The sharing economy relies on more than just goodwill
The sharing economy, a socio-economic ecosystem of collaborative consumption, is steadily displacing traditional buy-use-discard models. By 2025, sharing economy platforms are expected to hit a combined market worth of $335bn. This expansion can be attributed to a number of different factors. One of the most important drivers has been the availability of disruptive technology. Platforms, apps, and distributed networks have made it possible for people to share, and for entrepreneurs to build businesses around this new economic model. But which technologies have been particularly transformative, and how?
1) Digital supply chain
Businesses have to be able to understand and visualise their supply chains in order to manage them effectively. When it comes to the sharing economy, the most important marker of success is matching supply with demand. Without knowing what inventory or resources are available, where they are, where they have come from, and where they need to go, this is a hard task. As the sharing economy is built on the allocation of resources, this information is hugely important.
The bigger the scale of the business, the more important it is to have a digital supply chain to visualise real time data. WeWork, the largest co-working space provider in the world, utilises a digital supply chain to manage more than 100,000 members working at 463 office locations in 90 global cities.
2) The Internet of Things
Connectivity is imperative to sharing economy platforms, tracking inventory and creating constant feedback loops. Without IoT architectures, it is almost impossible for businesses with remote assets to accurately track and maintain their products.
Bike sharing platforms like Citi Bike in New York and China’s Mobike are able to leverage the IoT to track and maintain their cycles. Connecting devices in real time networks makes them easier to locate, preventing theft. Another example is in ride sharing, where machine to machine (M2M) communications enabled by the IoT are vital in building an accurate picture of fleet operation. This also helps to identify and fix faults before they can have a detrimental effect on operations.
3) Big data analytics
Ride sharing apps like Lyft and Uber rely heavily on big data analytics. These companies need to know where their users are, where their drivers are, and a host of other factors that could influence travel routes. Likewise, their customers need to know when and where they can be picked up.
Big data analytics gives businesses the ability to analyse use patterns in historic data, bringing even more efficiency to the services they provide by matching supply with demand. While customer reviews are helpful, they lack the detail and scope needed to provide actionable insights. Through predictive modelling and real time information, sharing economy companies can work out when and where demand is likely to be high. So, if it’s raining, and Manchester City has just played Manchester United at the Etihad stadium, Uber knows that demand will soar in that area.
Blockchain has faced its fair share of criticism, but is generally thought to bring transparency and trust to transactions and trade. As well as facilitating open, honest exchange, blockchain based cryptocurrencies can give users an automatic, secure payment method that transcends foreign currency boundaries. Another of blockchain’s benefits is digital rights management, which details the precise provenance of the goods or services in the transaction. As such, there is no confusion over who owns the goods or service at any given time. It’s also possible to track transacted products throughout their lifecycle, leading to more sustainable supply chains.
An example of blockchain in action is the peer to peer energy sharing platform LO3 Energy. The business relies on the smart contracts provided by blockchain to enable the circulation of unused energy within the community.
Cloud technology and the sharing economy have a reciprocal relationship. On the one hand, the cloud itself is a shared service and has enabled sharing economy businesses and processes through decentralised data storage and sharing. However, on the other hand, the sharing economy has driven the maturity of cloud services by accelerating the transition from ownership to co-ownership.
Sia, for example, is a sharing economy business that allows users to rent out their hard drives. Rather than ride sharing or product sharing, Sia provides storage sharing. It will be interesting to see how the big cloud providers react to storage sharing startups like Sia.
All of the above technologies come together in the form of apps. In fact, it’s almost impossible to think of a sharing economy business that doesn’t operate via an app. Websites are still hugely important, but in a world saturated by smartphones, apps are key.
One of the biggest challenges that faces the sharing economy is ensuring that shared items and services are treated appropriately. If IoT and blockchain technology isn’t available to companies due to their cost or complexity, apps offer a cheaper, simpler alternative. Recommendations and ratings, delivered via apps, can protect against exploitation and build trusted networks regardless of what is being shared. Just look at Airbnb: the sharing economy pioneer is predicated on user reviews. It simply doesn’t need to put sensors on all of the homes in its ecosystem, which is probably just as well…
New tech, new economy
Thanks to the development of distributed, decentralised networks, the sharing economy has gone from idea to reality. Individuals and businesses alike can take advantage of connected, hyper sensitive networks, tracking their assets and ensuring that sharing is reliable and secure. In the sharing economy, technology isn’t necessarily about growth – it’s about distribution.
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