According to analysts, the sharing economy could be worth hundreds of billions in revenues within a decade. How can CIOs go beyond simply protecting themselves from it, and learn to embrace it?
The sharing economy focuses on taking latent wealth and freeing it up for commercial use. With everything from holiday apartments through to cars often sitting idle, it makes sense to make use of them – especially if we can make a little money in the process.
Until the development of sophisticated web interfaces and location-aware mobile phones, it was difficult to make use of these assets in a profitable way. But things are changing, explained Arun Sundararajan, professor of information, operations and management sciences at New York University’s Stern School of Business.
“In its broadest sense, we are starting to see the emergence of a new set of business models that are taking economic activity outside of traditional boundaries and into marketplace-like platforms,” he said.
Sites like accommodation sharing service AirBnB and ride sharing company Uber are well known, but there are many other sharing economy services. Some create marketplaces to connect asset owners and renters together, whether you’re looking for an hourly workspace rental via Liquidspace or shared WiFi via Fon. Some put technology in the foreground, to focus on making their own assets as shareable as possible. Car2Go’s smart cars are rentable by the minute, for example. And others concentrate on shareable services (DogVacay connects dog sitters with owners).
Should CIOs run from it…
There are many apparent reasons for CEOs to fear the sharing economy. Incumbents in entrenched industries may have the most to fear. AirBnB is taking a bite out of the hotel industry, while Uber has been putting a severe dent in cab companies’ profits.
The regulatory issues surrounding some sharing economy business models are still being thrashed out. Uber, which was recently valued at $41bn, is still lobbying to be allowed into Vancouver, while simultaneously being sued by the City of Toronto for licensing violations.
…or to it?
With sharing economy business models disrupting so many sectors, though, it’s unlikely that regulators will stop them all. PwC believes that the sharing economy could unlock $335 billion in global revenues within the next ten years, and that was in just five sectors: financial services (peer to peer lending), online staffing, content streaming, car sharing, and accommodation. There are many other sectors on the sidelines.
It may be possible to embrace the sharing economy, and receive tangential benefits, without necessarily damaging your own markets. Some companies have already started. BMW got into the car sharing business with DriveNow because it knew that those people using the service would be different from those buying its cars. Marriott uses LiquidSpace to rent out its conference rooms when they’re not being used by regular customers.
It may even be possible to reap sustainability benefits from the sharing economy, which is an important consideration for companies who pay attention to these things in their mission statements.
In some cases, this involves brands encouraging and facilitating second-hand markets for their products online. Ikea did this for a limited test with ad agency SMFB, which took 50 customers and helped them to sell their used furniture online through a variety of mediums, including Ikea ad spaces, and the Swedish manufacturer’s Facebook page:
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IKEA The Second Hand Campaign from SMFB on Vimeo.
Yerdle, a marketplace for people to exchange second-hand goods online, has also created partnerships with clothing companies including Levis and outdoor clothing firm Patagonia, to encourage their clients to recycle their clothing by sending it on to others.
The potential benefits with projects like these extend beyond encouraging sustainability into customer relations. Maintaining a relationship with the customer post-sale can be a difficult task, and projects like these provide the perfect opportunity. They may also flush old products out to make way for new purchases; SMFB attributes a 40 per cent increase in online sales of new Ikea furniture to its campaign.
In some ways, the sharing economy is as old as business itself.
People have always been willing to lend and share resources with each other. But the new era of mobile and Internet apps has ushered in entirely new ways to share — and to profit from it. How will your business adapt?