It’s hard to believe that five years have passed since I first began to join the dots on how the likes of Airbnb, Netflix, Zipcar, and eBay were connected as an idea called "collaborative consumption." Many Post-Its later, a book emerged called What’s Mine Is Yours: How Collaborative Consumption is Changing the Way We Live and Time named the concept one of the "10 Ideas that Could Change the World." It’s funny that at the time it was tricky to find examples across sectors that had truly hit scale, and to prove there was a real economy and viable business model behind the startups that were still, for the most part, in their infancy. The Airbnb team didn’t have fancy offices around the world, but were just a few highly passionate entrepreneurs in a small apartment in San Francisco. Today’s success stories such as Taskrabbit and Lyft didn’t even exist.
To be honest, when I first started trying to spread collaborative consumption into a global movement and to get the media on board to spread awareness, I received more than a few dubious responses. Many people’s first reaction was that it was a "nice idea" about sharing small household stuff. But I passionately believed it was just a matter of time before a wide mix of people would see that we were at the start of a profound transformation in the way technology could create the efficiency and trust to match millions of "haves" with millions of "wants" in ways and on a scale never possible before.
The way we could think about supply and demand would change; the relationship between buyers and sellers would be disrupted; and the person formerly known as the "consumer" would now get what they need from each other, taking control and value away from big centralized companies. I kept going. And ironically, one of the reasons I kept going was that I thought the "consumption" facet was just one slice of a broader "collaborative economy," the macro paradigm shift I think the 21st century will become renowned for.
The picture is remarkably different today. Rather than being asked if this is a reactionary blip to the recession, the most common question I am asked these days is what is the best term to call the "space"? You may have noticed the terms "sharing economy," "peer economy," "collaborative economy," and "collaborative consumption" being used synonymously. Ideas like "crowdsourcing," the "maker movement," and "co-creation" are being thrown into the mix. The space is getting muddy and the definitions are being bent out of shape to suit different purposes. So, do I think these terms have different meanings? Yes. Are their common core ideas that explain the overlap? Absolutely.
People have asked me why I have not publicly clarified this earlier. To be honest, it is hard to do so without being accused of trying to "defend" a term. The words used concern me less than how they are being defined, and the core meaning of the space being misunderstood. Definitions are hard, especially when they are trying to capture new ideas never expressed before. As Bertrand Russell famously once said: "Everything is vague to a degree you do not realize until you have tried to make it precise." When I first began writing about this space nobody knew how big it might get. Its growth and expanding nature are, for the most part, a good thing but we need clear definitions that will enable us to move forward with a common understanding.
In this presentation, I have attempted to break down, define, and visualize the most commonly used terms. It’s a starting point, and I welcome your thoughts.
An economy built on distributed networks of connected individuals and communities versus centralized institutions, transforming how we can produce, consume, finance, and learn. It has four key components:
Production: Design, production, and distribution of goods through collaborative networks
E.g. Quirky is an online community of inventors that submits product ideas and then votes on the ones they love. The company then picks the best ideas to take to market, covering the costs of manufacturing and distributing the finished products, making innovation accessible to all.
Consumption: Maximum utilization of assets through efficient models of redistribution and shared access.
E.g. Airbnb matches people who have a place or space to rent (and that could be literally anything from treehouses, to a spare room, to holiday homes to an igloo) with people looking for a place to stay.
3. Finance: Person-to-person banking and crowd-driven investment models that decentralize finance.
E.g. Zopa is leading peer-to-peer lending platform that works by connecting individual savers and borrowers, without big banks in the middle.
4. Education: Open education and person-to-person learning models that democratize education.
E.g. On Coursera millions of people are taking classes taught by faculty from the best universities around the world, creating open access to education that used to be just for the privileged few.
An economic model based on sharing, swapping, trading, or renting products and services, enabling access over ownership. It is reinventing not just what we consume but how we consume.
It has three distinct systems:
1. Redistribution markets: Unwanted or underused goods redistributed
E.g. The company thredUp buys unwanted consignment-quality kids and women clothing and then resells it online, paying the supplier 40% of the resale value.
2. Collaborative Lifestyles: Non-product assets such as space, skills and money are exchanged and traded in new ways
E.g. Taskrabbit is like "eBay for errands" matching individuals and businesses that need tasks done with "runners" who make money helping people complete their to-do lists.
3. Product Service Systems: Pay to access the benefit of a product versus needing to own it outright.
E.g. BMW’s "Drive Now" is a car sharing service that offers a viable alternative to owning a car. Members can use their driving license (with embedded electronic chip) to access a car when and where they need them and pay for their usage by the minute.
An economic model based on sharing underutilized assets from spaces to skills to stuff for monetary or non-monetary benefits. It is currently largely talked about in relation to P2P marketplaces but equal opportunity lies in the B2C models.
E.g. Lyft is an "on-demand" ridesharing platform that matches ordinary drivers—students, retirees, stay-at-home parents—who can earn extra money by giving rides to people who need them.
Person-to-person marketplaces that facilitate the sharing and direct trade of assets built on peer trust.
It is the pure P2P slice of the sharing economy but also includes craft marketplaces like Etsy that matches makers of goods directly with buyers, as well as peer-driven production models such as Ponko that are not pure "sharing" models, but that are built on similar peer trust dynamics.
So why are these terms getting mixed up? It’s understandable given there are powerful commonalities and benefits underlying all of the above similar-but-different ideas. The key three common themes are as follows:
Across sectors, power is moving from big, centralized institutions to distributed networks of individuals and communities disrupting who we trust and how we can access goods and services. Through a business model lens this is creating the much-talked-about dynamic of "disintermediation," or removal of the middlemen that web technologies provide the efficiency and trust to create. But equally powerful is the big shift we are just in the nascent stages of experiencing: from a society of passive consumers to active and connected creators, collaborators, producers, financers, and providers.
All these ideas share the same key four drivers:
- Technological innovation: Social networks to payments to online identity systems and of course mobile devices create the efficiency and trust for these ideas to work at scale.
- Values shift: A connected society that is rethinking what ownership and sharing mean in the digital age.
- Economic realities: The growing realization that we need to think about wealth and assets through a new lens, and measure ‘growth’ in a more meaningful way.
- Environmental pressures: The need to make much better use of finite resources.
Innovative and Efficient Asset Utilization
New technologies enable us to unlock the "idling capacity" of resources—the untapped social, economic, and environmental value of underutilized assets. Idling capacity is everywhere, though it’s not always easy to see: empty seats in cars; unused holiday homes or spare bedrooms; underutilized Wi-Fi; unoccupied office spaces; latent skills and capital; and of course underused consumer goods.
Social, mobile and location-based technologies enable us to efficiently and increasingly safely connect the people who have this idling capacity (goods, services or skills) with those who want it. It’s a massive untapped resource of "wealth" and the benefits are huge: less waste, lower costs, neighbourly values, entrepreneurship and financial profit. And yes, this is a big commercial opportunity. Let’s not pretend otherwise.
On a personal note, I often go back to the first Post-It note I put on my wall a few years ago when I was trying to figure out the core meaning of this new economy. It has one word on it: humanness. So regardless of how the space grows and what you choose to call it, let’s not lose or dilute its power to humanize the way we live, work, bank, learn, travel, and consume in the 21st century.