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How the collaborative economy is disrupting traditional business

07 Aug 2015

The digital age is disrupting the traditional business model and making trust a valuable form of currency, according to Rachel Botsman, Collaborative Lab author and founder.

At the recent Adobe Digital Symposium, Botsman highlighted that technology is in the nascent stages of doing two things.

One, it is changing the nature of supply and demand by matching haves and wants on an unprecedented scale. Two, it is allowing a new kind of trust to form between strangers, acting as a currency with significant value.

This, in turn, is changing the relationship between producers and consumers, buyers and lenders, companies and employees, she says.

Collaborative business models, such as those employed by Airbnb and Uber, are not simply a trend with startups. Instead they reflect a significant digital transformation, Botsman argues.

Botsman says, companies like Uber and Airbnb are taking underused assets, such as rooms or drivers, and making them liquid by matching needs and haves via online platforms.

This bypasses traditional organisations and puts young emerging businesses up against giant taxi companies and hotel chains that have been establishing themselves in the market for decades.

“What we’re seeing is that we’re moving from an age where, in the industrial economy, we’ve built these top down, hierarchical, centralised institutions - institutions that can control the creation, production and distribution of goods - and what we’re moving to is this world of distributed, connected communities.

“It completely changes the way not only the way we buy products and services, and the way products and services are made, but the perception and reputation of brands,” she says.

Furthermore, it changes the way we think about value - how it is created, scaled and viewed - and it changes the way we think about trust, she says.

Airbnb, for instance, matches people who are looking for a place to stay with people who can provide this. In doing so the service relies heavily on trust between strangers.

In this new kind of business model, employed by the likes of Airbnb, customers rate companies and companies rate customers, and as a result trust becomes a crucial factor.

“Trust will be the currency of the 21st century," Botsman says.

“Reputation becomes a form of capital that can become more powerful than credit histories in the next 10-20 years."

This business model also enables consumers to ‘no longer be passive’, and encourages providers to be more transparent and engaged.

Despite those who thought the idea of Airbnb wouldn’t take, due to the fact that it relied on strangers trusting each other, it is now the second highest valued hospitality brand in the world. It is ranked just behind Hilton Hotels and above Mariott, and is worth around $25 billion.

While it took a traditional incumbent like Hilton more than 93 years to build a portfolio of over 610,000 rooms, Airbnb have now over a million rooms, and they’re adding more than 40,000 properties to their inventory every single month, according to Botsman.

This highlights another key differientiator between Airbnb and its traditional counterparts – it doesn’t actually own any rooms.

Traditional companies are asset heavy while emerging companies are asset light, says Botsman.

“Airbnb was one of the first entrepreneurs to realise […] what we can do with this interception of social, mobile and location technologies -we can create a market for things that never had a marketplace before," she says.

These emerging companies don’t own any inventory. Instead, they utilise existing assets and make them liquid through a marketplace that's highly scalable - they facilitate access to an inventory that already exists, she says.

“The sharing economy meets on-demand, instant gratification, where you can use these marketplaces to instantly enable people to find something that wasn’t immediately available,” she says.

As quoted by Botsman, Tom Goodwin summed up this fundamental shift when he said, “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”

As we move forward, the collaborative economy will drive a new wave of community, urging businesses and consumers to think differently about culture, assets, trust and value, says Botsman.

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