Category: Digital Disruption

Uber suffered a legal blow this week when a California judge granted class action status to a lawsuit claiming the car-hailing service treats its drivers like employees, without providing the necessary benefits.

Up to 160,000 Uber chauffeurs are now eligible to join the case of three drivers demanding the company pay for health insurance and expenses such as mileage. Some say a ruling against the company could doom the business model of the on-demand or “sharing” economy that Uber, Upwork and TaskRabbit represent.

Whatever the outcome, it’s unlikely to reverse the most radical reinvention of work since the rise of industrialization – a massive shift toward self-employment typified by on-demand service apps and enabled by technology. That’s because it’s not a trend driven solely by these tech companies.

Workers themselves, especially millennials, are increasingly unwilling to accept traditional roles as cogs in the corporate machinery being told what to do. Today, 34% of the US workforce freelances, a figure that is estimated to reach 50% by 2020. That’s up from the 31% estimated by the Government Accountability Office in a 2006 study.

Rise of the gig-based economy

In place of the traditional notion of long-term employment and the benefits that came with it, app-based platforms have given birth to the gig-based economy, in which workers create a living through a patchwork of contract jobs.

Uber and Lyft connect drivers to riders. TaskRabbit helps someone who wants to remodel a kitchen or fix a broken pipe find a nearby worker with the right skills. Airbnb turns everyone into hotel proprietors, offering their rooms and flats to strangers from anywhere.

Thus far, the industries where this transformation has occurred have been fairly low-skilled, but that’s changing. Start-ups Medicast, Axiom and Eden McCallum are now targeting doctors, legal workers and consultants for short-term contract-based work.

A 2013 study estimated that almost half of US jobs are at risk of being replaced by a computer within 15 years, signaling most of us may not have a choice but to accept a more tenuous future.

The economic term referring to this transformation of how goods and services are produced is “platform capitalism,” in which an app and the engineering behind it bring together customers in neat novel economic ecosystems, cutting out traditional companies.

But is the rise of the gig economy a bad thing, as Democratic front-runner Hillary Clinton suggested in July when she promised to “crack down on bosses misclassifying workers as contractors”?

While some contend this sweeping change augurs a future of job insecurity, impermanence and inequality, others see it as the culmination of a utopia in which machines will do most of the labor and our workweeks will be short, giving us all more time for leisure and creativity.

My recent research into self-organized work practices suggests the truth lies somewhere in between. Traditional hierarchies provide a certain security, but they also curb creativity. A new economy in which we are increasingly masters of our jobs as well as our lives provides opportunities to work for things that matter to us and invent new forms of collaboration with fluid hierarchies.

Sharing into the abyss?

Critics such as essayist Evgeny Morozov or the philosopher Byung-Chul Han highlight the dark side of this “sharing economy.”

Instead of a collaborative commons, they envision the commercialization of intimate life. In this view, the likes of Uber and Airbnb are perverting the initial collaborative nature of their business models – car-sharing and couch-surfing – adding a price and transforming them from shared goods into commercial products. The unspoken assumption is that you have the choice between renting and owning, but “renting” will be the default option for the majority.

Idealists take another tack. Part of the on-demand promise is that technology makes it easier to share not only cultural products but also cars, houses, tools or even renewable energy. Add increasing automation to the picture and it invokes a society in which work is no longer the focus. Instead, people spend more of their time in creative and leisurely activities. Less drudge, more time to think.

The “New Work movement,” formed by philosopher Frithjof Bergmann in the late 1980s, envisioned such a future, while economist and social theorist Jeremy Rifkin imagines consumers and producers becoming one and the same: prosumers.

From self-employment to self-organization

Both of these extremes seem to miss the mark. In my view, the most decisive development underlying this discussion is the need for worker self-organization as the artificial wall between work and life dissolves.

My recent work has involved studying how the relationship between managers and workers has evolved, from traditional structures that are top-down, with employees doing what they’re told, to newer ones that boast self-managing teams with managers counseling them or even the complete abolition of formal hierarchies of rank.

While hierarchy guarantees a certain security and offers a lot of stability, its absence frees us to work more creatively and collaboratively. When we’re our own boss we bear more responsibility, but also more reward.

And as we increasingly self-organize alongside others, people start to experiment in various ways, from peer to peer and open source projects to social entrepreneurship initiatives, bartering circles and new forms of lending.

The toughest tension for workers will be how best to balance private and work-related demands as they are increasingly interwoven.

Avoiding the pitfalls of platform capitalism

Another risk is that we will become walled in by the platform capitalism being built by Uber and TaskRabbit but also Google, Amazon and Apple, in which companies control their respective ecosystems. Thus, our livelihoods remain dependent on them, like in the old model, just without the benefits workers have fought for many decades.

In his recent book “Postcapitalism,” Paul Mason eloquently puts it like this: “the main contradiction today is between the possibility of free, abundant goods and information; and a system of monopolies, banks and governments trying to keep things private, scarce and commercial.”

To avoid this fate, it’s essential to create sharing and on-demand platforms that follow a non-market rationale, such as through open source technologies and nonprofit foundations, to avoid profit overriding all other considerations. The development of the operating system Linux and web browser Firefox are examples of the possibility and merits of these models.

Between hell and heaven

Millennials grew up in the midst of the birth of a new human age, with all the world’s knowledge at their fingertips. As they take over the workforce, the traditional hierarchies that have long dictated work will continue to crumble.

Socialized into the participatory world of the web, millennials prefer to self-organize in a networked way using readily available communication technology, without bosses dictating goals and deadlines.

But this doesn’t mean we’ll all be contractors. Frederic Laloux and Gary Hamel have shown in their impressive research that a surprisingly broad range of companies have already acknowledged these realities. Amazon-owned online shoe retailer Zappos, computer game designer Valve and tomato-processor Morning Star, for example, have all abolished permanent managers and handed their responsibilities over to self-managing teams. Without job titles, team members flexibly adapt their roles as needed.

Mastering this new way of working takes us through different networks and identities and requires the capacity to organize oneself and others as well as to adapt to fluid hierarchies.

As such, it may be the the fulfillment of Peter Drucker’s organizational vision:

… in which every man sees himself as a “manager” and accepts for himself the full burden of what is basically managerial responsibility: responsibility for his own job and work group, for his contribution to the performance and results of the entire organization, and for the social tasks of the work community.

The Author: Bernhard Resch, Researcher in Organizational Politics at University of St.Gallen

From The Conversation.

Every now and then, I see an article in the media that is skeptical about the future of mobile advertising – the kind of ad you see when you open an app on your smartphone and there’s either a discount coupon at the center of the screen or a display ad at the bottom.

Many critics have asserted that mobile advertising does not work, that mobile marketing is all but dead and that people worry too much about their data privacy to accept these techniques on their devices and will not do so in the future.

Facebook’s latest quarterly earnings report may show that the social media network now earns a whopping 75% of its US$12.5 billion in annual revenue from mobile advertising, but even that does not seem to calm the naysayers.

Now the skeptics may start changing their minds, however, thanks to a number of recent rigorous studies that have systematically analyzed the effectiveness of different kinds of mobile advertising and marketing over the past few years in a wide variety of countries.

Using carefully designed field experiments, my colleagues, fellow scholars and I have consistently found irrefutable evidence that mobile advertising works.

More importantly, we have seen that 85% of users have willingly embraced the idea that marketers will reach them with an offer for the right product at the right time at the right place on the right device (smartphone). In fact, 49% of users are receptive to it and willingly sacrifice data privacy in exchange.

The question isn’t whether mobile advertising is effective, as I’ll show; it’s what factors make it more or less effective and make it more likely that a consumer will engage.

It turns out that various factors – such as location, time, weather and crowdedness – influence the effectiveness of mobile advertising, especially when done in the form of coupons.

A complex infrastructure

At the outset, it is useful to distinguish between mobile push advertising (a coupon sent in a text message) and pull advertising (an offer or message in an app such as Yelp).

From a functional perspective, pull advertising is similar to search engine advertising by presenting consumers with a list of coupons that are sorted by relevance in terms of location, prices or store ratings, allowing them to actively search for preferred options.

Conversely, the concept of mobile push advertising is more closely related to display advertising, in which users are either being targeted depending on their browsing behavior (behavioral targeting) or by the context of the website (contextual targeting).

Mobile ads work

A number of studies have demonstrated the effectiveness of mobile advertising in different contexts.

For example, Professor Yakov Bart and colleagues have shown that mobile display ad campaigns significantly increased consumers’ favorable attitudes and purchase intentions when they promoted products that were utilitarian (ie, need-based goods used for practical purposes) versus hedonic (ie, desirable goods that are used for luxury purposes). Similarly, Professor Sam Hui and colleagues have shown that targeted mobile promotions that incentivize people to travel more within a store can increase unplanned spending by as much as $21 per visit.

Studies by mobile app analytics companies like Flurry have shown that people are more than willing to tolerate ads and accept various forms of mobile marketing in exchange for cool apps. While consumers may not be in love with in-app advertising, their behavior makes it clear that they are willing to accept it in exchange for free content, just as we have on the internet for years.

The impact of geography, time, weather and context

Lets start with geography. In today’s location services-enabled smartphones, it is intuitive to expect that geographical targeting can increase product sales or at least brand affinity.

Research I conducted with my coauthors (Avi Goldfarb and Sangpil Han) in 2013 demonstrated that even when users interact with brands on social media platforms like Twitter, they tend to engage much more strongly with brands whose stores are in close proximity to where they are physically located at any given point in time.

In another separate study, my coauthors (Dominik Molitor, Martin Spann and Philipp Reichart) and I showed that the farther away from a store a user is when receiving a coupon, the less likely it will be redeemed. Increasing the distance to a store by one kilometer (0.62 miles) decreases mobile coupon response rates by between 2% and 4.7%.

It is also intuitive to expect that temporal targeting – the time a user is sent a certain type of ad – matters.

For example, sending a mobile coupon for a 50% discount on a beer on a Tuesday afternoon at 2 pm has a much lower probability of being redeemed than a 50% offer on a cappuccino at the same time and same location, after controlling for price.

Surprisingly, the sales impact of employing these two strategies (location and time) simultaneously is not straightforward.

A paper by Temple University scholar Xueming Luo and others draws on contextual marketing theory to show that when targeting proximal mobile users – those located near an event or store – the odds of a sale are higher by 76% for a same-day promotion compared with sending a promotion two days in advance.

By contrast, with non-proximal mobile users, they found that a little advance notice helped, but not too much. When a mobile coupon is sent out one day ahead of an event, the odds of a consumer purchase jumps 950% compared with a same-day text message and 71% compared with one sent two days ahead of time.

Basically, consumers who received marketing messages close to the time and location of an event formed more concrete mental construals – a term in social psychology referring to how individuals perceive, comprehend and interpret the world around them. That in turn increased their involvement and purchase intent, while more spatial and temporal distance had the opposite effect.

Even weather can impact the effectiveness of mobile advertising.

A 2015 study revealed how mobile purchases prompted by marketing were significantly higher on days with more sunshine and lower when it was cloudy or rained. Theories from psychology have argued better weather, both actual and perceived, induces better moods and causes an increase in risk tolerance or the willingness to part with cash. On the other hand, exposure to bad weather leads to poor moods and more risk aversion.

Finally, it turns out that our propensity to respond to mobile advertising is also affected by how crowded our environment is.

In a 2014 paper my coauthors (Michelle Andrews, Xueming Luo and Zheng Fang) and I showed that people are more likely to redeem mobile coupons when they are being physically squeezed in crowded contexts.

Based on a follow-up user survey that we carried out, this behavior can be explained by the phenomenon of ”mobile immersion”: to psychologically cope with the loss of personal space in crowded contexts, users can escape into their personal mobile space. Once there, they become more involved with the targeted mobile messages they receive, and, consequently, are more likely to make a purchase in crowded contexts.

For marketers, the high-level finding is that consumers may be more receptive to targeted mobile ads when they are in crowded spaces with strangers, whether in a subway car or even in a busy tourist area such as New York City’s Times Square.

Lip service to privacy

Here is the bottom line: we think we care about data privacy, but when it comes to redeeming offers on our smartphones, we actually pay it only lip service.

Put differently, an increasing proportion of people (especially millennials) understand that a give-and-take relationship is becoming more common as we interact with brands trying to sell us stuff.

We give our data to marketers (both willingly and inadvertently), and in return we expect to receive highly curated and personalized offers on our smartphones. Many consumers have even become resigned to the idea that they have little control over their data, and that this is the future of the world we will inhabit.

Does every form of mobile advertising work well? Of course not.

A banner ad that pops up and covers the already scarce real estate on our screen is not going to be nearly as well-received by users as an offer distributed via text message and triggered by a location-sensing beacon when we are up and about in a shopping mall.

For example, as you walk past Zara, your smartphone buzzes with an offer of 15% off any purchase from Zara and a 20% off any purchase from American Apparel. In our most recent paper, my coauthors (Beibei Li and Siyuan Liu) and I showed that consumers have a growing preference for these kinds of offline trajectory-based mobile advertising: they are yielding extraordinary high redemption rates and customer satisfaction rates.

There is a simple message for mobile marketers in all of this: consumers appreciate relevancy and context. So make that ad count. Work on your targeting. Don’t overwhelm us with too many notifications. Don’t abuse our trust.

The evidence clearly shows mobile ads are not going anywhere. As such, the future of mobile advertising looks incredibly bright to me.

Author: Anindya Ghose, Professor of Information Technology and Professor of Marketing at New York University