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Podcast

Podcast

Harvard Business School Professors Bill Kerr and Joe Fuller talk to leaders grappling with the forces reshaping the nature of work.
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  • 09 Oct 2019
  • Managing the Future of Work

Handy’s CEO clears up the gig economy

Oisin Hanrahan, co-founder and CEO of home services gig platform Handy, has succeeded by finding order and opportunity in chaos. The former HBS student has navigated messy transitions, cutthroat competition, and a challenging venture funding environment. He is also on the front lines of the battle over worker classification. Now part of gig services conglomerate ANGI Homeservices, Handy has branched out from cleaning into skilled trades, contracting, and retail partnerships

Joe Fuller: Oisin Hanrahan left Harvard Business School in 2012 to cofound Handy, a household services gig platform. Since then, he has refined his business model and built relationships between companies, customers, and service providers. Over time, Handy has accommodated a growing array of gig workers, automated gig platform management, and orchestrating partnerships with major retailers. Oisin and his colleagues also have the distinction of having built a profitable business at Handy, a rarity in gig marketplaces.

Welcome to the Managing the Future of Work podcast. I’m Harvard Business School professor and visiting fellow at the American Enterprise Institute Joe Fuller. Today I’m speaking with Oisin about Handy and the evolution of the gig sector. How are gig platforms changing the nature of work and the makeup of the workforce? How does that emerging reality shape demand for gig services? What new categories of gig workers are emerging and how are customers’ expectations changing in reaction to the availability of gig labor?

Welcome back to HBS, Oisin.

Oisin Hanrahan: Great to be back here, in a whole new building.

Fuller: You’re one of the first survivors—you are an entrepreneur in what I’ll think of as Generation 1.0 of the gig economy with Handy. Now you’ve gone through a couple of iterations of the company, up to and including now its sale to ANGI [Homeservices Inc.], which is, arguably, the first gig conglomerate. So I’d be very interested to have you reflect on the evolution of the gig economy—how you experienced it as an entrepreneur. And what’s changed? How does it stack up today vs. to where it started?

Hanrahan: We started Handy, which was called “Handybook” in the beginning, about seven years ago with the view that the way people buy and sell services was broken. We thought, there’s a really interesting thing happening in how people are connecting and buying and selling home services, and we just wanted to make that incredibly easy. There was a whole lot of things happening around connecting people online. There was a whole lot of things happening around advertising. What we said was, “Let’s take a very simple lens and make it so that you can just buy services at the touch of a button. So you can get rid of all the negotiating, all the scheduling, all the back and forth, all the uncertainty, and make it so you could just press a button and buy services.” And that was the very first thought we had. And obviously, that’s changed drastically as we’ve had a proliferation of companies in that field. We’ve seen category winners emerge, we’ve seen words like “the gig economy,” “the 1099 economy.”

Fuller: A lot of people got that idea at the same time; a significant number of competitors entered the business. You weathered the storm. How did you do that? What did you learn along the way?

Hanrahan: You’ve got to have one side of your marketplace, at least one side, that cares a lot. And you rewind to 2012 when we started. We put up a couple of ads saying “Cleaners and handymen wanted.” And you think back to the economy in 2012. We had thousands of applications within 24 hours. I think we invited some people to interview for cleaning and handyman roles at the Innovation Lab.

Fuller: Yes, right here at Harvard.

Hanrahan: Not too far from here, yeah. And we probably invited 200 or 300 people to come along and come for an interview. And we thought, we’ll probably have 10 percent show up. And we sent this out on a Friday evening for a Saturday morning. And over 150 people showed up on a Saturday morning. That was the first insight. It was, you know what? The people selling these services care a lot. And I think a lot of companies—a lot of ideas—actually don’t get past that first step of, “Does anyone care?” The customers kind of care. So people that engage were like, “Yeah, that’s an interesting idea. It’d be easier to buy services in that way, by pressing a button.” The second part is: Grow big enough to matter, so that the velocity of the business just starts to work. And that’s where all the competition occurred. Once we raised a couple of million dollars of capital, there was a dozen other people who’d also raised capital, with the strategy around what we thought of as just shrinking the battleground to a small enough space so that we could win it with the resources we had. And it was large enough so that, if we won those battlegrounds, we’d win the category.

Fuller: Were most of those look-alike startups essentially offering the same service in the same way, or were there important differences?

Hanrahan: That category, at that point, it was thought of as one that was going to be very globally connected. There’s a case that there’s, you know, economies of scale on your technology and certain costs. But largely, there’s not a huge benefit to a consumer in New York that you’ve got a service in Vancouver. It doesn’t play out quite the same way that an Uber or a Lyft would play out. So we picked about 25 cities in the US, where some of our competitors went and expanded into 40-odd cities over seven countries with comparable amounts of capital, which meant that, for every dollar we spent, we could afford to be more competitive in the categories and the cities that we were in. The third step was, okay, the competition had kind of died away, and it became about, is there an economically viable business here? We went through figuring out how to optimize our costs, how to build the best experience possible. And it wasn’t just the third step of “Grow at all costs.” And then the fourth step: You earn the right to be at the table and actually figure out where you can take the platform. And that’s where we expanded into lots of other adjacent things, where we entered a lot of B2B partnerships with companies like Wayfair here in Boston and Walmart and others, where we realized that we could sell our services—not just direct to consumer, but also alongside product at point of sale—which was a really interesting evolution. Which, I think in those earlier phases, you don’t have the bandwidth, you don’t have the resources, you don’t have any of the ability to go do that until you’ve figured out how to own your own category.

Fuller: So with someone like a Walmart or a Wayfair or Best Buy, you’re offering a service that complements a product—whether it’s furniture, home, audio-visual system, or something—as an extension of the sale, the retail sale, to the consumer.

Hanrahan: Yeah. When we first started, we were so focused on cleaning—and cleaning is really a service-led solution, where the service is the solution—whereas a lot of other things we noticed, it’s actually a hybrid of product and service. It’s not a TV mounting. You don’t go buy a TV mounting because you want a TV mounted. What you want is, you want to watch Game of Thrones on a big TV on a wall. And, as a result, the product and the service fit really well together. The same with furniture. You don’t really think about, “How do I get furniture and furniture assembly?” You think about how to get a dining room table and four chairs. And I think we realized very quickly—not as quickly as we would have liked—but we realized, once we got to that third or fourth step, that we could actually partner up and really deliver an amazing experience if we didn’t just think about ourselves as selling services, but we thought about ourselves as providing a solution that complemented product. And I think that’s a really important distinction from the earlier part of this gig economy, where services were sold as just services.

Fuller: Over the course of your history, I would say you went from the phase of when risk capital was funding growth models to—I would have said it was 2015, 2016—all of a sudden, venture capital companies and others were looking for proof that your business was, in fact, profitable and could grow profitably. Do I have that chronology right? And if I do, what had to change in your business model when you were being held to that different standard?

Hanrahan: In the very beginning, there’s this view when venture capital enters a super-nascent category that there’s a really large category to be taken, and there will be winners that will be sustainable over the long term. And that’s a fundamental view—if you’re going to invest in a seed-stage company, or a Series A company, that’s very young—is the TAM large, is the total addressable market large? And do we fundamentally believe that whoever wins the category or the top two or three players in the category will have a business? And I think, as you take more of the category, questions start to arise around, okay, what does the business look like? And there’s certain characteristics early on that you look at and you say, okay, well are customers retaining? Is there strong retention curves? Do you see people sticking with this? And there’s certain variable costs you can look at in a business and say, all right, well, we know that when the business gets to scale, they’re going to figure out how to deliver customer service at a more affordable level. We know your payment processing costs are going to go down. I think, if there are core assumptions that need to change about retention curves in the business, I think that’s when the whole thing flips on its head and people say, “Actually, is this a business?” And for us, we were fortunate to be in a place where you could look at the business around 2014, 2015, and say, okay, well competition isn’t crazy anymore because the environment has changed, so let’s figure out how to optimize these costs and continue to scale at the business.

Fuller: As the business changed and started being held at that standard, how did the way you interacted with both your customers and the various people you attracted to the marketplace—what did you learn about what each group wanted, and how did you kind of arbitrate those alternative requirements?

Hanrahan: Our customers have come to Handy consistently for convenience, affordability, and the ability to get something in their home done. And it’s just a very, very easy way to think about solving what are typically not large problems—the average ticket price on Handy is less than $150, $200. So the transaction costs, the costs of organizing it, is almost more for a lot of people ...

Fuller: … than the actual direct cost.

Hanrahan: … than the actual cost of a job. So convenience, scheduling, easy payment, certainty of the experience is really, really important for the customer. And that hasn’t changed. For one-time services, that remains the same. For recurring services, like cleaning services, in some cases, they want to just set it and forget it. They want a system where they set this up once, and every Tuesday morning at 11:00, their home gets cleaned while they’re at work. And that hasn’t changed at all. For our pros, what we’ve noticed is this evolution to, okay, once I’ve got a certain amount of money, I’m also looking for meaning and purpose in my work. What the gig economy or this flexible economy that we’ve now got—this digital economy—has enabled is for people to trade economics, meaning, and flexibility. So the ability to set their own hours—not just on a macro basis of “I’m going to work three days a week,” but down to the minute. The ability to say, “Hey, I’m going to work Tuesday mornings from 11:00 AM to 2:00 PM, then I’m going to pick my child up from school, then I’m going to go back, I’m going to work another two hours in the evening. And I’m going to do it in these four zip codes.” And that level of flexibility is remarkable, because it couldn’t exist before technology. It couldn’t exist before the mobile work platforms that we’ve got now. And I think that change of enabling such a large group of people to work remotely and flexibly has really, really changed how companies, how individuals, how corporates, how SMEs all across the board are thinking about how to access labor. You rewind, many years ago, if a large retailer wanted to have installers, it would have to figure out how to hire an installer base, or they’d have to figure out a whole different system, which wouldn’t be great for the installers and wouldn’t be great for the customer. Whereas now, you’ve got this flexible economy, this digital economy, that is really changing how people are engaging with casual labor and semi-professional labor, and, in some cases, professional labor.

Fuller: Over time, we’ve seen in our research that actually the job satisfaction of a lot of gig workers is consistently a bit higher than that of normal full-time employees, in part, because of the type of flexibility you’re referring to. When you look at your population of pros, are there major segments? Are there people who are using this as a secondary source of income for short periods of time, as opposed to, there are people who are using this to augment an existing small business they own, and this is a new sales channel for them? How would you characterize the makeup of your pros?

Hanrahan: There’s a few things in that. So I’d break it down into cleaning and—call it “everything else:” handyman, plumbing, electrical. The cleaning pros are primarily women, so it’s primarily female. They’re primarily the primary caregiver in the home. So they’re either taking care of elderly parents or they’re taking care of children. And, as a result, they’re doing this for 10, 15, maybe 20 hours a week. They’re building a schedule around .... Look, anyone who’s ever been a caregiver knows that caregiving is a dynamic situation. You respond to whatever the person you’re taking care of needs. And that may be doctors’ appointments, it may be school, it may be a whole series of things. So you’re responding to a dynamic schedule, and that is enabled by this workforce. On the handyman side—or the plumbing, electrical, light assembly—it’s slightly different. And that’s where it breaks into people who perhaps have contracting businesses, and they’re filling in extra hours. Or it breaks to elderly people who are semi-retired and they’re saying, “Hey, I’m 50-odd. I was a full-time plumber, or I was a full-time craftsman, and now I’m looking to do 10 or 15 hours a week.” Of course, there’s certain people who are doing this on a 40-odd-hour-a-week basis, but it’s the teeny-tiny minority. The other thing I think you touched on was the level of satisfaction that people in this part of the economy have. And whenever we research and we do focus groups and we do study on this, flexibility and control of earnings is the thing that comes up a lot. They’re in control of their schedule, and they’re in control of where they work. So, though you put those things together … and you’re really changing what was a very regimented and structured way of working, where the company and the corporate essentially had all the control of setting shifts—saying, “Go here, go here, go here”—to one where you really are flipping the entire thing on its head and saying, “Well, look, you can decide wherever you want to work.”

Fuller: As I’m sure you know very well, there are a lot of public commentators, some politicians, and other public actors that that are skeptical about the gig economy and are worried that it’s actually disempowering of labor. And a major issue that keeps coming up is access to benefits—health care and others—that when you are a 1099 worker, of course, you’re essentially left to provide for yourself. You’ve got a big population of pros. How do they think about it? How do you think about it? Where do we need to go on that issue?

Hanrahan: No system is perfect. I think we’ve got a current model that dates back to 1938 where we’ve linked, essentially, benefits with employment. And we’ve coupled those things together. And we can debate what the original intention of that was. Was that to truly give employers more power? Or was that actually to empower the workforce? What do we truly do to people by linking their benefits to their employment? It’s questionable. I think what’s not up for debate is that we should figure out how to give as many people as possible access to benefits, whether it’s through employment, whether it’s through independent platforms, or whether it’s through some other means. We’ve been very, very forward-leaning on this. We’ve outlined potential legislation in a number of states where we have said, hey, we would love to see a way for Handy to provide access to benefits, to education, to training. And let’s be clear, it’s not just benefits that are up for conversation here. There’s other important earning enhancers that we could provide and provide access to if the legislation was adjusted. But we’ve put forward those bills in a number of places. We would hope that, over the coming years, we would see a change to regulation. I think right, now the only people that are winning in the current environment are the lawyers, who are obviously doing just fine through all this. I would love to see a situation where we are actually providing access to these things in a way that doesn’t impact the ability of our wonderful professionals to also have access to the flexibility they have today. So you couple all the things together, which, is it employment, is it 1099, is it access to benefits, is it access to flexibility? It’s a complicated environment. Over the last seven years, we’ve gone from a world where we thought, oh my goodness, this is the best thing ever, to, oh my goodness, 1099 is the worst, to, now we’ve got, I think, a pretty deep understanding that it’s a very complicated situation that is at a federal level, it’s at a state level. In some cases, it’s even at a city level. And we would love to see more and more people lean in to help us get some pilots up and running so that we could actually solve some of these problems.

Fuller: A phrase that’s often associated with this is “portable benefits.” Could you help our listeners understand what the definition of that is? And what does it mean? It sounds great, but are there practical ways to make a vision of portable benefits a reality?

Hanrahan: So, when I describe portable benefits, I’m definitely going to offend somebody who’s going to say this is not how portable benefits are internalized.

Fuller: Opportunity for yet another guest to clarify.

Hanrahan: So the simplest way to think about it is a decoupling from your employer of your benefits. And, instead of the benefits that you’ve got and the scheme that you’ve got and the system that you’ve got being attached to your employer, it becomes attached to you. And, as a result, your employer, perhaps, could give a contribution, or you could give a contribution to it, and in a tax-efficient way, if you were to move around, you would continue to maintain your same benefits profile. So you would maintain that benefits account irrespective of whether you’re a handyman on Handy, or whether you’re working here at Harvard Business School, or whether you’re freelancing across three or four other roles. You would be empowered to manage your own benefits. And those could apply to things like health care, it could apply to retirement savings, it could apply to funding paid time off, it can apply to disability. So there’s lots of different ways in which you can take a portable-benefits account, if you want to call it that, and you can use the funds therein to actually fund different things.

Fuller: For instance, if I were a 1099 worker, and my employer or the market maker—in this case, Handy—were making a contribution to a portable-benefits account that would have the equivalent tax status as if I were a full-time employee—so I’m not paying income tax on receiving that—how would the delta between the money being paid in and the actual cost of providing the benefit be paid? Would that be a government benefit? Or how do we envision that?

Hanrahan: So this is all up for conversation. I think it’s up for conversation around where the burden of actually the delta between what the account can afford and whatever the service would cost would be picked up. So the various parties involved are the individual themselves, who can obviously make a contribution; the platform or the employer or any counterpart that that individual is working with—so it could be the case that the customer actually could become a counterpart; and then the third group is this, well, let’s just call it government in general. So whether it’s federal, state, and local government. And I think there is obviously a wide range of political views on where the burden of picking up the costs of providing that will come in. I won’t give commentary on the pros and cons of each, but it’s obvious that there is different views in the country on where the cost of, actually—if there is a cost—or where the delta would be picked up.

Fuller: As a market maker in this space, as opposed to an employer of your pros, how do you envision your role in this? Is it to raise the issue, is it to advocate for your pros, is it to be a material contributor to those accounts?

Hanrahan: The way I think about it is, we’re dealing with a sector of the economy that is very traditionally a gray market. And by that I mean, it is cash, it is not taxed, it is, in some cases, not legal. And, as a result, we’ve got to be very careful. We’ve got to be very careful that we don’t put such a large wedge between what the consumer could pay offline and what the consumer will pay in this banked world, so that we don’t just push this sector of the economy back into the unbanked gray market. And if you look at other countries—you can look at some European examples, whether it’s Sweden or whether it’s Switzerland or whether it’s, I think, Germany is the same thing—where they’ve actually inverted this on its head and said, hey, for households that employ their home workers legally, they’ll actually make it a significant tax incentive to do so, which tries to bring this gray market work online. So I think we’ve got to be very conscious. I think our role right now is to raise the issue, try and explain the various pros and cons, and figure out a way to advocate for what we would think of as perhaps not the perfect solution, but a series of tests that would allow us to get to a better world than we’ve got today. So I think we would take the startup mindset of, we don’t necessarily know all the answers. We have a vision that says, hey, our pros should have access to benefits and access to training and access to education. And what we’d like to do is figure out a number of tests that we’d like to run that would allow us to decide and allow us to get some data on what may or may not be the right answer.

Fuller: A lot of data sources now suggest that the absolute number of people who are working in contingent work, or the gig economy, are low- to middle-level earners. But that that absolute number stagnant or declining a bit. Whereas the number of people making a substantial amounts, actually six-figure amounts, in the gig economy is the most rapidly growing part of the gig economy. Does that fit with what you’re observing? And how is the tightness in the labor market we’ve experienced in the last couple of years affecting your ability to attract pros and retain them, keep them on your marketplace?

Hanrahan: In particular cities, in particular verticals, we’re seeing prices go up as you’d expect. In other places, we’re not. Our role in this is to be as responsive as possible to make the marketplace clear.

Fuller: Given your history in this space, what do your instincts tell you about what we’re going to see the next five years in the gig economy?

Hanrahan: I think our homes are going to start to anticipate the maintenance that is needed. So I think we’re going to see more and more smart and automated ways.

Fuller: Internet of Things capability.

Hanrahan: Yes. Essentially the physical assets themselves, through some combination of AI and scheduling, saying, “Hey, why don’t I book or why don’t I schedule services to keep myself maintained?” And I think that, over a five- to 10-year horizon, I think it’s not crazy that we’re going to see the assets themselves schedule people to come and actually take care of them. I think, if you look at the gig economy, what you’re going to see is the bundling of product and service in a much more tightly-knit way. It’s a very interesting time to see how certain folks are going to be moved out of categories that are automated. But there’s evermore demand for categories that are not going to be automated. Obviously, we have a point of view that home services is one of those categories, where it’s just shockingly hard to automate plumbing and electrical services. And I think we’re probably going to see the labor market shift in that direction, where the tasks that are not automated become more filled with labor.

Fuller: And a bigger part of the composition of the workforce.

Hanrahan: I think it will become a bigger part of the workforce. I think it will also become a larger part of the economy if the economy continues on an upward trajectory.

Fuller: Oisin, if we’ve got this constrained supply of labor in this unprecedented period of demand, it seems that that should manifest itself in pretty tough competition to attract and retain pros on your platform. Do I have that right? And how do you think both inside Handy and at the ANGI level, of winning that game, that war, for talent as it applies to your pros?

Hanrahan: Across the three platforms, we have more home-services work than anybody else by a very large multiple. When we think about the position we’re in, we’re fortunate that we can provide a better experience to professionals—where, when you come to the Handy mobile app, what we have to figure out is not how to show you jobs, it’s which jobs to show you. You’ve got a five-inch screen, and we’ve got millions and millions of potential jobs over the course of a year. How do we figure out which jobs to show you that are relevant for you? We had to figure out how to balance both sides of the marketplace and how to get them to scale proportionately. Today what we’ve got to figure out is how to make sure that we show you the right work and the right jobs in a way that makes it incredibly obvious, and we piece together a logical schedule for you so that you can go from one job to the next.

Fuller: Well, in some ways, it’s also a validation of the early hypothesis that size was going to matter in these markets.

Hanrahan: Look, if you think about it, the flywheel is customers drive bookings to the platform, bookings drive pros, pros drive availability. And it comes all the way back around and helps customers book. When you come to the platform and you say, “Hey, I need a handyman tomorrow at 9:00 AM,” if we say, “Sorry, we can’t do tomorrow, but we can do the next day at 10:00 AM,” your likelihood to convert goes way down. If we say, “Great, we can do 9:00 AM,” your likelihood to convert goes way up. That just helps the economics of the business. It reduces our cost to acquire customers. It makes customers happier. It makes it more likely they come back. So all of it really trades on this idea that liquidity is so important in every market we’re in. And it’s not a macro-liquidity game, it’s not liquidity across the country. It’s liquidity of cleaners here in Cambridge that matter to you. Whereas, in New York, it’s liquidity of a handyman in Tribeca that matters to the person searching. So it’s thousands and thousands of local markets across hundreds and hundreds of categories that all have to be individually built up so that they work and they spin.

Fuller: Oisin, as you started making that transition from your growth phase—when there were a lot of competitors and you outlasted them—to trying to prove in your business model, demonstrate sustained profitability, what are the some of the steps you took to make that transition and make the company survivable and more robust?

Hanrahan: The way in which customers were interacting early on was through a lot of chat and through a lot of email or phone support. But so many of those things you could just move them into the app. So whether it was the ability to reschedule, the ability to talk to your pro, the ability to request a refund, the ability to see your pro on a map, the ability to chat with your pro, to call your pro, to gift dollars to a friend—so all of those things, all of those features, had to be moved directly. And it actually started moving them to web, and then finally we moved them to mobile. So we moved them into the mobile app. That actually empowered the customer to take care of themselves. It reduces some of your costs. And also things that make the platform better. So obviously, ratings and reviews, collecting information. So whether it’s the simple rating that you collect after a pro goes to a job from the customer. Whether it’s the question you ask the pro at the end of a job. So if they’re installing product it’s, “Okay, could you take a photo of the product, and we’ll send that back to the customer as part of a receipt to confirm it’s being done.” Whether it’s the question, “Would you like to work with this customer again?” Whether it’s simple things like, “Hey, does the customer want to review the product after the job is done, rather than just reviewing the pro?” There’s other data points you can also collect around checking in on time, checking out on time, which gives you insight into the duration of the job. So again, the system is coming all the way back around and collecting each piece of data on every job and saying, “Actually should we change future jobs as a result?” So there’s a whole technology layer that both empowers customers to self-serve and actually have a better experience than when they were engaging with a customer-contact center. And then the other part is technology that’s making the platform better through data.

Fuller: Oisin, thanks a million for coming back to Harvard Business School and sharing your story of Handy with us and its development. And also for proving that you can come to our school, never degree-complete, and not suffer any dire consequences.

Hanrahan: Thanks so much, it was great to be here. I thought this was the degree-completion part.

Fuller: Um, await further developments. I’m not quite sure we’ll get away with that.

Hanrahan: Thanks.

Fuller: From Harvard Business School, I’m Professor Joe Fuller. Thanks for joining us for the Managing the Future of Work podcast.

We hope you enjoyed the Managing the Future of Work podcast. If you haven’t already, please subscribe and rate the show wherever you listen to podcasts. You can find out more about the Managing the Future of Work project at our website hbs.edu/managing-the-future-of-work. You could also learn about our upcoming executive education course, “Leading an Agile Workforce Transformation.”

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