The Collaborative Economy – moving from community practice to a successful business model
What is the Collaborative Economy?
The Collaborative Economy or the Sharing Economy, is a term to describe economic and social activity involving online transactions. The Collaborative Economy is driving hybrid market models that are largely peer-to-peer exchange based, facilitated by community-based online services such as marketplaces.
Why is the Collaborative Economy on the rise?
A couple of years ago, PwC conducted a survey to understand if the sharing economy was a throwaway trend or a genuine business model to, amongst other goals, help companies become more resilient (i.e. withstand recessions), identify new revenue streams and deliver premium customer experiences. The study was fascinating and seven core pillars were identified as a result:
- Digital platforms that connect spare capacity and demand
- Transactions that offer access over ownership
- More collaborative forms of consumption
- Branded experiences that drive emotional connection
- Understanding an economy built on trust
- Rethinking value exchange
- The push for less friction
These pillars continue to support a wide range of business models that are in existence today. What is interesting to note is how it supports digital transformation, the current hot topic in industry, driving businesses to reassess their portfolio to drive new revenue growth. This begins with businesses examining their assets and understanding which can become digital and shift from offering an item to offering a relationship (and optimise that relationship accordingly). Implemented correctly, relationships create more perceived value, commanding more revenue as a result.
How are businesses tapping into the Collaborative Economy?
Subscriptions are one way to drive the relationship value exchange. Consumers get increased access to content in exchange for a subscription commitment. Other revenue-generating models, as described by Collaborative Consumption, include:
- Service fees: A company takes a percentage of the total transaction for successfully matching two sides of marketplace (e.g. hosts and guests, buyers and sellers, drivers and passengers).
- Flat membership/subscription: A company charges a flat monthly or annual membership fee regardless of usage.
- Tiered subscription: A company offers a range of subscription plans at different price points based on frequency of use or number of goods desired.
- Membership plus usage: A company charges a one-off or annual membership fee (sometimes with different plans offered based on frequency of use). Additional fees are charged based on usage.
- White label: A company creates a back-end platform that can be licensed and branded by other companies.
- Freemium: A company offers basic services or use of the platform/app for free. Users then ‘trade up’ for additional benefits and exclusive features.
But returning back to the premise the collaborative economy is based upon, businesses built on sharing of resources, an underlying level of communication and collaboration is implied to make this economy successful. Just recalling the pillars mentioned previously, it’s clear that emotive connections build trust.
“…the value of a brand is often linked to the social connections it fosters. Managing these connections is fundamental to successful marketing. In the case of sharing, experience design is critical to engendering emotional connections. By providing consumers with ease of use and confidence in decision-making, a company moves beyond a purely transaction-based relationship to become a platform for an experience…”
– PwC – ‘Assessing the Sharing Economy’
Key tenets for business growth in the Collaborative Economy
“Managing connections”, “ease of use”, and “become a platform for experience” look to be key tenets for business growth. It’s no longer selling a product set or solution, but selling and delivering an experience. And collaboration is key to helping sell those experiences. This is why, here at Arkadin, we have invested in delivering communication and collaboration platforms that are intuitive and brandable (white labelling that can be licensed/branded by other companies), to create those emotive connections. These platforms are backed by teams within Arkadin that companies have trusted in delivering powerful connections with their clients.
The Collaborative Economy is here
The collaborative economy is here. Think AirBnB or Uber, both successful organisations based on this premise. The concept of sharing has moved from a community practice into a profitable business model and at its heart is digital transformation.
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