Thursday, December 1, 2016

Customers in the digital economy have the whip hand


If the story of industrial relations has been the tussle between capital and labour, then we might have arrived at the plot twist. The digital economy threatens to unseat shareholders and workers as management aligns itself with a third party that has been sidelined until now. Customers, to whom executives have long paid lip-service, are in the ascendancy. “The customer is always right” is no longer just a hollow corporate slogan.
Nicolas Colin, the co-founder of investment firm TheFamily, sees this shift in power as the inevitable consequence of the way digital companies work. They need enough users to create scale and a network effect. Without them, their business models simply do not work. “The strongest party at the table is not the employees or the shareholders any more; it’s the customers,” he told the annual Drucker Forum management conference in Vienna this month. 
Amazon is a perfect example. Jeff Bezos, the chief executive, warned his shareholders in a letter in 1997 that Amazon would “focus relentlessly on our customers” and market leadership over “short-term profitability”. And it would make its employees sweat in the service of those customers. “It’s not easy to work here … but we are working to build something important.” 
Of course, there are plenty of sectors (utilities, airlines and pharmaceuticals to name a few) where customers are far from empowered. And even in the areas where they are gaining ground, they might not hold on to it for long. Many investors in companies like Amazon believe that eventually, once these companies have reached sufficient scale and dominance, the shareholders will reap the rewards. For now, though, it is the customers in the digital economy who have the whip hand.  
That has not been good news for workers. It is because customers want cheap same-day delivery from retailers that many van drivers are paid a piece-rate per parcel and cannot predict their hours. It is because customers want Uber to take them wherever they want to go that drivers are not told users’ destinations until after they have picked them up. It is because customers want their takeaway food delivered fast and hot that Deliveroo couriers have only 30 seconds to respond to the algorithm that controls them.
Low prices mean low wages. Speed, reliability and convenience mean pressure, monitoring and unpredictable hours. In other words, the same things that make this a wonderful time to be a consumer make it a terrible time to be a worker. 
Mr Colin thinks the smart thing for workers and unions to do would be to build alliances with the most powerful party at the table. That might mean calling fewer strikes, which usually hurt the clientele, and more time appealing to customers’ better natures. After all, most of us are consumers and workers at the same time. The “fight for $15” minimum wage campaign in the US, for example, persuaded some home-care clients to join forces with home-care workers to call for better wages and conditions.
Still, it requires a good deal of optimism to believe that customers will ride en masse to the rescue of workers, particularly if the quid pro quo will be higher prices or slower service. Initiatives such as Fairtrade, which certifies products that treat producers decently, have been a success but remain niche.
I once interviewed a man who worked at Amazon, his feet blistered from the seven to 15 miles he walked each day inside the warehouse. He said the company treated him and his colleagues like disposable automatons. But he was still an Amazon customer. He could see the irony but it was just so cheap and efficient, he said with a shrug. It is that good at what it does.

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