The outspokenness of Osama Ammar, co-founder of The Family, reminded us of the importance of integrating a startup ecosystem into the digital economy. A look back at his analysis of the accommodation industry.
"The Family is a company that acquires shares in very young startups as early as possible. Our job is quite simple, it is to keep them as long as possible and earn as much money as we can with them. This job leads us to see many things, including what the future looks like because entrepreneurs’ specialize in creating the future in the present. You are in a sector that had a successful startup called Airbnb. I would like to share with you our analysis of your situation and where the housing industry is going.
Let's start with something simple: disruption. Startups have nothing to do with technology. Oddly enough, every time we talk about startups or innovations, we talk about the technological response to this problem. However, the technological response is undoubtedly, and very often, the least interesting response. Why? Because technology only fascinates people who don't understand it.
It's been like this for tens of thousands of years. It started with the shamans. Not so long ago, when a shaman discovered something that gave him a comparative advantage - for example, a berry that can heal - he used that knowledge for political purposes or to gain influence. Instead of telling people: my stomach hurts, it turns out I ate this and my stomach hurts less, which would be scientific. He preferred to say: break rocks, set a fire in the hut, turn around three times, eat that and you'll see, it'll get better. The shaman’s goal was to hide the cure in the process.
The new shamans are the developers and IT project managers of your companies. Why? Their interest is not to explain that everything is possible, but that everything is complicated. Moreover, because people don't understand what they're saying, they can tell lies bigger than themselves and it goes unnoticed. It creates an interesting social divide between people who understand technology on the one hand and people who do not. It results in a situation where everyone thinks that Uber is extraordinary because there is an application and therefore when G7 makes an application three years later, people are not happier. People don't ask themselves the fundamental question of what the client wants. And yet, the digital disruption is not a technological revolution, but a sociological one.
It is part of a very profound movement that is the democratization of our world. We all want more and more democracy and we all want more and more power. That is true in our personal lives, it is true in our political lives and it is also true in business. Internet is not a technological revolution, it is a profoundly sociological revolution, in that it allows everyone to take power and express that power. And what do we want most as consumers? We want things faster, cheaper and more efficiently.
Moreover, everyone in this room suffers from the schizophrenia that almost everyone on this planet suffers from. Namely that our person as an economic agent has great difficulty reconciling with our person as a consumer. When you are a consumer, you want cheaper and faster and as an economic agent, you find everyone horrible. "They are horrible all those people who spend hours looking for the cheapest price on Booking," says the person who spent hours looking for the cheapest steak. “They're horrible people who want the car to come right away," says the person who himself looked for the cheapest hotel on Booking.
This schizophrenia prevents us from seeing the reality that competition is getting harder and harder and that competition is based on something fundamental, which is the desire to globalize people. Why is Airbnb interesting? It's not that people can go to a stranger's house or rent an apartment. Airbnb is interesting because they manage to get into people's daily lives. They manage to create a brand so strong that everyone knows them. My mother, after sixty years on earth, she doesn't know many hotels. However, she knows that Airbnb exists and how to put her apartment on Airbnb.
This is not true for check-in at most hotel sites that require assistance. Why? Because the fundamental difference between Airbnb or any digital or traditional society is that digital societies are created by people who live at the heart of their concepts. For example, the founders of Airbnb lived exclusively in Airbnb for three years.
Meanwhile, hotel managers ask their assistants to book hotels. Ever wonder why most hotel sites are horrible in their reservation systems? Simply because they are never used by "real people". All the people who book hotels, have assistants. These assistants learn to use completely unbelievable software. Then Booking arrives and makes the simplest interface in the world.
For example, I often go to hotels in Paris with my wife. It amuses me because I always book my rooms on Booking because every time I try to book live on a hotel site, I have a bug. Then I arrive at the reception and I am told: ah sir, you come often, you should book through our site and I want to shout to them: why? Why should I please you by spending more than four clicks on something?
If I tell you that the answer is not technological, it is above all nobody. Everyone asks the question: what should I do? Everybody asks the question: how should I do it? But nobody asks the question: who can do it? This, it is a fundamentally sociological subject.
The advantage that digital companies have over traditional companies is neither the resources, nor the money, nor the fundraising, nor all that can be believed to be the advantages that startups have. No, the advantage startups have is that they attract the most talented people of a generation. Your problem is a management problem. No one in my generation wants to work in a company like yours. Moreover, most of the people my age who work in your companies do so only because they couldn't come to work in the companies we created. So this creates a terrible selection bias.
This selection bias prevents you from being able to create the services consumers need. So, you must be wondering “why he's coming here to tell us this?” Actually, I like you. Let me explain something. Historically, wars bring in less money than peace. That has been true throughout the ages. It is true when we talk about territorial warfare, it is true when we talk about economic warfare and it is true when we talk about digital warfare.
Today, the great subject is that you are in what we call at The Family, the five stages of denial. The five stages of denial work as follows, and it's very simple:
Step number one is to say to yourself: never mind it's a startup, it doesn't count.
Step number two is to say: yes, yes, we can do it too.
Step number three is: we'll call the minister, he'll forbid all this. But when you realize that your minister will not be able to ban anything and that people are voting massively for this new service, step four will begin.
In step four, either you understand that there is an alliance to be made with digital companies and since you have a human resources challenge, you can entrust these digital companies with a number of things. Or a natural alliance will be formed in more value can be built together.
If you want an example, look at Apple. Imagine that Apple is a traditional group and it launches the iPhone. What would they have done? They would have made an applications commission for the phone, where people could present their projects to propose ideas for applications. Apple would have organized a jury in ten steps to find out which calculator was best. And three years later, after the launch, there would have been a new version of the software and the phone and therefore no more applications worked in it. What did Apple say? We are the best in hardware, we are able to provide this hardware easily to anyone. And anyone can develop an application for it. It's called open sourcing.
Open sourcing always wins over subcontracting. Why? Because the interests are aligned in a capitalistic manner. And secondly, because there is no selection, and thus no sociological bias, will or politics within an organization. It is the market that decides who uses what application. Today, the Open sourcing technique could be implemented in many more traditional companies. Everything is an asset that can be opened to startups.
There are two possibilities: either we continue the war in stage four of denial. In which case, when you realize that the minister cannot do anything, you will conclude that the solution is to buy all the startups in the world. When you have bought all the startups in the world, you will realize that there is no management team left and that you have, in fact, bought empty shells.
Or perhaps, in step four, we could build step five together, meaning look to see how we can create more value for two industries that today do not understand each other, but can work together? And you will see that, in fact, Airbnb is like Facebook and all the others, it was a giant with clay feet. In fact they didn’t need to go to the ministers, but create an army of startups competing with them."
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