Sharing economy: ignore or embrace?

Tuesday, 26 April 2016

There is nothing new under the sun and that applies to the sharing economy, too. Suvi Nenonen and Kaj Storbacka ponder how your business might join in.

Sharing economy, collaborative economy, collaborative consumption, peer-to-peer, access economy, and so forth. In addition to the multitude of expressions, there seems to be an ever-increasing buzz about the sharing economy in the media. The sharing economy has been heralded as the miracle cure for various modern ailments, ranging from the sustainability crisis to the lack of community spirit. The drawbacks of the sharing economy have also been exposed: the rise of the ‘gig economy’, and the erosion of traditional employment and the security that comes with it.

The common thread to all these accounts is that they are mainly described from the perspective of an individual user or service provider – or that they make a huge fuss about a particular sharing economy company (Uber! AirBnB! Harmoney!) without putting it into a larger context. In short, there is a lack for usable information that is relevant to entrepreneurs and managers: what is this sharing economy – and what should I do about it?

What is ‘sharing economy’, really? 
There is basically no commonly accepted definition for sharing economy – or for any of its synonyms, either. However, it is possible to detect some commonalities between the business models that are built around the notion of sharing. A great number of sharing economy businesses are fundamentally about renting out underused physical assets such as houses (AirBnB), holiday homes (Bookabach), cars (DriveMyCar in Australia), or office space (ShareDesk). In such models the foremost transition is from owning tangible assets to accessing them through various service agreements.

The second category of the sharing economy business models focus on enabling consumers to serve other consumers directly. Examples cover a vast spectrum of services, ranging from peer-to-peer lending (Harmoney), encyclopaedia (Wikipedia) and tutoring (Tutorly) to micro-tasking almost anything as long as it is legal (TaskRabbit). In peer-to-peer services a core shift has been the re-definition of an ‘expert’: who is qualified to write an encyclopaedia entry or to tutor your child?

The third group of sharing economy businesses makes the re-distribution of used goods more efficient. The global examples include the usual suspects of eBay and Craigslist, but TradeMe doesn’t pale in comparison. In this category, the main transition has been weaning more and more consumers away from their neomania and to start appreciating things that have already been loved by someone else.

There is nothing new under the sun, the ancients said – and the same applies to the sharing economy, too. The same phenomenon has been around for a long time, sans the snazzy label, that is. Farmers have been sharing expensive equipment for as long as they can remember. Public transport or flea markets are not exactly new inventions either.

Having said this, during the last two decades the sharing economy has expanded from its traditional domains and permeated multiple aspects of life. This development has mainly been spurred by digitalisation that provides multiple solutions for bringing the sharing parties together conveniently and increasing trust between them. Since the sharing economy is riding on the mega-trend of digitalisation, while feeding on other trends such as sustainability awareness, it is relatively safe to say that this phenomenon is not going to recede into the margins of economic life in the foreseeable future.

The sharing economy is here to stay – what should an innovative manager or entrepreneur do? There is no one-size-fits-all advice available, but let us offer some ideas for consideration.

The most successful businesses in a sharing economy seem to be the ones operating the platform (Uber) and not necessarily the individual service providers using that platform (the Uber drivers). So, if your industry falls under any of the three above-mentioned categories and doesn’t have a (local) sharing platform yet, this might be an opportunity to make some serious money.

But there is no need to despair if the platform position has already been occupied. In most instances none of the sharing economy business models have become the dominant design, but they co-exist quite happily with other sharing as well as “normal’ business models.

If this is the case in point for you, you could consider taking the BMW route. The car market has more than its fair share of sharing economy business models (Uber, DriveMyCar, ZipCar, you name it), but this didn’t stop BMW developing its DriveNow joint venture with Sixt. [It allows users to locate, unlock and start cars using a mobile phone app, then drive them on a charge per minute basis.] This venture might never become be the biggest revenue generator for BMW, but it is bound to generate insights that the company can use during the next big disruption of personal transport – the autonomous vehicles. 

 

Associate Professor Suvi Nenonen and Professor Kaj Storbacka work at the University of Auckland Business School’s Graduate School of Management. They teach in the MBA programmes and their research focuses on business model innovation and market innovation. They are passionate about building bridges over the academia-practice gap.

 

Column in New Zealand Management

Magazine Issue: May 2016

Page Number: 17