The sharing economy that has already revolutionised the taxi and accommodation industries, has led to start-ups with extraordinary valuations. It has also led to strikes, riots, new legislation and criminal trials.
All of this is happening because tech-enabled sharing-economy models create large new business and societal opportunities, simultaneously as they precipitate disruption, new business challenges and risks.
Sharing-economy business models are complex, multidimensional and nuanced. Yet they all share a simple core: the application of information access and real-time trading attributes of electronic equity exchanges to any asset or service market. They then layer on information about availability, location and quality (often through user ratings and reviews), and finally deliver the package in simple-to-use apps over wireless networks to your mobile device.
Here are five already proven, tangible benefits and opportunities that emerge from sharing-economy business models.
1. Customer delight
The market power of delighted customers is limitless. Customers experience increased liquidity and market efficiency primarily as a result of improved quality of service, lower prices and instant gratification. But there are more sharing economy paths to customer delight. Others offer a richer array of options than those served up by traditional businesses that achieve operational efficiency via vertical integration of selected choices. Just like social networks, they also offer people new ways to connect, interact and support each other. In the meantime they are filling marketplace gaps. In car hailing, for example, some fill a price and service gap between taxis and limousines. Some developing nations now have extremely low-cost ride-sharing services, costing less than taxis.
2. Individual entrepreneurship
The sharing economy makes entrepreneurs of us all. Some operators even report life-changing experiences. These models empower individual entrepreneurs in a number of ways, primarily by offering real-time platforms on which individuals can advertise their services. These models also enable better monetisation of an individual’s assets, time and skills. Meanwhile, they offer lower market-entry barriers and favour those with most merit through rating systems. All in all, sharing-economy models mirror the evolving future of work, reflecting the Millennial generation’s apparent desire for greater independence and flexibility.
Sharing-economy models mirror the evolving future of work, reflecting the Millennial generation’s apparent desire for greater independence and flexibility
3. New “abstracted” value creation
Technology providers are often surprised by the unintended uses their products serve after they hit the market. Sharing-economy models may drive a similar phenomenon throughout other industries too. Their platforms enable an asset’s value-creation potential to be abstracted, or detached, from the physical thing. Through this abstraction, capital assets like real estate or factories can be monetised in new ways not necessarily envisioned by their owners.
4. Developing-economy boost
In developing economies, sharing-economy models may enable first-time access to certain assets for a large portion of the population. Imagine how it would affect people in the developing world if these models were extended to refrigerators and freezers, for example, offsetting the ownership cost for those who can afford them and providing affordable access to many others. The benefit of developed-economy conveniences might spread in developing economies more rapidly than previously thought.
5. Societal benefits
Sharing-economy models are believed to be better for the environment because they make greater use of existing resources, reducing the need to make more. Increased utilisation and efficiency also raise productivity which, in turn, can raise the standard of living. As the utilisation of assets and services goes up, the benefits to society increase.
Ronald Attard is EY managing partner for Malta.