Your customers are making their own goods in the Maker Movement and sharing their resources, rather than buying them from you! Do you know why? We’ve conducted pragmatic research via interviews and other methods to find out. Consumers don’t need to continually buy from traditional companies because they are making, sharing, renting and lending goods & services among themselves.
[This rising behavior is being caused by three major trends: Social, Economic, and Technology drivers]
Analysis of Three Market Drivers: The Causes for the Collaborative Economy
In the research interviews, books, and content I’ve digested, I’ve found several common patterns relative to the causes of the movement. I realize that this is not a comprehensive list, so I appreciate your additions in the comment section of this post.
1) Social Drivers
||While also listed in Economic Drivers, denser population enables sharing to happen with less friction.
||Zipcar took off in urban San Francisco, where owning a car is impractical. Zipcar’s scattered storage lots give customers quick access to wheels, often walking distance.
|Mindset of Sustainability
||Greening, Cleaning, and Sustainability have been hot topics for years. This bolsters the need for economic conservation and long term thinking.
||Many of the startups we interviewed explained that this is about re-use or preservation of resources, rather than buying new products.
|Lifestyle Trend among Youth
||In Shareable Magazine’s book, Share or Die, Neal Gorenflo writes that this sharing mindset is common among college students who have limited resources.
||For resource-strapped students, Chegg enables students to trade textbooks, rather than buy at high margin bookstores. Social networking is part of their inherent behavior.
||In some cases, gifting or paying it forward are common in this movement. See list of gifting startups.
||A recent UCLA poll found that over 75 percent of incoming freshman believe it is “essential or very important” to help others in difficulty, the highest figure in 36 years.
||We heard from Molly Turner at AirBnb that many renters of homes found this service empowering. Their own homes were revenue generators for their independent lifestyle.
||Similarly, TaskRabbit advertises that their rabbits are: “College students, recent retirees, stay-at-home moms, young professionals,” enabling those who may not seek a full-time position.
2) Economic Drivers
|Increase in World Population
||China and India have population growth rates at 17% and 30%, respectively. America is at 22%. See Wikipedia.
||When I was born in the ‘70s, the world population was in about 4 billion; today it’s 7.1 billion. It is estimated to be close to 9 billion by the time I am 75 years old (data here).
||The interviews revealed a general sentiment that natural resources are finite and the cost to retrieve them is far greater than the potential return in revenue. Those with less money are more inclined trade, and to activate their inventory for revenue by sharing.
||Recycling programs are evident everywhere, even in the sales offices and break rooms there are recycled plates, utensils and paper
||Where there is a divide fixed between haves and have-nots, these sharing systems naturally seek to shift resources.
||For example, we saw a boost in Bitcoin value as Cyprus was under severe economic strain.
|Excess or Idle Inventory
||One of the root causes of this movement an abundance of idle resources sitting by the wayside that can be shared and often monetized.
||Rachel Botsman discusses in her iconic TED speech that the average usage of an electric drill is a mere 12 minutes per year.
||Those who can’t afford something, can now rent it. One successful Gen X banker told me that, “Access is more important than ownership”
||Why buy a $100,000 Lincoln Town Car, when you can rent an Uber for 30 minutes, saving money and headaches?
|Influx of VC Funding
||Venture capitalists have already put billions into this market of fresh new startups. Our research shows that there has been over $6 billion of funding in less than ten years.
||See the intense amount of funding in this market in my recent analysis.
3) Technology Drivers
|Social Networking Technologies
||These technologies provide three key features: 1:) Social profiles and reputations tracking, 2) Social graphics that enable people to connect, 3) Transfer of information, in this case, need for resources or supply of them
||AirBnb in itself is a social network. They have seller profiles, and renters have their own reputation with verified IDs. The goods traded are locations.
||Access to people or other resources requires “portability” for a majority of these services, so mobile platforms and devices for transfer of information become necessary.
||Many of these startups are mobile-driven. For example, Lyft has a thin website and suggests that users download mobile apps for this transportation site
||In the end, this is a marketplace of goods and services. Systems and platforms are required to broach the transactions that may use traditional ecommerce or new bartering methods
||TaskRabbit asks me to use my credit card, while other systems like Bittorrent are fueled by Bitcoins.
What it means: This is a long term movement, not a passing fad
I see three categories and at least thirteen distinct drivers for the Collaborative Economy. Like social media was to us in 2007, this is a broader movement that impacts many aspects of society and, therefore, business. If these market drivers are long-term (often social and economic drivers are), then this movement is likely to persist and to potentially increase in velocity. If you thought social business was disruptive, this next trend will impact us at a much deeper level.
Here are some of those from whom I regularly learn:
I originally posted a similar article over a year ago. It was time to revisit it with updated answers.
Below: see embedded slides, also on Slideshare
Ten years ago, we forecasted that social media would be disruptive to corporations. It was, but mainly to marketing functions, customer care, and corporate communications functions.
Fast forward to today, using these technologies and mobile apps, we’re seeing the rise of people getting what they need from each other: They’re sharing homes, cars, rides, money, goods, and their time.
This Collaborative Economy is forcing companies to rethink the relationship they have with their customers as the crowd is starting to become a competitor. In the embedded slideshare, I’m collecting stats of disruption and will update it over time as the market continues to develop.
To learn more, advance to my full body of work on the Collaborative Economy, including slides, research, info graphics, and more. Also, learn more about Crowd Companies, an association for large companies who want to lead this movement.
The longest graphic in the history of my career is embedded below, some mobile devices may not properly render.
As the Crowd Economy Rises, Brands Seek to Collaborate
We’ve been tracking corporations in the Collaborative Economy, and released version 1.0 in April, 2014. Now, as we approach the Crowd Companies members-summit in NY next week, we’ll be dissecting and analyzing the different deployments large companies are rolling out to participate in sharing, marketplaces, as well as co-innovation with makers. The scope? This collaborative or crowd based economy continues to rise (study, and daily numbers), and therefore corporations are adapting their business models to adjust to this peer-to-peer commerce movement.
Below Graphic: Frequency of Deployments
Since our initial tracking in Feb 2013, the frequency continues to increase. Since April 2014, we’ve found 27 new case examples, some that were before April 2014, but most were after. We’ve updated the following frequency chart to show the consistent deployment. It appears March was a slow month in terms of deployment (we do see a lot of conferences that month) and we saw a heap of deployments in August, which were due to Uber’s API partnership with several brands. We only counted the large brands like United, Hyatt, and Starbucks for the Uber API deal, as some of the others were smaller startups.
Below Graphic: Timeline Shows Each Deployment
The below timeline contains many of the deals, partnerships, deployments of corporations in the collaborative economy, using the same data set used in the above frequency chart. A great deal of these deployments are partnerships with startups, but we’re seeing many companies launch their own initiatives, which is a signal of corporations starting to invest more in these programs. There’s over 30 deployments in 2014 only, and most are partnerships, aside from Verizon launching a sharing service, starting with cars, and Walmart enabling game exchange.
The Future? Tracking will be Challenging as APIs Accelerate Exponential Adoption
It is my assumption that it will be nearly impossible to track this in just a few quarters. Since Uber has launched an API, expect Lyft and Airbnb to follow suit –resulting in Facebook-app-platform like adoption across the industry.
The crowd is bypassing traditional companies by sharing goods, services, space, and money with each other in the Sharing Economy. People are being empowered to build their own goods in the Maker Movement by crowd funding, tapping global marketplaces, and preparing to accelerate this with 3D printing. You see, the crowd, is starting to perform like a company: self-financing, self-designing products, self-manufacturing, and self-selling to each other.
So, what does this growing trend mean for traditional businesses?
In my closing slides to corporate audiences about the Collaborative Economy, I attempt to tie everything together on this one summary slide. While it’s best understood after the full presentation, the slide can, hopefully, stand on its own. I’ll try to succinctly summarize how we achieved each of these insights, so you can quickly grasp the changes that are occurring. Let’s break down these specific five points into further detail.
1) People are empowered to get what they need from each other. The Sharing Economy empowers people to get products from each other – without have to buy new from traditional retail or wholesale sources. Whether they’re sharing cars, homes, or money, they’re depending on each other to get information. Further, they’re making their own goods and products by tapping a global marketplace of individual makers. Soon, 3D printing become a force that will catalyze this at scale. It’s not new. We saw this ten years ago with social media – people were bypassing corporate communications, marketing, and customer care to obtain information from each other.
2) The crowd is becoming like a company – bypassing inefficient corporations. Of course, this is forcing business change, as the internet tends to bypass intermediaries that don’t provide lasting, value added services. Rather than buy vehicles, people can rent or borrow cars from each other. We’re also seeing the rise of peer-to-peer lending in LendingClub (funded by Google), which has served up $2.8billion in loans in a few short years – bypassing traditional banks. Watch this LendingClub chart carefully. This growth rate is starting to take a significant bump in a vertical line.
3) Corporations must use these same tools and strategies to regain relevancy. Just like we did in social business, to match customers launching blogs, video, and social networking accounts, we saw corporations apply the same strategies to engage in the same channels. Taking a cue from the first phase of sharing, which we call social business, we’re already seeing over 50 corporations that have transitioned into the Collaborative Economy, with significant upward rewards.
4) This requires business model change. No one said this is going to be easy. Significant new mindsets and business investments will be required to satisfy this paradigm change. BMW now rents cars in addition to selling them. Toyota is giving away 1,000 cars for the social good. TOMS shoes now offers a marketplace selling other people’s products beyond their own. Nokia voluntarily gave up their specs to their phone cases to allow 3D printing to occur. U-Haul allowed the crowd to fund their own vehicles. We will need internal champions (whom I call catalysts) who are able to lead this change inside of big companies and turn those large gears a different direction.
5) The crowd will become the company, making corporations resilient. We’ve seen the crowd become the media and the communications in the first phase of social business: Customers became the marketing and customer support departments. Just as we saw companies integrate customers into their media and communications, expect them to integrate them into their business models. Expect new models to emerge where the crowd is augmenting traditional business processes. They will co-fund, co-ideate, co-design, co-build, co-support, co-deliver, co-market and more for a growing variety of products. We’ll also see new forms of marketplaces emerge where products that customers make will be sold alongside those of big brands.
Companies that do this will achieve Resiliency: They’ll be agile, innovative, connected, empowering others, built to last, and profitable.
Want to learn more? Advance and read the full body of work on the Collaborative Economy, or if you’re a large corporations, join the Crowd Companies Association, with 42+ other corporations. This post was originally posted last year, and I’m republishing due to ideal market signals as disruption accelerates.
(Above pic: Thousands of HK protesters link their phones together using Bluetooth to become their own internet –overcoming the government ban on social media sites. Photo credit: Alex Hofford)
If you thought peer-to-peer-based Uber, Airbnb, Lyft and Lending Club were disruptive, you haven’t seen anything yet.
People are empowered –through commonly used technologies
Previous revolutionaries have used pitchforks, wagon barricades, pamphlets, signs and drums. Today’s revolutionaries are using Firechat. It’s not just for revolutionaries, as I just downloaded Firechat. If you want to communicate during an emergencies, in the subway or on a plane, you can download Firechat too.
Seven month old app enables the crowd to become the internet
Seven month old Firechat enables people to become the internet themselves by turning their phones into a network, bypassing access to the worldwide web. The preceding picture shows Hong Kong protesters “armed” with smartphones, using their devices as a single, united network to communicate, call in resources, talk to media, and tell their story globally – even when the government had shut down many internet services. This video tells first hand.
Firechat enables the crowd to connect to each other as one resilient network
Meet Firechat, the app for crowds, communities, and revolutionaries. Downloadable for free, Firechat enables you to chat with other people around you WITHOUT the internet. That’s right, it uses Wi-Fi and Bluetooth signals to create a “mesh network” where individuals can pass messages to each other on a peer-to-peer basis. It can also be used on the grid for further access. When it was first launched in March, Taiwanese protesters quickly adopted Firechat.
When would such a use case be common?
- With friends are on a plane that doesn’t offer Wi-Fi
- Camping with a troop of scouts
- In the desert at Burning Man when the weather goes bad
- In the subway with a group of colleagues
- At a concert or sports event when cell infrastructure overloads
- Austin during SXSW as cell networks are crammed from selfies
- At a protest when a government disables social media or the internet
- On a cruise ship in the middle of the ocean with your extended family
- For victims and first responders after a natural disaster
- In a foreign country where you’re concerned that someone might be sniffing your data
- In a village in an emerging country, where people have phones
Firechat enables P2P communication, bypassing centralized powers
Firechat enables people to connect to each other, peer-to-peer, without relying on a central telecommunications source, like an ISP, a government, or other system. In fact, in the last few hours, Firechat has been reported to have been downloaded 100,000 times, especially by Hong Kong protesters who are demanding people’s democracy after the government shut down the internet. Bruce Schneir, a top electronic security expert, writes the following:
“Firechat is theoretically resistant to the kind of centralized surveillance that the Chinese government (as well as western states, especially the US and the UK) is infamous for. Phones connect directly to one another, establish encrypted connections and transact without sending messages to servers where they can be sniffed and possibly decoded.”
Part of a broader suite of products – nearly impossible to stop
I had a chance to get some answers from Christophe of the Firechat team. The parent company is called Open Garden, which has the mission of: “…helping build a new decentralized mobile Internet.” The only way to stop Firechat is: Forbid people to download it (impossible through P2P file sharing), disabling power to a phone, or confiscating the phone. When it comes to speed, he told me that news broke of the closure due to weather at Burning Man on Firechat before it hit Twitter. In a remote area, the P2P network was stronger and faster.
Security and identity still questionable
I asked the team, how safe and secure is it, really? They responded, “Firechat is a public chat app. Everything that you type is public. Our mantra is, ‘do not use your real name or type anything you would not want someone else to read,’ But give us enough time and you’ll see what we come up with…” They mentioned that, in the future, they may be able to develop new forms of verified identity. I’ve seen these emerge in now defunct apps like Honestly, which verified if you had a real LinkedIn account without disclosing your name or identity.
Requirement: Adoption and Proximity
It’s also key to note that Firechat requires density and velocity to work well, adoption strategy is key. Also, users must download the app –before a severe outage –meaning adopting is required. There’s two scenarios: People anticipating to connect while going off the grid while traveling, or two: in response to an emergency, opposition from powers. The software worked well in dense SF (the second most dense city in USA) but when off the grid in the suburbs there were not folks in immediate proximity available to create a mesh network, see screenshot.
Forward looking thoughts:
- Expect Facebook, Twitter and Google to acquire or build these mesh technologies. Expect Facebook, Twitter and Instagram, each of which has been blocked by various governments, to develop this same P2P technology, enabling their experience to be shared all the time, regardless of a central power.
- A distributed network puts centralized telecom players on notice. This poses interesting questions to governments, internet service providers, telecommunication companies, and even marketers who rely on platforms like Facebook or Twitter. We’ve already seen the rise of FON, a peer-to-peer Wi-Fi device that enables people connect. This is more of the same.
- This is part of the continued trend of the crowd-based collaborative economy. I’ll likely include Firechat in some aspect of the next iteration of the Collaborative Economy honeycomb framework, as the next step is enabling people to share the physical world with each other using this P2P communications network.
The bottom line: People are empowered to get what they need from each other using commonly available technologies. It means the crowd is becoming like an organized company – and that they will bypass inefficient institutions. Get your organization ready now.