As our society becomes increasingly digital, traditional business models are being disrupted, creating new business models and opportunities that previously were inconceivable.
According to Upbeat research, the app sector will be worth £31 billion to the British economy by 2025 and a recent report by IDTechEx predicts that the wearables market will be worth $70 billion (£45 billion) globally by 2024. However, these are not the only new business models emerging thanks to digital technology and the business transformation it engenders.
Ten years ago, peer-to-peer rental firms simply would not have had the power or popularity that they have now. The premise of sharing items and expertise with neighbours may not be new – indeed, black cab drivers have long shared a vehicle, swapping over for day and night time shifts – but the technology that now facilitates and formalises these exchanges certainly is.
The sharing economy as we know it today – which, according to PwC, is predicted to be worth $335bn globally and $15 billion (£9 billion) in the UK by 2025 – would not have been able to exist in a pre-digital era on the same scale.
Not so long ago, people might have strayed away from inviting strangers from the other side of the world into their homes or lending their dog to a visitor for the afternoon but online review systems have bolstered trust and digital background checks have ensured users feel safe when sharing and swapping possessions, property and skills with strangers. The rise of digital technologies like location-based GPS have also led collaborative business models to new heights, as the technology allows people to quickly make and respond to requests for goods and services. This is crucial, as convenience outweighs all else for most consumers.
As a result, not only are we seeing a wave of new start-ups emerge but traditional companies are also recognising the benefits of the sharing economy model and following suit. The likes of Hailo drew on the digital possibilities to connect licensed taxi drivers with passengers using a mobile phone app and BMW has since also launched a car sharing service. As another example, Amazon is considering a crowd-sourced delivery solution via a mobile app that encourages individuals to deliver packages and existing retailers to store them with profound implications for distribution and logistics industries.
So, in the face of stiff competition, how can companies benefit from the digital transformation and thrive in the sharing economy? In order to facilitate – and profit from – interactions between customers, companies have to truly understand their customers by listening to them and acting upon their feedback. This does not mean investing in big data for big data’s sake; it is about harnessing this data. From our buying preferences to how we like to interact with each other, from the way we move around to how we pay for things. By using this data, companies can predict future trends and adapt their business models accordingly, before customers take their business elsewhere.
People are undeniably at the heart of a sharing economy, so it is vital to understand and recognise consumer trends. Through the use of what Cognizant terms “Code Halos”, the information generated by every click, like or browse that surrounds people, organisations, and devices, companies playing a part in the sharing economy and beyond can access customer insight and use this to tailor their products and services to increase customer loyalty. This data is crucial; it is the backbone of the collaborative economy model. It underlies the capacity calculations, social media integrations and digital technology interactions that together make on-demand access to places, people and items possible.
The sharing economy is set to grow by a third this year and anyone can see how companies such as Uber and Airbnb have changed the economics of the future. However, as with all emerging and digital companies that disrupt long-established business models, there are challenges to overcome. Existing regulations need to be adhered to until they are updated eventually to reflect our digital times, existing tax systems have to be respected, again until new models are introduced, and insurance policies and licence requirements – especially relating to road safety and property protection – need and must be followed.
Despite these challenges, the sharing economy will not stand still. Given how fast the landscape is changing, many companies now have to re-architect their core business and organisational models to help them transform their businesses into digital enterprises. The opportunity lies in the innovative use of data, giving the companies at the forefront of the sharing economy the power to develop beyond their original business models and transform into completely new entities. Airbnb is no longer a short-term room letting service, but a lifestyle brand that is hinting at moving into the restaurant and automotive industries. Uber is set to expand into the logistics and delivery market through Uber Rush, a parcel delivery service being piloted in Manhattan, New York.
In applying Code Halo thinking, these companies have gone from little known start-ups to global disruptors. They recognised the opportunities that digital transformation had to offer early on and have built and monetized ode Halos to create strong brands and innovative and compelling business models which have led to their meteoric rise.
There will continue to be teething problems but innovation moves fast, thanks to the digital opportunities available.
Whatever you choose to call it – sharing economy, collaborative economy, or the peer economy – nobody can deny its significance in the market today. Just ask the 15,000 Uber taxi drivers in London and the 150 million people who expect to pool property or possessions in the next year.
Euan Davis, European Head, Center for the Future of Work, Cognizant