The collaborative economy may be just the shot in the arm that capitalism needs as the alternative to corporate power, and also what corporations need to survive.
The latest report from Jeremiah Owyang, founder of Crowd Companies Council, and Alexandra Samuel, released on Monday, was written in conjunction with Vision Critical, which provides a cloud-based customer intelligence platform. The report makes the trenchant point that because the collaborative economy movement is here to stay and growing, its threat to traditional companies “can’t be underestimated.” They call it a tactical report on “how to survive and win.”
If corporations haven’t been paying attention to what’s happening with the collaborative economy, they better start, the authors say.
The report concludes that more than half of North Americans have “woken up to a new way a new way of getting the products and services they need."
"It’s called the collaborative economy, and it’s the biggest shift in the business landscape since the advent of the Internet itself," the report reads. "And just like the Internet, it’s changing the rules for how we market, sell and innovate. To compete in this growing economy, established corporations must develop new strategies.”
According to the report, the collaborative economy is defined as an economic movement “where common technologies enable people to get the goods and services they need from each other, peer to peer, instead of buying from established corporations.”
It’s a new economic reality, and a new form of consumption and exchange. For example, in this new and transformative landscape, the world’s largest hospitality brand, Airbnb, does not own a single room or hotel. The world’s largest car service, Uber, doesn’t own a single vehicle. And eBay, one of the world’s largest retailers, is driven by people buying and selling preowned goods. These companies are part of a “much larger shift that is transforming our lives, our economy and the way we do business.”
The 27-page report is a “roadmap” that outlines how companies can “compete and thrive” in a marketplace where “you partner with your customers instead of simply selling to them.”
It’s a much bigger deal than you might think: More than 110 million North Americans are now part of the collaborative economy, according to the report, and participation has grown by 25 percent in the past year alone. That’s impressive, but the report states that current rates of growth, more than 6 in 10 Americans will use a sharing service in the coming year, and that by 2017, 8 in 10 Americans will be part of the collaborative economy.
“The continued, rapid growth of collaboration means every business needs to think about how to combat, complement or compete in this space,” the report's authors wrote. The analysis describes three paths companies can take: price, convenience and brand.
Price: 82 percent of sharing transactions are partially motivated by price — “making financial savings one of the top drivers of the collaborative economy.”
Convenience: Convenience is the most popular reason that people give for using sharing services, and it matters across all sharing categories. “It’s a lot harder for traditional companies to compete with sharing services on convenience. It’s easy to get sharers to consider buying by offering them a lower price; but when it comes to convenience, it’s more likely that existing buyers will convert to sharing.”
Brand: Branding is still relevant, even in a sharing, peer-to-peer economy; in fact “big brands actually matter more than ever … in the collaborative economy, customers turn to brands as way of determining whether a transaction is trustworthy.” People prefer known brands, the report concludes, and it is trust that determines whether buyers are willing to consider sharing.
So, in order for established companies to deal with the risks posed by the collaborative economy, they need to compete on price. Established brands with broad revenue bases “are well-positioned to compete by offering value.”
They also need to compete on convenience, as local content continues to have great value to sharers. Because sharing services increasingly are identified as large, global powerhouses — rather than associated with the local community of buyers and sellers — “traditional businesses may be in a better position to provide the local goods that appeal to community-minded sharers.”
Finally, traditional companies should compete on brand. This is because “some sharing economy startups are under scrutiny,” the report continues, “and our research indicates they’re not as universally loved as established companies.” For example, Uber executives in France were arrested for running an illegal taxi service. And municipal governments in locations such as San Francisco and New York have moved to ban Airbnb.
“These developments reflect a key vulnerability of the collaborative economy: As sharing companies have taken off, they’ve come in for a lot of criticism as well as praise.” As brands become better known, they can attract negative as well as positive sentiment. “That risk is much greater for sharing brands than for conventional brands, because so much of the sharing experience depends on the users themselves,” the report notes.
To compete in the collaborative economy, “established companies need to recognize the role of price, convenience and brand in driving traditional buyers towards sharing. But each of these can also provide a path to wooing customers back to your company—particularly if you tap into sharing models to serve your customers in new ways.”
That sounds like a win-win for all companies, new and old, in the collaborative economy.
Image: Collaborative Economy Honeycomb from the Crowd Companies website