The "Sharing Economy" is upon us. And it has come faster than anybody expected. Allow me to share but two instances.
The other day I was chatting with an upcoming hairstylist. She told me she used to trudge her way to south Mumbai everyday from suburban Bandra to keep her job at an upmarket salon. Then one night she decided she doesn't want to travel the distance any more. Instead, she hires a chair and the services it offers at a salon. Her clients visit her there. She doesn't hang around between appointments. She now has a choice where to be.
Very recently I ran into a start-up called BreathingRoom. It helps people who work out of home and the self-employed find spaces to conduct professional meetings. It does that by asking small firms, studios, galleries and even restaurants and bars to lease unused spaces by the hour.
How people utilize, access infrastructure and resources is changing. It is a new way of consumption where people value ease of access over the emotional need for ownership. It holds the potential to free people’s time, effort and resources; they can focus on getting the job done on a need-to basis as opposed to owning and maintaining assets.
People value ease of access over the emotional need for ownership.
Most people are familiar with Uber and Airbnb—poster children of this revolution. Start-ups all over the world, egged on by venture capitalists, are trying to "Uberize" things.
In its purest form, this economy is an exchange where unutilized assets are made available to others using technology that makes it easy to discover and access. Assets could mean resources as well like hardware, software, talent, infrastructure or time. For the ecosystem to work effectively, it needs to have trust and review mechanisms built-in to assure payments and quality to those engaged in the exchange.
So what does this achieve?
It sweats assets harder and maximizes utilization. Your cars and trucks can run further, your space can be rented out longer and your factories can run more shifts. You can even extend this to your camera gear, which you use only during vacations.
It makes the assets accessible at a fraction of the cost—both in terms of money and time. It is often cheaper and quicker to set up and get moving when you are renting an asset. This becomes a productivity multiplier.
In turn, this brings down entry barriers for new businesses. They can instead share resources and focus on their value proposition than bother about infrastructure. This holds the potential to destroy older businesses that have failed to innovate, and depend on legacy and infrastructure as competitive advantages.
Time, skills and talent can be shared as well. It can make a micro-entrepreneur out of every one of us. Sharing is seen as a business model innovation in the West. But in India it can change how business is done because entrepreneurs and firms can access products and services at a fractional cost. How?
Time, skills and talent can be shared as well. It can make a micro-entrepreneur out of every one of us.
This is a high-cost economy with huge initial set-up costs. Let's take the first example I mentioned: To set up a salon requires you to get about 25-odd licences and municipal permissions. Add to this the upfront cost of real estate and the risk of failure. That is why India ranks at 142 out of 189 countries on the ease of doing business. The value of utilizing existing infrastructure outweighs the value of creating it afresh.
India has massive unutilized captive infrastructure—historically poor physical infrastructure and lack of reliable third-party services providers compelled firms to create infrastructure. This led to fragmented infrastructure that doesn’t operate at optimum levels. These capacities have to consolidate. The sharing economy can drive this consolidation faster—those who adopt this new model will grow faster, sweat their assets harder and eventually buy or drive their slower competitors out of business.
There is a stigma attached to second-hand ownership—a car depreciates by over 25% the moment it leaves the showroom. However, the younger generation has no such hang-ups about pre-owned or shared assets. This mindset shift creates a market for pre-owned and shared goods. This generation of Indians may get their first taste of several products and services by accessing them through a shared route at a fractional cost of ownership. This can expand addressable markets for brands dramatically.
This generation of Indians may get their first taste of products and services by accessing them through a shared route
The sharing economy in India will give birth to a new class of businesses that are designed for sharing—that are more functional, efficient and focused. This will be a disruptive force. To tackle it requires a new mindset. You have to "unpack" your own business and see what resources can be shared "out"—and what can be shared "in". It can transform cost structure and open up new markets.
Once again, how?
1. Launch shareable services
There is a big opportunity to create businesses that are designed to be shareable. In the example above, it is worth asking if there is a business opportunity in launching branded "shared salons". Regular salons need expensive high-street frontage, a client roster and face the risk of failure. But you could just create a brand designed to become a shared workspace for hairstylists. Where the barrier for a salon was acquiring customers and high-street frontage, it can now work as an efficient salon that ties up with hairstylists who drive customers to their location.
2. Leverage existing infrastructure
Oyorooms.com has shown it is possible to reach out to old, rusty 2- and 3-star hotels, take over a few rooms and craft a promise for consumers that makes the rooms accessible, convenient and trustable. Where else can you find similar opportunities to refurbish older businesses and bring them into the sharing economy?
3. Ride the wave with your own business
If you have already invested in infrastructure, there is an opportunity for aggregation. Think about your value proposition and how you can become the nodal point for shared services around it. For example, if Club Mahindra's core promise is a good time for families (versus running resorts), then is there an opportunity to aggregate stand-alone vacation homes for their captive customers and bundle in services that bring their seal of quality?
4. Look for opportunity where no one else does
Unlike ATMs in the West, Indian ATMs are manned 24/7. So, there are thousands of small spaces—manned, connected and serviced daily. Is this infrastructure shareable to do more than just dispense money? Can they become virtual branches or manned pick-up points for other businesses?
5. Create shareable networks of talent
Create shareable networks of professionals. Small and mid-size businesses cannot find or afford experienced talent on a full-time basis. In fact, while they can hire talent that can run and maintain their businesses, what they need most is advice and support for several one-time set-ups. Are there opportunities to create a network to share talent? Is it possible for seven-eight mid-size businesses to share a single CTO (chief technology officer) who is able to time-slice across them? These networks can create tremendous value. Some of this is already in place with services like MyCFO
This allows creating networks as well that small and medium enterprises can tap for expanding their business. An individual consumer gains nothing lasting from hiring or sharing a car. But a business network can be a transformative resource for a small entrepreneur struggling to learn.
6. Share idle talent and capacity
Is there an opportunity to create something like secondshift.com? Manufacturing firms upload their spare capacities on a platform and rent out their shifts. It can leverage existing manufacturing capacity and lower costs of doing business. This will disintermediate the value chain as well. What if you could train manufacturing staff to service third parties where there is no direct competition?
7. Share platforms
Indian supply chains are inefficient—truckers find it difficult to find loads for their return trips. They spend a lot of time waiting. So truckers build the loss-due-to-lower-utilization into their costs. This holds true for warehousing too. Sharing platforms can drive these inefficiencies out and probably save the economy more money and fuel than on-demand cab services.
8. Encourage customers to share
Is it possible to create networks as a manufacturer where people get a first taste of your product or asset? For example, if you have a large business park, would you dedicate a part of it to an on-demand office where you bring in start-ups that can't afford to risk booking an office for a year—and migrate to a longer lease on the same premise?
9. Build yourself into a trusted sharing platform
If you are already in the business of hiring out assets, can your legacy brand and relationships be used to build a sharing platform? You can become the TrustPass (the certificate Alibaba gives authenticated and verified companies) of your sector, aggregate supply and make it available on an on-demand platform. You can become a "serviced" exchange with some services bundled into your offering. This could be applicable for a whole host of businesses, which hire out construction equipment and other heavy machinery.
10. Collaborate to stay relevant
If you are in a sector that is being disrupted by online firms—like grocery chains—the only line of defence will be to collaborate with competitors and vendors at two levels:
See where you can share resources—warehouses, supply chain—and cut costs
See if you can invest in a joint platform where you create a hybrid network. Maybe you should evaluate how to share your DSA (direct sales agent) network with allied businesses before you are forced to join one.
This is already happening in the food delivery business, where start-ups like Grab have created a B2B shared delivery network for restaurants. That means restaurants don’t have to maintain delivery boys and pay per use with full tracking on delivery and collection. (Disclosure: I am an investor in grab.in)
The sharing economy will force you to re-assess your differentiators and reason to be in business. Take a hard look at what you really need to be the best at what you do and look around for someone who does the rest. You need to make a plan on how to participate in it, else your competitor will.
[An abridged version of this article appeared in Mint]