A series of significant monetary events have occurred.
In prior posts, I’ve covered the investment leaders by frequency and looked at funding in a category of 200 startups. I found that 37% had been funded, with some receiving very large cash injections. In the recent past, there have been some significant material events in the Collaborative Economy, including the following:
- Avis secures a place in the ecosystem by buying Zipcar. Zipcar to Avis for $491 million, January 2013. To expand and defend mobility-as-a-service, Avis snaps up Zipcar.
- PayPal spends $800 million on mobile payments player. On Friday, PayPal bought Braintree for $800 million. This startup provides the mobile payments power for Uber, Airbnb, and other sharing startups.
A quick tally shows that funding-wise, that’s $444m (not including other startups, and additional Uber funding) and acquisition-wise, that’s $1.291b, not including the unknown Topcoder purchase. So why are big companies like Google, eBay and top investors like Andreessen and Menlo Ventures putting into this market? Here’s a simple logic flow that helps to understand why this market matters to them.
Logic flow on why investors and tech companies are betting big on this market:
- They have ample technology. These well-funded sharing startups, like Airbnb and Uber, leverage cheap, but powerful, technologies like Facebook Connect and Apple and Google hardware and mobile apps platforms.
- They’re efficient. Using these startups, people are getting what they need from each other, often at a local level – rather than getting those things from corporations.
- They’re scalable. Since these startups match idle inventory to buyers and renters at a local level, it means their operating costs are lower than traditional corporations, as there’s no overhead or inventory to manage. These are scalable, two-sided marketplaces with low operating margins
- They shift power. This, of course, spells disruption to inefficient institutions like corporations who pay no attention to this growing trend by which individuals are getting products, services, time and space from each other.
This means, the crowd is becoming like a company. Airbnb is a hotel, Uber is transportation, Lending Club is a bank, Cookening is a restaurant, Yerdle is a retailer, Lockitron is a warehouse, Postmates is supply chain, and social networks are marketing. Savvy investors and big tech companies are paying close attention to this market, injecting resources and acquiring en masse. Corporations must pay attention, as many of these startups are directly aimed at better serving market needs – often unintentionally disrupting corporations. The more successful they are at meeting market needs, the wider the disruption of corporate businesses will become.
Photo used with creative commons attribution by Epsos.
I’m starting a new company to help progressive corporations tap into the Collaborative Economy.
I’ll be leaving Altimeter in my current role, but will remain connected as I join Altimeter’s Board of Advisors.
One of the advantages of being an industry analyst is being able to see what’s coming in the future. To address this transformation, large corporations are going to need help to manage this radical market change. In the coming weeks, I’ll share my plans for this new venture.
It’s amazing to see four years at Altimeter Group go by so quickly. We’ve accomplished so much. The kickoff, our first conference, and the publication of Open Research reports, we have helped clients adopt disruptive technologies.
My business partner of four years, Charlene Li, has been very supportive of me in launching this next venture, and shares her thoughts. As I continue to support the firm, I’ll be finishing up specific client projects, and I’ll be joining Altimeter’s board of advisors where I’ll continue to support the firm.
Perhaps most important, I will continue my friendships with all the great folks at the firm that I care about so deeply. Altimeter clients will still be able to work with analysts like Charlene Li, Brian Solis, Susan Etlinger, Rebecca Lieb, and the growing consulting and research team.
I’d love to hear from you, contact me if you want to discuss this exciting new opportunity (or peruse my body of work) as progressive corporations tap the Collaborative Economy:
(Read part one, Meet the Empowered People, in this two-part series.)
What’s a Resilient Corporation?
It’s one that minimizes risk, moves quicker, and can grow faster than others.
You may be asking, “How can corporations reduce risk, move quickly, and scale at the same time?” I’ll be glad to answer that.
With the acceleration of market changes from social media, new technologies, and increased competition, old-school corporations are at risk of becoming brittle and fragile. Traditionally-operated companies must establish resiliency by adapting to new models emerging in the marketplace. To find inspiration from a resilient species, we should look at bamboo which is rapidly growing, able to withstand changing weather patterns, and adaptable to many environments. Like bamboo, corporations must similarly adapt new modus operandi in order to remain in the mainstream of our rapidly changing business ecosystem.
Resilient Companies Do Three Things:
Corporations, in their own essence, are collectives which are designed to reduce the risk of the individual. The same principles that brought companies together can now be extended to the community, crowd, and marketplace that exist beyond employees and partners. Corporations that tap into their own crowd – the empowered people – stand to gain in three distinct ways.
1) They connect, embracing ecosystem diversification. Natural ecosystems that thrive during environmental stress often have characteristics of multiple failover points and have strength in bio-diversity, providing adaptability options for a variety of situations. These natural systems can also self-mend, just as diversification is a catalyst for trying new solutions at a rapid pace. Corporations that tap a broad, diverse crowd of customers, prospects, and partners for innovation are able to quickly create new ideas, solutions, and products beyond the scope of the more narrowly defined capabilities of a dedicated product team. The roots of bamboo trees are interconnected, generating strength as one forest.
What it means: Corporations that tap their diverse ecosystems have built in fail safes, diversity in innovation, and can self-mend.
2) They adapt to changing market needs, on-demand. Crowds can quickly respond both with and to change, as the parts can quickly re-form or maneuver. Unlike the slow process of hiring through HR, using online communities crowds can quickly be tapped into to meet sudden spikes in needs or quickly dispersed when not needed. Companies that tap into the crowd are able to quickly change direction, rather than waiting for more formal partnerships and alliances. This versatility allows for movement in many directions, as long as a community has already been fostered. Savvy companies can also learn how to tap into new business models beyond ‘selling’ to rent their products, time, or space to the crowd, on demand, like Toyota, Marriott, BMW, and the W hotel have done. Bamboo wood is flexible, bending to wind patterns, yet offering pliability and rigidity to grow tall.
What it means: Tapping a crowd means corporations can quickly change direction, as well as activate their own idle resources for returns
3) They enable the crowd to carry a greater part of the load to grow in scale. Crowds are powerful. They’re a source of renewable energy that can sustain on-demand, if properly nurtured. The passionate crowd will provide new ideas, resources, and even help to create and produce new products and services. If done well, a company can empower the crowd to automatically market, sell, and promote without additional investment. You can read all about how companies can provide a platform for their own customers, leveraging the crowd in effective new manners. All plants rely on insects, animals, and natural cycles to fertilize, aid reproduction, and protect the ecosystem.
What it means: Corporations can obtain scalable yield by tapping the crowd to do their jobs.
Companies That Aren’t Resilient Are Fragile. Rather than connected, these companies become increasingly more isolated, often without realizing it, like the example of Manganese Bronze as compared to resilient and “connected” Toyota. They are inflexible, unable to adapt to the rapidly changing economic, social, technology changes that continue to emerge faster than ever. Fragile corporations are able to scale only linearly, not exponentially as they need to do. They are limited to the staff they can hire, rather being able to tap into a renewable and ever-burgeoning crowd.
What Resilient Corporations Look Like. The most apparent examples lie within the software technology field, like IBM, Salesforce, Adobe, Microsoft, Google, and Apple. They all offer products on-demand, rather than selling boxed software. They tap into partners to resell and scale. They provide online communities so that their customers can support each other. They provide developer platforms to the crowd so that the crowd can build new products, software, and companies on top of their systems. But this same model shouldn’t be limited to software companies alone. Companies like Barclays Card are tapping their crowd for innovation. GE has tapped their crowd for new forms of skill sharing. A whole host of giant corporations I’m tracking are participating in the Collaborative Economy. I’ll be investing the rest of my time learning – and sharing – how we can apply these same principles to all companies.
What it means: Corporations that tap their empowered crowd will benefit from marketplace resiliency by reducing risk through variability, being agile by flexing when needed, and scaling by leveraging others to handle the load.
(Photo credits: Foilman, used with creative commons licensing)
(Read part two, Meet the Resilient Corporations, in this two-part series.)
Meet the people formerly known as customer/consumers/target markets.
They have new powers. They are backed by powerful companies. And they are starting to organize.
No, I’m not talking about the latest episode of Heroes. I’m talking about the people formerly known as your customers. You may be asking, “What powers do they have? Who gave those powers to them? What are they going to do together?” I’ll be glad answer that.
They are powerful. They have new powers, and you can see a collection of stats, that enable them the ability to get all the information they need about you in real time using social networks, mobile devices, and the internet. They can find ratings and reviews about your products as well as your competitors, compare prices and, now, have it delivered to them in under an hour from “the crowd” by using services like Postmates, Instacart, Deliv.co, Google Shopping Express and many others. They can also choose to buy a product one time, and then share it many times with their peers, rather than the whole group buying the same product over and over again. WARNING: This will cause extreme disruption to companies that sell ‘stuff.’ This powerful crowd is also able to act like traditional companies in their own right. They can become like hotels and host people at their own homes using Airbnb. They can transform into restaurants by having strangers over for dinner. They can even morph into a rental car company by chauffeuring or letting friend or even complete strangers borrow their cars. In their most advanced state, these empowered people can build their own products and goods, using Quirky, Etsy, Shapeways, TechShop, MakersRow, CustomMade and other sources, many of which are invisible to the corporate eye.
What it means: Your customers are now starting to be your competitors.
Technology is giving them strength. Who’s giving them these powers? Small tech companies and big tech companies are. There are hundreds of new startups that have emerged to enable ordinary people to share goods, services, time and space with each other at distinct local levels. Links on Craigslist (from used cars in Chicago to baby goods in Paris) are becoming like distinct companies. These startups are being funded by venture capitalists who see how “two-sided marketplaces” at scale. Also, these are startups have incredibly low upfront costs. A handful of people can build a successful company in a few short months. Big companies are giving ordinary people super powers too. Facebook, Google and Apple immediately come to mind. Most of these sharing startups are using Facebook connect, an instant plug-and-play trust network. Google just invested over $260 million into Uber, which will spur adoption of shared services at a local level around the globe. Apple’s instant app availability means global distribution at a local level to anyone carrying a smart phone. The average guy on the street can obtain a high-powered, locally-focused app on demand.
What it means: They can get much of what they need from each other –rather than from corporations.
They are organizing as a collective. While not everyone adopts the empowered state, we often see higher adoption within high density, progressive markets and is common among younger-aged people who were born sharing using the internet. In our last post, we explored how the Millennials will become the dominant workforce generation in less than 15 years. Like all great movements, they have opposition, and these empowered already have many challenges that combat their efforts.
The resistance is coming from municipalities and corporations that do not espouse change and its potential impact on their traditional controls. Dozens of other hardships rise to face them as they come into their own. But the crowd is pressing on relentlessly. On September 9, 2013, Peers.org, an advocacy group for the people, launched its first campaign to allow the crowd to collectively voice their opposition to LA laws that would suppress the growth of the movement. New entities like the Impact Hub, a global set of locations enable new organizations greater impact by allowing them a framework in which to cooperate with each other to build strength collectively. Using communication tools, they will connect to each other, and collectively build their own voice.
What it means: They are connecting to each other, and are self-organizing like a organic company.
The term “customer” or “consumer” is becoming antiquated. People who used to have the custom of buying from corporate entities will no longer be customers if they are enabled to get what they need from each other. The term “consumer” is unpopular word in sustainability circles, especially as they seek to share products amongst each other, rather than constantly buy anew. This is a new breed of people. They have power. They have strength in numbers. They are organizing. And big technology companies are backing them. This blog, and my ongoing career mission as a whole, is focused on helping corporations connect to their customers. In order to do this, corporations must take the time to listen and to understand how customers are changing.
Savvy corporations will collaborate with the empowered people. Savvy corporations that want to benefit from this massive economic revolution will collaborate with these empowered people, and, in return, create resiliency within their corporation. Make no doubt about it, this is a business opportunity. But if ignored, this is a threat that could unravel corporations.
What it means: Corporations who want to be resilient know the crowd becomes part of their company.
(image used with creative commons licensing, by ralph)
Meet Dan Schawbel. He’s an expert on millennials in the workforce.
I’ve known Dan for years, we both worked in the social business space, him at EMC, while I was at HDS. We learned together, shared insights, and he even featured me in some of his publications. In my opinion, Dan has become one of the leading voices of the millennial generation.
Not just because he’s in that age range, but because he’s studied the impacts, tracks the trends, and eloquently speaks on TV about millennials in the workforce. I’ve been talking to Dan, about how the Collaborative Economy is often being lead by this young generation that wants to make a difference.
Like the movement, Dan is focused on helping this generation be self-empowered, and the Founder of Millennial Branding and the author of the new book, Promote Yourself: The New Rules For Career Success. I’ve very selective on who participates in Q&A on my blog, to ensure quality in line with the web strategy mission. Dan agreed to grant me his generous time in the following Q&A. Also, he’s on Twitter, you should follow him.
Jeremiah: Is it true that Millennials seek access to goods and products rather than owning them?. What impacts does that have to brands who’re trying to sell to “Consumers”? What should brands do?
Dan: A lot of industries are having a lot of trouble engaging millennials. For instance, the automotive industry is in trouble because millennials aren’t buying cars. In 2010, despite being a large percentage of the population, millennials bought only 27% of all new vehicles sold in America, down from 38% in 1985. When it comes to the travel industry, millennials are using Airbnb.com and Uber in order to save money and have a unique experience, which is why both are experiencing revenue growth.
The real estate industry is hurting because millennials would rather rent than own property. From 2009 through 2011, just 9% of millennials were approved for a first-time mortgage. Fast food restaurants, especially McDonalds, are hurting because millennials are health conscious. Hamburger chains have seen a 16% decline in traffic from millennials since 2007. Companies, in general, are having a very challenging time retaining millennials and the average tenure for a millennials is only two years.
If you want to sell to millennials, you have to build a strong brand personality, connect with them on social networks, align yourself with a cause, have an open culture and include their opinions as you build new products. They want custom brand experiences that take their wants and needs into account. If you want to retain them as workers, you need to invest in their careers, mentor them, provide them with internal hiring opportunities and feed their entrepreneurial ambitions.
Jeremiah: Do millennials share, if what? And with who, do they even share with strangers?
Millennials are more willing than any other generation to post their personal information online yet they don’t want just anyone to have access to their personal data or web history. Relative to older generations, they are the most active and engaged group of social media users. eMarketer reports that 84% of millennials are on social media, whereas only 66% of Gen X and 44% of boomers are. 93% have mobile phones and 63% have smartphones. They are sharing their location, what they’re eating, who they are spending time with, personal achievements and interesting articles they find online. They post images and videos using YouTube, Facebook, Vine and Instagram. They see sharing as a way to express their identities and a way to keep in touch with friends. They all suffer from the “fear of missing out” or FOMO as the media calls it.
Aside from sharing on social media, they also have the same behavior in real life with physical goods. 68% share physical media, which includes books and DVD’s. The most shared physical categories are living space (58%), work space (57%) and food (57%). This makes a lot of sense because millennials carry $45,000 in debt, most of which is student loan debt. Millennials prefer access over ownership, especially when it comes to expensive goods like cars. 55% of millennials have made an effort to drive less, which was 10% back in 2010.
Millennials are more likely to share their opinions and information about their social activities with strangers and also many trust the opinions of strangers over their friends, which is what Bazaarvoice found last year. Many millennials are starting to understand the consequences from over sharing. 10% of millennials have lost a job prospect because of what they’ve posted online. Older generations are swarming social networks now in order to build relationships with millennials and many corporations are creating profiles in order to attract them for sales and recruiting purposes.
Jeremiah: What do they share that’s taboo to others?
One thing that millennials do differently is sharing their salaries with their co-workers. They want a transparent workplace that is open, honest and ethical. The workplace of the past was all about keeping salaries a secret so that employees wouldn’t find out and demand higher wages from their managers. The workplace of tomorrow is all about collaboration and competition in order to drive results.
Jeremiah: What supporting evidence they’re living in the collaborative economy? How are they sharing the physical work, their time, and space around them?
Millennials would rather work in a collaborative setting than in cubicles. Companies, such as American Express, understand this need and have programs around it. American Express created BlueWork, which is an innovative program designed to support workplace collaboration and promote flexibility. Employees benefit from being able to work side by side with peers and the company benefits from higher productivity. More millennials, especially entrepreneurs, enjoy co-working spaces because they are inexpensive and let them connect with like minded people. In Boston, for instance, we have Work Bar.
When it comes to transportation, research by Zipcar finds that 67% of millennials want media sharing programs, 53% want car sharing programs and 49% want home or vacation sharing programs. Their intent with sharing is to save money because they have students loans and aren’t finding jobs. When it comes to shipping, they do it together and more than older generations. Kit Yarrow and Jayne O’Donnell’s book “Gen Buy” says that 68% of millennials shop with other people at least half the time, while only 44% of older generations can say the same.
One thing that we looked at this year was how college students collaborate and we found something quite surprising. 75% of students want to study alone instead of with others and only 20% want to study with friends and classmates in person. Based on my experience with millennials, I believe that technology makes it easier for them to form work groups so they don’t have to meet in person. It’s interesting because you would think they would develop collaboration skills in college and then use the same skills when they get into the workplace.
Jeremiah: Why do they share? What’s in their nature to do this? (Dig in deep here and talk about WHY they share. Maybe look at psychographics and that they’re the first generation on the internet that sharing is a default behavior.)
Millennials share out of necessity. They were heavily impacted by the recession and are very slow to recover. They suffer a 16.1% unemployment rate, which is more than twice the national average of 7.4%. Millennials disclose a lot of personal information in order to stay connected with their peers and take advantage of social, economic and political opportunities. As they build their families, they will want to use the internet to keep in touch with them. By 2020, millennials will be more likely to share information online. We did a study for the 2012 elections and found that the second most popular way that millennials followed the election was on social media. They see social media as a way to keep up with what’s going on in the world and other peoples lives.
Jeremiah: Will they continue this behavior of sharing goods and services in the future?
I predict they will be sharing more in the future and the upcoming generation (Gen Z) will probably do it to an even greater extent. What I find really fascinating is how millennial consumerism and employment collide and it’s something I’m going to study more in the future. CareerBuilder reports that one third of millennials won’t buy from companies that don’t send them a response to their job application. So, for instance, if you’re Coke and you don’t get back to them, they might switch to Pepsi! YouGov did a study on sharing that was also interesting. They found that 55% of millennials share bad experiences on social media. If a company doesn’t treat a millennial fair, they might lose them (and their friends) to a competitor.
Jeremiah: What impacts does this have to work styles that we need to adapt to? Will they work remote? Will they work in shared offices? What?
Millennials want freedom and flexibility over a higher salary. One of my friends convinced his company to let him work from New York full time instead of accepting a higher salary. Their workplace priorities are completely different than older generations. They want to work remote or from a co-working space instead of having to go to the office every day. This is the first generation that is asking a very important question: “why do we have a 9 to 5 workday in a 24/7 world”? Not every millennial want to work from home but the important thing is that location and the time spend doing the work shouldn’t matter. The workplace should be one hundred percent focused on outcomes and results over everything else and we’re moving to that model, which has been reported on by The Financial Times this year.
Jeremiah: Forecast the future of the collaborative economy and millennials?
I think, and I think you would agree, that there will be more collaboration but it will be more virtual. They will have online work groups with their peers and use video and productivity tools to produce high quality projects. They will take on more projects outside of their job description, collapse organizational hierarchies and work in dispersed locations. The future is bright and the future is right around the corner. As of last year, 15% of millennials were already managers and by next year 36% of the US workforce will be millennials. Change is going to happen much faster than companies realize and most are not prepared for what’s to come.
Jeremiah: Thank you Dan, for sharing your expertise, insight, and research. I think we can summarize the interview as Millennials share (nearly everything), want flexibility and meaning in their work over rigid work styles and salary. In summary, access to experiences seem to matter more than hard assets. We look forward to reading your book soon.