Optimizing Underused Assets- The Shared Economy

Posted by SMstudy® on January 13, 2016 | Marketing Strategy (MS)

Keywords: Shared economy

Optimizing Underused Assets- The Shared Economy

Let's assume that it is the year 2000. Try and think of what are the biggest companies you know about in this era. Chances are, you would be thinking of a giant in IT, Manufacturing or Finance set-up. These companies come with a few common factors: 

  1. They have multiple offices around the world
  2. They employ tens of thousands of employees
  3. They have large capital investments in equipment, assets etc.

Now whether you think of an IT leader like Accenture, an Oil and Gas leader like Shell, a Manufacturing giant like Boeing, these factors are common to them. Any airline operator will need to invest a huge amount on leasing their fleet or paying their ground staff around the world.

However, the last five years have led to some companies creating multi-billion dollar investments despite having zero assets of their own, very small employ strength that operate out of a single office. We will look at two such companies who have leveraged on technological advancement and under-utilized inventory globally to develop huge businesses where none existed- Uber and Airbnb.

Now everyone would have heard of atleast one of these companies but if you have been living on a lonely island for the past few years, Uber is a taxi-aggregator that helps consumers hire taxis on the go through their app and Airbnb is an aggregator for people to find and rent lodging around the world. What's amazing about these businesses is that Uber does not own a single one of it's taxis and similarly Airbnb does not own any of the properties listed on their site.

What they have done is develop a two-sided marketplace where on one side, they identified an underutilized asset and found a way of addressing the same by providing them a platform to better utlize the asset and on the other hand, they have provided consumers cheaper and/or better options to use these services. The idea seems really simple when you think of it. There are people who stay in a house and have an empty room. Now they can just list this room and get some revenue out of it. At the same time, for customers, these rooms are cheaper than what a hotel room would cost. What Airbnb has been able to do is recognize this gap in the market and provide customers an easy way to view these listings. 

Now the basic question that comes to mind is: If the idea is so simple, why did no one thought of it before? 

Well like every major company in the world, the reason Uber and Airbnb were so hugely successful was not because someone thought of this unique idea all of a sudden, it was only at this point in time that technology had evolved to make such a model viable. Ten years back, there were low internet penetration, very few smartphones which meant it was almost impossible for such businesses to take off. There was no real benefit in me calling the uber office when I am stranded somewhere asking for a cab. And even if I did that, I would have to give them exact directions while someone from their office tried to call their cab drivers and find which cab driver was in the nearby locality to pick me up.

What has helped Uber is the new ecosystem:

  • Everyone now carries around a smartphone and is able to use their app
  • Uber is able to track their cab drivers to assign the nearest one to you
  • Uber was able to integrate these under-utilized cabs and get them more revenue
  • At the same time, Uber was able to increase their fleet by allowing anyone with a car to make money
  • Financial transactions are done with the click of a button making the user experience extremely smooth

Now with the new concept of sharing economy that Uber and Airbnb have evangelised, we see a number of businesses that come up for optimizing under-utilized inventory. Whether it is a marketplace for Adventure activities connecting adventure groups to consumers, Food delivery connecting restaurants and home chefs to customers, Utilities connecting electricians/plumbers etc to you. The ecosystem has helped these two-sided marketplaces really explode onto the scene.

Can you think of an underutilized asset that hasn't been optimized yet? You could be onto the next billion dollar idea.

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