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Wednesday, May 28, 2014

Will Technology and the Sharing Economy Adjust the Market?



The sharing economy is upon us as a direct result of the Internet and its ability to move information around the globe quickly. The lean years since the Great Recession has further fueled an entrepreneurial spirit that tries to hedge income and opportunities through micro-businesses. Large companies are adjusting their structures to reduce costs and improve upon operational functioning. Will the sharing economic and Information Age adjust the way we think, interact, and conduct business?

Things don’t often change quickly and it takes time for people to understand and develop methods of realizing goals.  The sharing economy encourages people to interact with each other by using technology on an economic, ecological, and sociological level (Dubois, 2014). They connect together and share resources to create opportunities.  On a micro level this collaboration builds new possibilities.

Companies are finding benefit in working with other companies and stakeholders to generate higher levels of efficient and effective operations. Excess capacity can be sold during the slow times or purchased during the growth periods without enduring large outlays of capital expenditures. This creates flexible economic growth that better fills in the gaps between the larger economic pieces.

Building a stronger economy requires the connecting of people through collaborative and cooperative participation (Schultz, 2013). Information transference and understanding of the environment encourages effective economic decisions to create better market adjustments. Helping individuals connect to the system, voice their opinions, share information, further their skills, and find opportunities to create growth momentum. Consider four likely adjustments:

New Business Structures: The way in which people view business and new technology is changing the way business and work is conducted. For example, a company called Loconomics is owned by the employees who are employed there (Said, 2014). Virtual companies are sprouting, traditional companies are become flatter, and concepts like crowdsourcing are becoming a powerful business development tool. 

Renting Excess Capacity: Company’s naturally have slack in their capacity or may need additional production abilities at certain times of the year but do not have enough of a need to expand or build new facilities.  For example a company called Floow2 is developing an online site to encourage sharing of excess capacity such as vans and rental equipment in similar geographic locations (Schiller, 2014). Small businesses are lowering costs and improving capacity for growth without as much long term risks.

An Entrepreneurial Class: Using new technology makes a higher level of sharing possible. The transformation in the way people think about selling, buying, and sharing is transforming the way in which entrepreneurial activity occurs (Said, 2014). A person can hold a job and work part-time on a business without major disruption in their lives. Hedged skills and abilities can be used to foster the economic engine and encourage market adjustment.

Pressure on Governmental Structure: There are inherent risks associated new technology and ways of thinking about economic participation. As new business structures and models form they will naturally put pressure on government to adapt. There will be years of negotiation, legal and social interaction that will occur before a happy medium is found. We can think of the ride-share program and the need to define the business while ensuring safety (Weidner, 2014). A proper balance will need to be found to protect stakeholders and the public while still encouraging the testing of new ideas.

The sharing economy is a collaborative one. As people find information, market position, and share resources they are better able to adjust to market realities and see emerging trends. Sharing is not something that is beneficial for only people but also helps companies to buy, sell, and lease capacity to adjust with the market without expensive outlays that create sticky markets. More finite pieces help to create smoother economic transitions and market efficiencies within the capitalistic perspective.

Duboise, et. al. (2014). Connected consumption: a sharing economy takes hold. Rotman Management

Schultz, R. (2013). Adjacent opportunities: the collaboration economy. Emergence: Complexity & Organization, 15 (4). 

Said, C. (May 24th, 2014). Cooperatives give new meaning to sharing economy. SF Southgate. Retrieved May 28th, 2014 from http://www.sfgate.com/business/article/Cooperatives-give-new-meaning-to-sharing-economy-5502879.php?cmpid=hp-hc-jobs

Schiller, B. (May 27, 2014). The Sharing Economy Isn't Just For Consumers: Now Small Businesses Are Getting In On The Game. Fast Co Exist. Retrieved May 28th, 2014 from http://www.fastcoexist.com/3030860/the-sharing-economy-isnt-just-for-consumers-now-small-businesses-are-getting-in-on-the-game

Weidner, D. (May 23rd, 2014). The unique risks of ‘sharing economy’ companies. Market Watch. Retrieved May 28th, 2014 from http://www.marketwatch.com/story/the-unique-risks-of-sharing-economy-companies-2014-05-23

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