What role do corporations play if customers don’t need them? What if the people who used to be their customers get their goods and services from each other? I’d love to answer that at your next event.
That’s exactly the question that our research answers after analyzing 200 of the startups, and interviewing three dozen experts (you can read the full report, right here). Customers are using social media tools, called “sharing websites,” to share products, services, and even money – bypassing the corporate world. What’s the solution? We found a counterintuitive opportunity for today’s innovative companies, that, we believe, they must use to enable their own business functions, business models, and products to be social and, therefore, able to compete in one of the most significant cultural market changes in history.
The above embedded slide deck is from the Vocus marketing and communications conference in DC last week, it’s designed for a 45 minute session.
About the Content
The speech uses the story of Danish King Frederick VII, whom I learned about on last month’s trip to Copenhagen. I was intrigued by his unique dilemma as he saw a revolution coming to his gates, giving him one of two choices: 1) Fight them and, potentially, lose his head, or 2) collaborate with them. We weave in and out of his experience throughout the presentation, as we cover key steps in the presentation: a definition of the trend, real world examples from many verticals B2B and B2C, numbers showing the disruption in terms of dollars, and the causes of this sharing movement. In the meat of the presentation, we focus on the solution, which we call the Collaborative Economy Value Chain, and provide real world examples of what corporations are doing now. To top things off, we’re honest about the many challenges, but we also explain the benefits for companies that are willing to join the collaborative economy.
The appendix has additional data from our research, a glossary, and interviewee citations.
About the Presentation
Many of the slides have animations, which can’t be fully experienced in this SlideShare mode. You may download the full PowerPoint presentation to see the animations. The presentation is open research and, as part of creative commons, may be used with attribution. I’d like to thank the Altimeter research team and designers, as well as RexiMedia for their excellent coaching and visual production. As a former musician, I’ve learned to take preparation seriously, so I choose to work with the best teams during preparation and rehearsals to ensure that I give my audience the best experience possible.
Upcoming Speaking Events and Samples
I’m getting the word out about the Collaborative Economy. I have presented elements of this subject in Copenhagen, London, the District of Columbia, and San Francisco, in addition to individual clients on private calls. I would be delighted to speak at your event.
I’d be pleased to share with your business teams how the evolving Collaborative Economy is moving from sharing of ideas to sharing of goods and services. I am happy to do so either by using the free webinars listed above or appearing live at your conference or private event.
I have now begun writing for the Huffington Post, covering the Collaborative Economy in the Business Section. The content will focus on news insights in this rapidly changing market and what it means to corporations. I hope to cross-post the articles when it makes sense (as below), or simply link to them in my posts. To me, the Huffington Post represents the crowd in terms of the collaboration of media, as they have thousands of writers who comprise a mainstream media network.
What does the potential new Google Mine project mean to the internet? Here’s a breakdown on how it could change the world.
On June 24, 2013, news leaked out that Google+ is potentially planning to enable their own users to share goods and products with each other so that they don’t have to buy them from name brands at retailers. This action, if taken, will reduce the revenue to brands and corporations that are locked in old business models of selling. The good news is that there is a solution for those corporations. It’s called the Collaborative Economy. It means that their own business model must change to enable sharing of products and goods, and eventually to allow customers to participate in core business functions.
I’ve been tracking this trend for several months, including following a list of over 200 startups that enable a Collaborative Economy, but if Google itself becomes a participant, it will have some radical ecosystem impacts.
First of all, we don’t know if Google will take this step in the near future or not. Google has a number of side projects that always stay behind the scenes, and those that do seem to remain in a perpetual beta mode. Google also compiled a track record of many products that don’t work (which they sunset after a few years), so there’s no guarantee this idea will work for them. Google’s social-product track record is littered with failed attempts like Sidewiki, Dodgeball, Wave, and many others. But let’s imagine that it does launch. What impact would it have on the marketplace?
Scenario: Let’s imagine that I want to go on a family bike ride, but I don’t own any bikes.
The Google feature set requires users to map out and take inventory of the products that they might want to share and, also, to request products they may want to borrow from their friends. This requires two steps. First, there must be a thriving ‘marketplace’ of owners and borrowers. Second, users must upload their data and explicitly say that they request something. This means one of my neighbors would have to upload to Google that they have bikes to borrow, and I would have to explicitly indicate I want to borrow the bikes.
If this came to fruition, Google can tap into a greater resource of their search engine and make these free products available in their search engine results page. So when I’m using Google Search for new products, Google could, instead, indicate that a set of family bikes are available down the street, reducing or completely eliminating my need to buy them. Instead Google’s software would match up the person who’s offering it with the person who wants to borrow it. Expect several reputation systems to be working, from a social graph perspective (“Do I know them?” or “Do we have friends in common?”). And, I would expect that they would be able to see my Google Mine reputation score.
I borrow the bikes (a normal behavior, by the way in Europe, New York, and other progressive cities) from my neighbors and I’m off on a joyful ride!
Don’t expect savvy corporations to stand by idly. For corporations, it means they must tap into the trend and enable their products to be shared, potentially yielding new offers to rent bikes, or even to provide advertising on bikes in their neighborhood. There’s even a possibility to encourage customers to try a certain brand of bike, with the opportunity to up-sell new bikes later, or even to provide a subscription service to access bikes on demand.
The broader ecosystems of the sharing startups are already being disrupted. For example, Yerdle, with whom I met last week, is a startup that encourages neighbors to use Facebook Connect to find friends that have products and goods that they want to gift to each other, thereby reducing the need to buy. This project, founded by Wal-Mart’s former Chief Sustainability Officer, shows promise if it gets traction. Furthermore, if Google launches a sharing service, expect that Facebook will follow, as we found that most of the sharing websites are already using Facebook Connect.
In summary, this disruption (where customers can share, rather than buy) is imminent and is virtually unstoppable. We have already published information as to how corporations can avoid disruption by joining the Collaborative Economy in this research report, along with collateral slides and a video. I’m dedicating a great deal of my mind share to helping the corporate world prepare for this looming change, and I need your help to spread the news.
What can business leaders do to leverage the sharing revolution? Something counterintuitive, try other business models beyond selling to build a deeper relationship with customers, reduce costs of housing inventory, and generate more revenue.
[Companies can offer goods as a service, selling it many times over to customers, generating new value for customers and new revenues for the company]
Disruption: Sharing startups enable consumers to share –not own
We’ve already learned that through the sharing startups (here’s a list of 200+ of them), customers are now changing their behaviors. They want access to products rather than owning them, as people get towncars on demand like Uber, or media subscriptions on demand like Comcast or Netflix, or even getting products at no cost from their neighbors with websites like Yerdle, or even the anticipated Google Mine.
The good news is, this model isn’t new as rental, on demand, and access models have existed for a few industries, but now it will extend to all companies who produce goods, here’s how it’s happening:
Four Phases of Maturity in Company as a Service model (with real world examples): In each of these examples, the company doesn’t own the products. Instead they are providing customers with access many times over, generating repeated sales. I’ve listed them out in a maturation order, so folks can activate in a systematic method. Thank you Scott Doniger for making this suggestion.
Great for Companies that:
Who’s doing it now
1) Sponsor the Movement
Corporations can offer something these startups don’t have. Money, recognized brand, distribution, and marketing
Who don’t offer physical goods, but want to be part of this growing collaborative movement.
Screenshots of the Phases of Maturity of Company as a Service:
1) Above Example of Sponsor the Movement: Barclay’s, a financial institution, doesn’t sell bikes, so they sponsored a bike sharing program called Barclay’s Cycle Share.
2) Above Example of Make Available On-Demand Goods: Toyota, a company who traditionally sells cars from their dealership lots, now rents them on-demand in Toyota Rent a Car.
3) Above Example Provide a Long Term Subscription: For consumable products, Dollar Shave Club extends the customer relationship into an ongoing subscription.
4) Above Example of offering a Lifestyle Membership: Beyond just cars, Peugeot offers scooters, bikes, busses, vans, electric cars and more in a mobility services called “Mu”.
Business Benefits for offering Company as a Service: What are some of the business reasons that you’d want to shift your business model? Here’s a starter list, there are others, that are likely specific to your company.
Satisfy new customers behaviors of access over ownership: If you’ve read the book Share or Die, which talks about how an upcoming generation of connected customers are living in a world of shared goods and services, this is a lifestyle trend that all marketers must pay attention to. To satisfy this behavior type of access over ownership, companies must first analyze their customer behavior and see if there’s a fit.
Finally, have a long term relationship with customers. Don’t just sell a product once, and try to constantly resell it back to a customer season over season. Instead, offer a long term relationship where they join an exclusive long term relationship with your company and they make a promise (with money) to buy and buy again.
Activate unused inventory into revenue. If you’ve idle inventories sitting around in your warehouses, instead, activate them by getting them to customers in a new way via an on-demand model. Turn those aging, depreciating liabilities into active moving products that can generate revenue many times over.
Connect to a new emerging market. For some luxury brands and high-consideration goods, providing subscription models gives access to a younger or emerging market base that can’t afford your goods at full value. This builds a new relationship with this emerging market, loyalty, and is an entry point as they grow in their consumption needs.
Add new value added services. There are many business models to generate additional value, and thereby revenue by offering new forms of insurance, cleaning, matching, and other services. Don’t just offer a product as a service, offer them a valuable package of services that can increase your overall purchase order.
Make more money: Sell one product a thousand times over. Rather than sell a product once time, and risk customers sharing it with each other reducing your revenues, change your mindset that you can sell one physical good over and over. I heard this quote from BMWs innovation lead at a Stanford event on the sharing economy who’s vision is to “sell” one single car dozens of times in a day, generating new value for the customer and new revenues for BMW.
Reduce global waste as products are used efficiently. At a macro perspective, reducing excess products being sold that are used effectively isn’t just smart for planet Earth, but also the sign of a responsible consumer and corporation. Thank you Justin for the suggestion for this bullet point.
Software vendors galore for subscription software: For our research, we interviewed subscription provider, Zuora, who’s tightly wound with Salesforce, but also know there are a number of players including, eVapt, Vindicia, Aria Systems, Fusebill, Recurly, Chargify, Transverse, and CheddarGetter (best name, in my opinion). This is clearly a mature software space, so the technology is ready –business models at companies are just getting changed.
Share or Die: Shareable Magazine’s Neal Gorenflo writes how the next generation of customers prefer access over ownership
Thank you Deborah Schultz for helping to craft the term Company as a Service during the research interviews. At first go around, I was headed towards Brand as a Service, but she reminded me that it’s bigger than a brand.
The Company as a Service is only one of three new models you must consider, read the full report, the Collaborative Economy Value Chain to learn more or learn about the third model the Provide a Platform on this post. To close, new business models are emerging that gives corporations the opportunity to sell a single product a thousand times, and in the Collaborative Economy, we call this Company as a Service.
[The Collaborative Economy is an economic model where ownership and access are shared between people, startups, and corporations.]
Disruption: The Crowd Is Already Replicating Company Functions The Collaborative Economy is where people get what they want from each other, bypassing corporations. They fund, ideate, design, develop, produce, distribute, market, sell and support products on their own. As proof points, here’s a list of over 200 startups across various sectors, industries, and geographies.
Corporations Have Two Options: Fight or Adapt Movement As with social media, disrupted companies have realized they must use the same technologies to regain power. Similarly, corporations have one of two options: 1) Fight this revolution by trying to ignore it or by trying to introduce or influence regulation. 2) Collaborate with this new economy, invite the crowd in and unlock new business value for all.
For the corporations that want to explore the second option, read on.
Adapt: Advanced Collaborative Economy – The Company Provides a Platform In our research on the Collaborative Economy, the most advanced use case is when corporations allow their customers to participate in core business functions. We call this Provide a Platform (software, services, solutions), whereby companies make available a dedicated area for customers to join in.
The Rollout: How Corporations will Deploy This Concept In my analysis of this industry, I am seeing business functions from every sector being taken on by the crowd. They will do one of two things: 1) Partner with the startups that offering this, or, 2) Host the available enterprise software on their website.
The below breakdown shows how it’s already emerging
Collaborating with the Crowd in Many Business Functions
Business Function: Element of a company that can collaborate with crowd
Startups: Disruptors and potential partners to corporations
Enterprise Software: SW providers that enable corporations to self-host the experience
Note: There are other business functions, such as sharing revenue and IP that could also be extended to the crowd; this is only a small sample of what’s possible.
Challenges Await for all Parties Rife with opposition, the road ahead will require a business transformation and, with it, a series of more challenges await. Challenges over liability, IP ownership, revenue sharing, information security, and concerns over quality lay ahead. Don’t assume that all startups will want to work with corporations. I interviewed Airbnb for this research, and asked them point blank if they would partner with hotels. They made it clear that’s not a part of their current roadmap.
Expect New Enterprise Software to Emerge Expect that many social business suite players will get wind of this space and seek to build or acquire players in this space to assemble a suite. I’ve briefed a number of the small and large software companies associated with this booming movement and informed them of the opportunities at hand. Expect for now that point players will continue to emerge and, eventually, provide an opportunity for acquisition cycle. But for now, we’re just at market identification stage.
Conclusion: Soon Customers and Employees Will be the Same Corporations that adopt these methods and invite the crowd to be part of the company will benefit from a more efficient workforce, reduced costs, and tapping into loyal customers from product ideation to delivery. In this new model, it will be difficult to tell the difference between customers and employees, as the ownership of core business functions are shared with customers.
In the very near future, the crowd will become the company.
Above Image: An advanced view of the Collaborative Economy Value Chain in an ‘exploded’ view. This exclusive image, which was not included in the seminal report on the Collaborative Economy, shows a potential new business model that taps into new transactions beyond traditional selling. In the final phase of “Provide a Platform,” the crowd is building new products.
[The Collaborative Economy is an economic model where ownership and access are shared between corporations, startups, and people]
First, it’s key to read the full report and watch the 18 minute video of the highlights of the research report, the Collaborative Economy. The report defines the movement, gives quantified examples of disruption, indicates the three market forces that are driving this trend, and offers solutions for corporations who must adopt the value chain. Once you’ve done this, we can explore the advanced model (above), which proposes a hypothetical model that we created in the market where new forms of transaction emerge and the end state is where the crowd starts to design and build the company’s products.
[For corporations that adopt the Collaborative Economy Value Chain, this results in market efficiencies that bear new products, services, and business growth]
Exploring the Above Graphic: The Collaborative Economy Value Chain (Exploded View). Starting at the top at the products and moving clockwise, let’s explore the three major use cases of the Collaborative Economy for corporations. In each phase, a shift is required as products become services, services become marketplaces, and marketplaces build products. I have named each of these phases, and then I have given real world examples of these phases already happening. In the table below, I give further definition to the transaction types at each phase.
In Company as a Service products become services. In this advanced model, companies move beyond traditional selling and transform their products to services. I call this, “Company as a Service.” To date, both BMW and Toyota are renting their cars from their dealership lots in San Francisco in order to serve the growing car-sharing trend. For those familiar with Netflix or Salesforce, this business model isn’t new, and it’s a good entry point for corporations.
In Motivate a Marketplace services become a marketplace. Companies evolve their services to an entire marketplace, called “Motivate a Marketplace,” which taps into peer-to-peer markets that are already trading goods and services a traditional company involved. The difference here is that corporations must join this marketplace, rather than stand aside and be disrupted. One notable example today is Patagonia, which partnered with eBay to encourage customers to buy used goods, rather than buy new.
In Provide a Platform, marketplaces build your products. The last phase, where marketplaces shift to products, means that corporations allow the crowd to collaborate on core business functions, such as design, funding, marketing, development, production, delivery, and sales. We’re already seeing examples emerge in pieces (Kickstarter for funding, Etsy for production, Quirkly for development, and Deliv for delivery). I see copious, open, market opportunities for brands to transform their businesses by being involved in the Collaborative Economy.
Transactions in the Collaborative Economy
Now that we’ve identified the phases in the Collaborative Economy Value Chain, we are free to explore the many transaction types that have already emerged in the industry. I’m thankful in particular to Neal Gorenflo, the founder of Shareable Magazine (the premiere media site in this space), who spent a few afternoons with me to map out the transaction types during my research process. The table below was featured in the appendix of the report.
Not new — but more and more individuals are empowered to provide goods and services directly to consumers online.
Crafters sell their wares on Etsy; virtual workers get hired on oDesk and Elance.
Traditional selling as we know it has morphed as disintermediation has occurred.
For payment, a seller offers used goods for purchase.
Craigslist and eBay are household names, but Apple’s refurbished products also count.
Most non-consumable goods
For payment, a provider offers a product for use.
RelayRides enables consumers to rent cars from anyone. Rent-a-Toy allows parents to rent toys for their children.
High-cost or low-usage goods
For a recurring payment, a provider offers repeat products or services.
Zipcar offers a month-to-month subscription plan with tiered pricing.
Renewable goods, goods that require seasonal storage, repeat services
Two or more own or share a product or service together. Applies to individual and business.
Sharing babysitting services on Sitting Around.
High-cost or low-usage items
Consumers become investors or banks, or invest in or lend directly to each other.
Kickstarter enables the crowd to fund and help products to market. Lending Club, Zopa, FundingCircle, and Prosper facilitate peer-to-peer lending.
Financing at reduced rates
For no payment or a nominal fee, two parties trade goods or services directly.
99dresses allows women to trade fashion. HomeExchange facilitates home swaps.
All goods and many services fit into this category.
For no payment or a nominal fee, a provider offers a product that will be returned.
NeighborGoods facilitates loaning of household items, and more.
Most non-consumable goods
For no payment or a nominal fee, a “gifter” provides a product or service to a receiver. Reciprocation may be a requirement.
Freecycle facilitates gifting of goods. GiftFlow’s mantra says it all: “Give what you can. Ask for what you need. Pay it forward.”
Most non-consumable goods
Counterintuitive: Let go of your company to gain the market. This macro view of how a corporation’s business model must change beyond the traditional selling model may be foreign to sellers of durable goods, CPG, retailers and wholesalers. When you look closely, however, large tech companies like IBM, Cisco, Microsoft, Salesforce and others are already activating many of these use cases. We expect that some companies will eventually incorporate at least one of these major use cases, but the really savvy ones will activate all use case scenarios to tap into their marketplace and glean a share of the new market transactions that are already happening without them. We looked closely and found that, on average, the sharing startups like Kickstarter or Uber are taking about a 20% transaction fee. We believe corporations can do the same. Without a doubt, the biggest challenge is the of the major paradigm shift that is necessary for corporations to let go of old methodology. The only way for business leaders to advance to this phase is to “let go” of your company to gain the market.More: Read all my posts tagged the Collaborative Economy for additional information.
As part of my ongoing coverage of the Collaborative Economy (read all the posts) it’s important we explore all facets of this disruptive trend to corporations, not just upsides, but the downsides as well. I also see that “marketplace friction” is a sign of the disruption that occurs as power changes hands, which should make the seasoned web strategist want to look closer.
If you’re from the sharing movement and are offended by this post, my opposite of this post is The Three Drivers of the Collaborative Economy, where I documented over a dozen specific attributes that are driving this movement. Please read it. While the recently published Report on the Collaborative Economy lists the key challenges continues to obtaining traction, let’s focus in at a deeper level on what’s counter-acting this market, and look at both sides objectively.
Index of Challenges: The Dark Side of the Collaborative Economy
It might be illegal. In some cities, it’s against the law to act like a business if you’re not one. Amsterdam ruled that unlicensed hotels (houses) were not legal. We’ve seen similar rulings in cities like New York and Berkeley. It’s difficult to move forward if sharing has been deemed a criminal behavior.
New is better than used. No more unwrapping new videos. You’re getting nothing but hand-me-downs for the rest of your life, Johnny. New products have their appeal. They’re shiny, unbroken, and devoid of anyone else’s grimy fingerprints. New cars, houses, clothes and even baby toys have intrinsic value over sweaty, beaten and ‘proven’ older products. Imagine an AirBnb, which provides value-added services of security, food, concierge, and of course, that coveted mini-bar, versus hotels.
The sharing mindset challenges traditional values. Call it hippy-dippy; call it radical liberalism; call it anti-consumerism; call it the anti-thesis of what a healthy society is built on; call it whatever you want. Not only will society cause those who don’t share to feel selfish, the very core values of some Western societies are rooted in owning a three-bedroom house and white picket fence a sign of success of, reinforced by marketing to “live the dream.” The mindset of sharing with others challenges the very values and principles that many consumers and business owners have been taught to fight against.
Traditional business models are threatened as the crowd becomes empowered over institutions. Undoubtedly, existing corporations are being disrupted by this burgeoning trend that enables the crowd to be their own company, bypassing corporations. Corporations are left with a burning question that keeps them up at night: “What role do we play if people buy once and share many times with each other?”
Governments balk in order to defend taxable revenues. Across the world, we’re seeing governments at the local level, and sometimes federal, resist the sharing of homes or cars, as it radically disrupts business models, taxable revenues, security, transient guests, and existing institutions. I assume that most lobbyists are gearing up, funded by corporate backers, in order to take these battles to court. Even in San Francisco, new rulings will be unveiled next month.
Service providers could be deemed a second-rate marketplace. Second rate hacks now posing as professionals? Professionals at hotels, restaurants, service firms and staffing agencies will tell you that their workforces are better than those found at on-demand marketplaces like oDesk or Taskrabbit. They’ll claim that their workforces are full-time professionals, working full-time, not stay-at-home part-time workers.
Concerns over public safety and quality control leave regulators reeling. Berkeley showed concerns that transient migrations of guests to neighborhoods could be a public safety hazard. Furthermore, as startups like Feastley arise that enable anyone with a kitchen to act like a restaurant, concerns over food safety arise. In a morbid case study, accidents and deaths in car sharing led to great concerns over safety, as unlicensed drivers act like taxi drivers, putting those around them at risk.
Legal liability is challenged as ownership and access models are diluted. Who’s liable if a car is shared, rented, or borrowed and then crashed by a stranger? That is an example of the questions posed by insurance companies that the legal sector and owners of assets will face. While websites like RelayRide offer insurance policies up to $1 million for autos, will that cover a tragedy caused by users of this service?
Lack of spending reduces the overall market, impacting jobs and the economy. Forget your silly startup; the bigger issue is that sharing reduces taxable revenues, jobs, consumption and economic injections from consumers spending widely. If no one ever bought anything again and, instead, just shared, fixed, and made their own products, capitalism as we know it could start to unravel.
Lack of trust in two-sided marketplaces leaves owners at risk. To quote contrarian, Milo Yiannopoulos, who presented a compelling speech at LeWeb, he “Works hard for his nice stuff and doesn’t want strangers touching it,” (paraphrased) strikes a chord with many. Furthermore, we’ve seen case studies of AirBnb properties being looted or damaged, or cars that were part of the sharing economy crashed. It’s hard to trust strangers, despite Facebook connect systems.
Collaboration in an economy ripe during recession, but not during a bull market. Penny-pinching is great during financial struggles, but during times of boom, it creates an undesirable friction, as I can buy new with wild abandon. Economic disparities aside, the developed nations will discard the silly notion of sharing when, instead, they can own more at will.
Oligarchy is reinforced, as owners rent to the economically deprived. The rich get richer as those who have the resources to build and fund startups, or the resources that will be used in these marketplaces or used on demand, will continue to generate the money. In fact, traditional corporations, like car rental companies, have purchased car sharing startups in this space, securing their place in the market. Venture capitalists and investors, who already stem from the 1%, seal their place in power positions by being owners of the movement.
Excess venture capitalist funding inflates an artificial marketplace. Those crafty venture capitalists continue to inject funding into startup clones, so their portfolio is also proven to have them covered in the car-sharing market, hotel-sharing market, services-shared market and office-sharing market. This artificial injection casts traditional business models aside, as startups have one focus: market adoption, rather than business models that will sustain, as they prepare for an IPO or an M&A exit.
Startup saturation in every category confuses the market. With over 20 car sharing/renting/on-demand car services available, how does one keep track of who does what? Trying to invest in the right service leaves those who would consume confused, and creates marketplace churn. With barriers to entry so low, what’s to stop this market from continual wasteful churn, as everyone tries to do the same thing?
Socialistic values are at odds with free market capitalism. Boom. I swore to myself I wouldn’t bring it up in public, but it warrants a discussion. The collaborative economy, like the internet and social media is a form of socialism where the crowd gains power over institutions. History is rife with examples of variations of socialism being challenged, not working at all, or in a few cases, working just fine (see Northern Europe). Nothing I learned in business school prepared me for these radical models where corporations, and capitalism as we knew it, are upended by this radical change.
Lack of standardized reputation systems. Currently, the startups don’t share reputation systems, and are generally siloed. While over 50% have deployed Facebook Connect, the ratings and review data of the individual goods being offered, or the owners, are not being shared in a consistent way. Solutions, like Trustcloud, have emerged, but lack broad market adoption. (Added this a few hours after I posted
A conduit for the underworld. There is an emerging black-market in every category, unchecked by regulatory bodies. Need I say more?
A sign of market disruption is heat from friction as power changes hands. Friction comes from disruption, which gives us pause to look more closely at market drivers and market resistors. This growing list illustrates the challenges this market will have to contend with, take head on and overcome in order to become a mainstay in society. I’ve provided some additional resources that aided me in compiling this list, to which I hope you will add your comments. The market will fight these challenges for years to come. We’re just at the very beginning.
As part of my ongoing research into the next phase of social business, I’m covering the Collaborative Economy, where people are sharing goods and services using the internet. You can read the definitive report, or peruse all the posts.
A Collaborative Economy of Shared Ownership and Access to Luxury Emerges. While many associate the Collaborative Economy with activating the mundane, such as unused meeting rooms, your spare bedroom, or renting an everyday car, there’s a slice of this industry that’s focused on luxury. Rental isn’t anything new, but now idle inventory from companies, as well as individual private owners, is emerging in a new ecosystem. Here’s what we’ve found:
Marketplace Solves Needs: Consumers Want Access to Luxury; Owners Saddled with Idle Inventory. In our research interviews, I chatted with a young financial services executive who was likely making six figures. He gave a key quote: “I just want access to luxury –I don’t want to own it.” For those that own luxury goods, they also know what a pain it is to do so. One popular idiom about luxury goods is, “The two happiest days with your boat are they day you bought it and the day you sold it.” Owning luxury is often net-negative when all costs are counted. To solve these business woes, a new market of Collaborative Economy startups have emerged that enable shared access and ownership between individuals and companies. For the most part, traditional, big retailers and corporations are not activating in this market, which leaves them exposed if this second market of buyers continues to act like their own companies.
First Mover Opportunity: An Open Market for Traditional Brands and Retailers to Forge the Way. Big retailers and big luxury good creators have a great opportunity. They should offer these same services of rental (which we call “company as a service”) to their own customers, giving access to rental products at a subscription. The upside includes access to new markets that could be an entry to try goods or using them in a long term commitment on a subscription basis, thereby forging early brand loyalty. While there will be product wear and tear, the opportunity to sell a product ten times, instead of once, is there for the savvy retailer who can activate its unused or unwanted inventory. Retailers and big brands have at least two business opportunities: 1) Enable idle luxury inventory to be available on demand in the ‘company as a service’ model, 2) Activate a marketplace of buyers and sellers around them which we call ‘motivate a marketplace’.
The Future Becomes an Ecosystem of Luxury Access for Anyone. At the Surfair launch, where planes can be accessed via a monthly subscription, I spoke to the owners of the startup who are trying to connect with town cars and luxury cars so that, as folks land on ground, they can then use an on-demand luxury car. This of course, could tie to luxury stay locations, services, and personal assistants, all ready to go. Expect that these companies will partner together, forging a consumption chain all tied to the luxury market. One of leading venture capitalists in this space is the former social software executive of Leverage Software, Mike Walsh, of Structure Venture Capitalists, who has investments in Boatbound, Uber, Surfair, Popexperts and more. I follow him, and I think you should too. Taking a page from Peugeot’s focus on mobility beyond cars, expect new types of luxury services to emerge on demand, including a network of spas, men’s clothing, sports cars, shared services at airport lounges, and access to specialized local fine dining.
Summary: Market disruptions and Opportunities for Big Corporations
Corporations that cater to the luxury lifestyle must quickly recognize that these changes are imminent.
Consumers may also want access to, not just ownership of luxury goods.
Unused inventories of luxury goods are being activated.
There are impacts to financing, ownership, and insurance for this changing market behavior.
Business opportunities emerge for corporations to partner with startups.
Brands can now offer products on demand as a service, not just sell them.
Case Example Overview: Fourteen Examples of Luxury on Demand
Kings and queens anointed! Here are 14 key examples with my notations of how they work and their business model so that you can see what’s happening in this luxury market across an entire lifecycle of luxury. Leave a comment if you know of others. Here’s a few notable examples:
Above: Industry figurehead Uber provides access to towncars that come complete with a suited chauffeur freeing up towncar inventory. I’ve met investor Shervin Pishevar, who’s watching this space. Model: On demand service to shared access.
Above: Surfair (I was at the premiere launch) provides a monthly all you can fly subscription saving time –and maybe money– to have access to your own plane –rather than own and maintain one. Model: Subscription to shared access company.
Above: Uber now provides helicopter service starting in NY to the Hamptons, which includes town car rides to and from the heliport, a chopper for 5, and a car ride to your mansion, all for $3000.
Black Jet provides access to private jets –without the saddle of ownership. Hat tip to steketee for pointing this out.
Above: Bag Borrow or Steal provides rental to accessories and ability to sell your own (even cleaning services), and activates potentially unused inventory. Model: Two sided marketplace, rental, and value added services.
Above: Rent The Runway makes today’s top fashions accessible to anyone. Model: Rental with value added services.
Above: BoatBound allows owners to rent and anyone to get access, in this two sided marketplace enabling the owner and those who want access to it. Model: Two sided marketplace of buyers and sellers, or as they cleverly put it “pier-to-pier”.
Above: TurningArt allows individuals to rent art –rather than own it, and also enables unused inventory of art to be put into market. Model: Rental service with value added services.
Above: OneFineStay provides top line luxury home rentals or vacation rentals for the most high end traveler. Exotic lofts in NY, or beach bungalows in the tropics are all at hand, freeing up unused second homes. Model: Two sided marketplace of buyers and sellers.
Above: Roomorama provides quality locations rather than hotels for the discerning traveler, and also activates unused inventory of luxury locations. Model: Two sided marketplace of buyers and sellers.
Above: Dogvacay finds a place for your pooch to stay at a local home –rather than a kennel. It also enables folks at home to activate their homes into services. Model: Two sided marketplace of buyers and sellers.
Above: Deliv means access to any good through a one hour delivery services with local retailers and merchants. It also enables merchants to get items moving off shelves, and enables a new marketplace of delivery service. Model: On demand service.
Above: PopExperts Get trained by experts in a variety of practices such as meditation, golfing, language learning. It also enables experts to find clients, regardless of location. Model: Two sided marketplace of buyers and sellers of private high-end training.
Above: Fancy Hands (hat tip Chris Carfi) enables anyone to have access to virtual assistants, in this membership model, it also enables the internet worker to find new clients. Model: Two sided marketplace of buyers and sellers.
Above: Need a quiet, clean, and luxurious place to work on demand? Breather gives the discerning access to a private studio. It also enables unused small inventory in crowded cities, like NY, to activate unused inventory. Model: Two sided marketplace of buyers and sellers, with upgrade of idle properties to a standard of quality.
Above: LendingClub enables anyone to act like a rich uncle (or find one), lending money to peers. This model cuts out banks, with a 1% fee to the startups, enabling money to be shared. Model: Two sided marketplace of buyers and sellers.
Please leave a comment if you know of other examples.
Excessive influx of startups in every industry. One of the findings is that there is a cambrian explosion of startups, caused by a few reasons: 1) Low cost to create startups in today’s software as a service and open source technology startup market 2) Influx of VC funding 3) A strong desire to solve the needs of sharing goods and services among people. Of course, this comes with a downside, as I see 5-15 startups in nearly every category, for examples a variation of car share ownership, shared car usage, shared car services and more being offered.
Some startups seek to partner –or disrupt– corporations. There’s a handful of disruptive startups to corporations that are emerging, that I wanted to point out, in particular: Yerdle, which is founded by former Walmart executives, is designed to allow neighborhoods to share and gift products –rather than buy them. Relayride which has partnered with big players like GM and OnStar for distribution and access to vehicles with OnStar technology, and soon to emerge Feastly, which will enable pro-sumer chefs to enable their home kitchens to invite guests over to eat –disrupting restaurants.
Expect many to die out –but VCs will fund accelerators who will likely succeed. So what does it mean? It means this large flood of startups means a hype market, and most will not stand the test of time. However those that receive rapid market adoption will be hunted by VCs for cash injection to further dominate their markets. I interviewed many of the startups for this research, and must aren’t ready to partner with corporations, they intend to disrupt, in order to raise their profile, funding, and value. Expect corporations to be disrupted before they adopt, just like in most technology markets.
Infographic: Collaborative Economy Startups Proliferating
Below, enjoy this infographic that summarizes just 200 of the thousands of sharing startups like AirBnb, Lyft, and a host of others, this data was taken from a list I compiled with the help of a Taskrabbit on this post here. We’ve segmented the startups by funding, use case, business model, and integration with social networking features.
Thanks to you, last week’s Report on the Collaborative Economy was readily received, and has been viewed over 26,000 times. The media and bloggers alike have picked up on it. As we digest what it means, it’s important to recognize that this is the next phase of the internet and the next phase of social business. An interesting finding is that the second era (social) and the third era (Collaborative Economy) use the same social technologies but, instead of sharing media and ideas, people are sharing goods and services. This is all part of a continuum. We need to understand how our careers will progress as the market moves forward with us.
[Social technology enabled the sharing of media and ideas called social business --The same tools enable sharing of goods and services called the collaborative economy]
Internet Phases: Past, Present, and Future
Brand Experience Era
Customer Experience Era
Collaborative Economy Era
CMS and HTML
1995: Internet had 14% American adoption
2005: Business blogging disrupted corporations
2013: AirBnb, TaskRabbit, Lyft, gain mainstream attention
Social strategy, community managers, communicators
Agencies that help with trust, customer advocates, ?
Those who adopt
Those who adopt
Those who adopt
What it means to your career, clients, and company: Change in our careers is good. It leads to new opportunities, growth, and even fun. It often requires us to step out of our comfort zones and be prepared to adopt new paradigms. With that said, here are three insights to remember as we enter into this next phase.
Prepare for the next phase in your career as we shift eras. The internet continues to evolve and, with, that our careers do as well. The mid 90s saw the blistering heat of the “dot bomb” era. As the internet became a dominant force, it subsided with the global recession and industry implosion until we saw the second phase emerge. We dubbed it “Web 2,” where information creation and consumption was democratized by all. The next phase uses the same principals of sharing and democratization, but involves goods and services.
Take what you’ve learned in social business and apply it to the Collaborative Economy. If you’re in social business, you’re in a good spot. The same rules apply about letting go of control, shifting to engage, and connecting with customers. Learning to listen for understanding, engaging with customers, developing programs where customers become your advocates, and applying scalability, all topics I’ve researched deeply, will apply to this next phase.
Change is in inevitable. Prepare for this next phase now. The next phase has already begun. Last week’s LeWeb received international acclaim, and funding to sharing startups is on rise. Even cities like Amsterdam are opening up to the potential of companies like AirBnb. Mainstream media is covering this movement. We must prepare for the next phases of our careers now. We can and will do this together.
Right now, customers are sharing media and ideas on social technologies, in the near future, they’ll use similar technologies to share products and services, which will cause a ripple of impacts far more disruptive than what we’ve seen before.
[The Collaborative Economy is an economic model where ownership and access are shared between people, startups, and corporations]
Disruption: Customers are now sharing products and services with each other, like AirBnb (vs hotels), Lyft (vs buying cars), Lendingclub (vs banks), 99 Dresses (instead of buying clothes), odesk (vs traditional hiring methods) as an alternative to traditional sales, in fact, our small list of 200 startups only has a portion of the services that have emerged, enabling this trend.
The executive summary encapsulates what you need to know:
The Next Phase of Social Business Is the Collaborative Economy. Social technologies radically disrupted communications, marketing, and customer care. With these same technologies, customers now buy products once and share them with each other. Beyond business functions, the Collaborative Economy impacts core business models.
Customers Are Sharing Goods and Services — Redefining the Buyer-Seller Relationship. Every car-sharing vehicle reduces car ownership by 9-13 vehicles; a revenue loss of at least $270,000 to an average auto manufacturer. The cascading impact to the ecosystem has far-reaching impacts to auto loans, car insurance, fuel, auto parts, and other services. For corporations, the direct impact is revenue loss that results from customers sharing products and services with each other.
Innovative Companies Are Already Moving Into Collaborative Economy. Some companies have joined this movement. For instance, Toyota rents cars from dealership lots, and Patagonia partnered with eBay to encourage customers to buy and sell its used products. NBC has partnered with Yerdle, a startup founded by former Walmart executives to foster peer-to-peer sharing. This movement impacts every industry.
Adopt the Collaborative Economy Value Chain. Companies risk becoming disintermediated by customers who connect with each other. The Collaborative Economy Value Chain illustrates how companies can rethink their business models by becoming a Company-as-a-Service, Motivating a Marketplace, or Providing a Platform. The forward-looking company
Above: Short Version from LeWeb (matches above video)
Above: Bloomberg TV interview.
Altimeter conducted a number of research interviews, as well tested the thesis with business leaders across multiple spaces. Special thanks to Loic Le Meur who triggered the ‘aha’ for me last year, on how this is the next phase.
Above Graphic: The first phase era of the internet allowed few to publish, yet disseminating knowledge, the second social era empowered everyone to share ideas, and now, the third era, the Collaborative Economy, empowers customers to share goods and services, continuing to shift power to the crowd.Select Coverage of the Report