The Rise of the Sharing Economy
Central to the goal of working together to better the world is the idea of doing business with a central sense of purpose. According to Howard, corporate entities tend to deem themselves socially responsible, but that sentiment may not be reflected in the way they actually conduct business. She says that this model is becoming antiquated and that “in its place has come this narrative that’s driving successful business today: how can we take what we’re doing as a business, and profit of course, but do so with a grander purpose for all.”
E-commerce and social media—particularly as driven by Millennials on mobile devices—have also been instrumental in shaping the sharing economy, Egol maintains. He says that people increasingly use online reviews and the recommendations of their peers on social media to inform purchasing decisions. For this reason, he says that many of the best brands that have emerged in the sharing economy are successfully using mobile devices and social media channels to engage directly with their customers. Furthermore, he adds that successful brands focus not only on delivering a product or service to consumers, but on crafting a positive overall experience.
Technology cannot be understated as a factor in the sharing economy’s rise. “[In the past] there may have been an empty apartment, or a car that’s not being used, or a drill that’s not being used, but without the technology to connect to each of those resources, it was hard to get it off the ground,” Fetto says. “Technology is really the driving factor to the rise of the sharing economy.”
According to de Silva Leon, the realization that many individuals and organizations have invested in lots of assets that are underutilized has also been crucial to the model. He notes that the average American vehicle sits idle for 93 percent of the time—an expensive asset that is seeing less than 10 percent usage. He says that now, individuals and organizations are looking for ways to monetize underutilized—and usually expensive—assets.
“The line between what was called a traditional economy business versus a sharing economy business is quickly evaporating. Big businesses who are successful today, or who are trying to poise themselves for success tomorrow, as well as trying to be innovative, are all putting collaboration in some way, shape, or form at their core,” Howard says. She cites General Electric as an example, particularly with its Predix operating system and platform for building applications. Based on the idea of the “Industrial Internet,” the cloud-based solution provides a collaborative environment for developers to build applications that connect to industrial assets to collect and analyze data, with the goal of optimizing industrial operations.
THE SHARING ECONOMY THREATENS MORE DISRUPTION
“It will be really interesting to see what [effect] the growth of the sharing economy has on the mind-set of the people who are really embracing it right now, and, as they move throughout their lives, [to see] what other industries it will touch,” Fetto says. He adds that many industries might think they’re immune to the effect of the sharing economy because their target audiences aren’t Millennials, but as Millennials age, they will constantly be questioning whether they should acquire something from a business or seek out an alternative means of access that is more cost-effective or environmentally friendly.
The PwC report identifies five industries that are facing disruption by the sharing economy business model. First is the technology industry itself. While technology has been one of the major driving factors in the rise of the sharing economy, many technology companies need to design their products specifically for the sharing economy model. Technology companies should focus on improving users’ experiences with real-time capabilities, as well as mobile and cloud technologies, the study suggests.
The entertainment, media, and communications industry (considered together as a whole in the report) could also be at risk. According to the study, a major reason is that music, movies, and games can feel less like possessions than physical assets do. For this reason, the study suggests that companies explore reward options that create greater perceived value for these materials. The rise of the on-demand business model, exemplified by companies such as Netflix and Hulu, is another big factor. The study notes that consumers may be willing to pay more for early or immediate access to certain media, and that a collective bargaining model might be beneficial for both consumers and providers.