It's time to pay attention to the collaborative economy
"Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening." – Tom Goodwin, vice president of strategy and innovation at Havas Media
Airbnb, TaskRabbit, Bla Bla Car, Wimdu – you might not have heard of them all, but you’ve probably come across at least one of these companies. They are examples of a wave of businesses that are disrupting traditional industries and fundamentally changing the relationship between companies and consumers.
Rachel Botsman is regarded as the global authority on the collaborative economy – the umbrella term used to describe these businesses. Her theory of “collaborative consumption” was defined in her book ‘What’s Mine is Yours: How Collaborative Consumption is Changing the Way We Live’ and was described by TIME Magazine as one of the “10 Ideas that Will Change the World".
This year Botsman designed the world’s first M.B.A course on the collaborative economy at Oxford University’s Saïd School of Business. And earlier this month at the 2015 Emerge conference she gave delegates a whirlwind tour of what the collaborative economy is and the impact it is having on traditional business models.
What’s the difference between the collaborative economy and the sharing economy?
The sharing economy is one of the latest ‘buzz phrases’ to be associated with the likes of Airbnb, but it can be misleading. According to Botsman, “the sharing economy is a good term for companies” – such as Bla Bla Car – “that genuinely enable sharing”.
The same does not apply to companies such as Airbnb and Uber, although they are often all lumped into this category. “Most people on Airbnb don’t describe it as sharing, they are renting rooms.
“I have never heard Uber say they promote sharing. It is a term made up by the media. The reality is that the sharing economy sits under this bigger paradigm shift that we call the collaborative economy – which is an economic system of marketplaces and networks that unlock the value of unused assets by matching needs and haves in ways that bypass traditional institutions.
“This makes them very disruptive to traditional industries – for example hotel chains – because they don’t need the same channels of distribution or infrastructure,” explains Botsman.
Growth of the collaborative economy
Botsman explains that when she started researching whether companies like Airbnb were part of a wider economic movement, many responded saying “this is a niche trend” and “a reaction to the recession”. When her book came out in 2009 it was “initially a terrible failure and in the first week had sold four copies” she remembers.
However, when you look at the size and success of some of the businesses operating in this space it is clear the sceptics are being proved wrong. Take Bla Bla Car – its three founders were initially interested in road congestion and its effect on the environment. They found out that 80% of all car rides taken in major cities are solo rides, meaning the driver is the only person in the car. They saw that this was highly ineffective and created Bla Bla Car, which is essentially a car sharing platform that allows people to post when they have free spaces in their cars before a journey.
Botsman says: “The reason why the collaborative economy is gathering such momentum is because technology takes the untapped social, economic and environmental value of underused or underutilised assets and makes it liquid through a network or market.”
Bla Bla Car earns revenue through users paying on a journey by journey basis to use its service, as well as through advertising. Botsman explains that it recently “got a $1.5bn evaluation”. It has 20 million members and operates in 19 countries. So far over three billion miles have been shared as a result of drivers and passengers using the service.
This $1.5bn company has never had to invest in any kind of transportation infrastructure – “yet they transport more people from London to Paris every single month than the Eurostar,” says Botsman.
This kind of rapid growth has also been experienced by Airbnb – the platform that connects people who have spare rooms with those who want them. It took the Hilton Hotel chain 93 years to build just over 610,000 rooms – Air BnB got there in less than four. It now has over a million rooms in its portfolio and is adding around 10,000 every single week.
Earlier this year Alex Murdoch, emeritus professor of not for profit management and leadership at London South Bank University, told participants of the Nat West SE100 Insight event: “This is a really hot button – the collaborative economy, the sharing economy. It’s an area where I have to say I think social enterprise is not necessarily picking up on the opportunities.”
Botsman also identifies yet to be fully realised opportunities in this space. “There are certain categories that haven’t quite being cracked but are massive opportunities, such as health, food and learning. There doesn’t yet seem to be the breakout player in those spaces. There’s certainly a lot of potential around learning and skills exchange,” she concludes.
Photo credit: Joiseyshowaa