write one page summery
omar23
sharing_economy_summary_12.docxWelcome to the ‘Sharing Economy’
Published: July 20, 2013 238 Comments
· GOOGLE+
· SAVE
· SHARE
· REPRINTS
·
IT all started with air mattresses.
Josh Haner/The New York Times
Thomas L. Friedman
Readers’ Comments
Readers shared their thoughts on this article.
· Read All Comments (238) »
Brian Chesky’s parents wanted just one thing for him when he graduated from the Rhode Island School of Design — that he get a job with health insurance. He tried that for a while with a design firm in Los Angeles, but he got fed up and packed up his Honda Civic and drove up to San Francisco to crash with his pal, Joe Gebbia, who agreed to split the rental of his house with Chesky. “Unfortunately, my share came to $1,150 and I only had $1,000 in the bank, so I had a math problem — and I was unemployed,” said Chesky. But they did have an idea. The week Chesky got to town, in October 2007, San Francisco was hosting the Industrial Designers Society of America, and all the hotel rooms on the conference Web site were sold out. So Chesky and Gebbia decided, why not turn their house into a bed and breakfast for attendees?
The problem was “we had no beds,” but Gebbia did have three air mattresses. “So we inflated them and called ourselves ‘Airbed and Breakfast,’ ” Chesky, 31, recalled for me in an interview. “Three people stayed with us, and we charged them $80 a night. We also made breakfast for them and became their local guides.” In the process, they made enough money to cover the rent. More important, though, it spawned a bigger idea that has since blossomed into a multimillion-dollar company and a whole new way for people to make money. The idea was to create a global network through which anyone anywhere could rent a spare room in their home to earn cash. In homage to its roots, they called the company Airbnb, which has grown so large, so fast that it is now the equivalent of a major global hotel chain — even though, unlike Hilton, it doesn’t own a single bed. And the new trend it set off is the “sharing economy.”
I first heard Chesky describe his company two years ago and thought it was a quaint idea that would find limited traction with niche travelers. I mean, how many people in Paris really want to rent out their kid’s bedroom down the hall to a perfect stranger who comes to them via the Internet? And how many strangers want to be down the hall? Wrong. Turns out there is an innkeeper residing in all of us!
On July 12, Chesky told me, “Tonight we have 140,000 people around the world staying in Airbnb rooms. Hilton has around 600,000 rooms. We will get up to 200,000 people per night by peak this summer.” Airbnb has 23,000 rooms and homes listed in New York City alone, and 24,000 in Paris. Worldwide, “we have listings in 34,000 cities and 192 countries,” added Chesky. “We are the largest short-term rental site of its kind in China today, and we have no office there.”
Chesky then fires up his iPad and shows me on Airbnb.com the rooms and homes being offered for rent: “We have over 600 castles,” he begins. “We have dozens of yurts, caves, tepees with TVs in them, water towers, motor homes, private islands, glass houses, lighthouses, igloos with Wi-Fi; we have a home that Jim Morrison used to live in; we have treehouses — hundreds of treehouses — which are the most profitable listings on our Web site per square footage. The treehouse in Lincoln, Vt., is more valuable than the main house. We have treehouses in Vermont that have had six-month waiting lists. People plan their vacation now around treehouse availability!”
In 2011, Prince Hans-Adam II offered his entire principality of Liechtenstein for rent on Airbnb ($70,000 a night), “complete with customized street signs and temporary currency,” The Guardian reported. You can rent any number of Frank Lloyd Wright homes — and even a one-square-meter house in Berlin that goes for $13 a night.
While it sounds like Chesky is just a global rental agent with more scale, there is something much bigger going on here. Airbnb’s real innovation is not online rentals. It’s “trust.” It created a framework of trust that has made tens of thousands of people comfortable renting rooms in their homes to strangers.
To rent a yurt in Mongolia, you go to the Airbnb Web site, sign up for it and pay Airbnb by credit card. It takes 6 percent to 12 percent of the fee from the guest and 3 percent from the host. The fee is paid to the renter after the first night. Through Airbnb, guests and hosts can verify each other’s driver’s license or passport, e-mail address and phone number, and connect Facebook profiles. No one is anonymous. They work out their own exchange of keys.
Afterward, guests and hosts rate each other online, so there is a huge incentive to deliver a good experience because a series of bad reputational reviews and you’re done. Airbnb also automatically provides $1 million in insurance against damage or theft to nearly all of its hosts (some countries have restrictions) and only rarely gets claims. This framework of trust has unlocked huge value from unused bedrooms. “In the last 12 months in Paris, we’ve generated $240 million in economic activity,” Chesky said.
Airbnb has also spawned its own ecosystem — ordinary people who will now come clean your home, coordinate key exchanges, cook dinner for you and your guests, photograph rooms for rent, and through the ride-sharing business Lyft, turn their cars into taxis to drive you around. “It used to be that corporations and brands had all the trust,” added Chesky, but now a total stranger, “can be trusted like a company and provide the services of a company. And once you unlock that idea, it is so much bigger than homes. ... There is a whole generation of people that don’t want everything mass produced. They want things that are unique and personal.”
There’s more. In a world where, as I’ve argued, average is over — the skills required for any good job keep rising — a lot of people who might not be able to acquire those skills can still earn a good living now by building their own branded reputations, whether it is to rent their kids’ rooms, their cars or their power tools. “There are 80 million power drills in America that are used an average of 13 minutes,” says Chesky. “Does everyone really need their own drill?”
More than 50 percent of Airbnb hosts depend on it to pay their rent or mortgage today, Chesky added: “Ordinary people can now be micro-entrepreneurs.” Jamie Wong, co-founder of Vayable.com , a platform through which locals anywhere can become custom tour guides of their area, told me: “I moved out of my apartment in central San Francisco, rented a cheaper annex in a friend’s home, and ‘airbnb-ed’ my apartment for $200 a night and earned about $20,000 in a year. It enabled me to bootstrap my start-up. Airbnb was our first round of funding!” And just think how much better all this is for the environment — for people to be renting their spare bedrooms rather than building another Holiday Inn and another and another. ... The sharing economy — watch this space. This is powerful.
Magazine
April 2013
ARTICLE PREVIEW To read the full article, sign-in or register . HBR subscribers, click here to register for FREE access »
Using the Crowd as an Innovation Partner
by Kevin J. Boudreau and Karim R. Lakhani
· Comments (10)
· |
|||||||||||||
· |
· |
· |
· |
·
RELATED
ALSO AVAILABLE
· Buy PDF
Photography: Michele Sereni
Artwork: Jacob Hashimoto, The Other Sun, 2012, acrylic, paper, thread, bamboo, Ronchini Gallery, London
To answer the most vexing innovation and research questions, crowds are becoming the partner of choice. Apple has turned to large numbers of users and developers distributed around the world to propel its growth by creating apps and podcasts that enhance its products. Biologists at the University of Washington used crowds of external contributors to map the structure of an AIDS-related virus that had stumped academic and industry experts for more than 15 years. Despite a growing list of success stories, only a few companies use crowds effectively—or much at all.
Managers remain understandably cautious. Pushing problems out to a vast group of strangers seems risky and even unnatural, particularly to organizations built on internal innovation. How, for example, can a company protect its intellectual property? Isn’t integrating a crowdsourced solution into corporate operations an administrative nightmare? What about the costs? And how can you be sure you’ll get an appropriate solution?
These concerns are all reasonable, but excluding crowdsourcing from the corporate innovation tool kit means losing an opportunity. The main reason companies resist crowds is that managers don’t clearly understand what kinds of problems a crowd really can handle better and how to manage the process. Over the past decade we’ve studied dozens of company interactions with crowds on innovation projects, in areas as diverse as genomics, engineering, operations research, predictive analytics, enterprise software development, video games, mobile apps, and marketing. On the basis of that work, the supporting body of economic theory, and rigorous empirical testing, we’ve identified when crowds tend to outperform the internal organization and, equally important, when they don’t. In this article we offer guidance on choosing the best form of crowdsourcing for a given situation. We also review how technology is helping managers address these concerns. Crowds are moving into the mainstream; even if you don’t take advantage of them, your competitors surely will.
Beyond “Make or Buy”
Let’s start by noting the fundamental differences between crowd-powered problem solving and traditional organizational models. Companies are relatively well-coordinated environments for amassing and marshaling specialized knowledge to address problems and innovation opportunities. In contrast, a well-functioning crowd is loose and decentralized. It exposes a problem to widely diverse individuals with varied skills, experience, and perspectives. And it can operate at a scale that exceeds even that of the biggest and most complex global corporation, bringing in many more individuals to focus on a given challenge.
In certain situations, that means we can solve problems more efficiently. For example, we worked with the Harvard Clinical and Translational Science Center (known as Harvard Catalyst) to design a contest to solve a tough computational biology problem that had immediate research and commercial implications. To provide a platform for the contest, we enlisted TopCoder, a company that administers computer programming competitions. The two-week contest attracted viable solutions from 122 solvers—a staggering number. Many of the solutions surpassed the quality of those developed over the years by the school’s own scientists and by experts at the National Institutes of Health.
In addition to benefits of scale and diversity, crowds offer incentives that companies find difficult to match. Companies operate on traditional incentives—namely, salary and bonuses—and employees are assigned clearly delineated roles and specific responsibilities, which discourages them from seeking challenges outside their purview. But crowds, research shows, are energized by intrinsic motivations—such as the desire to learn—that are more likely to come into play when people decide for themselves what problems to attack. (Can you imagine any company paying a salary to an employee who’s just floating around looking for a problem to solve?) The opportunity to burnish one’s reputation among a large community of peers is another strong motivator (as is money, to be sure). Also, crowds are often more cost-effective per output or per worker than traditional company solutions.
So although internal, crowdlike approaches to creativity and idea generation, such as “jams,” “idea marketplaces,” and “personal entrepreneurial projects,” may increase the scope for exploration and flexibility inside companies, they are qualitatively different from and fall short of the full capability of external crowds. At the same time, it should be said that the benefits of the crowd do nothing on their own to offset the management worries mentioned above. We will describe the safeguards and other mechanisms that address those worries.
Crowdsourcing as a way to deal with innovation problems has existed in one form or another for centuries. Communities of innovators have helped kick-start entire industries, including aviation and personal computing. The difference today lies in technology. Over the past decade tools for development, design, and collaboration have been radically transformed; they’re getting more powerful and easier to use all the time, even as their prices plummet. At least as important, online crowdsourcing platforms have become much more sophisticated, making it ever simpler to manage, support, and mediate among distributed workers. Companies can reinvigorate (with incentive systems, for example) and redeploy crowds across a continual stream of problems. In essence, the crowd has become a fixed institution available on demand.
From Zipcar to the Sharing Economy
by Arun Sundararajan | 11:43 AM January 3, 2013
· |
· |
· |
· |
· |
·
Avis has taken an interesting (and bold) step by acquiring Zipcar, absorbing an innovative but struggling competitor at what is likely to be seen as a bargain price while acquiring a small but desirable customer base and gaining a foothold in the rapidly growing world of collaborative consumption.
Sadly, the Zipcar culture may not survive the merger. But in the world of new “sharing economy” models that generate efficiency gains, theirs is just the tip of the iceberg. True, they pioneered the creative use of technology to open up flexible new ways of renting a car. However, although their members can rent the (more urbane and green) Zipcar fleet by the hour and pick up their vehicle at a local parking space using a smartphone app, this is still a dedicated fleet, still inventory that the company has to acquire, manage and monetize. Under the hood, the business model is fundamentally not very different from that of a traditional rental car company.
Contrast Zipcar with RelayRides and GetAround, both genuine peer-to-peer car rental marketplaces which tap into the existing (and massive) installed base of cars that people already own. These marketplaces don’t need to carry inventory. Their business model advantages are clear — the “fleet” renews itself naturally, there are no parking or logistics issues, geographic expansion and scaling is more seamless. Reputation systems and active supplier screening maintain quality, and the need for insurance keeps customers from bypassing the marketplaces.
Relayrides and Getaround are just two of a host of companies — Airbnb, Lyft, Sidecar, carpooling.com, Snapgoods, and TaskRabbit, to name a few — that are dramatically expanding the set of industries susceptible to transformation by information technology, taking its impact well beyond familiar (content) industries like music, movies, and books.
Furthermore, these “peer economy” marketplaces transcend the simple trade conducted on eBay, and are instead inventing an entirely new asset-light supply paradigm. They enable the disaggregation of physical assets in space and in time, creating digital platforms that make these disaggregated components — a few days in an apartment, an hour using a Roomba, a seat in your drive from Berlin to Hamburg — amenable to pricing, matching, and exchange.
Accompanying these peer economy companies are others (like Zipcar) which simply leverage technology and lower transaction costs to make flexible renting a viable alternative to asset acquisition. (One of my favorite classroom examples is GirlMeetsDress.) Collectively, they’re spawning a range of efficient new “as-a-service” business models in industries as diverse as accommodation, transportation, household appliances, and high-end clothing.
This “reengineering” of consumption is a natural consequence of the ongoing consumerization of digital technologies. Think back to the 1990s, a decade after corporate PCs and client-server became commonplace. Led by the writings of Michael Hammer and Tom Davenport, firms realized that they didn’t need to organize work the way they used to. Instead, they could leverage new information technologies to reengineer, reorganize and radically streamline their production and service delivery. Although Hammer’s mantra of “Don’t automate, obliterate” may have induced process redesign overkill for a while, an important lesson emerged: The returns from digital technologies are amplified dramatically when they are used as enablers for the fundamental reinvention of old processes and models (rather than to speed up existing ways of doing things, or simply for conducting entirely new activities).
Today, a decade after the launch of the iPod, consumers are starting to reach the same realization. Our mobile devices are powerful computers connected to high-speed networks. The digitization of social brings real-world trust and social capital online. We are comfortable with the notion of commercial transactions mediated by computers or smartphones, and we’ve had over ten years of experience with the idea of semi-anonymous peer-to-peer exchange.
So the reengineered consumption models of the sharing economy are now well poised to go mass-market, and the battle cries of Hammer and Davenport won’t be necessary this time around. While the marketplaces that facilitate sharing and peer exchange do begin at the fringes, they will spread organically among consumers as their value proposition becomes apparent. If you don’t need to own the assets you use, not only do you spend smarter, but your product variety and quality options expand quite dramatically.
In 2013, corporate America will need to pay very close attention to this new paradigm. The terms “collaborative consumption” and “sharing economy” might seem more reminiscent of flower power than of Gordon Gekko, but the business threats they embody are very real. For companies in a growing number of industries, it’s no longer sufficient if you leverage digital technologies to rationalize and optimize your internal production. If your business relies on a model of consumption that is inefficient for your consumers, chances are that there’s already a new sharing economy marketplace that is looking to streamline it for them.
More blog posts by Arun Sundararajan
More on: Customers, Internet, Strategy
