Are you an early adopter or a doubter when it comes to new technologies and disruptive services? What I mean is, when your municipality is faced with an opportunity to saddle up and jump on board a new technology or service that will change existing business patterns, how will you react - especially if it means a loss in revenue?
Across the country, cities are facing the reality of being at the forefront of interfacing with car-sharing services like Uber, Lyft and Sidecar, new types of restaurants such as food trucks, room-sharing (AirBNB), banking (Simple) and a host of other companies that seek to transform how consumers utilize everyday services that governments often have regulated.
And this is truly the beginning. Consider the lost tax revenue here in Boston from a new company that gives flyers out of Logan Airport free parking in exchange for using their vehicles as rental cars. If successful, parking revenue at the airport could decrease. Those tax surcharges paid to the city from rental car companies would diminish as well.
In that same vein, taxi companies are fighting to protect their turf from car-sharing services that clearly are a better business model for consumers. Need a ride? Just ask for one on your phone and it is there in minutes. No surcharges, no dirty old Crown Vic, no taxes, just a flat fee to get you where you need, pronto. But the taxi companies argue that they pay millions annually for medallions that allow them a virtual monopoly granted by cities. So, cities, who are you going to protect - your citizens or your revenue?
The new generation of consumers is extremely mobile in many ways. They will take their businesses and jobs to the cities that recognize it is the consumer who should be at the top of the food chain, not the government. That means operating a leaner, more nimble government.
Consider the problems facing you if Simple Bank is successful. In my town, there are no less than 10 bank branches in a town of 13,000 people. As the Y generation takes hold and money becomes increasingly digital, those branches will disappear over the next 20 years. The potential loss in tax revenue from vacant storefronts will begin to add up.
The DC food truck case we wrote about last year brings to light the idea of a level playing field. How do you force a new business dynamic to comply with existing regulations meant for older systems? Smart city officials will consider consumer-based regulations to be the most important, like healthy sanitation and food practices, rather than how to gouge the consumer with taxes forced on the new services.
Where is all of this leading? Disruption is coming to government services. In Detroit, a new kind of bus company is seeking a foothold in public transportation. How long before car-sharing goes after public transportation? In Aspen, CO, payment (tax receipts, etc.) processing was recently outsourced to a bank. Why isn’t one company handling payment processing for every city and town in the country?
Luddites will argue this disruption will lead to a loss in jobs. But will it? Someone, somewhere has to do the work. If car-sharing really takes off, tomorrow’s version of a taxi driver can keep all the revenue they earn instead of paying 50% back to the medallion owner. There is a strong argument that new disruptive businesses are simply empowering people.
It is just a matter of time before new “bottom-up” economy entrepreneurs will challenge traditional “top-down” government. Can government reinvent itself and beat them to the punch?