What is the Collaborative Economy?
The Collaborative Economy is an economic model where commonly available technologies enable people to get what they need from each other.
Ownership and access may be shared between people, startups, and corporations.
In essence it is peer-to-peer commerce.
It enables people to use stuff more efficiently, and ends up disrupting traditional business models.
Social technologies radically disrupted communications, marketing, and customer care. With these same technologies, customers now buy products once and share them with each other. Current technology enables consumers to displace sellers by selling to each other.
Beyond business functions, the Collaborative Economy impacts core business models. One could argue that for corporations, the threat is revenue loss – because customers are buying and sharing products. But there are opportunities as well. I’ll come back to that in a bit.
That said, the Collaborative Industry is growing rapidly and is increasingly disrupting more and more of the traditional economy.
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What factors do you see driving this shift to a Collaborative Economy?
Three clear factors – societal, economics, and technology. In a way this can all be traced back to 2008 and the financial meltdown.
Societal factors include the rise of the millenials, a desire for community and a less wasteful marketplace. The economic recession led to foreclosures, and lots of spare cars and room vacancies. People were looking for ways to earn income, and the Collaborative Economy was born.
On the technology front, the iPhone – also introduced in 2008 – accelerated this shift. Tie that in to Big Data, mobile payments, and the Collaborative Economy was born!
How does the collaborative economy disrupt the traditional industry structure?
The number one reason for using sharing services is convenience.
In collaboration with Vision Critical, we explored how traditional companies might compete. Looking beyond Uber and Airbnb, we see the Collaborative Economy moving into luxury spaces as well. Examples include Uber Black and One Fine Stay. The Collaborative Economy is a global phenomenon. We see examples in India, in the Middle East, and China.
Some of these Collaborative Economy start-ups have become enterprises in their own right – with explosive growth.
But we see traditional companies beginning to participate and changing their business models in order to compete. Ford, Home Depot, Whole Foods, and Farmers Insurance have adopted strategies to take advantage of this new peer-to-peer opportunities–just like Uber, Etsy and AirBnb have– and have thrived.
BMW, for example, is working on an innovative approach to share its cars, making cars available on-demand. Similarly, Car2Go, owned by Daimler AG, lets people locate and rent available smart-cars with their smartphone or computer, drive to their destination, and park the vehicle in any approved city parking spot.
Whole Foods is seeing 5% of its revenues coming from Instacart – the one-hour grocery delivery company.
How does marketing and branding change in this new world?
Our research clearly shows that in almost all categories of the Collaborative Economy, a single player dominates the market. That’s why Uber is practically synonymous with ride-sharing, Kickstarter with crowdfunding and Airbnb with house-sharing. So the innovative startups of the Collaborative Economy have become big brands themselves. Consumers prefer known brands.
Are certain industries more progressive than others? What steps should companies take to transform their companies?
The industries that are most vulnerable to the shift are industries where their products are expensive, not used often, and durable. Cars, for example.
But again, the brand matters. There are three strategies for companies that want to take advantage of their brand name in the collaborative economy.
- Partner with companies that have strong positive brand sentiment. This provides a level of brand trust, which is useful in encouraging people to try your initiatives in the collaborative economy.
- Leverage your own brand to increase your collaborative capacity. Determine if your brand has strong positive recognition, and if it does, make sure your brand is front and center as you launch sharing programs.
- Focus on customer experience to build your brand. For companies that are already well known, providing a high caliber of customer experience assures the continued strength of your brand—a necessary step in attracting customers in an era of collaborative consumption. Engage with your customers frequently to identify ways of providing a more seamless experience, and build your brand over time using customer insight.
Andrew Reid and I have a webinar on this, called The New Rules of the Collaborative Economy. Your readers may want to check it out.
What are the socio-political effects of the collaborative economy? With the coming Age of Robots, how does the human compete?
For manual jobs, there will be massive disruption. I don’t see how we will not have to have something like a “universal basic income” to keep people above the poverty line. This is a socialist idea, perhaps, but we are venturing into totally uncharted waters.
One could argue that the sharing economy reduces consumption, but the data is proving otherwise. The auto industry and the car-sharing industry both had their highest sales and highest ridership during the same time period last year.
This may not be sustainable. In fact there are many who argue that Uber and Lyft should be replaced by public transportation. Right now, our politicians may be too busy arguing with each other to focus on real worker issues.
The AARP is looking at ridesharing as well, so there are different views that are coming into play. What if “free” became the business model? See couchsurfing.com, for example. Or Yerdle.
We are going to see companies nurturing customer ecosystems to enable customers to co-create and sometimes build new products as partners. The ride has just begun. Peer-to-peer commerce promises to change how we live forever.
INTERVIEW by Christian Sarkar.