The sharing economy is coming of age: there are literally thousands of projects around the world trying to build P2P, collaborative networks and services. The moment has come to establish a framework that guides entrepreneurs who are building these businesses.
The challenges of the collaborative entrepreneur
Past efforts on building a framework have focused on the structure of the systems, such as the recent article by Mark Suster (where he classifies companies into those tapping into global markets, empowering the under-employed, making existing markets more efficient, etc.), or the classical one by Rachel Bostman (product service systems, redistribution markets, and collaborative lifestyles). But there’s one key missing element in those frameworks: the customer. The customer doesn’t care about structure, systems, or markets. What he wants is solutions to his needs and problems. This new framework uses the value proposition to the customer as a way to classify the types of sharing economy businesses.
Experience vs. value services
Let’s split them in two different categories. With experience services, people can do more or better things: wear more expensive dresses with Rent The Runway, ride in style with Uber, or solve errands with Taskrabbit. With value services, on the other hand, people do things at a cheaper cost. In this case, the experience needs not be better than the current alternative; good enough (even a bit worse) suffices as long as it’s cheaper (i.e. ride-sharing, time banks, or tools borrowing). Money is obviously an issue for experience services. In most cases, they are cheaper than the conventional alternative, and savings are often the motive why someone becomes a user; but experience is the reason they stay a user. Likewise, value services work hard to provide a good experience, because coupling it with great value makes their offer a no brainer. Some services also combine both advantages: co-working spaces are cheaper and can offer a better ambience than a traditional office; a city visit with a local guide is more enjoyable and better value than a typical, touristy tour; home swapping saves thousands of dollars and gets you a whole apartment plus local knowledge from your exchange partner.
Structure and business model
Value services are often free or very cheap, creating their revenues from advertising or small transaction fees. They go for quantity over margin, so they need many users to build a profitable business. Strong network and community effects are paramount to building liquidity, and all users are usually both a giver and a taker (that is, they can act sometimes as client and sometimes as provider). Experience services are almost never free, earning their money from commissions or service fees. They tend to have fewer users, and don’t depend so heavily on the community to provide value: takers are not the same people as givers, who often do it for a living and therefore take a more professional approach.
Audience
The target audience for each service is different: experience services are used by an older, better-off population, while value services are targeted at a younger, more economically focused group (i.e. the audience for Uber and Lyft is very different). This has strong implications for sharing economy projects: the stories they tell, and the media they use to acquire customers, should be focused on their particular audience. Stressing price may not work for experience services, and focusing on feel-good tales won’t help value services reach a mainstream audience.
Experience plus value equals mainstream
In both kinds of services,
collaborative consumption will succeed when it offers a better overall experience and value, not just because of an ethical, ideological or sustainable approach.
That is great for an initial group of first adopters, but it won’t take the service mainstream. The true token of success will be when a person living in a midsize city, who doesn’t know or care about the sharing economy, searches on Google and finds BlaBlaCar, or Feastly, or Skillshare, or Knok, and she thinks: “Cool! Who knew you could do that? I definitely want to try it”. Guest post written by Juanjo Rodriguez.
Founder at Knok, a home swap community. 3rd time entrepreneur in digital and marketing. 15 years experience with startups, both bootstrapping and corporate ventures.