advice and high-touch service to potential buyers—something that “retailers only provide that at a significantly higher price point.” The result is a delightful and memorable buying experience.

This isn’t the on-demand model’s approach to training; it’s something entirely different.

Proof of a Better Way

Examining what makes the successful companies stand out in an on-demand service market, one thing is clear: we need to embrace new solutions to solve new problems. The issues that surround on-demand service companies are unique, but not unsolvable. Fully embracing their IBOs is only one part of the solution. These companies need to have the training and support they need to fulfill that original vision of superior customer experiences.

Obviously, the second wave of on-demand companies can learn a lot from their predecessors – but we need to remember that the pioneers of the on-demand economy also don’t have all the answers. Maybe the solutions we seek are already existing in similar markets, allowing for new solutions to be created altogether.

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Brent Warrington is the chief executive officer of Hyperwallet, a purpose-built outbound payments platform. He has more than 20 years of experience in the financial services industry building and leading high-growth companies.

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