The rise of the collaborative economy

On any given day, millions of people around the world log in to Waze, a free GPS application, to contribute and access traffic data and incident reports in a collaborative, peer-to-peer system that provides real-time reporting on road conditions and routes based on user input. This community-driven application is just one more sign that we’re shifting away from an industrial economy and towards a more collaborative model.

We’ve spent the last 200 years trying to create an economic system that values standardization and commoditization. The Industrial Revolution brought consistent products, consistent quality, and lower costs through mass production, and these are things we still value today. It seems, though, that we’ve taken this approach as far as we can, and have maxed out its benefits.

What we’re seeing now is a shift toward a more open, collaborative system. A collaborative economy is more about the use of something than the ownership of it. People contribute information and ideas in an effort to find new ways to efficiently use existing technologies as well as drive innovation. Wealth, power, and influence are distributed among diverse individuals rather than controlled by a select few. People, not corporations, are at the center of the collaborative economy.

The more people participating, and the more diverse their areas of expertise, the better this model will work. And because there’s so much diversity and openness, the collaborative economy is all about flexibility and experimentation, and, as a result, adaptation and evolution.

What we’re finding everywhere is that people have a real desire and ability to participate in the economy as producers – and not just consumers – of goods, and are providing products and services among and between themselves.

And rightly so, because in a collaborative economy, we’re able to take advantage of all the intangibles that people bring to the table. Individuals can deliver a specialized, unique, and customized product or service much more easily than big businesses can. No matter how hard big businesses try, they deliver a standardized product because that’s the whole point of what they’re doing – that’s how they drive costs down.

The corporate model comes with a lot of benefits, and much of what we’re seeing in this new collaborative economy is making use of the old model. We’re already seeing a trend towards a new system and way of thinking that I call “Peers Incorporated” – a partnership between corporations and individuals that leverages the best of what they each have to offer.

In this model, corporations and individuals work together to capitalize on their respective strengths: Companies can take advantage of economies of scale, persistent investment, and the ability to provide standardized contracts, rules, and recourse – all of which are bound up in a brand promise – and, importantly, they build a platform for participation. Individuals then take advantage of that platform to do what they do best: provide an incredible diversity of the service or product offering through localization, specialization, and customization.

We’re seeing evidence of this Peers Incorporated model everywhere we go. Smartphones, for instance, need to be industrially produced so there’s a lower price and a consistency to the way they’re made, and to their quality. But the collaborative economy is also at work here, as people develop hundreds of thousands of apps on a platform that the smartphone provides. And smartphone companies have gone to a lot of work to make sure it’s easy for individuals, small companies, and innovators to get on top of that platform.

This collaborative process results in impressive innovations that would otherwise be very costly for traditional companies. While a traditional company might have an innovation division of 10, or maybe even 100, people, the Peers Incorporated model allows thousands – or even millions – of people to participate in the innovation process, with incredible results. Consider organizations like Wikipedia and eBay, whose success is derived from the contributions of hundreds of thousands of people who are not affiliated with the brand.

Once the right platform is in place, the Peers Incorporated model delivers the speed of collective action, with the benefits and beauty of individual creativity, ingenuity, and innovation. That’s a powerful combination, and one that can be applied across sectors: crowdfunding in the financial sector, ride sharing in the transportation sector, and online learning initiatives like edX in the education sector, for instance. Again, it’s a combination of big tools and big production with things that are very individualized.

These sorts of open platforms are transforming the way we interact with each other and think about our impact on the world. People are increasingly interested in the source of things they buy – they recognize the value of buying local products, and they want to know that the things they purchase were produced ethically and in a way that has a low impact on the environment. This is all part of the collaborative economy. But while environmental sustainability, ethics of production, and a sense of community all motivate us to rethink our practices, economics is still the biggest driver of change.

What we’re finally beginning to realize is that we are wallowing in excess capacity: There are resources at our fingertips that are already bought and paid for and are not being used to their full potential. Turbulent economic times and the knowledge of our impact on the environment are making us rethink this, and question how we can better use the resources that we already have. How can we recycle more, share more, and ultimately get a better return on our investments? If you’ve already purchased a car, for instance, and are making use of it yourself, perhaps there’s an excess capacity that you can take advantage of by participating in a peer-to-peer car-sharing service like Buzzcar, making some extra money off an investment that you’ve already made.

This fundamental shift in the way we think about the individual’s role in the world brings unlimited opportunities to the fore. As individuals increasingly share ideas and information, leverage their excess capacity, and work together to create a more open, dynamic economy, we begin to see the strength of people-powered innovation. If we embrace this shift toward a collaborative economy, companies, individuals, and the environment can all win.

© Japan Today