The Ripple Effect
Platform based companies have been the models of success in the last decade. Uber, Airbnb and Ebay transformed industries enough to be called the next Industrial Revolution. The Pandemic caused some ripples in the model however and it points out a few key things in the model that need to be a little better. Let's look at Airbnb. The Pandemic has basically halted the renting of their listings. This caused major issues not just with Airbnb but all the entrepreneurs that were part of that ecosystem. If you bought into the idea, you would own several properties, a cleaning crew, a property manager and handymen all on payroll. If you were however, lax on cancellation policies you could be looking at six months of no revenue. How many entrepreneurs of the 7 million listing do you think really thought that through. The ripple effect is you cannot pay your cleaning service, your pool service, your gardener or anyone else. In fact you cannot clear enough to pay off your debt. While this might not ruin the real estate market it will cause significant hardship to associated businesses. This is the fallout we are seeing, the ripple effect is damaging the fabric of what it means to be an entrepreneur. Cue data strategy. Predictive analytics will not have helped but prescriptive analytics would allow you to manage what is happening. While you scramble to cover this situation focus on the analytics of what can change. A solid focus on any company should be the state of its analytics and to be able to ask questions. My research has shown that leadership stops asking questions if they know they cannot get answers. This is state of many analytics shops where they have lost the ability to execute on new projects but can give you great operational reporting. At this point we need to know what else to do.
The Dairy industry has been upended by the restaurant industry. I for one could not understand why there is a shortage of milk at the grocery store yet I am hearing about farmers destroying millions of gallons of milk. It makes no sense until you look a little deeper at the rules and regulations. The start of the ripple here is the closing of retail and restaurants. They consumed a huge amount of product and they bought it not by the gallon but in much larger quantities. When they stopped buying dairy the ripple effect caused supply chain logistics to break. Suddenly a lot of trucks could not unload all the milk they had to deliver. My first question is why not just send product to the grocery stores. Here is where the rules and regulations come in and the dangers of contamination etc. You simply do not have the people now to turn around and pour that milk into containers that do not exist in a time frame to satisfy the rules. So either you relax the rules or you gain people to get the job done. Since no one can get out to do it there is a break in the system that we cannot easily fix. But now there is a lot of milk we cannot use and it gets wasted. If you are seeing oil tankers off the coast it is because they are also stuck. Refineries are full and cannot take any more because they are not shipping it anywhere due to lessened demand. Again the supply chain breaks and causes a global ripple effect and the price of oil goes negative. The ripple effect also devastated the stock market where people invest in futures. The future price of about anything is up for debate. So how do you fix it? Bottom line you need to come up with creative ideas and you need to have a strong advisory data team that can help you navigate quickly. When supply chains break and logistics do not work you need to move fast and you need to analyze the situation and look at alternatives. That takes new sets of data and new ideas that can be put into a data model that is created quickly. Can you do that internally or do you need a strong team that has done this before. Some lack the resources, some lack the architecture and the tech and often you just cannot move as fast as you need. However like some of the entrepreneurs at Airbnb maybe you do not want to move quite that fast. There is opportunity even though the ripple effect has upended the markets. As things stabilize everyone needs to be able to seize the new model that will emerge because I am certain the old normal is not the new normal.