Point: The collaborative economy enables new business models (and disrupts old ones).

Story: The collaborative economy is growing as individuals find new ways to connect directly with their peers to share or rent their assets and skills. The collaborative economy includes sharing assets like spare rooms (Airbnb) and cars (RelayCars) or consumable goods (CampusBookRentals, Toyswap) or services (TaskRabbit, oDesk).

The peer-to-peer rental market alone is worth $26 billion, according to Rachel Botsman, and that doesn’t include peer-to-peer-lending or crowdfunding, which is predicted to reach $5 billion this year.  Altimeter Group’s sample of 200 collaborative-economy startups revealed that one-third had received VC funding, amounting to $2 billion overall and an average of $29 million per company.

Consumers are sharing and collaborating with each other as new platforms make search easier and verification more secure.  The collaborative economy is expanding rapidly because it:

• appeals to consumers who want to make money from their unused assets (RelayRides avg $715/mo)
• appeals to companies who want to rent out extra office or warehouse space or equipment
• appeals to individuals who want to earn extra income running errands or doing one-off tasks
• appeals to individuals and companies who want to rent assets at a lower-cost or on a short-term basis
• is good for the planet: renting a car when you need it means fewer cars need to be built. Patagonia is partnering with eBay to encourage re-sale of its used clothing rather than have it go to the landfill.

Some collaborative-economy startups are partnering with existing players. For example, Deliv partners with retailers who want to offer same-day delivery to customers.  Big companies, seeing potential disruption as well as opportunity, are entering the market as well. BMW is offering rentals from its dealership in San Francisco, and GM invested in RelayRides, which connects car owners who want to rent their cars with consumers who want to rent them by the hour, day or month.  GM gave RelayRides access to GM’s OnStar Navigation System, which is installed in 6 million American cars. Anyone who has an OnStar-equipped car and wants to rent it out can sign up on the site and then use the OnStar app to let the approved renter unlock the car via the app rather than handing over the keys.

Action:

• Explore new business models enabled by the collaborative economy. Altimeter’s Jeremiah Owyang and Chris Silva offer three models: Company-as-a-Service, Motivating a Marketplace, or Providing a Platform. Or, use Alex Osterwalder’s Business Model Canvas to think through changes in the nine elements that make up a business model.
• If you’re an established company, think about ways you could be disrupted, and consider jumping in or planning a counter-move.
• If you’re a startup, consider providing a platform that connects and verifies the parties involved. Be aware of legislation and incumbents who may seek to legal action (bus companies blocking ride-sharing services like Ridester.com) or running afoul of licensure or insurance laws.
• And whether you are an individual or a company, think about the under-utilized assets that you have sitting around.  Perhaps there’s a way to monetize them.

Sources:

The Sharing Economy, Economist March 9, 2013

Rachel Botsman, What’s Mine Is Yours: The Rise of Collaborative Consumption

Ontario bus-companies trying to shut down competition from ride-sharing groups

Crowdfunding tries to grow up – May. 6, 2013 – CNN Money

Jeremiah Owyang

Chris Silva

Point: While many people wring their hands over seemingly insurmountable problems, entrepreneurs roll up their sleeves and work on solutions.

Story: Peter Diamandis, founder of the X PRIZE Foundation and Zero Gravity Corp., is particularly optimistic. Seeing what small teams can accomplish with today’s technologies, he sees limitless opportunities. “A Maasai tribesman in Kenya today has better mobile communications than President Reagan had 25 years ago. If they’re on a smartphone, they have access to more information than President Clinton did 15 years ago,” he says.

These achievements don’t get as much attention as bad news, because our brains are wired to hone in on anything that could threaten our survival. But above the din of disasters and terrorist attacks are the facts that more people have been lifted out of poverty in the last 50 years than the previous 500. The cost of food is 1/13th what it was in 1870. Even those living below the poverty line in many countries today have access to a telephone, toilet, television, air-conditioning and a car — things that Andrew Carnegie or John D. Rockefeller couldn’t have dreamed of a century ago.

Moore’s law — the doubling of computing power for the same price every 12-24 months — is now showing up in other areas that are linked to computing power, including sensors, 3D printing and biotechnology.  For example, 3D printers that cost $500,000 can now be bought for $1300, making them accessible to small companies and entrepreneurs.

Lower costs like that make it possible to offer much-needed but low-cost products to the “bottom billion” people in the lower rungs of the economic pyramid. For example, an estimated 1.1 billion people lack access to clean drinking water. But four billion of them are spending 30 cents a day for water, which makes clean water a $400 billion a year market, as inventor Dean Kamen points out. Kamen is in trials with a new water purifier that can turn any water (even polluted water, seawater or latrine water) into pure drinking water for less than .02 cents a liter).

Such innovations by entrepreneurs can solve the world’s biggest challenges.

“That’s my source of optimism. That and a realization I made early on that if there’s a problem, I’m going to solve it. Once you see the world that way, it’s a different place,” Diamandis said.

Action:

• Look at negative events as potential opportunities to create new products or services to prevent or mitigate the negative.
• Look past the sensationalized “bad news” to see the less-publicized march of positive trends in human development that create or expand markets for products and services.
• Consider how to leverage the rising spread of modern infrastructure (communications, utilities, and logistics) to access more suppliers, partners, and customers.

Sources and more information:

Peter Diamandis at the Innovation Summit at the Shell Technology Center Houston, January 9, 2013

Peter Diamandis’ book, Abundance: Why the Future Will Be Much Better Than You Think

Ted Greenwald, “X Prize Founder Peter Diamandis Has His Eyes on the Future,” Wired

Point: Get quick wins by encouraging small experiments throughout the organization. They’re fast, inexpensive, and reduce the fear of failure.

Story: One of the biggest obstacles to innovation is fear of failure. Rarely do people want to bet their careers or companies on what might — or might not — be the next big thing.  But fear of failure becomes a self-imposed obstacle to success.

As Amazon’s CEO Jeff Bezos says, “Innovation is part and parcel with going down blind alleys. You can’t have one without the other. But every once in a while, you go down an alley and it opens up into this huge, broad avenue. And that’s so satisfying and, from a shareholder’s point of view, so successful, that it makes going down blind alleys worthwhile.”

The key twist isn’t to avoid failure but to avoid high costs from failure.  To reduce those costs, institute and encourage ongoing little experiments throughout your company.  For example, Google does this by testing more than 5000 software changes a year. Amazon does it by continuous A/B testing.  And CEO Scott Cook made experiments common practice at Intuit. In Cook’s experience, 89% of experiments don’t lead to a breakthrough or even to an improvement, but that doesn’t make them a “failure” — the experiments simply provide data on what doesn’t work.

These little bets cost little in terms of time and money. They don’t require weeks of planning; rather, they’re tweaks to an idea that can lead to eventual, substantive breakthroughs.  Ever hear of a company called Odeo? Most people haven’t, because Odeo was a small podcasting company of little distinction until its CEO, Evan Williams, gave employee Jack Dorsey two weeks to develop his idea of a short messaging system. That quick prototype developed into Twitter.

Action

• Don’t use uncertainty of success as a filter — the more you don’t know about your chances, the more you can learn by trying.
• Do consider how you might inexpensively look down a possible avenue to see where it leads.  You might use a A/B testing, co-innovation with a lead customer, or a quick minimum-viable prototype.
• Test fast, test often, but pay attention to the results, especially if the unexpected happens.
• Learn what you can from any failures — not just that the idea failed, but why it failed and what it says about your customers, your markets, or your business environment.
• Use each test of a new avenue to scout for other avenues. Even a blind alley can have a side-passage that leads somewhere wondrous.

For more information:

Dave Gray, The Connected Company

Bloomberg BusinessWeek, “Jeff Bezos: ‘Blind-Alley’ Explorer.”

Peter Sims, Little Bets and “What are Little Bets?“