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LEAD Innovation Blog

Read our latest articles on innovation management and innovation in a wide range of industries.

Date: 21-May-2018
Posted by: Franz Emprechtinger

How the sharing economy is changing business models and products

 

Benefit instead of owning is the new motto of the consumer society. The sharing economy is changing business models and products disruptively - in all industries. Read in this blog entry which chances but also risks the sharing economy holds ready for each of us.


We borrow skis from the sports shop. We rent our apartment via AirBnB to holidaymakers. We trade fashion for Kleiderkreisel. We use car sharing models such as Car2Go or Drive Now and no longer own a car. And if we do, we make it available to the community via platforms like Drivy or Snappcar. Sharing economy is no longer a buzzword. We have been living in it for a long time: as a study by PWC shows, almost one in two already uses sharing services. One in four even offers products and services themselves.



Sudden demand for durable products

If ownership becomes unfashionable, this of course has a massive impact on the business model and product design. Because when the customer pays for its use, the supplier appreciates long-lasting products that are as maintenance-free as possible. Planned obsolescence, which artificially reduces the shelf life of products and thus boosts sales anew, loses its meaning.

On the contrary: In a sharing economy, robustness and reparability are in demand. Because with a cotton T-shirt of a textile discounter like Kik or Primark you will hardly be able to score points at file-sharing exchanges like Kleiderkreisel or platforms like Willhaben or Shpock.

The Citybike from Vienna provides an illustrative example of the values an item must have in the Sharing Economy: solid rubber tyres and a heavy, stable bicycle frame that is easily adjustable for all users guarantee a long life. The problems that suppliers like oBike or Ofo have in the Austrian metropolis show that a similar model cannot be realized with cheap wheels.

Case Study Business Model Innovation

 

Sharing changes the business model of every industry

While the sharing economy may have a strong impact on product design, the pressure for change in the business model of almost all industries is much more profound. Two examples show how this transformation of the business model can proceed successfully.

 

1) The trade expands its rental offer

The ski rental business has grown by 25 percent annually and has thus doubled in the past three years," Alfred Eichblatt, managing director of the sports retail chain Hervis, told the Tiroler Tageszeitung. Eichblatt added: "In the meantime, half of all skis are being hired from us." Meanwhile, Hervis also delivers the rental skis to the hotel. The Primus on the domestic sports retail market Intersport and its challenger Sport2000 have also been doing good business with ski and bike rental for many years. Sport-2000 board member Schwarting recently announced his intention to rent out electronic devices such as GoPro or navigation devices for hikers in the future. Hiding things instead of selling them is now becoming a growth market for more and more retail sectors. Hartlauer rents cameras and photo equipment of all price ranges, for example, on a daily basis. Such a service naturally places new demands on staff, branches and many internal processes that the customer does not even notice.


2) Car manufacturers grow through car sharing

Car manufacturers Daimler and BMW have succeeded in launching Car2Go and Drive Now, two sharing products on the market that are generating double-digit growth rates. With the sale of automobiles such an increase can no longer be achieved. Currently, 2.1 million customers in Germany alone use car sharing.

 

The dark side of the sharing economy

Companies do not always succeed in opening up new growth markets through the sharing economy. The economy of sharing has a downside. Namely exactly when a third player forces itself between the user and the provider in between, which prevents the direct exchange of the two parties. Uber has managed to lie like an invisible film between the one who needs a ride and the one who can undertake one. Such a constellation leads to extremely negative effects if the platform provider has a large market power. Because every real estate agent is a platform provider who wants to avoid by all means that tenants and landlords or buyers and sellers contact each other directly. Because otherwise he must fear for his commission. However, since there are many real estate agents, the competition is so high that the individual cannot abuse his role.

 

Exploitation as a business model

That U can and does this can be read in the media. Part of the great success of the taxi alternative is the exploitation of drivers. Uber already uses its formula for success to offer other services such as food delivery. Uber's model is applicable to almost every industry. Uberisation threatens to turn the entire service sector upside down and extends to many areas of life: AirBnB is changing the way we spend our holidays. Kickstarter revolutionizes project financing. Tinder pretends how we organize our love life. Our view of our world is already largely influenced by Google - we are getting more and more lost in the filter bubble.

 

Managers are afraid of overisation

This over-exploitation is worrying for individual companies, and according to a study, there is growing concern among top management about the destructive power of such competitors. But actually everyone should take a very critical view of this development, which sometimes appears very friendly as a "sharing economy". After all, it ultimately leads to the formation of monopolies. Clients and entrepreneurs alike, like drug addicts, depend on the needle of the platform company, which can set the conditions for both parties at will.

 

The comeback of the cooperative

Of course, it doesn't have to come to that. Although the sharing economy itself may trigger such a development, it also offers an opportunity to combat it. That is when the sharing principle is applied to the platform itself. As soon as this is "owned" by no one and all participants at the same time, no dependencies can be established. Trebor Scholz, professor at the New School in New York, has developed such a model called Platform Cooperativism. Platforms are organized as cooperatives or cooperatives. The much discussed blockchain technology plays a key role in this. Background: The Blockchain is a decentralized verification system for transactions that does not belong to anyone and that cannot be manipulated. The information to be transmitted is stored and verified on different servers, computers or smartphones.

 

Alternatives to Uber, Amazon and Co

Blockchain technology also uses the Israeli startup LaZooz to offer a cooperative solution for shared journeys and to compete with Uber. In Berlin, Fairmondo is a cooperative alternative to online giants such as Amazon or eBay, which belongs to around 2000 private individuals and merchants themselves. The business model of the companies involved can benefit from the advantages of the sharing economy without suffering from the dark side of the platform economy.

 

Conclusion: How the sharing economy is changing business models and products

The first thing we all associate with Sharing Economy is something quite positive. Digital tools have enormously expanded the possibilities of sharing or using things instead of buying them. The platform through which all these transactions run has the most important role to play. If this powerful instrument is controlled by only one actor, then that actor can determine the rules for all other participants. Such a constellation naturally has enormous negative effects on the business model of any company. Only the platform entrepreneur profits - at least until he leaves the other too little for economic survival. Ultimately, we will all determine the face of the sharing economy and thus of our own business model. Because where we shop, with whom we work and through which channels we offer our services, we can still decide for ourselves. Birkenstock, for example, has shown that even overwhelming market players such as Amazon do not necessarily have to be taken in the wrong direction. 

Business Model Innovation

Franz Emprechtinger

Born in Ried im Innkreis. As former Head of Innovation, he was responsible for the entire project management and specializes in the areas of fuzzy front end and business model innovation.

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