Changing Consumption Models : The Sharing Economy

Changing Consumption Models : The Sharing Economy

The Baader-Meinhof Phenomenon, have you heard of it? I am sure you will again shortly. It is that strange coincidental thing that occurs when you hear something semi-obscure for the first time and then seem to repeatedly hear about. My latest instance of B-M really went to the heart of what I love about technology, and how through enablement it creates or transforms companies, verticals or in this case an economy.

I was recently at a Cisco Partner Advisory Board in Valencia (unfortunately not as glamorous as it sounds, rain seems to follow me around). A fellow delegate recommended a website called Airbnb (www.airbnb.co.uk). It provides ” a trusted community marketplace for people to list, discover, and book unique accommodations around the world – online or from a mobile phone”. Basically, people with spare rooms can hire them out via the website and be matched with people looking for a room. A great use of technology. Enabling a market that would not have been commercially or practical without it due to trust issues and transaction costs. It is connecting local supply to demand for B&B services at low cost via a familiar, trusted website.

When I arrived home from my trip to the usual pile of junk mail, one item caught my eye. It was from a company called “One Fine Stay” and it introduced to me the concept of an unhotel. You may have heard of it. This concept is based on staying at someone’s “fine” place while they are out of town. Isn’t it funny how that happens I thought. A very similar concept and application.

It got me thinking, is there some new technology enabled craze here that I am missing out on? It then all crystallised when I was later listening to an Economist podcast entitled ‘The sharing economy’. It argued that a new economy seemed to have been born around 2008 which was moving out of startup and starting to attract some corporate attention. The reasons seemed to revolve around the financial crisis (and the pressure that had put on people), the advancements in technology, and the evolution of technology application. Bang! A light went on – new consumption model.

I am sure you are all familiar with the tremendous impact new or changing consumption models can have on companies, industries or even economies. It is not an entirely new phenomenon, but seems a current term of favour. I am sure some of the more experienced readers will remember VHS vs Betamax. For the more youthful reader, it was similar to Blue Ray Vs DVDHD, for the annoyingly young it is similar to Facebook Vs MySpace.

No sooner had we decided on buying VHS for our VCRs (consumption model 1) did Video Rental stores spring up, offering rental videos through a membership process (consumption model 2). Technology ever advancing, then served us up the delight of DVDs and everyone upgraded (besides my Nan who still watches VHS). The benefits were obvious. Then some bright spark (Lovefilm) realised they could start to post DVDs as they conveniently fitted through the letterbox. No more visits to a store and speaking to real people. I could happily order the latest films through a website without moving from my sofa (consumption model 3).

Meanwhile, in a  telephone exchange near you, connections to the internet got faster. Another bright spark (Netflix) started to deliver the digital content of DVDs or HD over the internet to our PCs, then games consoles or players and now Smart TVs (consumption model 4). I am sure we are all familiar with the Blockbuster story: how a once dominant force in home video rentals failed to embrace the 3rd and 4th consumption model, partly through it’s legacy overhead of stores but also from its inability to effectively adapt. They went into administration and were bought (and I am sure they will likely be in administration again). There are countless other examples, recently Jessops, Currys, Borders and HMV to name just four.

A very good example of how it is possible to adapt to changing consumption models is John Lewis. They have fully embraced the Web and created a dual consumption model of online and in-store. Each catering for a different need and overlapping to create a consistent intimacy, leveraging their brand of good quality, value and excellent customer service. They recently posted results of increasing profits and sales in both online and in-store.

The Economist pod also pointed out that Avis, a traditional car-rental, had purchased Zipcar (www.zipcar.com), a membership scheme which allows the web-booking and use of a fleet of cars parked at convenient local places. Through this acquisition, Avis also inherited a stake in a company called Wheelz (www.wheelz.com), a company that enables peer to peer car rental in a similar model to Airbnb. This provides Avis with 3 routes to market for car rental and will also allow it to potentially extend its brand to assure nervous users as they hand their keys over to complete strangers. Similar to how Amazon established a brand to allay fears when eCommerce began with their marketplace.

Block’s biggest project at the moment is for a company now called intu (formerly Capital Shopping Centres) which owns many shopping centres (e.g. Lakeside, Metrocentre, The Trafford Centre). They have redefined their strategy to transform their digital proposition and brand  in an aim to address the general trend of shoppers using the centres to browse and then shop online for price or convenience. intu will be providing access to free internet at all the centres to create a deeper digital relationship with its shoppers. I wouldn’t be surprised if the smart people at intu then built on this relationship with some really innovative brand extension and new consumption models.

http://www.intugroup.co.uk/investors/shareholders-bondholders/operational-initiatives-and-change-of-name/

There are several situations where we have worked with eCommerce or spread betting companies to provide technology that provides access to new markets.  We have also worked with hospitals to change the way patient care is provided, and in Education, we have worked to evolve the student experience.

So what does this all mean? I believe it serves as a lesson to continuously assess your own organisation and the impact technology can have. If technology is not integrated into your business or organisation and there is not a culture to continuously innovate through technology, then make the change. A good litmus test is to see if your organisation has a CIO on the Board or is it integrated into your strategic, transformation or commercial teams? With current general macro trends of mobility, consumerisation and data centre transformation moving at pace, if you don’t adapt soon, you too could be left behind. Coincidence, I think not!