Year: 2018

Stratim, the mobility services company formerly known as Zirx, is suing its co-founder and now-former COO Shmulik Fishman for breach of fiduciary duties, civil conversion, criminal conversion, theft, criminal mischief, deception, unjust enrichment and fraud. The lawsuit’s co-plaintiff is Adesa, a subsidiary of KAR Auction Services, which acquired Stratim earlier this year.

Stratim powers fleet management for more than 50 companies, including BMW (DriveNow), General Motors (Maven), Ford (Chariot) and Toyota, to power their respective mobility services. Through STRATIM’s vendor marketplace, for example, Ford can request gas fill-ups for its Chariot shuttles. The next day, a fuel company will come to fill up the tanks and then send that information back into the system.

Stratim alleges Sean Behr, the company’s CEO, noticed unusual activity in Fishman’s expense reports and notified ADESA. That led to an investigation, which allegedly found Fishman did not properly file his expenses.

“In order to further his embezzlement scheme and avoid having these expenses rejected for failure to attach receipts, Fishman uploaded sham files including indiscernible black, red or blue images, the KAR logo, pictures of trees, images of the Stratim vision statement, a bath towel, and even a Val Pak envelope with a New York City address,” the lawsuit states.

Fishman also, allegedly, reimbursed himself for flights, hotel stays, restaurants, Apple products, Uber and other expenses that were “all unrelated to any legitimate business purpose for Stratim.”

This went unnoticed, the lawsuit states, because Fishman had administrative rights in the expense reports system. In total, Stratim alleges Fishman reimbursed himself $738,942.80 in unauthorized expenses. After a conversation with Fishman, Stratim says it terminated him on Dec. 6, 2018.

Zirx had previously raised over $36.4 million from investors like Bessemer Venture Partners, Norwest Venture Partners, BMW’s iVentures and others. That funding rolled into Stratim’s operations.

I’ve reached out to Stratim and Fishman, and will update this story if I hear back.

Lucasfilm has released an initial cast list for “The Mandalorian,” the live action Star Wars series that Jon Favreau is creating for the upcoming streaming service Disney+.

Pedro Pascal, who had a brief-but-glorious run on “Game of Thrones” as Oberyn Martell, will star in the title role — Lucasfilm describes his character as “a lone Mandalorian gunfighter in the outer reaches of the galaxy.” (In the Star Wars universe, the Mandalorians are a group of warriors that includes Jango and Boba Fett.)

The cast also includes Gina Carano, Giancarlo Esposito, Nick Nolte and and legendary director Werner Herzog. Sadly, it appears that Herzog will only be acting in the series, not directing any episodes.

However, there will be some impressive names behind the camera, including Dave Filoni (the creative force behind the recent Star Wars animated series), Bryce Dallas Howard and Taika Waititi.

So far, “The Mandalorian” is looking like it will be the marquee title for Disney+ when it launches late next year — a New York Times report over the summer suggested that the series could cost $100 million for a 10-episode season. There will also be at least one other live action Star Wars series about Cassian Andor (played by Diego Luna) from “Rogue One,” as well as a Marvel series with Tom Hiddleston returning to the role of Loki.

During the first two weeks of Scoot’s operations of shared, electric scooters in San Francisco, more than 200 scooters were either stolen or damaged beyond repair, Scoot CEO Michael Keating wrote in a blog post today. As a temporary fix, Scoot attached cable locks to some of its scooters in San Francisco. Now, the company is unveiling its permanent solution.

The solution still relies on a cable lock, but instead of using a padlock to unlock the scooter, you just use the Scoot app. These locks will be deployed sometime this month.

“This will not prevent all theft and vandalism, but it will reduce the rate to one that is sustainable, both operationally and environmentally,” Keating wrote. “It will also have the benefit of keeping Kicks locked to street infrastructure out of the way of pedestrians. We wish we didn’t need this lock but the reality of operating in San Francisco and many other cities is that assets like shared EVs need to be secured so that they can be used.”

These kick scooters are a valuable asset for Scoot. So far, people use these scooters more than any other type of Scoot vehicle. Scoot also offers mopeds and bikes and certain markets.

Founded in 1990 by CEO Bahram Akradi, Minnesota-based Life Time used to be known as a premier health club that operated large gyms mainly in affluent suburbs in Midwestern and Southern states. Its success was memorialized in 2015 when two leading private equity firms, Leonard Green & Partners and TPG Capital, led a $4-billion deal to take the company private. But rather than retire or move on to new challenges, Akradi chose to remain in his leadership post and continue to build the Life Time brand.

Just a few years later, Life Time, which has always been profitable — even in the depths of the Great Recession — is enjoying double-digit top-line growth, which should enable it to top $2 billion in revenues next year. With the median household income of its members topping $100,000 throughout its 139 clubs, Life Time has sought to build a central relationship with its discriminating clientele by adding extensive health, wellness, spa and sports offerings.

For the company’s next act, Akradi plans to make a big leap into co-working and residential living, and he’s spending considerable time with shopping mall landlords as they look to replace struggling anchor stores with vibrant new tenants. A one-time immigrant who has overcome his fair share of adversity, Akradi understands that he will encounter formidable competitors as he adds new services that are not within the typical scope of a company with fitness roots. But Akaradi doesn’t have time to dwell on his boundary-busting ways. Instead, he’d rather talk to you about his Four Seasons-esque vision for his company and his desire to serve a customer’s mind, body and soul at play, at work and at home.

Gregg Schoenberg: It’s great to see you, Bahram. Let me kick things off by asking you how you found your way here from Iran.

Bahram Akradi: I came here one year before the revolution [1978] to get an engineering degree and go back. Of course, a year later, there was nothing to go back to.

GS: Now, 40 years later, Life Time is a great American brand. But for those not familiar with it, what’s the elevator pitch?

BA: We’re thinking about your health, your nutrition, your spiritual wellness, anything that touches your life. With that in mind, we wanted to focus on the member point of view, to create something where the member felt like our club was designed with them in mind.

GS: Two things are notable about Life Time relative to a lot of other health and wellness-related companies. One is that you have more clubs in the suburbs than in the cities, and two, you have more clubs in America’s heartland versus the coasts. What was the thesis? Did you say, “Let Equinox and others duke it out in New York, D.C. and California. Let’s be aggressive in Minnesota, Texas and Indiana”?

BA: That’s a great question. Actually, I left the company that I had sold to Bally’s in 1988 to build new clubs. The first target market for me was San Francisco. In fact, I spent three years of my life traveling back and forth to San Francisco trying to secure sites and financing. For one reason or another, things just would not come together. So, finally, I was able to start a tiny little club that had been vandalized and closed—

GS: —in Minnesota.

BA: Yes, in Minnesota. But the idea wasn’t originally to be a Midwestern company, and then kind of accidentally get to the coasts. We had always planned to be a national company. The benefit of starting on the coasts is that people know your brand. Your brand gets built, and then you can go everywhere.

GS: But there are offsetting benefits to starting in the Midwest, no?

BA: Starting in the Midwest is tougher. The economies and market can be less robust. Plus, you can do magical things and nobody talks about it. But the benefit is that today, we go to the East Coast, we go to the West Coast, we go to Miami, to all of these hot markets, and we get to build our best product in the hottest markets.

GS: Actually, I hadn’t heard of Life Time because of that best product. Instead, I have this friend who lives in the suburbs of Philadelphia, who one day told me that he was working at this terrific co-working facility launched by Life Time. So with that backstory, let me ask you this loaded question: Is it easier to start a co-working facility when you already have health clubs, or is it easier to start health clubs when you’re already in the co-working business?

BA: Co-working is a substantially less complicated business to operate than a health club. We both rent space. We both have to fit that space to the needs of the customer, and then we have to provide the programs and everything else. But the health club business is significantly more work than the co-working business.

GS: It sounds like you view them in similar fashion.

BA: Like the club business, we think of co-working as a subscription business. I see it as a continuation of what I wanted to do at the beginning: make things more convenient for my customers. Some of those people would like to work in an environment where they can go downstairs and get their massage or workout. For us, tying it together is a completely natural move.

GS: In five years’ time, how many co-working facilities would you like to have?

BA: I’d say 50 to 60.

GS: Wow. So, a good part of your business?

BA: Yes, but our clubs are so large that even at 50, they’re not equal to 50 of our clubs in terms of revenue. But we think we have a great approach to co-working at the very high end.

GS: What does very high-end mean to you?

BA: The one company we admire and regularly give accolades to at Life Time is Four Seasons. I love their execution. I love their consistency. I love the way each employee is certified and trained to give you the Four Seasons brand of service. We constantly work on delivering that at LifeTime, and that extends to Life Time Work.

GS: You are the largest private operator of swimming pools in the country, right?

BA: That’s correct.

GS: So, in the future, if I’m choosing between Life Time Work and WeWork or another co-working brand, one benefit of your offering is that there’s is a decent shot that you’ll be able to go for a swim in the middle of your workday, right?

BA: That’s right.

GS: That is something that, I would imagine, is not so easy for anybody else, including WeWork, to replicate.

BA: I will tell you this: I think WeWork is a phenomenal entity. They have to get credit for what they have done. Co-working existed long before WeWork showed up. They made it the real thing. They put it on the map, and they have created enough size and momentum for other people to step in.

GS: To that point, as you know, WeWork has made a modest foray into residential living. Is that also on your roadmap?

BA: It’s called Life Time Living.

GS: Would that residential offering be integrated alongside the clubs and the co-working facilities?

BA: Yes, and the concept is to bring Life Time Work, Life Time Living, Life Time Resort and sports all together under one roof, and create basically the Life Time Village. This Life Time Village is naturally and intuitively environmentally friendly because you have a car, but you don’t have to use your car for as many trips as you do if you live in disjointed places. This isn’t a noble idea. It’s been done for hundreds of years in other countries where they have had massive populations.

GS: A modern-day town square of sorts.

BA: Exactly.

GS: On that note, I watched the videos associated with your Oklahoma City opening. A few of the people featured said, “I can cancel my country club membership” or, “I can cancel my golf club membership.” That resonated with me, because I’ve always felt like when I’m in an elegant golf club, some guy in a Kelly green blazer is going to tap me on the shoulder and ask me to leave. Do you see Life Time as sort of the alt golf club?

BA: Yes, except I think there’s a place for the country club with golf, because there are some people who want golf.

GS: Sure.

BA: But there are also people like you who don’t want golf. I don’t golf, but my nephew golfs. Compared to athletics, however, golf is played by a much smaller percentage of the population on a regular basis.

GS: Your new club in the Baybrook Mall near Houston and your club in Oklahoma City were both mall-based properties. As you well know, people attribute what’s going on with shopping malls to e-commerce in general and Amazon specifically. Do you see an opportunity for Life Time to become the new anchor of a reimagined shopping mall?

BA: Yes, exactly. Think of the size and the scale that we can deliver. We have approximately 3,000 to 4,000 people with a very high median household income come to each club per day. That’s a lot of foot traffic with money to do other shopping. So, yes, we can play that role. But it’s not as easy as you may think to deliver the feeling of our club into one of those boxes. We generally don’t. Instead, just as we did in Oklahoma City, we need to build on a freestanding piece of a shopping center, and it takes a lot of work.

GS: So if there’s a Sears that is closing in a mall, you can’t just go in and inhabit that box.

BA: Well, it’s not going to be the experience that we have developed for our brand. But it doesn’t mean that we can’t make it work in some locations.

GS: Do you create that experience in-house?

BA: Actually, Life Time has its own development company. We have over 120 architects and engineers. We have our own construction company. We have our own mill shop. So, we’re also a vertically integrated development company.

GS; Given that team and the particulars involved, I’d imagine you’re spending a lot of time with mall owners today.

BA: Oh, regularly. We are in the think tank with them about the opportunities where it makes sense. And I think that there’s at least one thousand locations of the big retailers, like a Sears, or Macy’s, or JCPenney that will become available. But that doesn’t mean you can put a thousand clubs there…

GS: Sure.

BA: In some of those locations, you will find opportunity to build our type of product, and some places it could be apartments. Some places could be office buildings. In some places, it could be all of the above. It’s definitely additive to our traditional opportunity, where we’d go find a raw piece of land to build our club on 12 or 14 acres.

GS: A few years ago, I know you launched a foray into an integrated health solution, and you ran into some challenges. Can you talk a little bit about that?

BA: I still feel passionate about that integrated health model. The problem with our healthcare system is that it’s neither driven 100% by government nor 100% by private enterprise. And right now, it’s in a train wreck. At this point, we kept one of our clinics open for primary care, in which we deliver this integrated, optimal health model. I do remain passionate about it, but from a business model perspective, it just doesn’t work.

GS: What does work is your overall financial model. Do you ever look at the metrics of some of the unicorns that have never approached profitability and think to yourself, “My company is growing very quickly, has scale and is well-diversified across the country. If it were a start-up, positioned as a tech company and had a few large Silicon Valley VCs on the cap table, my company would be worth a stratospheric amount”?

BA: (Laughs) My job is to serve Life Time and its causes, mission, and vision. And while I can see the folks who have become billionaires on paper, I don’t ever think about somebody else being worth more money. When we die, we all go away with absolutely nothing. And right now, I am so lucky to live the life I live and to do what I do. Not only would I do it for free, I would literally pay to do my job.

GS: You ran Life Time as a public company, and now as a private company. Does that represent a major difference for you ? The quarter-to-quarter pressure, the conference calls, grinding non-deal roadshows, etc….

BA: The quarterly conference calls were just never a concern of mine, because I think we either beat or met the street expectations in 41 of the 44 quarters we were public. We have impressive discipline inside of the company, and it extends beyond me. So we’re not worried about it. If we have to be public, we’ll be public. If we have to have other shareholders, we’ll get them in.

GS: It sounds like either way, you’ve got plenty of room to grow. Best of luck to you.

BA: Thanks very much, Gregg.

When in July of last year, Softbank’s Vision Fund led a whopping $200 million round in the Silicon Valley startup Plenty, investors behind a competing indoor farming startup across the country, New York-based Bowery, were left reeling. Just one month earlier, they’d closed on a round that brought Bowery’s total funding to $31 million. As one of Bowery’s backers told us in the immediate aftermath of Plenty’s enormous round, SoftBank’s involvement “definitely gives you pause.”

Its involvement has not, however, prompted investors to give up. On the contrary, Bowery just today announced that it has raised $90 million in fresh funding led by GV, with participation from Temasek and Almanac Ventures; the company’s Series A investors, General Catalyst and GGV Capital; and numerous of its seed investors, including First Round Capital.

It’s easy to understand investors’ unwavering interest in the company and the space, given the opportunity that Bowery, and Plenty, and hundreds of other indoor farming startups, are chasing. As Bowery outlined in a post this morning, “traditional agriculture uses 700 million pounds of pesticides annually, and fresh food takes weeks” and sometimes longer to land on the dinner table. Along the way, terrible things sometimes happen, including E.coli outbreaks, like the kind recently linked to the sale of romaine lettuce in the U.S.

Meanwhile, Bowery, which is growing crops inside two warehouses in New Jersey can promise people in New York that their bok choy didn’t travel far at all.

Bowery also appears to be gaining the kind of momentum that VCs want to see. According to the company, it started life with five employees three years ago; today its staff has ballooned to 65 people. It has established a distribution partnership with Whole Foods. It has as partnered with sweetgreen, the fast-food chain known for its farm-to-table salad bowls, and Dig Inn, a New York- and Boston-based chain of locally farm-sourced restaurants.

Unsurprisingly, the company says it plans to partner with new retail, food service, and restaurant partners in the new year, too.

Bigger picture, Bowery says it plans to build a “global distributed network of farms” that are connected to each other through a kind of operating system, and that it has already begun work on the first of these outside of the tristate area.

Whether it succeeds in that vision is anyone’s guess at this point. It’s hard to know how big an impact that Bowery, or Plenty (which plans to build 300 indoor farms in or near Chinese cities) or any of its many competitors will ultimately have. But given that we’ll need to feed two billion more people by 2050 without overwhelming the planet, it’s also easy to understand from a humanitarian standpoint why investors might be keen to write these companies big checks. In fact, the rest of us should probably be rooting them on, too.

When in July of last year, Softbank’s Vision Fund led a whopping $200 million round in the Silicon Valley startup Plenty, investors behind a competing indoor farming startup across the country, New York-based Bowery, were left reeling. Just one month earlier, they’d closed on a round that brought Bowery’s total funding to $31 million. As one of Bowery’s backers told us in the immediate aftermath of Plenty’s enormous round, SoftBank’s involvement “definitely gives you pause.”

Its involvement has not, however, prompted investors to give up. On the contrary, Bowery just today announced that it has raised $90 million in fresh funding led by GV, with participation from Temasek and Almanac Ventures; the company’s Series A investors, General Catalyst and GGV Capital; and numerous of its seed investors, including First Round Capital.

It’s easy to understand investors’ unwavering interest in the company and the space, given the opportunity that Bowery, and Plenty, and hundreds of other indoor farming startups, are chasing. As Bowery outlined in a post this morning, “traditional agriculture uses 700 million pounds of pesticides annually, and fresh food takes weeks” and sometimes longer to land on the dinner table. Along the way, terrible things sometimes happen, including E.coli outbreaks, like the kind recently linked to the sale of romaine lettuce in the U.S.

Meanwhile, Bowery, which is growing crops inside two warehouses in New Jersey can promise people in New York that their bok choy didn’t travel far at all.

Bowery also appears to be gaining the kind of momentum that VCs want to see. According to the company, it started life with five employees three years ago; today its staff has ballooned to 65 people. It has established a distribution partnership with Whole Foods. It has as partnered with sweetgreen, the fast-food chain known for its farm-to-table salad bowls, and Dig Inn, a New York- and Boston-based chain of locally farm-sourced restaurants.

Unsurprisingly, the company says it plans to partner with new retail, food service, and restaurant partners in the new year, too.

Bigger picture, Bowery says it plans to build a “global distributed network of farms” that are connected to each other through a kind of operating system, and that it has already begun work on the first of these outside of the tristate area.

Whether it succeeds in that vision is anyone’s guess at this point. It’s hard to know how big an impact that Bowery, or Plenty (which plans to build 300 indoor farms in or near Chinese cities) or any of its many competitors will ultimately have. But given that we’ll need to feed two billion more people by 2050 without overwhelming the planet, it’s also easy to understand from a humanitarian standpoint why investors might be keen to write these companies big checks. In fact, the rest of us should probably be rooting them on, too.

In the summer of 2012, I had just learned of a new service where a driver would pick you up in their own car, not a taxi or licensed town car. You’d be able to recognize the car by the pink mustache strapped to the front. I quickly downloaded the new app called Lyft and, intrigued, started to share it with others around the Airbnb offices.

Almost everyone gave me a same response: “I would never use it.” I asked why. “Well, I wouldn’t feel comfortable getting into someone else’s car.” I said, “Wait a minute, you are comfortable allowing others into your home and staying in others’ homes while you travel, but you don’t want to get into someone else’s car?” The reply was always a version of “Yeah, I guess that’s it—a car is different than a home.”

I was dumbfounded. Here was a collection of adventurous individuals — who spent their days at Airbnb expanding the boundaries of what it means to trust another person — but they were stuck on the subtle behavior change of riding shotgun with a stranger. I then had another quick reaction: this product was going to be huge.

Behavior Shifts in Consumer Internet

Truly transformative consumer products require a behavior shift. Think back to the early days of the internet. Plenty of people said they would never put their credit card credentials online. But they did, and that behavior shift allowed e-commerce to flourish, creating the likes of Amazon. Fast forward to the era when Myspace, Facebook, and other social networks were starting out. Again, individuals would commonly say that they would never put their real names or photos of themselves online. It required only one to two years before the shift took hold and the majority of the population created social media profiles. The next wave included sharing-economy companies like Airbnb, Lyft, and Uber, prompting individuals to proclaim that they would never stay in someone else’s home or get into their car. In short order, times changed and those behaviors are now so commonplace, these companies are transforming how people travel and move about the world.

The behavior shifts were a change in socially accepted norms and previously learned behavior. They alone don’t create stratospheric outcomes, but they do signal that there could be something special at play.

Build an Enhanced Experience

Still, just because a product creates a behavior shift does not mean that it will be successful. Often, though a handful of loyal users may love them, there is ultimately no true advantage to these products or services.

One prime example comes to mind, the product Blippy. In late 2009, the team built a product to livestream a user’s credit card transactions. It would show the purchase details to the public, pretty much anyone on the internet, unlocking a new data stream. It was super interesting and definitely behavior shifting. This was another case where many people were thinking, “Wow, I would never do that,” even as others were happily publishing their credit card data. Ultimately there was little consumer value created, which led Blippy to fold. The founders have since gone on to continually build interesting startups.

In successful behavior-shifting products, the shift leads to a better product, unlocking new types of online interactions and sometimes offline activities in the real world. For instance, at Airbnb the behavior shift of staying in someone else’s home created a completely new experience that was 1) cheaper, 2) more authentic, and 3) unique. Hotels could not compete, because their cost structure was different, their rooms were homogenized, and the hotel experience was commonplace. The behavior shift enabled a new product experience. You can easily flip this statement, too: a better experience enabled the behavior shift. Overall, the benefits of the new product were far greater than the discomfort of adopting new behavior.

Revolutionary products succeed when they deliver demonstrable value to their users. The fact that a product creates a behavior shift is clearly not enough. It must create enormous value to overcome the initial skepticism. When users get over this hurdle, though, they will be extremely bought in, commonly becoming evangelists for the product.

Unlock Greenfield Opportunity

One key benefit of a behavior-shifting product is that it commonly creates a new market where there is no viable competition. Even in cases where several innovative players crop up at the same time, they’re vying for market share in a far more favorable environment, not trying to unseat entrenched corporations. The opportunity then becomes enormous, as the innovators can capture the vast majority of the market.

Other times, the market itself isn’t new, but the way the product or service operates in it is. Many behavior-shifting products were created in already enormous markets, but they shifted the definition of those markets. For instance, e-commerce is an extension of the regular goods market, which is in the trillions. Social media advertising is an extension of online advertising, which is in the hundreds of billions. Companies that innovated within those markets created new greenfield but also continued to grow the existing market pie and take market share away from the incumbents. The innovators retrain the consumer to expect more, forcing the incumbents to respond to a new paradigm.

Shape the Future

A behavior shift also allows the innovator to shape the future by creating a new product experience and pricing structure.

When it comes to product experience, there are no prior mental constructs. This is a huge advantage to product development, as it allows teams to be as creative as possible. For instance, the addition of ratings in Uber’s and Lyft’s products changed the dynamic between driver and rider. Taxi drivers and passengers could be extremely rude to each other. Reviews have altered that experience and made rudeness an edge case, as there are ramifications to behaving badly. Taxis can’t compete with this seemingly small innovation because there is no mechanism to do so. They can’t enhance quality of interaction without taking the more manual approach of driver education.

Another benefit to the innovator is that they can completely change the economics of the transaction, shaping the future of the market. Amazon dictated a new shopping experience with online purchasing, avoiding the costs of a brick-and-mortar location. They could undercut pricing across the board, focusing on scale instead of margin per product. This shifted the business model of the market, forcing others to respond to follow suit. In many cases, that shift ultimately eroded the competition’s existing economic structure, making it extremely challenging for them to participate in the new model.

Expect Unintended Consequences

It can be difficult to imagine at the outset, but if your product is encouraging massive behavior shifts, you will undoubtedly encounter many unintended consequences along the way. It is easy to brush off a problem you did not directly and intentionally create. But as the social media companies are learning today, very few problems go away by ignoring them. It is up to you to address these challenges, even if they are an unintended byproduct.

One of the most common unintended consequences nearly all behavior-shifting companies will run into is government regulation. Regulation is created to support the world as it is today. When you introduce a behavior shift into society, you will naturally be operating outside of previously created societal frameworks. The sharing-economy companies like Airbnb and Uber are prime examples. They push the boundaries of land use regulation and employer-employee relationships and aggravate unions.

I want to emphasize that you should not ignore such matters or think that their regulation is silly. Regulation serves a purpose. Startups must work with regulators to help define new policy structures, and governments must be open to innovation. It’s a two-way street, and everyone wins when we work together.

What’s Next

My advice is to start by thinking about existing categories that represent people’s biggest or most frequent expenditures. The amount of money you spend on your home, transportation, and clothes, for example, is enormous. Is there an opportunity to grow and capture part of these markets by upending old commercial models and effecting a behavior shift?

Scooter networks are a real-time example of a behavior-shifting innovation that is just getting going. It has the same explosive opportunity of prior game-changing innovations. There are still many individuals who state that they will never commute on scooter. But applying this framework tells me that it is just a matter of time before it is more widely adopted as the technology keeps evolving and maturing.

There is no magical formula for uncovering massive, behavior-shifting products. But if you come up with an innovative idea, and everyone initially tells you that they would never use it, think a little harder to make sure they are right…

In the summer of 2012, I had just learned of a new service where a driver would pick you up in their own car, not a taxi or licensed town car. You’d be able to recognize the car by the pink mustache strapped to the front. I quickly downloaded the new app called Lyft and, intrigued, started to share it with others around the Airbnb offices.

Almost everyone gave me a same response: “I would never use it.” I asked why. “Well, I wouldn’t feel comfortable getting into someone else’s car.” I said, “Wait a minute, you are comfortable allowing others into your home and staying in others’ homes while you travel, but you don’t want to get into someone else’s car?” The reply was always a version of “Yeah, I guess that’s it—a car is different than a home.”

I was dumbfounded. Here was a collection of adventurous individuals — who spent their days at Airbnb expanding the boundaries of what it means to trust another person — but they were stuck on the subtle behavior change of riding shotgun with a stranger. I then had another quick reaction: this product was going to be huge.

Behavior Shifts in Consumer Internet

Truly transformative consumer products require a behavior shift. Think back to the early days of the internet. Plenty of people said they would never put their credit card credentials online. But they did, and that behavior shift allowed e-commerce to flourish, creating the likes of Amazon. Fast forward to the era when Myspace, Facebook, and other social networks were starting out. Again, individuals would commonly say that they would never put their real names or photos of themselves online. It required only one to two years before the shift took hold and the majority of the population created social media profiles. The next wave included sharing-economy companies like Airbnb, Lyft, and Uber, prompting individuals to proclaim that they would never stay in someone else’s home or get into their car. In short order, times changed and those behaviors are now so commonplace, these companies are transforming how people travel and move about the world.

The behavior shifts were a change in socially accepted norms and previously learned behavior. They alone don’t create stratospheric outcomes, but they do signal that there could be something special at play.

Build an Enhanced Experience

Still, just because a product creates a behavior shift does not mean that it will be successful. Often, though a handful of loyal users may love them, there is ultimately no true advantage to these products or services.

One prime example comes to mind, the product Blippy. In late 2009, the team built a product to livestream a user’s credit card transactions. It would show the purchase details to the public, pretty much anyone on the internet, unlocking a new data stream. It was super interesting and definitely behavior shifting. This was another case where many people were thinking, “Wow, I would never do that,” even as others were happily publishing their credit card data. Ultimately there was little consumer value created, which led Blippy to fold. The founders have since gone on to continually build interesting startups.

In successful behavior-shifting products, the shift leads to a better product, unlocking new types of online interactions and sometimes offline activities in the real world. For instance, at Airbnb the behavior shift of staying in someone else’s home created a completely new experience that was 1) cheaper, 2) more authentic, and 3) unique. Hotels could not compete, because their cost structure was different, their rooms were homogenized, and the hotel experience was commonplace. The behavior shift enabled a new product experience. You can easily flip this statement, too: a better experience enabled the behavior shift. Overall, the benefits of the new product were far greater than the discomfort of adopting new behavior.

Revolutionary products succeed when they deliver demonstrable value to their users. The fact that a product creates a behavior shift is clearly not enough. It must create enormous value to overcome the initial skepticism. When users get over this hurdle, though, they will be extremely bought in, commonly becoming evangelists for the product.

Unlock Greenfield Opportunity

One key benefit of a behavior-shifting product is that it commonly creates a new market where there is no viable competition. Even in cases where several innovative players crop up at the same time, they’re vying for market share in a far more favorable environment, not trying to unseat entrenched corporations. The opportunity then becomes enormous, as the innovators can capture the vast majority of the market.

Other times, the market itself isn’t new, but the way the product or service operates in it is. Many behavior-shifting products were created in already enormous markets, but they shifted the definition of those markets. For instance, e-commerce is an extension of the regular goods market, which is in the trillions. Social media advertising is an extension of online advertising, which is in the hundreds of billions. Companies that innovated within those markets created new greenfield but also continued to grow the existing market pie and take market share away from the incumbents. The innovators retrain the consumer to expect more, forcing the incumbents to respond to a new paradigm.

Shape the Future

A behavior shift also allows the innovator to shape the future by creating a new product experience and pricing structure.

When it comes to product experience, there are no prior mental constructs. This is a huge advantage to product development, as it allows teams to be as creative as possible. For instance, the addition of ratings in Uber’s and Lyft’s products changed the dynamic between driver and rider. Taxi drivers and passengers could be extremely rude to each other. Reviews have altered that experience and made rudeness an edge case, as there are ramifications to behaving badly. Taxis can’t compete with this seemingly small innovation because there is no mechanism to do so. They can’t enhance quality of interaction without taking the more manual approach of driver education.

Another benefit to the innovator is that they can completely change the economics of the transaction, shaping the future of the market. Amazon dictated a new shopping experience with online purchasing, avoiding the costs of a brick-and-mortar location. They could undercut pricing across the board, focusing on scale instead of margin per product. This shifted the business model of the market, forcing others to respond to follow suit. In many cases, that shift ultimately eroded the competition’s existing economic structure, making it extremely challenging for them to participate in the new model.

Expect Unintended Consequences

It can be difficult to imagine at the outset, but if your product is encouraging massive behavior shifts, you will undoubtedly encounter many unintended consequences along the way. It is easy to brush off a problem you did not directly and intentionally create. But as the social media companies are learning today, very few problems go away by ignoring them. It is up to you to address these challenges, even if they are an unintended byproduct.

One of the most common unintended consequences nearly all behavior-shifting companies will run into is government regulation. Regulation is created to support the world as it is today. When you introduce a behavior shift into society, you will naturally be operating outside of previously created societal frameworks. The sharing-economy companies like Airbnb and Uber are prime examples. They push the boundaries of land use regulation and employer-employee relationships and aggravate unions.

I want to emphasize that you should not ignore such matters or think that their regulation is silly. Regulation serves a purpose. Startups must work with regulators to help define new policy structures, and governments must be open to innovation. It’s a two-way street, and everyone wins when we work together.

What’s Next

My advice is to start by thinking about existing categories that represent people’s biggest or most frequent expenditures. The amount of money you spend on your home, transportation, and clothes, for example, is enormous. Is there an opportunity to grow and capture part of these markets by upending old commercial models and effecting a behavior shift?

Scooter networks are a real-time example of a behavior-shifting innovation that is just getting going. It has the same explosive opportunity of prior game-changing innovations. There are still many individuals who state that they will never commute on scooter. But applying this framework tells me that it is just a matter of time before it is more widely adopted as the technology keeps evolving and maturing.

There is no magical formula for uncovering massive, behavior-shifting products. But if you come up with an innovative idea, and everyone initially tells you that they would never use it, think a little harder to make sure they are right…

Epic Games unveiled plans for a new developer framework for online services. This framework will let other game developers add cross-platform support into their games. The SDK will be free and roll out in multiple parts over 2019.

Fortnite has been one of the best examples of cross-platform gameplay. A single player can install Fortnite on a console, a PC and a phone and find their profile on all platforms. Many games support multiplayer matches between players on multiple platforms, but very few games “port” your profile from one platform to another.

That’s why Epic Games wants to make that easier. The SDK will work with all game engines (not just Unreal Engine) and support many identification methods (Facebook, Google, Xbox Live, PSN, Nintendo accounts and Epic accounts).

After you sign up, you can customize your profile, add friends and win items. Everything you do on one platform shows up on another. User data is stored in the cloud and you can track achievements across platforms.

And of course, you can create parties with players on different platforms and start playing together. Epic has also developed its own voice communications service.

This is an intriguing move. It sounds like Epic wants to control your video game identity. The company could also potentially get a lot of insights on user habits even if they’re playing non-Epic games.

Maybe Rocket League was waiting for this SDK to roll out cross-platform IDs…

Epic Games unveiled plans for a new developer framework for online services. This framework will let other game developers add cross-platform support into their games. The SDK will be free and roll out in multiple parts over 2019.

Fortnite has been one of the best examples of cross-platform gameplay. A single player can install Fortnite on a console, a PC and a phone and find their profile on all platforms. Many games support multiplayer matches between players on multiple platforms, but very few games “port” your profile from one platform to another.

That’s why Epic Games wants to make that easier. The SDK will work with all game engines (not just Unreal Engine) and support many identification methods (Facebook, Google, Xbox Live, PSN, Nintendo accounts and Epic accounts).

After you sign up, you can customize your profile, add friends and win items. Everything you do on one platform shows up on another. User data is stored in the cloud and you can track achievements across platforms.

And of course, you can create parties with players on different platforms and start playing together. Epic has also developed its own voice communications service.

This is an intriguing move. It sounds like Epic wants to control your video game identity. The company could also potentially get a lot of insights on user habits even if they’re playing non-Epic games.

Maybe Rocket League was waiting for this SDK to roll out cross-platform IDs…