Economic, social and technological forces are reducing the need to own products. How can brands harness the forces behind the sharing economy?
The digital revolution has enabled consumers to wrestle back control over their brands through blogs, consumer forums (fora?) and social media. In turn, brands have accommodated some consumer needs to exert influence with the co-creation of products and communications, even crowd-sourcing the creative for Super Bowl commercials.
It turns out that this was just the first steps in an on-going shift in control, where consumers have started to invade every domain of the corporation.
This post outlines the forces causing the continued shift in control, the areas where the shift is occurring, and a basic playbook of what brands can do about it.
A.What’s causing the continued shift from producer to consumer?
The shift in power from corporations to consumers is fueled by economics, social values and technology:
The world has learned that access can be as important as ownership, because it makes more productive use of assets during idle times. The foundation of this trend of sharing started with Time Sharing and Job Sharing, but is spreading quickly. New brands have appeared to facilitate sharing during downtimes, allowing more people to enjoy the good life without breaking the bank. These brands include:
Flightcar - rents out private cars while the owner files
Parkatmyhouse – rent out extra parking spaces
AirBnB and Kozaza - allows home owners to lend out extra space in their residences
MyTurn - a platform for sharing household items such as tools.
2. Social values
Many individuals have started to embrace the concept of “sustainability”, realizing that we are putting too much stress on the environment. Sharing reduces overall consumption and increases “dis-ownership” by ensuring greater use and less “downtime” with any single asset.
People have also developed digital tools such as recommendations from friends and ratings, to become more open to trusting online communities. This trend is enhanced by the growth of reputation and trust networks as assets, as well as the growing importance of local communities i.e., “Buy local” programs.
Moreover, smart individuals are realizing there are burdens related to ownership, including storage (material things take up space and space is expensive in urban environments) maintenance, and insurance. This is why cities are where the sharing economy is most prevalent.
Finally people are starting to realize that when they want holes in the wall to put up shelves to support their lifestyle, they do not need to own the drills that make the holes.
Digital technology has provided the underlying structure, communications network, transaction tools and reduced the transaction costs, which have allowed the sharing economy to be both efficient and to scale. This was not possible in a pre-digital age.
B.What corporate roles are being invaded by consumers?
The first phase of the internet allowed many consumers to compete and sometimes win against corporations. For example, eBay allowed consumers to become retailers, whenever they felt the need to sell. Now there are literally thousands of micro-entrepreneurs making a living from eBay’s platform.
Further, digital technology is allowing consumers to takes on an increasing number functions previously associated with corporations, including:
1.Innovation and design
Innovation can be enhanced by tapping into the excess capacity of human resources from outside the company to solve commercial problems. This is commonly known as crowd-sourcing or Wikinomics, and is another manifestation of the sharing economy. A good example of this is Procter & Gamble’s crowd-sourcing website P&G Connect and Develop.
People are banding together the pool their capital and compete with banks and other financial institutions to finance products, services and projects. A good example of this is Kickstarter, which funds such creative products as films, music and video games.
Peer-to-peer (P2P) lending through such sources as Lending Club is also starting to compete with banks, albeit starting from a small base.
The Maker Movement has the potential to dramatically disrupt the entire production process. That’s because a warehouse of spare parts can be replaced with a file of blueprint specifications. So rather than own a factory, individuals can share a 3D printer.
One way to ensure a wider distribution of goods to a larger number of consumers is through rentals vs. purchases. A number of second hand shops in Japan in 2009 started this trend to rent out designer bags to women for special occasions. This trend has spread to China, America and Europe, supporting the idea that access can be more important than ownership.
Brands such as Task Rabbit have sprung up where neighbours help neighbours toget tasks done quickly and easily through “Task rabbits”. This type of operation is perhaps best described as a service network.
Fon is the world’s largest WiFi network with 12 million hotspots in over 100 countries and it started with the proposition that if everyone shared a little bit of their home WiFi, you could roam the world for free.
As the sharing economy grows bigger, and more sophisticated, it will face issue including financing, insurance and liability, intellectual property, and regulation. Each of these subjects is beyond the scope of this post to address; that said, an ancillary business will arise to mitigate these issues as these businesses grow.
That said, some forward thinking governments are embracing the sharing economy, and this will help solves some of the unresolved issues. For example, September 2012, the Seoul Metropolitan Government disclosed a plan for the “Sharing City Project” that included over 20 projects related to sharing.
D. What should corporations do?
Most companies’ initial reaction will probably be to crush the sharing economy, because it’s a threat to the status quo. The firms that actively oppose the movement, run the risk of increasing consumer backlash, because “The Deer still have Guns”, and are now better shots with them.
Others might consider embracing, or at least partially embracing the sharing economy, including:
1. Plan for where the sharing movement is headed
Wayne Gretzky is a famous Canadian hockey player who said “Don’t skate to where the puck is, skate to where it’s going to be”. Smart companies will plot a course for the sharing economy and find ways to embrace it. This starts by viewing sharing as both a disruptive threat to existing business and an opportunity for new business models. It also includes finding areas where assets are underutilized and where there are opportunities to transform products into services and experiences. For example, there is an opportunity to recycle baby products because the user outgrows products quickly.
2. Adopt a model to move from a product to service
There are a number of ways that a brand can join the sharing economy including:
a) Start fresh with the sharing economy – Usedcardboardboxes is a company that rescues and resells used shipping boxes to movers.
b) Leverage brands – an established brand can add credibility to the shared economy by endorsing a product turned service. An example of this is Marriott and Liquid Space which teamed up to offer temporary work spaces on demand.
c) Increase commitment to the sharing economy - Avis had already been a participant in the sharing economy by facilitating the rental of its vehicles. With the purchase of Zipcar, Avis is trying to move deeper into the sharing economy, making its vehicle sharable by the hour versus the day.
3. Adopt a model to create a platform for participation.
One key way to encourage sharing is to build a peer-to-peer (P2P) platform that connects buyers and sellers around your brand. A good example of this Patagonia and eBay, which collaborate, to allow those who otherwise could not afford to buy a new Patagonia product, to buy one, second hand.
4. Distribution systems for recycling and reuse
Brands needs to find ways to deal with multi-user life cycles by recover, refurbishment and recertification and repackaging their products.
The sharing economy is gaining traction because of economics, social trends and technology. While it’s safe to say it will never completely displace the desire to own assets, it will cause a new classes of “own and share” and “shared only” assets, to grow and prosper.
The trick now is for Brands to learn how to benefit from the trend that consumers are at times the corporation, and an increasing number of consumers want an asset-light lifestyle.
The Rising Sun
September 15, 2013