It’s Time To Take Advantage Of Technology
An “entrenched industry that is failing to recognize and adapt to changing consumer demands,” Jillian Manus said as she explained why $400 million in venture capital is being invested to disrupt our self-service storage business model.
Ms. Manus was the keynote speaker at the California Self Storage Owners & Technology Conference in Napa this past May. Based upon Jillian’s credentials, we should be listening!
Ms. Manus previously invested in several successful self-storage properties. She is managing partner of Structure Capital, a venture capital firm that provided early seed investments in disruptive technology titans Uber, AirBnB, Netflix, and Lending Club.
Ms. Manus sees the storage industry evolving from a problem-solving business to a lifestyleservice (hobbies or lack of closet space). The digital ecosystem, she believes, will disrupt self-storage use and demand as today’s consumers buy “experiences” and not things. They expect everything to be on demand, as in it comes to you not you go to it; and it is all controlled through the magic wand of a smart phone.
Structure Capital invested in Omni, an on-demand storage startup. Their “concierge” business model picks up your belongings, then stores and catalogs them with photos and descriptions. Storage fees are based upon the items stored—not a unit size. Omni’s mobile app allows customers to conveniently select which items to retrieve from storage to be delivered to their front door.
The storage industry, Manus opines, is too fragmented, lacks technology infrastructure, and suffers from an industry-wide complacency toward disruptive changes. Publicly traded storage companies, she points out, have yet to innovate, leaving a huge opportunity for new companies to fill in the gaps.
She believes that too many leaders are risk averse and content with incremental outcomes at the expense of disruption. Challenges in transporting items to and from a storage unit creates what she calls the “Black Hole Effect” where stored items get sucked in, held hostage, forgotten about, and overtime breeds customer contempt toward the self-storage business model. This should be a reality check for all self-storage operators to wake up and work together in developing the technology to address unmet consumer-driven issues from opening the door for disruptive business models to compete and take market share.
The storage software industry possesses too many “silos” or fiefdoms that are blocking innovation, Manus claimed. These “silos” are the owners’ inability to grant technology companies complete, unfettered access to their store’s data via a common API feed. API access is the digital bridge connecting your business software to software applications used by consumers. She believes common API access from all software companies is necessary for outside technology companies to invest in technology solutions demanded by a changing customer base. Without universal API access and protocols, our industry cannot provide the business services, easy apps, platforms, and other technology needed to remain competitive and relevant to today’s “on demand” consumers. Our self-imposed inefficiencies are why so many venture capital firms seek to disrupt our industry!
John Chambers, chairman of Cisco Systems, famously warned that business leaders who don’t reinvent, change their organizational structure, and fail to appreciate the speed of innovation will get disrupted. “And it’ll be a brutal disruption, where the majority of companies will not exist in a meaningful way 10 to 15 years from now,” he says.
Our industry possesses a staggering 2.35 billion square feet of storage capacity, but minimal technology. On-demand competitors are technology rich and view storage capacity as an incremental expense based upon demand. Our profit is driven by the demand for convenient space whereas on-demand competitors will profit from their convenient technology which efficiently utilizes under-utilized storage space.
It is time for all of us to work together in making the transformational changes necessary to remain a relevant long-term business model. Otherwise, we may very well look back upon today’s prosperity as the storage industry’s antebellum period.