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Nov. 30, 2017, 2:39 a.m.
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Richard Curran
Email


November 30 2017 2:30 AM


Dublin City Council has decided to crack down on the growing number of short-term Airbnb-type properties being let out around the capital. Dublin isn't unusual in this regard, as Airbnb has encountered ever-stronger pushback from various city authorities around the world.

It is a case of the disrupter becoming the disrupted as more assertive regulation bites back. In Dublin's case, about 100 apartment owners are under investigation for inappropriate use of short-term lettings.
These are usually on foot of complaints made by residents in the area. Certainly the council gives the impression that it is all over the Airbnb issue with a tough enforcement regime.
More is the pity it didn't apply such a tough enforcement regime on rip-off landlords who are cramming literally dozens of long-stay tenants into individual houses, as highlighted recently by RTÉ, But sin scéal eile, as they say.
Given the pushback against Airbnb, and other regulatory crackdowns on the likes of Uber, are the famous global disrupters being driven back or will they just adapt to fresh change?
In the case of Airbnb, Morgan Stanley recently suggested that we may be reaching "peak Airbnb". Based on a survey of 4,000 consumers in the US, UK, France and Germany, it found that 25pc of respondents had used the service in the previous 12 months.
But growth was slowing down. The vast majority of those surveyed were aware of Airbnb.
This prompted Morgan Stanley to say the company has exhausted most of its easy growth from people who would use the service if they only knew about it. Given that Airbnb's user base is not unlimited, it seems fair to conclude that they've already reached most of them.
Yet, back in Dublin, while the city council is insisting those renting out their properties apply for relevant change-of-use permission, the short-stay business is still booming and very attractive for those who play by the rules.
Lots of investors are applying to build purpose-built short-stay accommodation. These include applications from the likes of Kateo Investments, which wants to build 19 short-term accommodation bedrooms in a six-storey building on the site of JJ Smyth's Pub on Aungier Street. Rather than say the disrupters are in retreat, it is more a case that regulators, competitors, lobbyists and old-fashioned common sense are beginning to kick in.
Take Uber, for example. Much was made of the fact that it lost its licence in London.
In pure financial terms, Uber UK's revenues amounted to just £23m, or less than 1pc of its worldwide sales. Nevertheless, the issues raised in London reflect a wider pushback. For example, the ride-hailing business was getting squeezed in a pincer movement of scandals involving its founder and former chief executive, Travis Kalanick.
It was also caught up in industrial tribunal cases about whether its drivers are actually employees.
Like many other international tech companies, questions were being asked about its corporate structure and how it minimises the amount of tax it pays in the UK in particular. There are many examples of highly successful disrupter companies and each year Forbes Magazine publishes its list of the top 50 that year. Perhaps the greatest disrupters have been in the area of social media and advertising. Yet questions are now being asked about how these firms use algorithms to place advertising.
YouTube was the latest business to feel a backlash from advertisers who pulled ads because they were appearing beside wholly inappropriate content.
The list of firms to pull ads from the Google-owned video platform included Diageo, Mars, Hewlett-Packard, Deutsche Bank and Mondelez.
Rather than suggest that the model isn't working or the disruption is misfiring, the truth is that companies like Google or Youtube have become so enormous that inevitable problems are emerging.
These problems go with the territory and are not necessarily life-threatening.
They do raise questions about the costs and responsibilities attached to publishing content, and whether the internet needs to be more heavily-regulated.
This applies to everything from fake news and the future of journalism, to libel and protection of privacy. The disrupters are very slowly being pushed, but not forced, to take these concerns on board. They want to avoid having their business model completely altered by the sledgehammer of massive regulation.
At the very least, they will have to hire more humans to apply checks and balances to their decision-making about the suitability of content.
These are not the only sectors where disrupters are feeling a bit of regulatory pushback. In financial services, the enormously helpful phenomenon of peer-to-peer lending is also being cut a little less slack by regulators.
And there are valid questions about whether many of the companies tagged as disrupters really adhere to the definition at all. It has become a loose description applied to practically any company or phenomenon that involves change or innovation.
Academics writing for the 'Harvard Business Review' are getting a little upset by the tendency to describe practically all innovation by any size company as 'disruption'.
One recent article, 'The Ubiquitous Disruptive Innovation', defines disruption as a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses.
"Specifically, as incumbents focus on improving their products and services for their most demanding customers, they exceed the needs of some segments and ignore the needs of others."
The article goes on to identify how entrants that "prove disruptive begin by successfully targeting some segments and ignore the needs of gaining a foothold by delivering more suitable functionality - frequently at a lower price".
It is very hard for large incumbents in any industry to become the next disrupter in their own sector. Yet management consultants around the world are throwing these words around the place and offering all kinds of advice on using innovation to become the next disrupter in your sector, irrespective of the size of the business.
Using the approach defined in the 'Harvard Business Review', the smaller disruptive firm moves upmarket, delivering the performance that incumbents' mainstream customers require, "while preserving the advantages that drove their early success". It is only when mainstream customers start adopting the entrant's offerings in volume, that disruption has occurred.
Ryanair was a classic disrupter. It identified a new way of serving customer needs at a lower price. It used technology to cut out traditional travel agents and adopted new pricing models.
Now it is the most profitable airline in Europe and perhaps smaller operators might feel it is there as an incumbent for the next wave of disruption from smaller operators. But larger airlines have had to copy some of its offerings along the way. It really only completed the disrupter journey in recent years when it attracted many of the so-called mainstream customers by taking a more mature approach to customer service and choosing more central airports.
Netflix is often cited as the classic disrupter. It began life as a DVD delivery service, taking on the likes of Blockbuster, but has ended up as a content provider and subscriber-based video streaming business.
But Ryanair had its detractors too, whether it was in relation to industrial relations, government, public servants or State incumbents.
The question is how far will the regulatory pushback, which is now emerging against some of the most successful new tech companies, actually go?
Spotify and music streaming has fundamentally and permanently altered the music industry, as well as the customer experience. It isn't all good, especially for the artists themselves. Yet, there is little sign of, or even scope for, regulatory pushback in that business.
Disrupters are commercially aggressive by nature. They have to be or they would never make it beyond year two. As legislation and regulation respond to their whirlwind of change, expect them to put up a fight.

https://www.independent.ie/business/irish/who-will-win-as-regulation-crackdown-tries-to-turn-disrupters-into-disrupted-36364978.html