Jeremiah Owyang, Founder of Crowd Companies, is one of the biggest authorities on how disruptive Web technologies—such as social media, the collaborative economy, and interactive marketing—impact the relevance of corporations to customers today and in the future. nexxworks Partner Peter Hinssen interviewed him about how more traditional companies can tap the collaborative economy, maker movement, and customer collaboration and use it to their advantage.
Hinssen: I saw a very powerful statement in one of your presentations: “What role do corporations play if people don’t need them?”. Can you elaborate?
Owyang: Through what we call the collaborative economy, the crowd is competing directly with corporations. Airbnb, for instance, has caught up with the largest hotel companies in size, with its available rooms having evolved from roughly 300,000 to about one million over the past year. Uber seeks to remove 400,000 cars off the European roads. BlaBlaCar, a long distance ridesharing app in Europe has now more travellers than Eurostar, the multi-national rail system that cost trillions of Euros. Why is this happening? These services are more efficient, defray the costs to the crowd, and access idle supply of cars, homes, time and money, using commonly available apps, and mobile devices. In an increasing number of industries, people are simply replacing corporations. They do no longer need them. This is obviously going to impact their business models and their margins.
Hinssen: The concept of competition has been completely overturned. It does not only come from similar companies, but from customers and newcomers from completely different industries. How can companies fight this?
Owyang: Corporations just realized that the people formerly known as their customers –are now their competitors. Former hotel guests, are now Airbnb guests. Former car buyers are now utilizing ride sharing at scale. Former customers are competing against traditional consulting firms via online marketplaces like oDesk, Crowdspring, and Taskrabbit.
Corporations have one of two choices: One, fight the crowd, with regulation, or bombastic marketing, or two: collaborate with this new category of crowd-based start-ups and wield new business models.
Hinssen: How can organisations use the sharing or collaborative economy trend to attract more customers and stay relevant?
Owyang: There are 5 essential dynamics from the sharing economy which will greatly impact corporations. First of all, people are empowered to get what they need from each other. The sharing economy capacitates them to get products from each other – without having to buy new ones from traditional retail or wholesale sources. Whether they’re sharing cars, homes, or money, they’re depending on each other to get information. Further, they’re making their own goods and products by tapping a global marketplace of individual makers. Soon, 3D printing will become a force that will catalyse this at scale. It’s not new. We saw this ten years ago with social media – people were bypassing corporate communications, marketing, and customer care to obtain information from each other.
Second, the crowd is becoming like a company – bypassing inefficient corporations. Of course, this is forcing business change, as the internet tends to bypass intermediaries that don’t provide lasting, value added services. Rather than buy vehicles, people can rent or borrow cars from each other. We’re also seeing the rise of peer-to-peer lending in LendingClub (funded by Google), which has served up $2.8billion in loans in a few short years – bypassing traditional banks.
Thirdly, corporations must use these same tools and strategies to regain relevancy. Just like we did in social business, to match customers launching blogs, video, and social networking accounts, we saw corporations apply the same strategies to engage in the same channels. Taking a cue from the first phase of sharing, which we call social business, we’re already seeing over 50 corporations that have transitioned into the Collaborative Economy like GE, Ford, Intuit, Coke, Walmart, UPS, and more, with significant upward rewards.
Fourth, all of this requires business model change. No one said this is going to be easy. Significant new mind-sets and business investments will be necessary to satisfy this paradigm change. BMW now rents cars in addition to selling them. Toyota is giving away 1,000 cars for the social good. TOMS shoes now offers a marketplace selling other people’s products beyond their own. Nokia voluntarily gave up their specs to their phone cases to allow 3D printing to occur. U-Haul allowed the crowd to fund their own vehicles. We will need internal champions - whom I call catalysts - who are able to lead this change inside of big companies and turn those large gears a different direction.
Fifth, the crowd will become the company, making corporations resilient. We’ve seen the crowd become the media and the communications in the first phase of social business: Customers became the marketing and customer support departments. Just as we saw companies integrate customers into their media and communications, expect them to integrate them into their business models. Expect new models to emerge where the crowd is augmenting traditional business processes. They will co-fund, co-ideate, co-design, co-build, co-support, co-deliver, co-market and more for a growing variety of products. We’ll also see new forms of marketplaces emerge where products that customers make will be sold alongside those of big brands.
Hinssen: If large organisations use the collaborative economy to their advantage, should it be through acquisitions, partnering or by integrating it into their own business?
Owyang: Companies should approach this space with a multi-strategy approach. Currently, the majority of instances are sponsorship of start-ups (Uber partnerships with brands, are the most common), a few have approached collaborative start-ups with a partnership (GE and Quirky, or WholeFoods and Instacart), and only a few corporations have built their own service, (Barclays Card built a collaboration platform, with their customers).
Hinssen: What impact will artificial intelligence and increasingly mobile and smart robots have on the collaborative economy?
Owyang: What kills the crowd? Robots. This quick moving trend is on the horizon. I see self-driving cars here in Silicon Valley, Google is nearly an AI, and now we have “dronies”, which are group “selfies” with a drone. Uber’s CEO has already stated that driverless cars will disrupt his own contract based drivers, and we should continue to expect to see humans to be replaced and augmented for repetitive low value tasks. This is a much bigger discussion, which I’ll pursue in a few years. Right now, we’re focused on CrowdCompanies.com but we also own RoboCompanies.com –in anticipation of what lies ahead.
Hinssen : Some people believe that Uber, Taskrabbit or Airbnb are not actually part of the sharing economy as so many people claim they are. They ask the valid question ‘is it still sharing if money is involved?’.
Owyang: Many are debating the semantics of "Sharing economy vs X Economy" but in the end, it really doesn't matter. Arguing over terms and nomenclature over a new movement is healthy and normal.
In Web1.0 we debated over terms related to: click commerce, ecommerce, business, vs ebusiness, clicks vs bricks, and more. In Web 2.0 we debated terms like user generated content, citizen media, pinko marketing, business blogging, and a variety of other terms. Today, there's debate over on demand economy, sharing economy, collaborative economy, peer economy, circular economy, and more.
Each term has its weakness. For example, using the on demand economy to represent Lyft/Uber and Sidecar, isn't encompassing enough as Airbnb could be booked weeks in advance, and hotels.com and McDonalds are also on demand economy.
To me, while I use Collaborative Economy (it nicely buckets the whole movement), I'm trying to avoid the specific debate over nuances as in the end, it'll just be called "The Economy" --it'll naturally just become part of what we do. Just like that, no one says "ebusiness" or "ibusiness" when they shop on eBay, Amazon, or Google Shopping Express, they just do it.
Hinssen: There are those who claim that the sharing economy is nothing new. People have been sharing since the dawn of time. The only thing that has changed is the scale of it, because of online platforms.
Owyang: Sharing isn’t anything new, we’ve been doing this since we banded together for safety in numbers, to increase productivity, and to benefit from kinship of a community. The difference is this: in the past, these tribes and communities and sharing were only limited to your physical proximity. Recently, a Midwest insurance company told me sharing isn’t anything new, it’s just called “being a good neighbour”.
Now, with these sharing apps, we can share with folks that are not in our physical proximity, using ratings and reputations, the internet of things, we can find strangers to offer us homes, food, rides, and more. With commonly available technologies in the Collaborative Economy, we can now be good neighbours to strangers.
Hinssen: With regards to your ‘honeycomb’: which are the next industries that will be most impacted by the collaborative economy or is it already ‘attacking’ every existing sector?
Owyang: We’ve found 12 industries that are being disrupted and compiled those in the honeycomb 2 (December 2014): goods, food, services, money, healthcare, municipalities, logistics and several others. Some surprising areas we may start to see impacts are in Military, Global Shipping, Aerospace, and at the Federal level.
If you want to find out how nexxworks can help you thrive in the collaborative economy, contact firstname.lastname@example.org.