The terms "collaborative consumption" and "sharing economy" have been popping up in the news media with increasing frequency over the past few years, appearing in The New York Times, Forbes, Fast Company and others. Time Magazine went as far as to label collaborative consumption one of the "10 Ideas that Will Change the World."
But what does it mean? The accepted definition is one that refers to an economic model based on the sharing, swapping or renting of products or services, rather than ownership.
O.K. That sounds good, but what here is actually new? People have been borrowing and sharing for as long as they have had neighbors. People have taken advantage of carpool lanes by sharing rides and community gardens have existed for generations. So why all the attention now?
It's something we've been thinking about at Ford for some time, and more so lately, as we just signed a partnership with ZipCar -- one of the leaders in the collaborative consumption trend. The insights we've gleaned into what differentiates these current developments have applications for so-called traditional businesses wanting to stay ahead. While the trend is evolving at a rate that makes it difficult to say exactly what it all means, at the very least, it means business leaders must pay attention.
So what makes a business built on the collaborative consumption model different from a classic business? And how can a traditional business join the movement?
Here are a few key insights into what we think differentiates a business based on collaborative consumption from the rest (this list is by no means comprehensive, so I encourage you to write me if you can think of others):
1. Puts More Trust in its Customers
A sharing business "puts more trust in its customers" -- and in their relationships with other customers. Banks have always provided loans, and rental companies of all sorts have provided items from cars to carpet cleaners. But companies that use a collaborative consumption model hedge risk differently than other businesses. Sharing-based companies do this by creating a community and replacing traditional collateral with peer incentives, reviews and regulation.
2. Community of Stakeholders
A successful sharing-based company must build a "community of stakeholders" -- not just customers -- who take pride in the product or service offered. Again, this is nothing new, and something that businesses have always strived for. But by displaying additional trust in the customer, businesses gain an extra degree of gratitude and loyalty, so much so that customers will not only come back, but take action in support of this community. If you treat customers as stakeholders, they will come to see themselves as stakeholders.
3. Leveraging Social Networks
"What's different now?" The most fundamental answer to this question is social networks. Advances in online and socially-based platforms have allowed businesses based on collaborative consumption to grow rapidly. Before social networks, people didn't have the means to get to know one another at the speed of commerce. Now, with online profiles and peer reviews, people don't borrow and share anonymously with strangers; they first check with others within the community and refer to community-sourced reviews and referrals to help ensure they're comfortable with the person or organization they're dealing with.
Finally, inherent in the collaborative consumption model is the idea that people don't need to own everything they use. Why should two neighbors have two lawnmowers when one would do? The ultimate effect is that people consume less, though not less than they need. In moving in this direction, as Ford has done with ZipCar, a business ensures that it meets consumer demand in a more nuanced way, for the benefit of the planet.
In addition to ZipCar, there are several other companies and organizations leading the trend in collaborative consumption. We know the demand is there, it is up to business leaders to evolve practices to reach new audiences, especially with younger demographics.
Image CC licensed by Flickr user tvol.