Information Systems: A Manager’s Guide to Harnessing Technology, V7.0

1. Information Systems: A Manager’s Guide to Harnessing Technology, V7.0

By John Gallaugher
©FlatWorld 2018

2.

PUBLISHED BY:
FLATWORLD
©2018 BY FLATWORLD. ALL RIGHTS RESERVED. YOUR USE OF THIS WORK IS SUBJECT TO THE LICENSE
AGREEMENT AVAILABLE.
USED, MODIFIED, OR REPRODUCED IN ANY FORM BY ANY MEANS EXCEPT AS EXPRESSLY PERMITTED
UNDER THE LICENSING AGREEMENT.
©FlatWorld 2018

3.

CHAPTER 10
The Sharing Economy, Collaborative
Consumption, and Efficient Markets
Through Tech
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4. Learning Objectives

1. Recognize firms often categorized as part of the “sharing economy”
or participating in “collaborative consumption.”
2. Gain a sense of market size, impact, investment, and business
valuation in these sectors.
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5. Introduction

• Technology allows product and service providers to connect with
consumers.
• Offers far greater reach and efficiency than traditional markets.
• Efforts are enabling a generation of “citizen suppliers.”
• Product owners become providers of rentals.
• New class of micro-entrepreneurs providing personal services.
• Categories of products are “collaboratively consumed.”
• An individual takes possession of an item for a period of time and then returns it
for use by others.
• Internet-enabled market makers.
• Roots in eBay and craigslist.
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6. Firms Characterized as Part of the “Sharing Economy” or “Collaborative Consumption”

• Examples of firms:
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eBay, craigslist, thredUP
Zilok, Rent The Runway, Chegg
Etsy, CustomMade
UpWork, crowdSPRING
Angie’s List, Handy, TaskRabbit
DoorDash, Grubhub, Instacart, Postmates,
Drizly
Uber, Lyft, Didi
Turo, Zipcar
LiquidSpace, ShareDesk
Airbnb, HomeAway, Couchsurfing
LendingClub, Kiva, Prosper
LendingClub, Kickstarter, GoFundMe,
Indiegogo

7. Firms Characterized as Part of the “Sharing Economy” or “Collaborative Consumption” (cont’d)

• Consumption by Category
• RGoods:
Pre-owned: eBay, craigslist (peer-to-peer supplied); thredUP (firm-owned inventory).
Loaner products: Zilok (peer-to-peer supplied); Rent the Runway, Chegg (firm-owned
inventory).
Custom products: Etsy, CustomMade.
• Services:
• Professional services: Upwork, CrowdSpring.
• Personal services: Angie’s List, Handy, TaskRabbit.
• Delivery: DoorDash, Grubhub, Instacart, Postmates (self-employed drivers for
restaurant or grocery delivery), Drizly (drivers and alcohol inventory owned by
suppliers).
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8. Firms Characterized as Part of the “Sharing Economy” or “Collaborative Consumption” (cont’d)

• Consumption by Category
• Transportation:
• Transportation Services: Uber, Lyft, Didi (cars supplied by drivers).
• Loaner Vehicles: Turo (peer-to-peer supplied), Zipcar (firm-owned inventory).
• Office Space:
• Office Space: LiquidSpace, ShareDesk (peer-to-peer supplied inventory).
• Places to Stay: Airbnb, HomeAway, Couchsurfing (peer-to-peer supplied inventory).
• Money and Finance:
• Money Lending: LendingClub, Kiva, Prosper (peer-to-peer loans).
• Crowdfunding: KickStarter, GoFundMe, Indiegogo (peer-to-peer capital).
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9. Learning Objectives

1. Identify the factors that have contributed to the rise of the sharing
economy.
2. Understand the competitive factors that influence success in
marketplaces that support collaborative consumption.
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10.

Share on! Factors Fueling the Rise of
Collaborative Consumption
• Many sharing economy firms were born during a prolonged, worldwide
economic recession.
• Stagnant wages have boosted consumer interest in low-cost alternatives.
• Encouraged a whole new class of laypeople to offer services for hire.
• Many of the services also have an environmental benefit by fostering reuse and
diminished consumption.
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11.

Winning in Electronic Markets
• Early players gain scale, brand, and financial
resources.
• Technology allows for peer-to-peer supply
without need for inventory.
• Some services do oversee inventory to gain
more control and offer higher quality.
• In fragmented markets, marketplaces extend
the value chain by connecting suppliers and
customers with search and discovery,
scheduling, payment, reputation management
and more.
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ClassPass provides choice and
variety for fitness customers.
Source: Image courtesy of ClassPass.

12.

Social Media for Virtuality & Trust Strengthening
• Word of mouth through social media accelerates the growth of the
sharing economy.
• One survey reported that 47 percent of participants in the sharing economy
learned about the services they used via word of mouth.
• social proof: Positive influence created when someone finds out that others are
doing something.
• Some concerns include trust and safety issues.
• Audit trails help with trust.
• Ratings can help with trust, safety, and service but ratings can also be be unfairly
biased.
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13.

Can You Share Nice? Challenges of Safety and
Regulation
• Instilling trust doesn’t mean that firms are without safety issues.
• Participating in the sharing economy raises questions for insurers.
• Will firms pay out if there is a “sharing economy” incident with a supplier, or will
they try to refuse?
• Many local firms also benefit from taxes and regulatory fees from
industries threatened by the sharing economy.
• Groups opposed to new, rival efforts can represent very powerful lobbies.
• Another major concern for firms in the sharing economy is uncertainty
around the ability of these firms to continue to consider their workers as
independent contractors and not employees.
• The issue has gained the attention of state and federal agencies and presidential
candidates, and raises the specter of class action lawsuits.
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14.

WePay Winning Big: Processing Payments and Taming
the Crowd Through “Social” Security
• WePay is a firm that has stepped up to offer simple payment solutions
that specifically target the challenges of buyer/seller platform operators.
• WePay combats challenges in several ways:
• The firm’s Veda fraud-fighting technology analyzes social profiles to get firms up
and running with payments in a streamlined process.
• WePay can gain a fast read on whether founders and businesses are legitimate.
• Has transaction history from hundreds of thousands of customers currently
sending billions of dollars a year through the firm’s systems.
• The firm’s machine learning technology continually update the firm’s fraud models
to adapt to new patterns it uncovers.
• WePay makes adding payment capabilities to any site as easy as
embedding a YouTube video, with a cut-and-paste of pregenerated
code.
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15. Learning Objectives

1. Identify and give examples of how large firms are investing in,
partnering with, and building their own collaborative consumption
efforts.
2. Gain insight into the advantages of collaborative consumption firms for
traditional industry players, and enhance brainstorming skills for
identifying possibilities for other firms.
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16. Future Outlook: Established Players Get Collaborative

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Alphabet & Toyota: Invested in Uber
Alphabet and General Motors: Invested in Lyft
Condé Nast: Invested in Rent the Runway
Walgreens: Task Rabbit partnership
IBM: Worked with Deliv
Avis: Acquired Zipcar

17. Learning Objectives

1. Understand how Airbnb has built a multibillion-dollar sharing economy
firm.
2. Recognize the appeal the firm has for suppliers and consumers.
3. Identify sources of competitive advantage and additional challenges
as the firm continues to grow.
4. Understand how technology can build trust, even in an area as
sensitive as selling stays in private homes.
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18. Airbnb—Hey Stranger, Why Don’t You Stay at My Place?

• Multibillion-dollar hospitality industry empire.
• Over 200 million guests have stayed with Airbnb so far.
• With listings in 81,000 cities and 192 countries, there is no other single
hotel group that approached the firm’s worldwide reach.
• Listings include:
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Castles
Yurts
Caves
Water towers
Private islands
Igloos
Glass houses
Tree houses

19. Unique Airbnb Properties

A sampling of some of
the more unique
properties available for
rent on Airbnb.
Source: Airbnb.com
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20. Airbnb—Hey Stranger, Why Don’t You Stay at My Place?

• Trust is essential for the sharing economy to work.
• Negative incidents involving theft and unwanted visitors have attracted plenty of
unwanted press.
• The firm offers a $1 million guarantee for hosts, secure payment guarantees, and
24/7 support phone service.
• Airbnb monitors transactions and communication at a deep level:
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Reservations
Payment
Host/Guest communication
Subsequent reviewers
Technology hunts for scams

21. A Phenomenal Start, but Not Without Challenges

• In many areas where Airbnb operates, providers of the service are
breaking the law.
• Running a business in an area not zoned for it.
• Health and safety laws governing hotels require things like sprinkler systems, exit
signs, and clean towels.
• Competition looms, including HomeAway.
• Several hotel firms have experimented with homesharing, including Marriott,
Accor Hotels, and Hyatt.
• Travel sites like Booking.com and TripAdvisor now incorporate homestays into
their search.
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22. Learning Objectives

1. Understand the appeal of Uber both to drivers and
consumers.
2. Discuss how Uber leverages technology to radically
improve on the service and cost structure of traditional
and cab and limo services.
3. Understand the implications of executive behavior and
harmful corporate culture on the firm, its hiring prospects,
investors, and customers.
4. Recognize how technology also empowers a data-driven
enterprise that crafts strong and deepening competitive
advantage over time.
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23. Uber’s Wild Ride: Sharing Economy Success, and Lessons From a Fallen Founder

• Operating in 633 cities and 76 countries worldwide.
• Uber had raised $21 billion so far, and boasts a private valuation of over
$70 billion.
• Uber claims to create over 50,000 new jobs a month.
• Uber drivers in NYC make an average of $90K a year.
• Customers regularly complain of surge pricing:
• Uber raises prices where supply doesn’t meet demand to encourage drivers to
work.
• They cap surging during emergencies at a price that is below the three highestpriced non-emergency days during the preceding two months.
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24. From Rebel to Revulsion: When Uber Behavior Became Hostile and Required Big Change

• In Silicon Valley, a place known for lionizing the brash disruptor, Uber
was perhaps the firm seen as most brazenly pugilistic.
• Problems began piling up (dishonesty began to be seen as an Uber cultural trait):
• Strikes by drivers, protests by the taxi industry, and aggressive political push-back.
Accusations of the theft of self-driving car tech.
• Rival Lyft accused Uber of unethical behavior, including calling and canceling Lyft
rides to crater the efficiency.
• Culture shown to be hostile to women and minorities.
• Mounting customer complaints of price surging
• It's unclear just how damaging the fallout has been for Uber.
• Network effects may make customers stick with a firm, even if they'd rather not
remain, but talent and the fundraising wallet may be far stronger in pushing a firm to
recognize and deal with repellent behavior.
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25. Tragedy, but Tech Raises the Safety Bar

• Technology actually helps Uber keep a high safety bar, and to continue
to raise that bar even higher.
• The Uber app knows who the drivers are at all times, knows who was picked up
and where they were taken.
• Bad performance are exposed and customers (and drivers) empowered to shine
a spotlight on what might have been previously hidden.
• Collectively, this offers a safety bar conventional cabs simply don’t offer.
• Uber continues to invest in new technologies, exploring voice recognition and
biometrics to further strengthen driver verification, and implementing a panic
button linked to emergency services.
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26. Driven by Data

• Employs mathematicians with PhDs in nuclear physics, astrophysics
and computational biology.
• The staff optimizes algorithms to determine number of drivers, where
demand is, and dynamic pricing.
• The software system shows maps, cars, locations of customers.
• Uber’s massive data haul allows it to cut prices and attract drivers to
power continued growth and expansion.
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27. Uber’s “God View”

Uber’s so-called “God View” shows
every Uber car operating in a city,
and every user looking at the Uber
app.
Source: Uber Blog,
http://blog.uber.com/2011/05/16/uberdata-mapping-san-francisco-new-york-and-the-world/
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28. APIs to Expand Reach

• Uber is embedding everywhere in the digital world.
• The firm offers an API (application programming interface) that is essentially a
published guideline on how other developers can embed Uber into their own
apps.
• The service launched with eleven partners, including OpenTable, United Airlines,
TripAdvisor, and Hyatt Hotels.
• A new initiative, Uber Health, offers APIs for integration into health care
products.
• Another example of network effects help solidify a firm as a winning platform.
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29. How Big Can this Thing Get?

• Analysts differ on current valuation of Uber.
• Regulatory concerns, maintenance of quality service and the
uncertainty of expanding in global markets where competitors exist are
challenges to be faced.
• Business Insider claims it could grow to a $100 billion company.
• Doubling in size every six months.
• Looking to expand into shipping and logistics.
• Begun to test its own self-driving car technology.
• The firm has shown a prototype vertical take-off and landing vehicle
that’s a cross between a helicopter and prop plan.
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