How the Sharing-Economy Business Model Fosters Regulatory Engagement

How the Sharing-Economy Business Model Fosters Regulatory Engagement

The sharing-economy business model promises to revolutionize the concept of capital and ownership. Companies that want to embrace it must form collaborative relationships with governments and regulators, among others.

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Sharing has been a fundamental human trait since our early days. From farmers who shared their crops to the neighbor who lends you her power tool, we have an innate desire to help each other. The sharing-economy business model formalizes this, and opens up new opportunities for engagement.

The sharing-economy business model runs counter to our current economy, which has been based purely on ownership. Take that power tool as an example: you buy it, and you own it forever. This transaction doesn’t take the efficiency of that ownership into account. Unless you’re a construction or carpentry pro, you may use the tool for three hours in a day and for perhaps 15 days in an entire year. Even that optimistic assessment still accounts for only .005 percent of the time. For the other 99.995 percent, your expensive reciprocating saw lies around doing nothing.

This model uses technology to invert that inefficiency. For instance, a network of home do-it-yourself enthusiasts communicating via a smartphone-based app could rent tools from each other by the hour. This creates more capital for power tool owners, and puts a wider range of tools at each person’s disposal. It also has the potential to create communities of people with a common interest.

Companies considering sharing-economy models should put these and other societal benefits at the heart of their service proposition. These include sustainability (ride-sharing services can reduce congestion and pollution) and even job creation. Thousands of people already participate in sharing economies—such as Uber and Uber Eats—as a side hustle, giving them more freedom.

Opening Closed Markets With the Sharing-Economy Business Model

Companies that are hoping to capitalize on a sharing-economy business model must engage a range of stakeholders beyond their customers. This includes finding synergy with each other. By forging powerful business alliances, companies can leverage the sharing economy to expand into closed markets, where ownership was the only option, and they’re able to do it at a relatively low cost.

In many cases, these relationships marry technology companies with incumbents in entrenched industries to generate new value for both parties. One example is Russian ride-sharing company Yandex, which developed a ride-sharing service called Yandex.Taxi. It did this by engaging with existing taxi companies to help them win more orders. By looking for harmonious relationships instead of trying to bypass incumbents, sharing-economy companies can create sustainable, profitable ventures.

Companies must also create collaborative relationships with government stakeholders when capitalizing on the sharing economy. We saw an example of why in December 2017, when the EU faced a decision: Should it interpret ride-sharing as a digital service or a transportation service? If the former, it would be regulated under the 2006 EU Services Directive. If the latter, it would be regulated by member states under tough taxi rules.

The court decided that ride-sharing was a transportation service, which had profound consequences for companies such as Uber in that region. It shows why businesses must engage regulators as they navigate fast-developing rules in a nascent economy.

Collaborating With Government

Sharing-economy companies can learn from those in other sectors who have blazed a trail in helping to shape regulatory frameworks. Telecommunications players and energy producers have helped regulators to identify touch points for smart, sensitive intervention.

Starting these conversations will enable sharing-economy businesses to clarify roles and responsibilities for tracking and penalizing abuses, and to create tax collection frameworks that align with a sharing-economy business model. They must help to guide the dialogue on data privacy and articulate their role in protecting it, and they can also engage in collaborative talks with incumbents to find models for coexistence and mutual benefit.

This is an area where companies can apply the societal benefits of the sharing economy for a positive effect. The positive social impact of many sharing-economy models enables companies to position themselves as allies in achieving government goals. This includes advocating for the environmental benefits of the sharing economy, and taking steps to create roles for underrepresented groups.

Sharing-economy companies also have a part to play as information sources. They are in a unique position to collect useful societal data as part of their everyday business operations, ranging from ride-sharing journeys through to labor patterns in task-based and pay-per-hour ad hoc hiring networks. Data sets like these can be invaluable for public policy discussions.

This same data can also help to lower customer transaction costs by driving new efficiencies into service delivery. Digital platforms served by ubiquitous, transparent data sources will enable customers to get the best product or service for the best deal. Data will be instrumental in enabling sharing-economy providers to lower the effort and expense of sharing goods over time.

A Collaborative Future

Companies that plan these engagements now stand to benefit from the rapid evolution of the sharing economy. New platforms are already driving new sharing relationships that are tailored to the economics of particular markets. Expect to see companies engaging consumers in emerging markets such as motorbike taxi rental, which is already being done in Rwanda via SafeMotos, and household appliance rental, which is already happening in India through Rentsher.

The sharing-economy business model will transform business in developed markets, too. With ride and accommodation sharing already hitting the mainstream, other models are following close behind. Expect to see asset sharing options such as workspaces and storage, along with service-based models covering everything from pet sitting to boating. Opportunities abound, even covering areas such as fashion (imagine peer-to-peer apparel sharing).

Companies that want to capitalize on these models early must carefully blend collaborative business alliances, astute government conversations, and of course, sensitive and value-centric customer engagement.

At the root of all these relationships lies the ability to collect and manipulate sharing data in a way that creates value for all stakeholders. The companies that get this right can look forward to a vibrant future.

Abhas, senior director of strategy and innovation, is also a member of the Forbes Technology Countil and this blog first appeared as a contribution to Forbes CommunityVoice.

Abhas Ricky
Chief Strategy Officer
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