Written by: Marieke Schulenburg
(Urban Hello, 2015)
Imagine you are going on a business trip and you can get everything you need without buying it from any company. For transportation you don not use a taxi but you make use of the app Lyft, which enables you to use another person’s car. You stay at someone else’s apartment using AirBnb and for dinner you enjoy a home cooked meal from someone’s home kitchen. You pay all this by borrowing money from the crowd using peer lending websites. This scenario is possible in today’s world and is part of a big transformation, the beginning of the collaborative economy.
The Collaborative Economy is Changing Business
Sharing is a phenomenon as old as humankind, it is nothing new, even our mums taught us to do it. But now, people can use technology to do it at a scale without any boundaries. The sharing economy and collaborative consumption are phenomena born in the Internet age and are growing in popularity nowadays. “Collaborative consumption is about people coordinating the acquisition and distribution of a resource for a fee or any other compensation” (Belk, 2014). Common online technologies enable people to acquire the services and products that they need from other people, instead of buying it from established companies. This shift is changing our lives, economy and the way people do business.
What is causing this?
Sharing isn’t new but the main drivers for collaborative consumption appear to fall into three main categories: social, economic and technological factors. These three categories have changed sharing from a private behavior into a transformational movement.
First of all, the attitude towards consumption has changed recent years and people are more concerned about ecological, societal and developmental impact (Hamari, Sjöklint & Ukkonen, 2015). People concern more about the climate change and sustainability and a greener world have been hot topics for years. This encourages the need for economic conservation and long term thinking (WebStrategist, 2015). This makes the collaborative consumption an attractive alternative for consumers (Hamari et al. 2015).
Most academic studies of motivations and attitudes for participating in collaborative consumption stated that economic benefits are the main drivers (Barns & Matsson, 2013; Fraiberger & Sundararajan, 2015; Fremstad, 2014). The economic recession has raised some to question the outcomes of capitalism and the need for people to own so many assets (Barns & Matsson, 2013). A search for alternatives created new ways for people to share what they have and encourage more efficient resource use and increased social benefit. So sharing expands opportunities and help people to save money.
Another key driver underpinning collaborative consumption is information technology, John (2013) describes this as both a driver and enabler of collaborative consumption. While the internet started as a conduit for digital activities and different forms of e-commerce, such as Amazon and eBay, in the 2000s has it proliferated as a new digitally-mediated social platform that enables peer-to-peer sharing of resources, such as space, money, services, goods and skills, between people that are both suppliers and consumers (Barns & Matsson, 2016).
Fight or Join?
The collaborative consumption economy can have a strong disruptive impact on existing supply chains across many industries due to its global relevance and great growth potential (Barns & Matsson, 2016). People are for example able to travel way cheaper then any other modes of transportation when they do it in a personalized way. As a consequent less cars are needed. So, the impact of sharing can be quite severe for companies, for example a properly shared care results in a loss of revenue of $270.000 (1 shared car is 9 cars at average of $30k each). The sharing and collaborative consumption are not without problems for companies. Therefore, the question remains where are the opportunities for businesses to become part of the collaborative trend and think strategically about how to shift their business models? What role do companies play if people don’t need them? Perhaps, the first instinct for companies is to fight back. Fight reactions can especially be seen in the music, film and publishing industries by invoking intellectual property regulations to attempt to stave off the results of the sharing economy. However, the results of these fights have been always poor and these fights keep industries away from innovating in new technologies and innovating from them (Belk, 2014). Instead, companies don’t have to fight – they can join. I will explain you how!
Join the Crowd
According to Barns & Matsson (2016) the most important issue is the lack of awareness of collaborative consumption, so companies need to understand the collaborative economy in order to be able to embrace it and to see the opportunities it offers. The key is to change the way we think (WebStrategist, 2015), in order to find new and creative ways to participate in the collaborative economy.
1. Products become Services
Weinberg et al. (2013) state that it becomes important to be more customer centric rather than product centric. Of course, customers want access to your products but they may not necessarily want to own them. Netflix for example offers customers to watch movies and series online using their platform but customers do not own the product. So they make money by sharing the same products over and over again instead of by selling more products. Another example is that from Toyota and BMW, to get ahead of the changing customer needs they now rent cars from their dealer in SF bay area (Zipcar, 2016). So, Toyota and BMW are
now also services. Companies should focus more on the customers and the services they provide to the customer. According to Carlioz brands and companies become valuable to people when they invest their own time and resources in it (The Guardian, 2015). The value is no longer at the pair of sneakers that customers buy but value will be sought elsewhere, in the service that companies provide such as coaching sessions or running courses (The Guardian, 2015). Consumers define their brand experiences more and more by making their branded products and services more fitting to their own likes and needs. Companies can change their relationship with their customers and should offer services, lending options, subscribing and renting. The first lesson learned; products become services!
2. Services become Marketplaces
Information technology is seen as both a driver and enabler of collaborative consumption (Barns & Matsson, 2016). The internet can effectively support the collaborative community (Weinberg et al. 2013). It can be used for a broad spectrum of relevant purposes, such as providing access to information and knowledge using online communities and blogs, creating online conversation, managing content and also sharing market information (Weinberg, 2013). So it breaks down hierarchies and enables people, who might be not willing to participate in an offline setting, to contribute. Of course companies cannot own a marketplace but they should try to help users along. It is important to engage and drive social technology, don’t assume that it will automatically take care of everything itself (Weinberg, 2013). Some examples of established companies embracing secondary markets are for example IKEA and ASOS. IKEA launched an online platform that enabled consumers to resell IKEA branded goods which supported the company’s environmentally friendly ethos (MarketingMagazine, 2013). Also, ASOS created a marketplace platform for individuals and small companies to sell branded clothes, vintages collections or their own label by ‘renting’ out a shop window on their site (MarketingMagazine, 2013). According to Stafford “The success of any collaborative-consumption platform or business is dependent on reaching a critical mass, at which point users can easily find the goods, food or skills they seek. In this way, big brands have a leg up on start-ups” (MarketingMagazine, 2013). Why not get involved and make sure that your brand is a visible part of the process if your consumers will sell it anyway? The best brand focus on creating value for their customers instead of just selling their products. Enabling a marketplace for collaborative consumption is definitely a way for established companies to create value for their customers and join the collaborative economy.
3. Marketplaces build New Products
The social media landscape enabled consumers to create content and use their voices and creativity (Labrecque et al. 2013). Participation, empowerment and contribution are concepts that organizations should embrace in order to assert control and create an open and participative marketplace where consumers can make some meaningful contribution (Weinberg et al. 2013). Using the collaborative community in the marketplace together with the platforms enables companies to transform into a social business. Many start-up companies are already using collaboration with consumers. Quickly for example co-build new products with users and Kickstarter co-funds new ideas. But also established companies do this, Nike for example, co-designs new products with their customers and at Etsy you can co-customize products. So companies must activate their marketplaces in order to empower the crowd to to build future products and services.
Benefits to letting Go
Many companies will ask themselves now, what are the benefits from the abovementioned strategies? First of all, if you innovate now, you will acquire a first mover advantage. Besides that, by co-creating with your customers and providing a marketplace you can build a long-term relationship with your vested customers. Also, the process will be more efficient as the crowd helps you. Besides that, new value created between people, implies new revenues for the company.
Although above mentioned strategies provide some opportunities for companies, opposing market forces will also emerge from this. It will be difficult to change the corporate mindset since they want to hold control and make use of revenue models (WebStrategist, 2015). Also lobbyists, institutions and the government will oppose. Besides that, the growth in start-ups will create confusing and uncertainty on which will last. How to overcome and cope with this, how to change the corporate mindset and the mindset of employees are questions that should be considered in the future.
What did we learn?
The collaborative movement is still in its infancy although it is certain that it will bring about dramatic changes in the future. Societal, Economic and Technological factors appear to be the main drivers for collaborative consumption and appear to be further stimulants to future sharing and a growing importance of the collaborative economy. Certain is that the collaborative economy is hot and growing and provides a huge threat to many businesses, but even more important, also tremendous opportunities to companies. By regarding movement as bringing huge opportunities to companies rather than threats, forward looking firms can benefit from this. The key is to change the way you think and acknowledge that products becomes services (1). Furthermore, it is important to enable a marketplace for collaborative consumption (2). Lastly, this marketplace should be used to co-create, co-fund and co-customize products and ideas with your customers. It important to ask yourself questions like how can my company innovate to benefit from the possibilities that this new marketplace provides me? This collaborative movement presents an immense opportunity for companies that are ready to build and invest in innovative new business models that fit into this new economy!
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