Over 50 participants from all over the world gathered at IMD in September 2015 to hear how the Sharing Economy is ushering in new business paradigms in traditional industries such as rental accommodation and banking. Professors Albrecht Enders and Andreas König highlighted the difficulty for incumbent players to understand – and then react to – the disruptive innovations which sharing- based businesses bring to markets, and how in the future these innovative models for capturing value can be integrated into incumbents’ modus operandi.
Is the Sharing Economy here to stay? For many incumbents whose industries are being disrupted by sharing-based business models, the initial reaction has been one of denial. Attitudes range from dismissiveness – “These upstarts can’t possibly compete with us” – to scorn: “They aren’t trained industry professionals. They’re amateurs.” Another common form of denial is to predict that the sharing economy is doomed because of the fact that it often operates outside of regulatory frameworks (or in legal grey areas). According to this scenario, governments will eventually crack down on the Ubers of the world and then Uber will be forced to pull back from its expansion into the private turf of taxi drivers’ unions.
But by now, more and more established players are realizing that the Sharing Economy is indeed here to stay. Sharing businesses such as Fiverr, Skillshare, TaskRabbit, HelpAround, Lending Club, TransferWise, nimber and sharemystorage.com epitomize this new trend. Their attraction lies largely in the so-called frictionless nature of their digital platforms, which allow easier and more transparent peer sharing as well as product and service transactions. Users are flocking to these online marketplaces in ever greater numbers. In fact, the revenues of “shared” businesses such as car sharing, online staffing and peer-to-peer lending will likely catch up with the revenues of their traditional rental-sector counterparts within ten years.1
As the Sharing Economy blossoms and grows, established players tend to move to the next reaction stage: puzzlement. Because the sharing-based business models are so different from their own, incumbents struggle to understand them. How do these sharing models function? What value do they bring to their users? For example, one can imagine the staff of a food-sector giant like Nestlé discovering the app called LeftoverSwap. In this application, people post pictures of their leftover food for others to select and then pick up. The app features a photo gallery of unfinished meals to choose from, ranging from pizza to Chow Mein. And though this type of food sharing may seem anecdotal, it lies so far outside of the norms and the corporate culture of food and beverage companies – which are based on strict hygiene and food-sourcing rules – that it can only be perceived by industry professionals as alien. For incumbents, the question becomes: how do we compete with something that we don’t fundamentally understand?