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ALP says sharing economy businesses should comply with laws

Posted on Oct 28, 2015

If the sharing economy is the Wild West, then signs are the Sheriff is about to ride into town.

The ALP launched proposals for regulating sharing economy businesses like Airbnb and Uber, that have so shaken incumbents and thrilled consumers.

The ALP wants sharing economy businesses to comply with laws on wages and working conditions, to pay tax, meet consumer law standards, have insurance and be accessible to the disabled. It all seems very reasonable. They pledge to regulate with a “light touch.”

If a rare strain of bipartisanship were to break out and the Labor Party’s “light touch” proposals became law, established old-economy businesses might think they can relax, whoop and throw their hats in the air.  But the promise of sharing economy businesses would not be dimmed.

Anyone who has tried them knows the benefits. Via Airbnb I can visit family abroad and stay as near to them as possible, without intruding on their space! A hotel can’t make that offer – for economic reasons they invest in the most popular parts of town.  Likewise, for my son’s wedding next year we have booked a big place that will offer my family the freedom to all enjoy that time in each other’s company. The opportunity is priceless – but not expensive.

The vast promise of the sharing economy might even attract more investors now, confident they can rely on a stable legal framework.

Existing old-world businesses need to be ready for this challenge. They need to instil flexibility and be ready to adapt. This sounds easy but – all too obviously – it is not.

Flexibility is always necessary for business. But right now the magnitude of change and rate of change is so large flexibility is a matter of life and death.

The job of ensuring a business is flexible belongs to the leader. Flexibility is a cultural issue more than a technical one and a willingness to consider new ideas is a business trait spread by example, not instruction.

Businesses that often find it hardest to adapt and stand at highest risk are mid-market businesses and family businesses where the leaders of the business are also the owners. Often they will have refined that business model themselves and been doing it the same way for a long time.

I have seen this clearly in a pizza franchise with whom we have worked. The first generation started the business and it has been very successful, but new risks are arising as the sector develops. The new generation now coming into the business bring with them tech savvy. There is often a difference in views between the generations. In this example the solutions are right there – but management needs to listen.

Counting on the threat to go away is a recipe for disaster.

The sharing economy has got to scale in an exceedingly short space of time. Uber is now worth $50 billion, Airbnb $25 billion, and start-ups  are getting into parking (parkhound), delivery (Nimber), capital raising (Kickstarter) and more.

Airtasker – a business that lets you hire someone to do any sort of job for you – takes the sharing economy concept into basically every sector.

Sharp new businesses are forever launching into the sharing space and taking on the leaders. But with the government winding up to lob regulation into the mix too, sharing economy business face new challenges.

For them the advice is simpler – focus on your core business model. In this space there are a lot of ideas that are cool, exciting and even brilliant.

But I’ve seen too many start-ups who think – let’s worry about the business model later. In a new, regulated regime, that won’t fly. A sound business model is more crucial than ever.

Regulation may crimp margins, raise costs, and introduce hurdles. But if your fundamental business offers value someone will pay for, the opportunity will remain.

Bill Shorten wrote the following, “There is huge economic and community potential in the emerging peer-to-peer market. I want to see Australia embrace it, while ensuring we have the right rules in place to protect workers, consumers and the public good.”

He’s right about the economic potential. Recent data released by the Portland Bureau of Transportation in the US showed that the taxi market in that city fell by less than 20% while Uber’s market share boomed about 300% over the same period from May to August this year. While Uber has crimped growth of Portland’s taxi industry, it has not crushed it.

Rather than fighting the taxi industry for the same clients, the launch of Uber has expanded the size of the market. People are making transactions they weren’t before. That’s the definition of economic growth.

The scope for the sharing economy is limitless. But it needn’t crowd out traditional business if it is adaptive. Both incumbents and new economy businesses can survive and flourish if they stay flexible. The west can be dynamic, exciting and make a lot of people rich – without being lawless.

Rob McKie is partner at Pitcher Partners Consulting