Lessons from Zipcar: Simplify, organize, empower
The following is a condensed excerpt from “PEERS Inc: How People and Platforms Are Inventing the Collaborative Economy and Reinventing Capitalism.” Reprinted with permission from PublicAffairs.
Back In 2000, sleepless at night during the early months of building Zipcar, I had a recurring nightmare. Lying in bed next to my husband, I imagined the mafia — the rental car mafia — bursting through the door, black machine guns bearing down on us. I understood clearly that we were on a path that was going to break a 100-year-old industry.
What I failed to appreciate back then was the much larger movement made possible by the Internet. Zipcar was a trailblazer. When you can connect and share assets, people and ideas, everything changes, not just how you rent a car. Google, eBay, Facebook, OKCupid, YouTube, Waze, Airbnb, WhatsApp, Duolingo — all are part of this transformation of capitalism.
Web 2.0, the sharing economy, crowdsourcing, collaborative production, collaborative consumption and network effects are simply terms we’ve created along the way in an effort to capture what is going on. Attributing all this to “the Internet” misses the building blocks and therefore the ability to replicate this type of activity in a more controlled way.
There is one structure that underlies all these — excess capacity + a platform for participation + diverse peers — and it is fundamentally changing the way we work, build businesses and shape economies. I call it Peers Inc. Peers Inc combines the best of people power with the best of corporate power.
Platforms for participation: Simplify, organize, empower
My friend Nick Grossman lives in New York City and has spent a decade leveraging technology to make cities more livable. The fact that Nick’s car is sitting idle for days and sometimes even weeks in its Brooklyn parking space offends his urban environmentalist sensibilities, but all his know-how and desire could not manage to make this a viable project. He lacked the expertise and the resources necessary to make his car accessible to others.
What Nick and others couldn’t do, platform-based companies like Zipcar could. Almost 1 million Zipcar members can share 15,000 Zipcars because the platform makes it easy. Of course, people always could share cars in cities, but they didn’t in any significant numbers because of the transactional effort and the unwillingness to share with strangers. These platforms took an idle asset — the privately owned urban car — and made it simple to share.
(Come hear Robin Chase speak at VERGE 2015 in San Jose, Oct. 26 to 29.)
People (the Peers) choose to participate on a platform because a bigger entity (the Inc) has spent lots of time and money turning something complex and expensive into something simple and inexpensive. It is the Inc that has the ability to make long-term and large investments, marshal teams with many kinds of expertise, extract economies of scale and apply standard forms of interaction and quality. The unique role of the Inc is to do what peers can’t — to create platforms for participation and put the assets of the large company, institution or government (such as billing or satellite maps) into the hands of the smaller, autonomous peers who participate.
The 3 ways platforms use excess capacity
There are three ways that platforms make excess capacity accessible to others. They can (1) slice it or (2) aggregate it, in each case letting co-creators use excess capacity more efficiently. Or they can (3) open it, enabling co-creators to generate entirely new ideas, processes, products and services.
Slicing and aggregating: right-size supply
Zipcar slices. It takes big, lumpy options (owning a car or renting one in 24-hour increments) and slices them into half-hour increments so that people can consume just the amount of driving time they want and can pay only for what they actually use.
Other platforms aggregate the excess capacity of assets that were individually too small to bother with and make them into something reliable and consistent, thus creating enough value to make tapping into those resources worthwhile.
Both Zipcar and Airbnb are examples of access platforms that, through slicing or aggregation of excess capacity, enable users to get more value out of an asset by using it more conveniently and cheaply than they could before.
All this slicing and aggregating is a good thing — particularly for physical assets. With a world population of 7 billion and climbing, we need to get the most out of every finite resource we extract.
Opening up: Invite new value creation
Now let’s turn to the most amazing kind of platform, one that opens up excess capacity, the way Google Maps did. Not only does it deliver the efficiency of access platforms, but an open platform enables the creation of new value, and lots of it. Open platforms are generative — better than spinning gold out of straw, because you can put that same piece of straw through the spinning wheel again and again to create as much gold as human ingenuity will allow. The open data movement is a prime example.
In September 2008, Vivek Kundra, the young new chief technology officer for the city of Washington, D.C., thought he’d like to engage with the grassroots technical community in his city. He had heard about an engineer named Peter Corbett who was the CEO of a start-up that had three employees and who was one of the organizers of the local tech community. At their first meeting in Vivek’s municipal office, he showed Peter the city’s data catalogue. “If you were CTO of the city, what would you do with these?” he asked.
What Peter saw on the screen was the largest amount of open city data in the world at that time. Several hundred databases covered everything from public school test scores to potholes, from broken parking meters to real-time crime reports — all the data one would expect to find in an organization that needs to educate, operate, build and maintain a city. Here it was: excess capacity (the data had already been collected and paid for by the city for various purposes) on a beautiful platform for participation (the data resided in standard formats, making them easily accessible for engineers to grab and manipulate).
“It was like honey to a hacker,” recounted Peter, “and real-time open data is like a drug.” He told Vivek that he’d love to share it with his hacker community. “Why not hold a contest and give some cash prizes as incentives? We could call it ‘Hack the District.’ ”
“I love the idea,” said Vivek, but he knew the name wouldn’t work. “Let’s call it Apps for Democracy,” he suggested.
It is common for platforms to be nested within platforms, since they are nothing more than the simple(st) way to engage. So it was here. Apps for Democracy was created as a contest platform to draw attention to the availability of the city data via common API platforms.
Over the next weeks, Vivek and Peter’s teams created a first-of-its-kind contest and website, built with $50,000 from the CTO’s budget. They dedicated $25,000 to prize money and $25,000 to market and support the hackathons. Within 30 days, 47 apps had been submitted to the contest. There were Google mash-ups that mapped marinas, libraries, post offices, gas stations, banks, hotels, construction projects, embassies, places of worship, vacant properties, recent building permits applied for and housing code violations, all searchable by location.
Vivek’s office calculated that it would have cost $2.2 million had the city contracted for these applications. This gave them a return of more than 4,000 percent on the initial $50,000 investment. As an added bonus, no procurement officers had to research and write requests for proposals, nor vet the responses. The entire contest had taken four weeks from ideation to award.
Open platforms keep on giving. The first round had produced those 47 apps, worldwide press and accolades for the creative idea behind the Apps for Democracy contest. But that was just the first order of innovation. Peter was inundated with requests. He decided to write a guide, “How to Run Your Own Apps for Democracy Innovation Contest,” and he made it open-source. This guide is its own platform for participation, making Peter’s structure for building a contest for apps and his earned experience available to the world at large (earned experience that isn’t shared is excess capacity). So far the guide has inspired more than 50 Apps for X contests worldwide. Country-specific contests have been run in Finland, Denmark, Norway, Bulgaria and Australia, as have sector-oriented contests such as Apps for Climate Action and Apps for Development (the latter with the World Bank, which developed its own very robust data catalogue). There have also been Apps for the Army, Apps for Inclusion and Apps for Healthy Kids, among others.
Only two months after the first Apps for Democracy demonstrated the creativity unleashed by the District of Columbia’s prize challenge, President Barack Obama asked Vivek, then only 34, to join the White House as the nation’s first chief information officer. Within just two months of Vivek’s arrival, the White House launched data.gov, the new home for government datasets.
Enterprising students, civic-minded engineers and companies can now mine these datasets — converted into accessible formats — to extract whatever useful value they might see in it.
Data.gov itself has 35 pages of alphabetically organized listings of ways in which the data have been used. The range of organizations extracting new value from this already-paid-for federal data is wide. Some names are familiar, others not.
On the for-profit side, you can find:
• Archimedes, which creates analytical tools for doctors and patients to predict how specific interventions will impact specific patients. It uses data from the National Health and Nutrition Examination Survey, the U.S. Centers for Disease Control and Prevention, trial datasets from the Framingham Heart Study, and Medicare datasets.
• Trulia, a website that provides a greatly enhanced look at the residential real estate market. It taps into congressional district data and wildlife refuge data.
• HelloWallet, an app that helps people understand and plan for their long-term financial needs. It makes use of a federal survey of income and retirement program participation.
• SaferCar, which helps people compare the safety of new and used cars based on an aggregation of data that includes a database of federal new car safety ratings.
• The Weather Channel, which has as its foundation federal weather and climate data.
• The Climate Corporation (recently acquired for $1 billion) combines the weather and climate data with historical soil and crop data to analyze, predict and provide insurance against the likelihood of crop failure. But use of this data extends far beyond commercial exploitation.
• Aqueduct, a “global water risk mapping tool that helps companies, investors, governments and other users understand where and how water risks and opportunities are emerging worldwide.”
• The BioEnergy Atlas.
• A child safety seat inspection station locator.
• A credit card agreement database.
• The Ethiopia Toto Agriculture Portal, a pilot demonstrating “a global data-sharing platform that brings worldwide agricultural public and/or private data together and aggregates agricultural information into a single repository.”
Nick Sinai, while deputy CTO in the White House, told me, “No one can anticipate every use of federal open data. But our experience has been that open data is fueling growth in a variety of economic sectors.
To foster this economic growth, the U.S. government needs to do three things. First, we need to make it easy for entrepreneurs to find and use any public government dataset. Second, supplying data isn’t enough — data doesn’t do anything by itself. Data is only useful if you apply it. And open platforms permit an unlimited — abundant — numbers of uses.
FOSS slices, aggregates and opens excess capacity
The free and open-source software (FOSS) movement taps into excess capacity in all three ways. FOSS aggregates engineers and their work on Platforms for Participation. Coders volunteer their efforts and work on thousands of projects around the world. Many of them do the work on their own time, leveraging the excess capacity of this worldwide workforce of programmers and engineers. While aggregating, FOSS also lets you slice the code you are interested in working on into very small pieces.
GitHub is a cloud-based service that uses Git, a tool popular among programmers and originally written by Linus Torvalds (Linux’s first mover). Git helps coders manage changes to the code and, more importantly, share the code with others. It is a far-reaching platform for participation used by millions around the world to keep track of their original source code and collaborate with other coders. An open-source project on GitHub can be made visible to everyone, and there are hundreds of thousands of projects.
In the open-source world, plagiarism is the sincerest form of flattery.
Although the great economies of scale in the traditional closed software industry enabled giants such as Microsoft and Oracle, the thousandfold-larger numbers of FOSS engineers, together with “free” pricing, make FOSS an innovation engine that’s hard to beat.
Platform structure dictates potential for innovation
We now understand three ways that platforms make excess capacity available: slicing it, aggregating it and opening it.
In general, there is an inverse correlation between platform complexity and its openness to innovation (and therefore to potential value). The less rigid and structured the platform, the more innovation. More structure produces less variation.
Structure matters, and infrastructure is destiny. The structure of the platform defines its possibility and its success. But even so, open platforms evolve and become the basis for a whole host of unpredictable uses.
Platforms have impressive properties based on their raison d’être: simplifying, standardizing and easing participation. This means that once you’ve got the elements of the platform exactly right and people are interested in the excess capacity you are offering up, it will grow very quickly. The good platform has reduced the cost and effort of participating to its absolute minimum, making the barriers to entry as low as possible.
At the end of the day, the point of a platform is to liberate the value hidden in excess capacity by engaging others: their assets, time, expertise and creativity. Making use of excess capacity is fundamentally a collaborative act. It is sharing. The platform is the extended hand. It is half the handshake.
Platforms are made for peer participation; peers give them life.