By Sampo Hietanen, CEO and Founder of MaaS Global

Crises puncture bubbles and inflate new ones. Recently, in the world of mobility we’ve seen the great hope of yesterday, the Segway, halt production while the value of today’s promise for a better future, Tesla, has gone through the roof.

Both Segway and Tesla represent admirable technological achievements, but are single device solutions to multidimensional problems. Segway was fantastic when cruising down sunny ocean boulevard, but a terrible means to pick up the kids in a hale storm. A Tesla may not directly emit CO2, but replacing combustion engine cars with electric ones bears an enormous environmental cost and does not solve urban congestion.

As a solution to the world’s transportation problems, MaaS is fundamentally different. Its multimodal service-based approach aims at changing the whole system, not just adding one more shiny object. And that’s why MaaS will be the next red hot investment playground. The potential is staggering. When households start moving the five or six hundred euros per month they are using for the upkeep of their cars into mobility services, this will make the telecom revolution look like child’s play.

Most in the mobility sector see this and are attaching a MaaS stamp to everything they do. This is why Uber started talking about itself as Amazon of transportation before its $82.4 billion IPO. That is why last May Intel made a strategic MaaS move and bought the urban route planner Moovit for $900 million.

The Covid situation is making the MaaS M&A landscape increasingly interesting. While mobility companies suffer from lack of demand and therefore of diminishing cash flows, the investors are benefitting from stimulus cash. Things can be bought for fire sale prices while money costs nothing. In this environment empires will be built, but also bubbles. The predators are circling, but so are constructive visionaries.

Even before the Covid crisis I had expected a shopping contest to begin this year, and every outfit declaring itself a MaaS company becoming a possible acquisition target. But M&A fever is still building up, not raging yet.

The most conventional approach to empire building is to consolidate smaller actors into bigger entities within an industry. This is done in search of increased market share and synergies. Sometimes it works, oftentimes not. Market share may not be coupled with increasing margin and achieving synergies may turn out to be tricky in real life.

I think consolidation across sectors and cooperation through cross holdings present a far more interesting approach. Size is not at the center of MaaS. Trust is. Transportation is an awfully siloed and old-fashioned business, and winning customers’ trust and building mutually beneficial partnerships takes time. Once these have been achieved they become powerful assets. Investing in companies that have a good trust record and building good relationships with them may be far wiser than simply buying anything labeled MaaS.

The main reason for this approach is that to function, MaaS must be an open ecosystem, and in ecosystems the winners are the ones with the most friends, not the ones that seek absolute control. The world of transportation is simply too big and too capital intensive to be controlled by a monopoly or an oligopoly. In an open ecosystem trust is much easier to establish through cross holdings and resulting shared fate, than through contracts. Open ecosystems can also be vulnerable. If one component fails, it affects the whole system. This risk can be mitigated through cross holdings and a mutual alarm and support system based on that.

Cross holdings also complement contracts (or vice versa!) when you are building a future that is unknown to all participants. It may be much faster and far more efficient to swap some ownership than to try to come up with a contract that takes into account everything we don’t know yet.

In the MaaS game we are still far from a bubble. Consumers get and are drawn to the idea of MaaS, but the business model is not ready for massive growth quite yet. But we will get there soon, and then we will be talking about something far bigger than single gadget solutions like a Segway or even Tesla.

When the business models start falling in place, and when investors start seeing the benefits of ecosystem thinking and cross sector consolidation, this space will be flooded with money. The winning companies will be those that have an overarching vision for the future of transportation, a tested use case and capabilities to get things done fast and to form trust-based alliances.

As a result we will get on a fast track towards more sustainable global transportation structures. Will there be a bubble? Most certainly so, but personally I do not worry about that much. Bubbles are sometimes necessary byproducts of building momentum. Once they burst, and the dust settles, what’s left are a changed industry, the best solutions and most resilient organizations. And that’s what we want, right?

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