The collaborative or sharing economy is an economic model where ownership and access are shared between corporations, startups, and people. The result? New products, services and business grow in a new way. According to a recent report from Altimeter Group, an independent research firm based in San Mateo, Calif., the sharing economy is a $2 billion industry already.
Look no further than Rent the Runway, Zipcar, Uber and CitiBike to understand what companies in this space are beginning to look like. People are sharing and they're doing it faster and across more services than ever before. So what instigated this new way of living and doing business?
Three market forces snuck up on us that have been driving this collaborative economy into development:
1. Societal drivers like increased population density, drive for sustainability and desire for community are one influencing factor.
2. Economic drivers such as people and businesses looking to monetize excess or idle inventory, increased financial flexibility, access over ownership and VC funding.
3. Technological drivers that are helping push the collaborative economy forward. Those include social networking, mobile devices, payment systems and more.
People have become a DIY kind of group. They've taken back control from corporations and are in the driver's seat when it comes to using the technology they want and sharing and making their own products and services. A few years back, people started to create a shift in IT throughout the enterprise with the BYOD movement and more recently, consumers have even begun to create their own exchange networks. Instigated by consumers, sharing, borrowing, reciprocating, lending and more is the next big thing that’s going to be responsible for changing how companies think about doing business and how consumers spend.
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Airbnb is a perfect example of how consumers are dramatically altering how business is done. Shortly after moving to San Francisco in October of 2007, Brian Chesky and Joe Gebbia created the initial concept then called Air Bed & Breakfast during the Industrial Design Conference. At the time, the two friends couldn't afford the rent for their loft in the city, so they made their living room into a bed and breakfast, accommodating three guests on air mattresses and providing homemade breakfast. Soon after, in February 2008, a new Harvard graduate and technical architect joined the Air Bed & Breakfast team and took the concept to the web. At the time, the startup was solely focused on high-profile events where alternative lodging was scarce. Today, Airbnb is a thriving business that offers a diversity of accommodations - from private homes to private islands in over 33,000 cities in 192 countries.
Airbnb is just one example of many. Everything from dog walking to driveway sharing is now an online, fast-growing business. It’s clear that companies need to tune in and makes some directional shifts, fast. Some are getting smart quick and jumping on the bandwagon- they’re also seeing the benefits of sharing that may have at one time not long ago seemed impossible. BMW and Toyota are already renting cars from select dealerships throughout the country. BMW is a fan of the approach, having gone on record saying that the sharing model allows them to sell one car nine times.
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So how does a business switch gears to accommodate the sharing economy? Jeremiah Owyang, an analyst with Altimeter says there are three methods business can follow:
1. Start thinking like a company-as-a-service.
Develop a long term relationship with the customer and getting products into the hands of new customers. This isn’t something new. Netflix and rental car companies have been around for a while. But, more and more businesses are taking renting, subscribing and gifting to the next level. Rent the Runway lets women rent clothing from the web and oDesk provides virtual employees on demand.
2. Connect people to people so that they can buy and sell from each other.
Sounds like Craigslist, eBay, and even Airbnb doesn't it?
3. Let consumers create something on a branded platform.
By tapping into the crowd and engaging with key audiences through a community based approach, brands can improve all business functions and products. For example last year, at my company, Vision Critical, we worked with Discovery Communications to help them tune into 15,000 viewers to gain their feedback on programing, design, advertising and more. As a result, it launched a brand new channel that viewers wanted to watch -- Destination America.
What do these methods have in common? They’re guidelines for businesses to build their organizations surrounding people. Unlike before, when companies and their executives dictated what's trending, consumers are shaping the future economy.
No doubt, it will be tough for some companies to share. They’ll struggle with it – either because they’re too big, or because they’re too old school. Or, maybe they don’t believe in leveraging the power of the voice of the customers. Regardless of what the reasons may be, in order for a business to truly be meaningful to the next generation of buyers who are far more careful and frugal, the sharing economy can’t be ignored.
Andrew Reid is the founder, president and chief product officer of Vision Critical, a technology company that helps businesses and organizations connect with large pools of customers on an ongoing basis to pull valuable insights on everything from new products, ad buys and more.