The Sharing Economy: the science of choice under abundance.

Jan 29, 2016

I realized how the massive global network of highly connected individuals created by these Web 2.0 companies laid the foundation for the emergence of a diverse and self-sustaining ecosystem. The top fifty Abundance Economy or Sharing Economy (i) companies were categorized into five classes based on the source of their value origination:

  • Assets — Short-term rentals of homes, cars, boats, commercial space
  • Goods — Reselling apparel through the new Closet Sharing Economy
  • Delivery Services — On-demand goods delivery and personal chauffeuring
  • Commodity Services — On-demand home and caregiver services
  • Specialized Services — Online marketplaces for specialized skill providers

The most attractive classes are Assets and Specialized Services.

How the #sharingeconomy grows: the company is a collection of hundreds of local 2-sided marketplaces. Blue Ocean of Demand and Red Ocean of The lens of Uber as hundreds of 2-sided local marketplaces also helps explains the importance of compromises like surge pricing and fare cuts. These mechanisms keep the marketplace in balance, and help grow the network effects. It is an approach of lowering fares to boost demand, and pairing that with guarantees while the rider side of the market figures this out. In tandem, good things happen. WIN-WIN outcome. (i)

Growth hacking is natural for these companies (use-cases).

And here is the thing: These companies are grounded in Data. Data drives everything. Just as steam powered much of the First Industrial Revolution, the free flow of data is powering what is called the Fourth Industrial Revolution. More and more of our world today runs on the free flow of data — through smartphones, cloud computing, chip cards, biometrics, sensors, and more. Data is driving more of our economies, growth, and productivity. (2)

The second thing is Virality. What is Virality? The Network (Influencers) + Stickiness.

The Tipping point: This idea of the importance of stickiness in tipping has enormous implications for the way we regard social epidemics as well. We tend to spend a lot of time thinking about how to make messages more contagious — how to reach as many people as possible with our products or ideas. But the hard part of communication is often figuring out how to make sure a message doesn’t go in one ear and out the other. Stickiness means that a message makes an impact. You can’t get it out of your head. It sticks in your memory. The Power of Context says that human beings are a lot more sensitive to their environment than they may seem.

The three rules of the Tipping Point — the Law of the Few (Influencers), the Stickiness Factor, the Power of Context — offer a way of making sense of epidemics. They provide us with direction for how to go about reaching a Tipping Point.

The Power of Context. Broken Windows theory and the Power of Context are one and the same. The impetus to engage in a certain kind of behavior is not coming from a certain kind of person but from a feature of the environment.
Minor, seemingly insignificant quality-of-life crimes in NYC 1990-s were Tipping Points for violent crime. The Power of Context is an environmental argument. It says that behavior is a function of social context. But it is a very strange kind of environmentalism. What really matters is little things. Little things defining you or your ideal.

We programmed genetically, and we programmed environmentally. It is like a little model inside us controlling our behavior, and controlling our results then.

The Power of Context is amazing topic. I promise to come back to this subject soon.

But we can recognize the conclusion so far: the sharing economy is the science of choice under abundance. Science based on Data, Virality and Context. Science of Abundance. Science to look differently. Science of Blue Ocean shifting your paradigm…

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(i) Sharing economy = on-demand service companies.

(ii) Red Ocean companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, prospects for profits and growth reduce. Products become commodities and cut throat competition turns the ocean bloody red. Blue Ocean companies, in contrast, access untapped market space and create demand, and so they have the opportunity for highly profitable growth. In Blue Oceans, competition is irrelevant. Yes, imitators arise, but experience shows there is a wide window of opportunity to stay ahead of imitators. Creators of blue oceans do not use the competition as their benchmark, but follow a different strategic logic that we call value innovation, by simultaneously creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.

Blue Ocean creating businesses follow a different strategic logic. They say:

  • We Challenge Industry Conditions & Paradigms
  • We Focus On Customers, Not Competitors
  • We Don’t Segment Customers, We Aggregate Them
  • Our Assets Capabilities Are Not Fixed, They Are Fluid
  • We Solve Problems Across The Entire Supply Chain

(iii) According to McKinsey & Company’s “Global Flows in a Digital Age,” GDP growth increases between $250 billion and $450 billion annually — approximately equivalent to the GDP of Finland or Norway — when data flows freely.