Taking Advantage of the Sharing Economy: Mistakes to Avoid

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1 Q&A Fawn Fitter NO. 98 Taking Advantage of the Sharing Economy: Mistakes to Avoid SAP Center for Business Insight Brief Q&A Case Study Inquiry E-Book Infographic 1

2 A tectonic shift in the way consumers do business is disrupting big brands to an extent that hasn t been seen since the early years of e-commerce. Thanks to the convergence of social, mobile, and geolocation technologies, it s easier than ever for individuals to share goods directly, crowdfund innovation and production, and use products and services on an asneeded basis instead of owning them. This perfect storm of peer-to-peer commerce is called the sharing, or collaborative, economy. If traditional companies don t find a way to participate, they risk being left behind, not just by competitors leveraging the innovative power of the crowd but also by consumers who see the sharing economy as a valid response to social and environmental challenges. We gathered a panel of experts to discuss why companies need to heed the rise of the sharing economy and how they can adapt to it. Prof. Dr. Christian Berg is global head of Sustainability, Business Transformation Services, for SAP SE. Rachel Botsman is coauthor of What s Mine Is Yours: How Collaborative Consumption Is Changing the Way We Live and one of the founders of Collaborative Lab. Andrew Leonard covers technology for Salon.com. Jeremiah Owyang is founder of Crowd Companies, a council for large organizations that want to participate in collaborative commerce. 2 Q&A: Taking Advantage of the Sharing Economy: Mistakes to Avoid 2014 SAP SE or an SAP affiliate company. All rights reserved. NO. 98

3 Why are major brands getting involved in the sharing economy? Christian Berg: Our society faces two challenges: limited natural resources and growing waste. Consumers are increasingly aware of this and they care about it, so organizations need to care about it as well and, of course, there s also regulatory pressure. So organizations are increasingly interested in solutions that help them green the supply chain and provide greater transparency into the social and environmental footprint of products and services. Jeremiah Owyang: It all fits into the broader trend of people being empowered by technology to get what they need from each other. The net effect of empowered people is peer-to-peer commerce. The net benefit for big companies is the ability to connect to the ecosystem for co-innovation, create new business models, and sell one product many times, whether that s by charging per use on a subscription model or by facilitating a secondary market for used goods. This is why I call it the collaborative economy rather than the sharing economy. Rachel Botsman: A growing number of big brands across sectors are realizing that if they ignore or fight this deep socioeconomic shift, they will ultimately lose. The collaborative economy represents a new way to engage with customers and gain valuable new sources of revenue. Andrew Leonard: You don t have to call it collaborative. Thinking about what you can do yourself versus what somebody else can do better for you is, in a word, outsourcing. What are some of the issues companies should be aware of in joining the sharing economy? Botsman: Many companies have been accused of greenwashing, where they pay marketing lip service to the green movement, but fail to make deep systemic changes. Similarly, the sharing economy needs to be careful not to fall into the trap of sharewashing. Some brands might enter the space purely because they think they should jump on the bandwagon. But if they re not committed to reinventing their business and benefiting the end user, it s doubtful that their participation will be more than a minor marketing tactic. The way to overcome this is through real examples that show how big brands can bring scale, reach, and resources to the collaborative economy. And they must do this in a way that is beneficial and true to the values at its heart: humanity and empowerment of the individual. Owyang: Brands can build partnerships with collaborative start-ups, offer their own marketplaces, or tap the maker market, but whatever they do, they have to think about the crowd as partners not just consumers. That s the only way this can work in the long term: sharing intellectual property, sharing resources, and in some cases sharing revenues. Leonard: A lot of companies are being sucked into the same terminology that s attracted idealistic consumers: if we call it the sharing economy, maybe you won t notice that we re making a boatload of money off your scrimping and saving. Every possible service is being broken out by who can provide it cheapest, but the companies that really win are the ones that control the platforms that make the collaboration possible. Uber isn t selling rides; it s selling the technology that coordinates riders and drivers. Brands can build partnerships with collaborative start-ups, offer their own marketplaces, or tap the maker market, but whatever they do, they have to think about the crowd as partners not just consumers. Jeremiah Owyang, founder of Crowd Companies NO SAP SE or an SAP affiliate company. All rights reserved. Q&A: Taking Advantage of the Sharing Economy: Mistakes to Avoid 3

4 Where do you see this trend heading? Botsman: We re just at day one of a transformation in the concept of ownership, the way we utilize assets, and how we create and measure value. It is going to be fascinating to see how brands built on connected communities create new internal cultures, marketing structures, and relationships with their end users. Leonard: The concept of vertical integration is already disappearing, and that will continue. Any company that figures out a better way to leverage what the Internet does best sharing information has a leg up. Berg: The sharing economy has great potential for helping big brands face increasing pressure from consumers, regulators, and investors around the globe to address environmental and social issues. Scarcities drive innovation. If people live in a situation of scarcity, they need to find new ways of sourcing things and solving problems. A scarcity of resources in our environment raises questions. How soon will we be able to adapt? Can we make innovations out of that? The emergence of the sharing economy is a promising sign that such a transition is already taking place. I think that when we look back a few decades from now, we ll be amazed at how wasteful our society was. Sharing consumption is a promising entry point toward a more circular economy and a more mindful use of resources. Owyang: From a corporate perspective, customers and employees will start to look the same. Imagine that you walk into a big-box retailer to do some shopping and get a text message saying that the company will pay you $100 to fill a few shelves that need restocking. You decide that since you re in the store anyway, you might as well earn a little money. Coca-Cola has funded a company called Wonolo that does exactly that. The crowd will become part of your company in every business unit, from funding to R&D to production to delivery to storage. You ll be able to crowd-augment every single business unit on demand, flexibly, at a local level. There s More. TO LEARN MORE ABOUT THE SHARING ECONOMY, DOWNLOAD THE IN-DEPTH REPORT 6 WAYS BIG BRANDS CAN TAKE ADVANTAGE OF THE SHARING ECONOMY. Fawn Fitter is a freelance writer specializing in business and technology. The SAP Center for Business Insight is a program that supports the discovery and development of new research-based thinking to address the challenges of business and technology executives. 4 Q&A: Taking Advantage of the Sharing Economy: Mistakes to Avoid 2014 SAP SE or an SAP affiliate company. All rights reserved. NO. 98

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