Why major brands and startups are joining the ‘collaborative economy’: Q&A with Rachel Botsman

Airbnb and Uber are just two well-known players in the ‘collaborative economy’, as defined by Rachel Botsman in her critically acclaimed book, What’s Mine is Yours: How Collaborative Consumption Is Changing The Way We Live. Botsman is a global expert on the subject and speaks regularly at events around the world. Her Ted talks have been viewed more than 2 million times. Michelle Herbison caught up with her ahead of her visit to Sydney and Melbourne for Wired for Wonder this week.

Marketing: You’ve mentioned in talks previously that a seemingly unrelated collection of ideas turned out to come together into this idea of collaborative consumption. Can you start off by outlining a few of those new ideas and explaining what drove you to write your book about the trend?

Rachel Botsman: Technology has literally wired our world to create the efficiency and trust to share in ways and on a scale never possible before. In the first wave, we experienced how this interconnectivity made it easy to share information via email. We then entered the second wave whereby the emergence of social networks enabled the exchange of photos, videos, and music. What is happening today is the rise of the third wave, where it is now possible to share everything from a house to a ride to a power drill.

Studying these different waves of sharing behaviors led me to think of the third wave and I call it collaborative consumption or what is now commonly referred to as the ‘sharing economy’.

When I wrote What’s Mine is Yours in 2009, the likes of Airbnb and Uber seemed like crazy ideas let alone household names. I believed then that there was a need to help people from different sectors understand what was driving these ideas and how they were connected. The space has obviously grown and evolved considerably but the core principles remain the same.

M: Surely there is a limit to the viability of the collaborative economy model as an alternative to typical business. To what extent do you think this is changing, or will change, the way the world operates?

RB: The point often overlooked is that this model is a transformative lens on how technology transforms the way we can unlock the value of assets and enables new forms of trust that change the way products and services reach the end user. The start-ups will come and go but these two principles remain fundamental and are changing business models and consumer behaviors in ways that can’t be reversed.

Traditional businesses are realizing that the collaborative economy is not about start-ups versus ‘typical’ ways of doing businesses. It’s about discovering new ways to create value that is meaningful to customers. That is why we are seeing major brands such as GE, Marriot, BMW and even DHL apply the principles to develop new business offerings.

M: What are three of the coolest yet lesser-known collaborative economy and sharing economy projects happening in the world right now?

RB: I think it’s in sectors where examples are emerging such as:

  • Cohealo: a US-based logistics platform that allows non-emergency hospital equipment to be shared between hospitals,
  • Vandebron: a Dutch company that allows people to buy their power directly from independent energy producers. The business model follows a Spotify-like subscription, and
  • BlaBlaCar: a French start-up, an example of a ‘true’ sharing economy platform that enables people going on long-distance trips to share their empty seats with people going the same way.

M: Who does collaborative economy benefit most and how great are the benefits? Who does it benefit least?

RB: Through this growing sector of the economy, millions of people are empowered to become ‘micro-entrepreneurs’ by using technology to monetize their existing assets thereby allowing people to gain supplementary income. I’ve talked to people who rent out the empty rooms of their houses through Airbnb to pay off their mortgage to university students or stay-at-home-mothers who run tasks on TaskRabbit to pay bills.

The concern is how we prevent marketplaces that become two sided in terms of increasing the gap between the haves and haves not. We need to ensure providers — drivers, hosts, sellers, etcetera — of goods and services are protected and it does not become a race to the bottom of cheap labor.

M: What are some of the common issues with a collaborative economy model, or the reason why some projects could fail?

RB: It’s a mistake to try to identify the next opportunity and to build the next Airbnb or Uber for X. Business ideas often fail when they are market-led or asset-led instead of needs-led. Why? It may be cool and quite novel at the start but if it does not fulfill a real or latent need, customers will not come. The most common reasons for failure in the space are that start-ups can’t build enough critical mass of either supply or demand, or both.

I always advise entrepreneurs to look for two things. Firstly, find pain. What I mean by this is identify areas where customers are not satisfied with or even better, what they hate about the current experience. For example, transferring money internationally is often frustrating and you get screwed on fees. Hence the phenomenal rise of the peer-to-peer currency platforms such as Transferwise and Currency Fair.  If you start with a needs-led proposition you will enter into this new economy with a customer mindset.

Secondly, identify assets with ‘idling capacity’ and broken systems of supply and demand. Both Airbnb and Uber are built on these exact principles. There are millions of spare rooms, idle holiday homes and underutilized spaces such as tree houses all over the world. Airbnb realized that these assets had locked value and it was hard if not impossible to book them.

M: Where do you see this trend going in the next five years? And beyond that?

RB: I do not see collaborative/sharing economy as a start-up trend but as a transformative lens on how we trust other people and how we view assets. I think the terms will stop being disputed and it will just become part of the economy. People will not see these behaviors as quirky ‘alternatives’ they can access through cool apps but just a better way they bank, travel or consume. They will traverse across examples without even thinking whether they are part of something different or not.

I think there’s also a massive evolution in trust. The idea of trusting ‘peers’ over a traditional corporation is becoming increasingly normal and this will create shifts around the way we engage and interact with the ‘wider’ world in ways we can’t yet even imagine.

And finally, I think there will be big leaps in the regulatory environment. Current rule-breakers will become rule makers changing established laws and policies and re-shaping the global workforce.

Michelle Herbison
BY Michelle Herbison ON 26 August 2015
Assistant editor, Marketing Magazine.