Wednesday, June 19, 2013

The Many Forms of Transaction in the Collaborative Economy

The Many Forms of Transaction in the Collaborative Economy:
Screen Shot 2013-06-19 at 5.50.39 AM

Above New Image: An advanced view of the Collaborative Economy Value Chain in an ‘exploded’ view. This exclusive image, which was not included in the seminal report on the Collaborative Economy, shows a potential new business model that taps into new transactions beyond traditional selling. In the final phase of “provide a platform” the crowd is building new products.

[The Collaborative Economy is an economic model where ownership and access are shared between corporations, startups, and people]

First, it’s key to read the full report, and watch the 18 minute video of the highlights of the research report the Collaborative Economy. It defines the movement, gives examples of disruption with numbers, indicates the three market forces that are causing this trend, then provides solutions to corporations who must adopt the value chain. Once you’ve done this, we can explore the advanced model (above) which indicates a hypothetical model that we found in the market where new forms of transaction emerge, and the end state where the crowd starts to design and build the company products.

[For corporations that adopt the Collaborative Economy Value Chain, this results in market efficiencies that bear new products, services, and business growth]

Exploring the above graphic the Collaborative Economy Value Chain (exploded view).

Starting at the top at the products and moving clockwise, let’s explore the three major use cases of the Collaborative Economy for corporations.  In each phase, we require a shift as products become services, services become marketplaces, and lastly, marketplaces build products.  We name each of these phases, and then i give real world examples of this starting to happen.  In the below table, we give further definition to the transaction types at each phase.
  • In Company as a Service products become services. In this advanced model, companies move beyond traditional selling, and shift their products to services, which we call “Company as a service”. To date, both BMW and Toyota are renting their cars off their dealership lots in SF to contend with the growing car sharing trend.   For those familiar with Netflix or Salesforce these business models aren’t new, and are often an entry point for corporations.
  • In Motivate a Marketplace services become a marketplace. Secondly, companies will shift their services to a marketplace, called “Motivate a Marketplace” which taps into peer to peer markets that are already trading goods and services around a company. The difference here is, that corporations must enable this marketplace –rather than stand aside and be disrupted. One notable example today is Patagonia, who partnered with eBay to encourage customers to buy used goods –rather than buy new.
  • In Provide a Platform, marketplaces build your products The last phase, where marketplaces shift to to products means corporations allow the crowd to collaborative on core business functions such as design, funding, marketing, development, production, delivery, marketing, sales and more. We’re already seeing these examples emerge in pieces (Kickstarter for funding, Etsy for production, and Quirkly for development, Deliv for delivery) and see open market opportunities for brands to wholesale jump in.
Transactions in the Collaborative Economy

Now that we’ve identified the phases in the Collaborative Economy Value Chain, we can now explore the many transaction types that have emerged in the industry. I’m thankful in particular to Neal Gorenflo the founder of Shareable Magazine (the premiere media site in this space) who spent a few sunny afternoons with me to map out the transaction types during my research process. The below table was also featured in the appendix of the report.
Model Description Example Ecosystem Impacts
Sell Not new — but more and more individuals are empowered to provide goods and services directly to consumers online. Crafters sell their wares on Etsy; virtual workers get hired on oDesk and Elance. Traditional selling as we know it has morphed as disintermediation has occurred.
Resell For payment, a seller offers used goods for purchase. Craigslist and eBay are household names, but Apple’s refurbished products also count. Most non-consumable goods
Rent For payment, a provider offers a product for use. RelayRides enables consumers to rent cars from anyone. Rent-a-Toy allows parents to rent toys for their children. High-cost or low-usage goods
Subscribe For a recurring payment, a provider offers repeat products or services. Zipcar offers a month-to-month subscription plan with tiered pricing. Renewable goods, goods that require seasonal storage, repeat services
Co-Own/Co-Op Two or more own or share a product or service together. Applies to individual and business. Sharing babysitting services on Sitting Around. High-cost or low-usage items
Invest/Loan Consumers become investors or banks, or invest in or lend directly to each other. Kickstarter enables the crowd to fund and help products to market. Lending Club, Zopa, FundingCircle, and Prosper facilitate peer-to-peer lending. Financing at reduced rates
Swap For no payment or a nominal fee, two parties trade goods or services directly. 99dresses allows women to trade fashion. HomeExchange facilitates home swaps. All goods and many services fit into this category.
Lend For no payment or a nominal fee, a provider offers a product that will be returned. NeighborGoods facilitates loaning of household items, and more. Most non-consumable goods
Gift/Donate For no payment or a nominal fee, a “gifter” provides a product or service to a receiver. Reciprocation may be a requirement. Freecycle facilitates gifting of goods. GiftFlow’s mantra says it all: “Give what you can. Ask for what you need. Pay it forward.” Most non-consumable goods
Counterintuitive: Let go of your company to gain the market.

This macro view of how a corporations business model must change beyond traditional selling may be foreign to durable goods, CPG, retailers and more. But when you look closely, large tech companies like IBM, Cisco, Microsoft, Salesforce and others are already activating most of these use cases. We expect that the savvy company will do one of these major use cases, but the superior corporation will activate all of these use cases, to tap into their marketplace and glean new market transactions that are happening without them. We looked closely and found that on average, the sharing startups like Kickstarter or Uber are taking around 20% transaction fee, and we believe corporations can glean 20% cut from transactions they’re currently absent in. Without a doubt the biggest challenge is the mindset of letting go, the only way for business leaders to advance to this phase is to let go of your company to get gain the market.
More: Read all my posts tagged the Collaborative Economy for additional information.