How the sharing economy can be applied to existing business models

| February 24, 2016

Around the world, a new wave of peer-to-peer businesses are shaking up established industries. Whether it’s borrowing goods, renting homes, cars, caravans or providing micro-skills in exchange for money, consumers are showing a robust appetite for the sharing economy. Australia is no different.

It’s encouraging to see recent announcements by the NSW government to support innovation by actively encouraging the growth of sharing economy services, but this was almost inevitable as consumers have been leading the charge to embrace these services. Our governments are racing to catch up.

There’s no doubt some more traditional businesses will suffer from the disruptive influence of the sharing economy, but customers have, and always will, seek the most effective ways to meet their needs, often at the expense of companies that do not have a customer-centric strategy.

These competitive pressures are nothing new; businesses have always been required to adapt in order to thrive. But it has shown that if companies do not listen to their customers, they will lose them. The taxi industry has been spectacularly unsuccessful in its campaign to protect its archaic service from the advance of ride-sharing. They did not recognise how much their customers disliked their service and relied on half-truths and outdated technology to support their position. Uber swooped in and won.

Similarly, the accommodation industry has been less than united in its opposition and still does not appear to know how to regain interest from customers. It’s no surprise then that Airbnb grew as quickly as it did.

What should incumbents and challengers do to position themselves ahead of disruption and capitalise on new sources of revenue? By tapping into the sharing economy, companies can shift the threat and turn it into a real opportunity.

Sharing economy platforms are an effective way to manage an imbalance in supply and demand. Asset owners often have a temporary excess of assets, but no realistic way to monetise the assets apart from selling them. This is despite their being many individuals and companies that may have a need for those assets. The sharing economy makes it easier to match the needs of owners and renters and provide the necessary security, processes, insurance and payment channels.

One way to do this, is to identify common ground and build alliances. For example, the sharing economy provides an interesting opportunity for the insurance industry to capitalise on the shift in consumer attitudes that now favours short term rental of assets over ownership. Insurers can provide insurance coverage for assets that are rented through sharing economy marketplaces and take advantage of the extra trust and security they provide. Australian motor vehicle insurer Insuret was an early move in this space in collaboration with DriveMyCar.

Alternatively, sharing-economy start-ups might even consider partnerships with incumbents. For example, the UK-based food-sharing service Eatro pivoted into another business that delivered courses prepared by professional chefs, creating new sales channels for them. More people are using the sharing economy and seeing the benefits of wider choice and lower costs and they are telling their friends. Companies are also getting involved, especially by providing assets for rent because they see the economic benefits. Now governments are not only embracing the concept, they are encouraging their own departments to use sharing economy services. From here the concept will only grow; those companies that fail to adapt and focus on the customer, aren’t likely to survive long.