Building a big business on latent resources

 

resource

latent |ˈlātnt| adjective(of a quality or state) existing but not yet developed or manifest;

What do Uber, Airbnb, and now Recharge have in common? They are all using mobile phones and sophisticated routing algorithms to take advantage of what I call latent resources:  cars that aren’t being used, unoccupied rooms in your house or apartment, or hotel rooms that aren’t rented. There are dozens of startups focused on this concept, from parking spaces to surplus food.

So here’s a tip on building the next big thing: look for latent resources that you can transform into active resources, while making money for you and the resource owner.

The very tricky aspect of this type of business it’s a two-sided market the resource owner, such as the person with an extra room to rent via Airbnb and the traveller looking for a cheap place to stay. And balancing supply, in Uber’s case, drivers (with their cars – the latent resource) with demand (the riders) is very, very difficult.

There’s another aspect to monetizing latent resources: perishable inventory. Food is a great example: every day billions of dollars of good food is thrown away as it’s past its sell by date; hundreds of planes fly with empty seats; thousands of seats in theater remain empty. Owner of these resources have high fixed costs and they need to drive demand for their product before it expires. Can you help them do that? Recharge is a great example, as the article by  in The New York Times outlines: Recharge, which lets users book hotels by the minute, just launched in New York,

Recharge, a two-year-old, San Francisco-based company whose app enables users to book a stay in a hotel for just 66 cents a minute, is opening in select New York hotels today, after testing its service over the last year in San Francisco.

According to co-founder and CEO Emmanuel Bamfo, Recharge, which has been used by at least 25,000 people to date, has several primary use cases. These include business travelers who may want to freshen up before heading into a meeting; families who might be doing some shopping and dining and need a place to relax; and local commuters who don’t have the time or inclination to ride home between work and evening engagements.

Recharge is even looking at changing the business model for hotel stays yet again, from charging by the minute to subscriptions:

“We see a lot of ways to [generate] incremental revenue,” he says, including hotel subscriptions that include food, massages, even personal trainers. “There a lot of things we could be, and will be, doing.”

So if you are looking for the next big idea start by intensively studying the world around you and the products and services used by consumers. The usage pattern should be frequent – it’s doubtful there’s a latent resource play in cemetery plots, but who knows? You’ll likely have to come up with a new business model, as Recharge has for hotels. That’s going to require customer education. Most latent resource plays also seem to be local, so you’ll need to figure out how to roll out nationally and how to scale your business.

Turning latent resources into active resources in a two-sided market is not easy and it’s no surprise that Uber and others have raised billions of dollars to launch and grow their businesses. And any successful new model tends to attract cloners, so be prepared to constantly innovate to stay ahead of your followers.

I had an idea for a latent inventory business called LetMeKnow several years ago, it was aimed at bakers and other food vendors who ended up having to throw their food away at the end of the day. For example, LetMeKnow would notify their customers of what pies and cakes were available at sale prices at the end of each day. But after talking to a number of potential providers I found they had an alternative solution they were pretty happy with. It’s name: Twitter.

So whatever idea you come up with for helping owners of latent resources make money by activating them, make sure they aren’t already doing this with the many tools out there already from Nextdoor to Craigslist to Facebook to Instagram to Twitter.

Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

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