The Collaborative Economy: An Altimeter Group Research Report

A couple of weeks ago I attended a conference where the keynote speaker, Jeremiah Owyang from the Altimeter Group, presented his latest research report, “The Collaborative Economy.” The premise of the report is that social technologies have changed everything from communications to marketing to customer care, which has brought us to an era of consumers sharing products and services among one another in lieu of purchasing through businesses. He described this marketing shift in power in three phases: the “Brand Experience Era,” the “Customer Experience Era,” and the “Collaborative Economy Era.” According to Jeremiah, we are now in “The Collaborative Economy Era.”

Phase 3 involves many of the same concepts that fueled the social revolution in Phase 1 and Phase 2- innovative companies have created spaces for people to share reviews on products and services with each other, but in Phase 3, “The Collaborative Economy,” consumers are often completely bypassing existing institutions to purchase these products and services.

The difficulty for businesses is that consumers can now purchase a product, and literally share it among many other people by reselling or renting the product or service out. As the collaborative economy grows, business revenues could dramatically reduce if a company is unwilling to embrace this movement.

The only way for corporations to play into this space, is they have to let go in order to gain more, and that’s a big leap of faith for many companies to do, but it’s the only way.

-Jeremiah Owyang

Companies who sell products or services to consumers risk failure as people bypass traditional means of transactions in favor a sharing economy.

Here’s an example:

A new Toyota Camry costs about $25,000 to buy. Tack on interest payments, insurance, fuel and routine maintenance, and the cost of owning that shiny new Camry climbs even higher. Given these costs, let’s say you decide to forgo buying a car and instead use services like Citibike and Lyft to get around. That’s one less car purchased. You discover that this system works out nicely for you and so you tell your friends what you’re doing. Several of them think it’s a good idea and they go for it too. The result is four more cars not purchased. Now imagine that this idea spreads across the country and 10% of the population decides to get on board. You now have a 10% reduction in the number of new cars being purchased in the US. The entire automobile industry would be in crisis. If you’re Toyota, Ford, or Volkswagen, this is a scary proposition.

Let’s then say you love the sharing idea and you start applying it to other areas of your life. You use AirBnB to find a place to stay instead of booking a room at the local Hilton. You use 99dresses to get your clothes rather than going to Nordstrom or JCPenney. You skip Wells Fargo and go with Prosper and PayPal for your banking needs. The list goes on and on. Pretty soon traditional industry is disrupted and businesses collapse.

Owyang predicts that companies will need to refocus what they do in order to remain relevant. Those who are able to find ways to facilitate this new collaborative environment will be able to generate profits while those who ignore it will fade from prominence.

It’s an interesting concept.

Fortunately, government organizations are already poised to be leaders in the new collaborative economy.

Share Data

The free exchange of data is what will make the collaborative economy work. Government organizations are already beginning to release mountains of data as a result of the Open Data Initiative. Numerous companies are using this data to create cool new applications where people can learn about health code violations, recreation options, transit routes, road repairs, public safety and much more.  By coupling government data with user created content, governments and the public are able to collaborate to make life better for everyone.

Partner many organizations

One way that government is already poised to aid the collaborative economy is in its ability to partner many different organizations together. Since government organizations are not beholden to the whims of shareholders, they can share information between different units of government. Government can also rally businesses, non-profit agencies, as well as religious and community groups to unite around a common cause or objective. Often, these projects fall into the economic development category where the government helps with land acquisition and clean-up; and businesses provide stable jobs. These are great for local economies, but they are just the tip of the iceberg as we move toward a collaborative community.

What would it look like if a state health department and the CDC were able to bring businesses, non-profits and local parks departments together to rally around diminishing childhood obesity? What if the Small Business Administration were able to get business owners, the Better Business Bureau and Yelp together to train new business owners how to use social media or improve customer service? Maybe the USDA could solicit help from non-profits working with new mothers, restaurants, and grocers to provide feedback on ways to improve WIC and SNAP that go beyond the basics of “this item is covered,” and “this one isn’t.”

There are lots of possibilities out there but one thing is certain. As people search for ways to get the goods and services in non-traditional ways, government organizations have a huge opportunity to bring the players together on an issue and dream up new ways of doing things.

Serve as “trust broker”

One of the biggest challenges to the collaborative economy is the trust factor. Do you trust someone to rent out your house? What if they wreck it? What if someone uses your information to obtain a fraudulent loan through Prosper? What happens if you hire someone from TaskRabbit to take your clothes to the cleaners and they steal your stuff? These are all concerns that people have as they begin to venture into the collaborative economy. Fortunately, this is the exact sort of thing government organizations were set up deal with. Police…check. Courts…check. Helpful regulations and guides for vendors…check. Mediators and liaisons…check again. Government organizations can use transparency in these collaborative practices to gain trust among the public.

Standardizing systems

Like any new concept in its infancy, multiple standards emerge until, eventually, a winner is declared. Think Betamax and VHS, Laser Disk and DVD, or MySpace, Friendster and Facebook. Government wields enormous weight when it comes to setting standards for an industry. While you won’t typically find government weighing in on the Betamax/VHS sorts of discussions, they do evaluate things like encryption coding or payment processing procedures. Government also has a lot of muscle when they decide to purchase something. What if government organizations got involved with shaping the new collaborative economy standards? Or, with giving guidance on the way data should be submitted to meet requirements?

There are numerous scenarios of how this could work out. One thing is certain, if government organizations are involved from the beginning, there will be plenty of opportunities to shape the conversation in a way that works best for everyone.

What are some ways you see government being involved with the new collaborative economy?

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