They say change is inevitable, but when you look at the lumber and building material industry, change has been miniscule and comes in fits and starts. Who can forget how the modular home builder Katerra was going to transform our industry by relying on technology?
Unfortunately, they failed. Lumber dealers will say it was because they were tech people and didn’t understand our business. Builders will say they didn’t see the value.
Regardless, our industry is full of naysayers who want to think we are already doing things the best way possible. That, “our market is different.” Or we have sufficient barriers to entry to keep out any companies that may try to disrupt our business model. Sometimes to see the flaw in one’s logic, it helps to look at something similar and make an analogy. So let’s look at the taxi industry.
Taxis dominated transporting people to custom destinations for well over a century. The cost of buying and maintaining a taxi was a large barrier to entry, and in most big cities, local governments limited the number of taxis by requiring that you purchase a medallion. In 2014, New York City medallions were auctioned off for over $1 million each. This was a protected and profitable industry. Then along came Uber and Lyft.
So, what were the factors that disrupted the taxi industry and how can we relate those to LBM?
Ease of use and convenience: Uber’s app-based platform allows customers to book rides with ease, view the location of their ride in real time, receive estimates on arrival times, and pay automatically through the app. This convenience is different from the traditional taxi model, where rides often have to be booked over the phone, or a taxi must be hailed on the street.
Takeaway: How easy do you make it for your customers to interact with your business?
Transparent pricing: Uber provides fare estimates before the ride begins. This transparency contrasts with taxis, where fares can sometimes be unpredictable until the end of the ride.
Takeaway: What if someone could take the commodity price volatility out of our business model? How disruptive would that be?
Wide availability: Uber’s platform has enabled it to amass a large network of drivers, often providing wider coverage and shorter wait times than traditional taxi services.
Takeaway: Deliveries are often first come, first serve because of people and equipment availability. How can this barrier be overcome?
Quality control: The Uber app allows customers to rate their drivers after each ride. This helps maintain high service standards. Taxi services are mostly dependent on the individual driver to provide a clean vehicle and good service.
Takeaway: Are you fanatical about keeping your trucks clean? Do your drivers wear uniforms and have their own business cars to promote your company?
Flexible workforce: Uber’s model attracts drivers due to the flexibility the schedule offers, enabling Uber to scale its workforce rapidly to meet demand, a flexibility that traditional taxi companies with structured employment models cannot easily replicate.
Takeaway: What other options can you explore to solve the bottlenecks in your production and delivery schedules?
Disruption will come. The question is will you ignore it or embrace it? Today, medallions in NYC are up for sale for $100,000, and that is if you can find a buyer. Yet some markets have adapted. In Pittsburgh, the cab companies united and created their own app called zTrip which offers the convenience of Uber’s app, but uses the existing taxi fleet.
You can sit and wait for customers to come to you, or you can get involved with new opportunities that will add value to your business. Change is coming. Are you going to be in the driver’s seat, or are you going to be run over by it?
