A Collaborative Economy Cheat Sheet

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“cheat sheet”
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C O L L A B O R A T I V E
E C O N O M Y
By Jim Nichols

Its leading companies -- Airbnb, Uber, Lyft, Instacart -- have become household names.
But what defines a collaborative economy business, and why is this peer-to-peer model
such a powerful and influential force in our changing economy? Here are seven things
you need to know about this game-changing trend.
A COLLABORATIVE ECONOMY 2

SIMPLIFY: Collaborative businesses offer mechanisms that
bring buyers and sellers together in low friction
ways.
STANDARDIZE: They shape and define the goods and services that
change hands.
STREAMLINE: They make transacting easy by using mobile and
payment technologies.
REDUCE RISK: They use the crowd to provide basic quality
assurance and peer-to-peer evaluations.
A variant of this is the sharing economy, where services are rented in lieu
of purchasing goods.
What Makes A Business
Part Of The Collaborative Economy?
1Broadly, the core idea behind the collaborative economy is that individuals get their needs met by other
individuals versus by product or service companies. Collaborative economy businesses enable the peer-
to-peer value exchange with platforms that:
Copyright © 2016 All rights reserved worldwide.
SIMPLIFY:
STANDARDIZE:
STREAMLINE:
REDUCE RISK:

Much of the press coverage of the collaborative economy has been focused on travel industry disruptors like
Uber rides and AirBnB stays. But it’s increasingly difficult to find an industry that isn’t being changed by the
collaborative economy:
2What Industries Are Being Impacted
By The Collaborative Economy?

• Manufacturing has been reshaped by Etsy and used goods exchanges like OfferUp.
• Retailing has been significantly changed by Instacart and other delivery services.
• Investing in businesses has been democratized by services like Kickstarter.
• ISPs are facing new players like Open Garden’s peer-to-peer connections.
• Brand/agency relationships are evolving thanks in part to services like Freelancer or Upwork.
• Restaurants face new competitors via a host of a host of peer-to-peer meal sharing services.
But pureplay internet platforms are only one source of disruption. Now major “old economy” brands are
redefining fields like real estate and retailing. For example, major retailers like Nordstrom and Sears now
rent out store sections to small and boutique brands. The list goes on.

Smarter people than me have produced major studies on this, but I think it’s a convergence of at least six forces:
• Consumer control. Example: before Uber and Lyft, San Francisco had few cabs on the street. Here you didn’t
just walk outside and whistle. Limited -- very limited -- supply meant getting a cab could take 20 minutes or
more. So when ride services came along, people were thrilled.
• Mobilization: It’s these amazing computers we have in our pockets making all this possible. Instantaneous.
Secure. Integrated with payment systems.
• Focus on “Useful Life:” If you think about it, a lot of things we own are only used for a tiny portion of the
day. My car, for example, drives for six minutes to the bus stop, six minutes from the bus stop, maybe 20
miles a week of “other.” But for 23 hours and 48 minutes of most days, it sits. I’m not ready to go carless, but I
understand why many of my coworkers have. It’s about trying to get value.
• Reurbanization: More people, especially young people, are choosing to live downtown, which makes sharing
services far more viable.
• Financial pressure: Lots of people are struggling financially these days, and it’s easier to pay $12 for an Uber
than $30,000 for a mid-sized sedan. Doesn’t mean they wouldn’t like to own a car. Just that they maybe can’t,
or want to spend limited resources on other things.
• Social media and connectedness: Word gets around a lot faster these days. A great idea can get incredible
exposure quickly and cost effectively. Plus, rapid trial and adoption create masses of users/fans before
entrenched forces can take action to block them. Cab companies can successfully oppose the issuance of
a few hundred new medallions, but they have a more difficult time opposing millions of people who love
sharing a ride.
Why Is The Collaborative
Economy Growing So Quickly?
3

But What About Something Like
Hourly Car Rental Services?
Or The Rent-A-Desk Office Places?
Are They Part Of This Same Trend?
4Great question. I’m not sure exactly where to draw the line. But Jeremiah Owyang and his Crowd
Companies http://www.crowdcompanies.com/ consultancy -- arguably the most authoritative resource on
the collaborative economy -- do include such services. So I will go with that.

Yes and no. This is where it gets fascinating. A PWC survey https://www.pwc.com/us/en/
technology/publications/assets/pwc-consumer-intelligence-series-the-sharing-economy.pdf of
consumers who were aware of the sharing economy revealed some amazing findings about people’s
attitudes toward sharing versus ownership: 86 percent think sharing makes things more affordable;
83 percent say it makes life more efficient and convenient; 78 percent say it makes for a stronger
community; 76 percent say it’s better for the environment; and 43 percent say they think owning
things can feel like a burden.
The findings of this research were even more pronounced for Millennials, who are known for their
frugality as well as their connectedness.
All This Renting. Don’t People
Want To Own Things Anymore?
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A COLLABORATIVE ECONOMY

How Are Traditional Businesses
Responding To The Trend?
8A COLLABORATIVE ECONOMY
6As with every megatrend, some people and institutions are thretened by these developments.
Further, some local, state, and national governments are creating impediments that are having
negative effects.
But other businesses are embracing and incorporating elements and services of the collaborative
economy into their core business strategies. Ford and GM, for example, are preparing for
selling fewer cars by making investments in ridesharing businesses. Auto was a huge presence
at CES this year, and Ford’s CEO now calls his company a “mobility company .” http://www.cnn.
com/videos/business/2016/01/06/ces-ford-ceo-mark-fields-intv-wbt.cnn Smart (Daimler) rents
cars by the hour in Portland.
The auto rental industry tried putting up roadblocks for a time, but Enterprise now offers
hourly rentals in many locations.
Some hotel companies fought against Airbnb. Others are actually incorporating collaborative
economy services into their offerings, like getting forgotten clothing and essentials picked up
and delivered to your room.

This is a big and fast-growing class of enterprise, but we’re not moving to an all shared economy, at least
for the foreseeable future. It comes down to whether there is untapped value that can be extracted through
sharing. Sometimes there is. Sometimes there isn’t.
Fast Company recently told the story http://www.fastcompany.com/3050775/the-sharing-economy-is-dead-
and-we-killed-it of how many thought the hand tool industry was positively ripe for plucking by the shared
economy. After all, the functional life of most power drills, for example, was 8-12 minutes over several years
of ownership.
Lots of tool-sharing services got funded. But in-market results were spotty. Most people continued to buy
their own drills and other tools, because going to the trouble of picking up and returning a drill wasn’t
worth a couple of dollars to most people.
Sometimes the logistics of sharing things make things easier, but sometimes, the effort required doesn’t
seem worth it.
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A COLLABORATIVE ECONOMY
Is The Whole World
Going Sharing Economy?

A Collaborative Economy Cheat Sheet

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