Sustainability through Collaboration: New Consumption Models in the Collaborative Economy

Leadership in Sustainability Management Capstone Project

Presented by :

Alix Omori

Objectives

To align on a standardized definition of the collaborative economy and differentiate it from related models

To identify successful value propositions and review key business models in the collaborative economy

To envision how the collaborative economy can advance more sustainable consumption

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Sustainability through Collaboration: New Consumption Models in the Collaborative Economy  

Introduction

Define the collaborative economy and understand its significance in today’s society

History & Background

Examine existing thought leadership and historical context of the collaborative economy

Terminology & Taxonomy

Differentiate the collaborative economy from related concepts and review key business models

Challenges & Critiques

Confront the legality of ‘sharing’ and negotiate its place in a traditional capitalist society

Next Steps

Identify how the collaborative economy can cultivate sustainable consumption habits

Agenda Sustainability through Collaboration: New Consumption Models in the Collaborative Economy

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INTRODUCTION

The projected worth of the collaborative economy is

$26.2B in 2014

An economy built on distributed networks of

connected individuals and communities, as opposed

to centralized institutions, transforming how we can

produce, consume, finance, and learn. ”

Sources: 1 Rachel Botsman, “The Sharing Economy Lacks a Shared Definition: Giving Meaning to the Terms,” Collaborative Labs, 2013. 2 Rachel Botsman and Roo Rogers, What’s Mine Is Yours: The Rise of Collaborative Consumption. New York: HarperCollins, 2010.

“

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1

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What is the collaborative economy?

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Why does the collaborative economy matter?

6 Source: “The Power of Collaboration,” Visual.ly, December 2013.

Video: http://youtu.be/0qWdmZnXpN0

HISTORY & BACKGROUND

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The collaborative economy is a cross-disciplinary movement rooted in socioeconomics

2008

Smith’s ‘invisible hand’

Marx’s commodity fetishism

Veblen’s conspicuous consumption

Hardin’s ‘tragedy of the commons’

Sources: 1 Andrew Smith and Ruth Potts, The New Materialism. London: Bread, Print, and Roses, 2012. 2 “Towards the Circular Economy: Volume 1: Economic and Business Rationale for an Accelerated Transition,” Ellen MacArthur Foundation, 2013.

1776 1867

1899 1968

McDonough & Braungart’s Cradle to Cradle™ framework

2002

Collaborative consumption in TIME’s ’10 ideas that will

change the world’

2011

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Converging social, economic, and technological trends have accelerated this new economy

Source: Jeremiah Owyang, “The Collaborative Economy,” Altimeter Group, 2013.

•  Increased urbanization & population density

•  Voluntary simplicity & sustainability

•  Desire for community

•  Generational altruism

•  Monetize excess or idle goods

•  Increase financial stability

•  Access over ownership

•  Influx of VC funding ($2B to date)

•  Social networks & constant connection

•  Mobile devices & platforms

•  New payment systems

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There are 3 main systems for consumption within the collaborative economy

All of these systems require an element of trust in order to facilitate successful transactions

Source: Rachel Botsman, “The Case for Collaborative Consumption.” Presentation at TEDxSydney, Sydney, Australia, May 2010.

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Market relationships have shifted due to new channels and technologies:

Source: Jeremiah Owyang, “The Collaborative Economy,” Altimeter Group, 2013.

These systems empower customers by allowing them to transact directly with one another

Companies speak ‘at’ consumers via online corporate presence

Consumers share content & opinions,

requiring brands to listen and speak ‘with’

consumers

Consumers empowered to share goods &

services; power shifts to the

consumer

Traditional Capitalist Economy New Collaborative Economy

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Manufacturer as Producer Consumer as Producer

Bank as Lender Consumer as Lender

Retailer as Seller & Distributor Consumer as Seller & Distributor

Retailer as Service Provider Consumer as Service Provider

This consumer-centric economy threatens to make traditional market players obsolete

TERMINOLOGY & TAXONOMY

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It is important to differentiate the collaborative economy from several related concepts

Source: Rachel Botsman, “The Sharing Economy Lacks a Shared Definition: Giving Meaning to the Terms,” Collaborative Labs, 2013.

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For example, peer-to-peer sharing is one type of collaborative consumption within this economy

These concepts share common values & drivers, including:

•  Distributed power: Power shifts from centralized institutions to networks of consumers

•  Optimal asset utilization: Social & mobile technologies allow consumers to unlock idle resources

•  Efficient supply & demand: System built on peer trust matches ‘haves’ & ‘wants’

Source: Rachel Botsman, “The Sharing Economy Lacks a Shared Definition: Giving Meaning to the Terms,” Collaborative Labs, 2013.

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Others argue this movement must be segregated into different types of collaborative economies

Source: “The Sharing Economy: Where We Go from Here,” Leo Burnett Company, Inc., 2014. n = 4,404

Collaborative businesses can be categorized based on their products and value proposition

Sources: Jeremiah Owyang, “Collaborative Economy Honeycomb, Version 1.0,” Crowd Companies, 2014. Rachel Botsman, “Purpose with Profits: Collaborative Consumption Business Models,” Nesta, 2012.

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< Maker movement >

Types of collaborative business models:

•  Service fee

•  Freemium

•  Tiered subscription plans

•  On-sale

•  White label

•  Flat membership

•  Membership plus usage

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Collaborative consumers can be segmented based on their stage of adoption

Source: “Sharing is The New Buying: How to Win in The Collaborative Economy,” Vision Critical and Crowd Companies, 2014.

n = 90,112

Not yet engaged in the collaborative economy; however, many intend to try these services in the next 12 months, making them a key target audience for collaborative businesses

Buy and/or sell preowned goods online using well-established collaborative services like eBay or Craigslist, but have not used any emergent ‘neo-sharing’ services like Etsy or Uber

Already using the latest generation of collaborative services like Airbnb, TaskRabbit, or Kickstarter

61%

16%

23%

In the US, there are roughly 80MM consumers engaged in collaborative consumption

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Alternatively, consumers can be segmented based on their reasons for collaborating

Source: “The Sharing Economy: Where We Go from Here,” Leo Burnett Company, Inc., 2014. n = 4,404

CHALLENGES & CRITIQUES

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For some consumers, barriers to collaboration frequently outweigh the benefits of sharing

Source: “The Sharing Economy: Where We Go from Here,” Leo Burnett Company, Inc., 2014. n = 4,404

•  Americans’ primary reason to engage in collaboration is decidedly altruistic (53% agree ‘helping the needy’ is a top motive)

»  Other motives are collective (sustainability) or personal (convenience)

•  There is no consensus on barriers to collaboration, but top reasons include:

•  Risks of scams, privacy, and safety

•  Pro-consumption attitude & benefits of ownership

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Critics claim ‘sharing’ is just a new form of privileged commoditization

Sources: Susie Cagle, “The Case against Sharing,” Medium, 2014. “Sharing is The New Buying: How to Win in The Collaborative Economy,” Vision Critical and Crowd Companies, 2014.

•  Collaborative consumption touts access over ownership, but how is this different than renting?

»  ‘Sharing’ as ‘enlightened capitalism’

•  Sharing is not new, and has been practiced out of necessity for ages

•  Collaborative businesses don’t create trust, they reinforce homogeneity & privilege

»  Participation requires access to expensive new technologies

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Some feel lack of legal protection is at odds with ‘for the people’ ethos

Sources: Susie Cagle, “The Case against Sharing,” Medium, 2014. Andy Kessler, “Brian Chesky: The Sharing Economy and Its Enemies,” The Wall Street Journal, 2014.

•  In the collaborative economy, individual consumers act as businesses

•  Currently few regulations covering issues such as:

•  Lack of consumer protection as barrier to entry

•  Peer reviews ≠ legal protection

»  Contradictory to consumer-centric ideals

•  To be accepted as mainstream, the collaborative economy needs its own laws

»  Traditional laws not easily enforceable on collaborative businesses

»  Ownership

»  Consumer protection

»  Taxation

»  Insurance

»  Liability

»  Zoning

»  Licenses & permits

»  Workers’ rights

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Tensions also stem from differing values between ‘old’ and ‘new’ powers

Source: Jeremy Heimens and Henry Timms, “Understanding ‘New Power’,” Harvard Business Review, December 2014.

Old power: limited, inaccessible, leader-driven, transactional in nature

New power: participatory, distributed, peer-driven,

beyond passive consumption

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The intersection of new and old models and values demonstrate opportunity for change

Source: Jeremy Heimens and Henry Timms, “Understanding ‘New Power’,” Harvard Business Review, December 2014.

NEXT STEPS

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Most Americans recognize the need for a major change in consumption habits…

Source: “Analysis Report: New American Dream Survey 2014,” The Center for a New American Dream, 2014.

n = 1,812

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…and many see collaboration as a potential solution to the environmental crisis

Source: “Analysis Report: New American Dream Survey 2014,” The Center for a New American Dream, 2014.

n = 1,812

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The answer is smarter consumption, not just less, to support the economy and the planet

Source: “The New Consumer and The Sharing Economy,” Havas Worldwide Prosumer Report, Volume 18, 2014.

n = 10,574

•  Americans still see consumption as necessary ‘patriotic duty’

•  By consuming smarter, we can replace guilt with purpose via: »  Mindful purchase decisions—local makers, products with a story

»  Consuming only what’s needed—quality over quantity

»  Obtaining full product value—extending product lifecycle, sharing/reusing

Businesses can respond to consumer needs by solving key problems of traditional consumption

Source: Rachel Botsman, “Sharing’s Not Just for Start-Ups,” Harvard Business Review, September 2014. 30

Role Action Brand

Guarantor Facilitate peer-to-peer transactions

Sustainability partner Foster sustainable consumption

Proponent of reuse Create secondary markets

‘Lending library’ Offer access, not just ownership

Connector Cultivate relationships

Curator Provide ‘thrill of the hunt’ experience

Employer & partner Develop new consumer relationships

Maker champion Act as intermediary for artisans 31

Brands must adapt to a less transactional retail model where companies play more passive roles

Source: “The New Consumer and The Sharing Economy,” Havas Worldwide Prosumer Report, Volume 18, 2014. n = 10,574

+  

+  

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Services and less tangible assets remain prime opportunities for market entry

Source: “The New Sharing Economy,” Latitude in Collaboration with Sharable Magazine, 2013.

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Economists predict the value of the collaborative economy will jump to $110B in the next 12 months

Source: “The Sharing Economy: Where We Go from Here,” Leo Burnett Company, Inc., 2014.

QUESTIONS?

APPENDIX

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Convenience and price trump sustainability as motivators for collaborative consumption

Source: “Sharing is The New Buying: How to Win in The Collaborative Economy,” Vision Critical and Crowd Companies, 2014.

Top reasons to engage with collaborative business:

n = 90,112