Today, with so many apps at our fingertips — think Tinder, Uber, Foodora — it feels like we’ve solved a lot of the older business problems around convenience and matching services and products with users who are willing to pay for them.
Have we finally put to rest the problems of supply, demand and distribution that plagued us in the past?
Actually, this is just the beginning, says Professor Ming Hu. We are now faced with a brand-new set of questions that arise from the emergence of peer-to-peer buying, selling and lending platforms — collectively referred to as the sharing economy.
Hu, who is a professor in the Operations Management and Statistics area at the Rotman School of Management and a distinguished professor at the University of Toronto, is curious about the unintended or unaccounted-for consequences and best practices of the sharing economy. His main research focus is on operations management when it comes to the sharing economy, social buying, crowdfunding and crowdsourcing.
His work has been covered by major media outlets, including the Financial Times, and he also puts operations management and his research interests into context for young professionals by teaching courses in the MBA programs at Rotman. His teaching acumen earned him a spot on the Poets & Quants 2018 list of the best 40 professors under 40.
As Hu has discussed in his classes and research, while these apps might have solved a lot of inefficiencies, they have also created new dilemmas.
For example, ride-hailing apps like Lyft and Uber might actually be contributing to congestion on city streets.
“Though we are surrounded by exciting and new platforms, we still wrestle with a classical dilemma: matching supply with demand.”
—Ming Hu, Professor of Operations Management and Statistics
“The great thing about ride-sharing apps is that riders only have to wait a few minutes for a ride, but that convenience comes with a price,” Hu explains. “Drivers are waiting idle on city streets for requests or have to come from a long way to pick up customers. And many riders are choosing these apps over public transportation.”
Food ordering and delivery apps, while removing the hassle of cooking, are adding to our landfills.
“Though we love these apps, the packaging that comes with our food orders is often excessive or not recyclable,” he explains. “There is an environmental downside that we often don’t think about as consumers.”
Other apps have unintended social and environmental consequences too: short-term rental apps, like Airbnb, are thought to be crowding out long-term renters. As well, clothes-sharing apps may be encouraging customers — who know that they can resell or share their purchases — to buy more clothes than they need. This not only increases the volume of clothes in circulation, but incurs further environmental costs, such as cleaning, shipping and packaging, whenever these items change hands.
Essentially, Hu wants to figure out how we can match service providers and products with users more efficiently and minimize some of the problems and waste caused by these technologies. Already, he has developed models for desirable pricing and matching in the sharing economy.
As he puts it, his main interests are in “understanding and sorting out the wild-goose chase that comes with these new apps”, especially those that involve organizing drivers and couriers.
Consider ridesharing apps: Hu sees a lot of potential for improving the efficiency of how drivers are matched with riders. For instance, until recently, it was common practice for apps to match riders with the first available driver (who might be far away geographically), though it makes more sense to match customers with drivers who are completing a trip nearby. Hu believes that even the apps that are starting to do this could be greatly improved upon.
“We’re seeing a lot of time wasted on the road for drivers with these driving apps,” Hu explains. “We need to design more efficient systems.”
Inspired by the taxi stands commonly seen in Singapore and Hong Kong, Hu is currently studying models where users in busy areas must wait at designated zones to be picked up.
In the crowdfunding space, he has authored a number of papers (including this one published in Marketing Science in 2015) that look at the social behaviours of investors and identify strategies on how entrepreneurs can successfully raise capital.
With all this work on the go, where does his inspiration come from?
“I’m an avid user of these apps and naturally my experiences as a user give me ideas on what to look into next,” says Hu. “Generally, my colleagues and I are asking the basic questions that come up in operations management — around supply, demand and efficiency — but in a new context.”
Rebecca Cheung | More Rotman Insights »