BlaBlaCar: Lessons From the Shipping Container

European Straits #24

Dear all,

I just spent 6 days on the RMS Queen Mary 2 crossing the Atlantic: Southampton, Cherbourg, Saint-Nazaire, New York City. The event I participated in on the ship was called ‘The Bridge’: it was designed to celebrate the 100-year anniversary of US involvement in World War One with a series of conferences and workshops around the future of business.

The Queen Mary 2, a magnificent British Cunard liner (built in Saint-Nazaire), radiated the past splendor of the British Empire. And in her elegant “Chart Room” and “Commodore Club”, no reading seemed more appropriate than one about innovation and the ocean: Marc Levinson’s The Box, which narrates the invention of containers and the revolution that ensued.

The book got me thinking about the complex, adverse relationship between regulation and innovation. Next Saturday I will be in Aix-en-Provence for the Rencontres économiques, which is a kind of French equivalent of the World Economic Forum, with CEOs, politicians, and economists gathered to debate the future of the economy. I’ll be participating in a panel titled “Can innovation be regulated?” where I’ll mention the telling business case of the shipping container.

The key message is that rigid regulations spur innovators to be smarter and go sideways. Malcolm McLean, a truck magnate from North Carolina, was the one who in 1952 came up with the systemic vision of the container. Unfortunately, he was prevented by the Interstate Commerce Commission from diversifying into maritime transportation, for fear that it would harm other trucking companies.

Yet McLean was so obsessed with his new idea that he decided to leave the trucking business altogether and reinvest his fortune in a shipping line company. That’s how he gave life to his vision and imposed a new mode of transportation that eventually revolutionized shipping goods around the globe.

McLean’s approach to overcoming the obstacles put in his path by a regulatory body resembles that of BlaBlaCar founder Frédéric Mazzella’s sideways approach to transforming passenger transportation in France (and then the world). Faced with the frequent impossibility of traveling by train in France at peak times—all tickets are sold early and it’s too expensive anyway—Mazzella simply bypassed the railroads and founded the world’s leading long-distance ride-sharing platform.

That story could only have happened in France. To have the idea you needed a typically French railroad system, one that is both centralized (every line leads to Paris) and unaffordable for the majority of households (France’s beloved high-speed trains are costly). And for BlaBlaCar to be able to grow, it was critical that it not face any adverse incumbents along the way—just like McLean didn’t have to struggle with incumbents in a maritime transportation sector that had been destroyed by World War Two.

Why did BlaBlaCar meet so little resistance along its way? For one, the SNCF (the French national railroad company) took a long time to realize there was a new competitor in town—a typical case of Clayton Christensen’s disruptive innovation. Also, unlike in Spain in 2015, BlaBlaCar didn’t have to deal with the more alert resistance of coach line companies, as those had long been forbidden in France, precisely to protect the SNCF against cheaper competition. How ironic!

The lesson that can be drawn from these tales is not that all regulatory obstacles should be removed as a matter of principle, as those are needed to spur innovation and force innovators like McLean and Mazzella to go sideways. However resistance must be eliminated in a timely manner by the government once the new model has proved its viability, added value and transformative impact.

Because there’s a fine line between a new platform with the power to reshape the economy (like Malcolm McLean’s container) and a once-promising startup eventually brought down by legacy regulations and entrenched incumbents (as would have happened if BlaBlaCar had been founded in Spain). And mostly it’s the state that can make that difference, by either killing or supporting an empowering venture once it has overcome early obstacles and finally reaches its deployment phase.

Apart from that, don’t miss my latest Scaling Strategy note: Why Scaling a Tech Company Is Different.

Warm regards,

Nicolas