These days, there are three business models that are emerging into serious long-term opportunities. I have written about the Internet of Things, which is the most developed, and now write about The Sharing Economy. I chose this business model as next to highlight an area currently getting a lot of media attention. A post on Product as a Service (PaaS) will follow in due course.
How are PaaS and Sharing Economy trending (according to Google)?
The sharing economy is still less popular than PaaS but catching up quickly.
What is the Sharing Economy?
Sharing occurs when a person or business uses an object owned by another person or business and offers something tangible in exchange (like money).
Jeremiah Owyang, Founder at Crowd Companies, recently wrote, “Sharing is the new buying”. With Millennial and Gen X, this may well be the case. From a business perspective, it is starting to grow but has not yet made great progress into mainstream B2B organizations.
This chart shows where a number of common applications stand on a life cycle graph:
In this graphic, car sharing is Uber, Lyft, and Zipcar while peer-to-peer accommodations is Airbnb. Airbnb is already making an impact in the hotel industry (and not just for singles with limited funds). I recently spoke at Bentley University and drove a fellow speaker to our dinner venue. When it was time for me to leave, I asked him where he was staying, and he said, “I have an Airbnb apartment in Cambridge and will contact Uber for a ride to get me there.” This from a tenured Brit who has travelled a large part of the world!
Of course, just about everyone knows about these applications but what about some other innovative, but not as well known, examples?
CrashPlan hosts my computer’s off-site backup. One of the options I have is shown here:
Invite your friends to back up to you
Of course, I can do this as a favor, charge them a nominal fee, or make the offer and trade for something. Although I do none of these, it is an example that I would not have thought about.
Another example is businesses with extra office space that offer to rent out an office or cubicle for a nominal amount of money. The company earns some income for an under utilized asset and a startup or small business has a place to go and work without the distractions of home.
A third example is fascinating to me. I am a Trustee of my town library. We recently looked at adding an automatic book sorting systems to our facility. When people return books, they are placed on a conveyor belt and diverted into pre-defined bins. This make book sorting, a labor-intensive chore, very easy. One of the sales people I met with told me that some libraries buy one and use it on the first shift for their sorting needs and then switch programs and allow another library to bulk sort its book on a second shift. The second library rents the sorter for a fixed price per day and yet finds that the rent plus the cost to move the books and man the sorter is still less than manually sorting!
What about the big boys?
Ford and BMW recently announced that they are each rolling out a car-sharing platform. Ford launched a pay-as-you-go network of shareable, on-demand cars in London, called GoDrive. And in late June, 2015 BMW announced it is taking steps to link its car customers to the sharing-economy, offering owners of its latest Mini a chance to place their vehicles in the auto maker’s global DriveNow car-sharing service. The idea is that if the owner does not use the new car every day, she can rent it out to a pre-qualified stranger who has also signed up on the same platform. Neither company will make a lot of money but will demonstrate that it is progressive enough to try new things and, also, the renters get to try the vehicles and maybe buy them down the road.
Caterpillar recently took a stake in the online rental platform Yard Club.
Founded in 2013, the San Francisco start-up allows contractors to easily rent machinery to one another for weeks at a time. The rentals in turn allow businesses to boost revenue in between jobs. Construction equipment rental already is a nearly $40 billion industry annually. But start-up Yard Club is trying to one up more established networks by showcasing its easy-to-use, online community. Members are prescreened and construction fleet inventory is detailed virtually so posting equipment to rent and accessing specific gear are easy tasks.
Citi bank in New York City recently opened a bicycle sharing service in Manhattan. Their objective is not to make money but to get closer to young customers and increase their brand recognition.
Why should we care about this model?
As people share items, the number of sales will decrease and, if your income depends on sales, you had better be prepared to widen your scope.
It will change the way you do business but you may find that the service group is best suited to managing these new ventures.
Be brave!
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of their clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization minimize the risk of participating in the sharing economy please contact us or check out some of our free articles and white papers here.