I hate writing about the next big thing because it is usually trite, clichéd or just hype, but I read a great piece in the Harvard Business Review about the collaborative economy (“Sharing’s Not Just for Start-Ups” by Rachel Botsman) that I wanted to share. Most of us have come across and probably used start-ups leveraging collaboration or sharing, companies such as Airbnb (where people share excess rooms with travelers) or Uber and Lyft (where people who need a ride can find a driver who is looking to earn extra funds. In and of itself, this is an exciting space with many promising early stage companies, from peer-to-peer lending (money club) to online lessons (Udemy). What I found interesting in Botsman’s article is how this opportunity can be extended to many other businesses.
There are great opportunities in the collaborative economy to create additional revenue streams (which may supplant their core business at some point) or provide channels for user growth. Botsman starts by discussing Marriott, the hotel chain, which rolled out an offering in conjunction with LiquidSpace so people and businesses could book excess conference rooms at market clearing prices. Not only did this initiative create a new revenue stream for Marriott by generating income from rooms that were sitting unused, it also helped grow the customer base. Marriott found that the program got people familiar with its properties who had previously not been Marriott customers and these people were more likely to return in the future. This also represents a great application of blue ocean strategy: Rather than just trying to compete with every hotel to sell conference space, Marriott moved into a non-competitive space by offering rooms at effectively lower prices (as it was only excess demand) to a new set of customers.
She also lists collaboration as a strategy for established companies to leverage the collaboration economy. Drugstore chain Walgreens has teamed with TaskRabbit (a service where people hire others with excess time to complete tasks for them) to deliver Walgreens’ products to people home sick with the flu.
Botsman offers a very useful framework for looking at your business and the market to determine collaborative economy opportunities. She lists five “disruption factors” that indicate areas where there may be a collaborative opportunity:
- Redundancy. Redundancy refers to extra steps in a process that can be eliminated by create a direct relationship between the creator/manufacturer and the customer. Airbnb is a good example as users do not have to go through a broker, they have a direct relationship.
- Broken trust. Broken trust is when customers in the existing customer relationship do not trust the provider. Although Uber hits several of these principles, I actually think broken trust is the strongest motivator as almost everyone has been cheated by a taxi driver at some point.
- Limited access. Limited access is when not everyone can get a product or service and the collaborative economy thus replaces the limited access with empowerment. Online courses (MOOCs and services like Udemy) are an example of this force.
- Waste. When something is not being fully used, waste drives opportunities in the collaborative economy creating greater efficiency. The Marriott example above points to this, as the conference rooms otherwise would of not been used (wasted).
- Complexity. People prefer simple and good collaborative economy products reduce complexity. TransferWise eliminates the need for complicated currency transfers by making it inexpensive and simple for people to send money.
Opportunities for everybody and every company
By focusing on the five problem areas above, companies and individuals can leverage the collaborative economy. Existing businesses can grow or improve profitability while founders can solve a need and create exciting new enterprises.
- The collaborative economy, where people or companies share resources, provides extensive opportunities for both existing companies and start-ups.
- Traditional businesses can create new product lines or attract new customers by tapping into the collaborative economy.
- To best understand the opportunities, focus on five problems that indicate openings for collaboration based businesses: redundancy, broken trust, limited access, waste and complexity.