Innovation and the sharing economy
The sharing economy is growing at an unprecedented rate and embodies a new kind of social innovation. What will it mean for more traditional businesses in the long run?
One of the most innovative and game-changing business models of recent years, the ‘sharing economy’ has taken the world by storm. A hotly debated topic and one that has fired up many controversies; it is loved by the consumers and workers it embraces and loathed by the companies it threatens, as well as inviting numerous complications for the government bodies who attempt to regulate it. Having already disrupted the hospitality and taxi industries among others, how much further disruption will it bring?
Today the sharing economy is worth US$15 billion but PWC predicts it will total US$335 billion by 2025. Currently it accounts for 5% of the market across five key areas – travel, car sharing, finance, staffing and streaming – but PWC predicts this to rise to 50%. These are mammoth figures and if these predictions become reality, then organisations outside of the sharing economy need to start acting. In short, they need to get innovating and fast.
Benefits of the sharing economy
The sharing economy takes popular consumer trends and common worker concerns to provide a combined solution for both parties. Individuals and even businesses can turn their assets into cash. It’s a win-win situation because people can monetise their belongings or services with minimal input and customers benefit from a more cost-effective option.
“Matching people who need things with people who have those things,” Simon Hampton, Director for EMEA Policy Development at Uber
There is no end to the possibilities and opportunities that the sharing economy opens up for ordinary people. Suddenly everyone has easy access to the world of business, simply by owning something that other people can utilise. In short, the sharing economy represents a constant wheel of innovation which could rival that of the most innovative organisations. But aren’t people hardwired to resist change? Why has the sharing economy been so widely embraced? Simply because it offers an array of mutual benefits, addressing the issues that many consumers and workers have long held with the more traditional systems:
- Cost-effective. There are obvious cost advantages to the sharing economy, as there are fewer bridges to cross and no third parties involved; it is a simple transaction between owner and consumer.
- Accessibility. The use of web-based platforms, namely mobile apps, makes these services consistently accessible and therefore effortless to engage with.
- Community. A reliance on user-based rating systems ensure quality control and brings a wider moral message; there is a sense of trusting the individual acting alone, rather than a large corporation out to take your money.
- Personal touch. An extension of the sense of community associated with the sharing economy, consumers appreciate the human touch which can get lost when dealing with bigger organisations.
- Flexibility. Primarily for the workers, the sharing economy facilitates flexibility in deciding working hours: a popular trend amongst the current generation of workers.
“The collaborative economy creates new opportunities for consumers and entrepreneurs. It also promotes new employment opportunities, flexible working arrangements and new sources of income. Innovation will bring more of the same”, Anna Maria Corazza Bildt MEP, the EPP Group’s Spokeswoman
The success of the sharing economy demonstrates the innovative capability of the people. Where governments and organisations are not fulfilling the needs of the consumer, the general public are providing the solutions themselves. This represents an exciting new era of social innovation that champions crowdsourcing, communities and connecting citizens.
“The Mesh or Share Economy, is at its core, a world in which access to goods, services and talent triumphs over the ownership of them.” – Tepsie, ‘Social innovation in the age of the sharing economy’
With modern technologies and the advent of social media, there has been a notable power shift away from businesses and towards the consumer. This has had a drastic effect on the consumer-business relationship and the sharing economy has been the natural product of this shift. Such a move also has wider implications and businesses must start acknowledging the power of social innovation. Ignoring such a popular phenomenon is dangerous and will only make it easier for the sharing economy to gain total domination of the market.
“The sharing economy is as much a social movement as it is an industry and that’s difficult to compete with.” – Peter Khalil
Innovations vs regulation
All of this sound very ominous for those companies with a more traditional business model. However, it is important to remember that the sharing economy is not all sunshine and roses. There have been many high-profile problems, such as tax evasion loopholes and the effect on current industry workers, both of which are actually damaging to the wider economy. As a result, we have already seen an increase in regulations around the likes of Airbnb and Uber – these are only likely to increase and this could mean an end to the cost advantages associated with the peer-to-peer economy. Overregulation is the killer of all innovation and it is by far the biggest threat to the sharing economy.
Yet this threat certainly does not make the sharing economy obsolete. Far from it. By providing many benefits to the economy, there is an incentive for governments to keep it alive without squashing it under regulatory requirement. Companies must start recognising this and paying attention to the ways in which it is affecting their industry or will affect it in the near future. More traditional companies will not be able to compete on a level playing field with those from the sharing economy, due to a totally different business model. However, they can learn lessons from the new era of business-customer relationship and incorporate aspects of the sharing economy into their own strategies.
- The sharing economy is set to continue growing and dominating the market share, making it a serious threat to companies with more traditional business models.
- Social innovation demonstrates the power of the people in providing consumer and business solutions as a result of crowdsourcing and community connections.
- Organisations must start paying attention to the rise of the sharing economy and incorporating some of the key innovations into their own business models and strategies.