Do you own or lease your home or car? Would you let a stranger sleep in your bed or drive your car as a way to earn extra income? How do you feel about paying to use things that other people own or that many have used? Perhaps asked another way, are you comfortable with not owning property or assets once deemed as a metric of personal success or status?
These questions are equally philosophical and utilitarian. Increasingly, customers are facing unique quandaries that come down to a simple but difficult series of decisions where they either buy and own, buy and share, use and reuse, or a combination thereof.
Welcome to the paradoxical yet commonsensical economy of collaborative consumption. In this economy, new technologies create a frictionless exchange for goods and services between people rather than the traditional path between businesses, intermediaries, and customers. While peer-to-peer exchanges aren’t new, the idea of a collaborative economy is expanding opportunities for consumers to access what they need as they need it. And this is impacting traditional business models as one sold good can be used and reused almost endlessly.
Jeremiah Owyang, my colleague at Altimeter Group, released a new report that explores “The Collaborative Economy” and how businesses must explore participating in and contributing to the evolving landscape of shared value chains to “avoid disruption.”
While peer-to-peer-driven economies aren’t necessarily new, they are becoming connected, social, and easier for contributors and consumers to share and share a “like.” Through the use of smart phones, social networks, and geo-location, startups, and savvy businesses of all shapes and sizes, are building platforms that connect sharers with each other. Here, companies become services, market places become collaborative and platforms facilitate transactions, economies, and digital reputations.
Almost overnight, there is a mind-boggling array of services now connected through people, products, services and apps that integrate convenience, real-time, location, and transactional information.
Car Service – Lyft lets anyone with a car become a driver as they desire. The app puts them on the grid to help them get fares from people searching for rides.
Car Sharing – RelayRides allows car owners to place their cars in a community rental program where those who need to rent a car locally can do so at a peer-to-peer level.
Accommodations – AirBnB provides people with a platform to list their place or a spare bed or couch to provide budget or experiential conscious customers find alternatives to traditional hotels and other forms of boarding.
Errands/Tasks – List your services or find resources on TaskRabbit to accomplish random or specialized tasks and errands.
Social Lending – Lending Club provides a platform that turns people into banks connecting those who can lend money with those who are qualified to borrow it.
Shared Event Space – Eventup (www.evenup.com) helps companies or people with unused event space list availability for those looking for alternatives to host events.
Community Funding – Kickstarter (www.kickstarter.com) offers a platform for people to present ideas to earn community support and funding to bring them to life.
What’s Driving the Collaborative Economy?
This is just a taste of the ever-evolving collaborative economy that’s only getting stronger and more creative in the applications and solutions that continue to emerge. In Jeremiah’s report, there are seven pages listing more than 200 of the most promising startups.
According to Jeremiah’s research, there are three factors that are driving the collaborative economy.
- Increasing Population Density: Population density enables sharing to occur with less friction.
- Drive for Sustainability: There is growing awareness about the environmental impact of our consumption habits.
- Desire for Community: A latent desire to connect with people and communities is re-surfacing.
- Generational Altruism:There is a longer-term trend in sharing finite resources or “paying it forward.”
- Monetize Excess or Idle Inventory: Previously idle resources can be now be shared and often monetized.
- Increase Financial Flexibility: As owners begin to find uses for idle inventory, the possibility emerges for earning income and gaining greater financial independence and empowerment.
- Access Over Ownership: Individuals who can’t afford luxury goods can now rent them; businesses can hire on demand workers or rent on-demand space.
- Influx of VC Funding: There has been an influx of over $2 billion in funding, with the average funding per startup at $29M
- Social Networking: Social networking facilitates peer-to-peer transactions by matching up supply and demand that wasn’t previously possible.
- Mobile Devices and Platforms: The rise of smartphone adoption means that customers can increasingly offer or locate goods and services anytime, anywhere.
- Payment Systems: Top sharing startups rely on online or mobile payment systems tied to credit cards. There are also examples of gifting or swapping that depend on digital reputation instead of traditional payment systems.
Maximizing the Share Economy
“If you are really thankful, what do you do? You share.”
- W. Clement Stone
In the collaborative consumption or share economy, each time someone shares, it’s a decision to either not purchase or not use a traditional service or business for an everyday solution. This ultimately impacts businesses that are in the business of selling said good and services. Additionally, in these instances where people connect with one another, a new currency evolves based on trust and reciprocity. While many consumers are saving money, peers are also making money. Funds therefore circulate in a different exchange thinning the volume that flows through customary markets.
Ordinary individuals now learn what it takes to become extraordinary sharers. Doing so builds a strong digital reputation by earning trust and reciprocity in how they use and provide products and services much like any business that desires income and stronger, long-term relationships.
Now it’s no longer caveat emptor or caveat vendit, where the buyer or the seller must beware, it’s now the age when technology and shared goods talem emptorem and talem vendentes: empower buyers and empower sellers.
How is your business building a culture of sharing among employees and other constituents?