The Tortoise and the Hare in Silicon Valley

Unicorn startups and celebrity founders are faltering while good old fashioned loyalty programs continue to expand.

By Xische Editorial, October 31, 2019

Source: Hudasaktian/Shutterstock

WeWork, the company offering hip co-working spaces, was supposed to change the world. Far from reaching that goal, WeWork is the latest technology company to spectacularly stumble while going public. Uber and Slack are facing similar reckonings. The trends are familiar: companies go public at incredibly high valuations only to see their stocks drop off a cliff in the weeks following. Wary of a sluggish global economy, investors don’t seem to have the appetite to pour money into companies that pursue growth at all costs. What else is at play? 

Pursuing (and subsidising) growth at all costs means going into unfamiliar markets. WeWork expanded at breakneck speed with co-working spaces from Tokyo to London. The only problem is that many of its markets simply didn’t make sense for its business model. Since the company never purchased its office locations, it found itself acting as a real estate behemoth renting more than 20 million square feet of office space worldwide. That’s an incredible amount of space to fill with paying customers. 

Analysts are quick to point out how WeWork’s appeal was tied up with its high-flying and charismatic founder. Like other unicorns, the WeWork founder was able to effortlessly distort reality around him with a bold vision of coworking. With the IPO off the books and the future of the company in question, the company’s CEO was shown the door (with a substantial golden parachute to boot). Is our love affair with unicorns and their eccentric founders ready for a break? 

WeWork’s IPO stumble points to the changing nature of loyalty in the global marketplace. Since their idea was little more than traditional office spaces with interesting coffee, the company bet big that customers would be loyal to the brand above all else. In a self-centred world, businesses can change their relationship with customers by focusing on the “we”. However, maintaining brick-and-mortar loyalty in the digital age is an expensive gambit. Unfortunately for WeWork, investors balked at the cost of all that free-flowing coffee.

Still, the idea of loyalty remains a critical ingredient to business success despite its transformations in the digital age. In a recent addition of one of our favourite newsletters, Why Is This Interesting?, the writers consider the intersection of loyalty and Amazon Prime. With millions of members around the United States, Amazon Prime is a hyper-successful example of a loyalty programme in the internet age. But, as the writers note, loyalty now is more about behaviour than anything else. 

Citing a study on Amazon Prime, they note, “The biggest lesson to take from Prime is that loyalty is about behaviour. It is not about a point system, coupons, discounts, branded credit cards or any other oversimplified projection of loyalty. Instead, loyalty is about nurturing behaviour that defaults in a business’s direction. Building the best customer experience is a guaranteed way to incite loyalty. With a true understanding of Prime, one can apply this mentality to other industries, including ones that don’t rely on fast shipping. The key is to simply enable an experience that is so good it changes previous behaviour. That’s all loyalty is.”

What would happen if we apply this approach to loyalty on a national or civic level? If governments enabled experiences that were so good they positively transformed resident behaviour, the ensuing productivity would be groundbreaking. Happy people are more productive. The Dubai Government is already experimenting with such a plan with its Dubai 10X loyalty programme. As the world’s first cohesive government loyalty programme, it’s an innovative way for the government to “give back” to residents and citizens. 

In line with the Dubai10X program to accelerate Dubai ten years ahead of global competition, the loyalty programme is designed to increase customer satisfaction in order to increase Dubai’s global competitiveness and increase foreign direct investment. The programme is still young but given Dubai’s track record of attempting new ideas and tinkering with them until they work, it will surely revolutionize the way governments understand loyalty. Amazon is famous for trying many different projects at once to see what works. Prime is actually one of the companies best examples of a moonshot idea that transformed into a successful operation. The Dubai 10x loyalty programme is on the bleeding edge of what is possible when creative government officials bring the best business practices to the work of government. In ten years time, we will look back and review the many other government loyalty programmes that have followed in its wake.