We've all heard of the "sharing economy": It's a wide-ranging term that, at its core, refers to a market model in which groups share ownership and use of goods or services. And it's a model that has recently exploded in popularity. Credit the proliferation of user connectivity, combined with evolving consumer behavior:
Related: What's Next for the Sharing Economy?
Examples? Look no further than Airbnb and Uber for real-world examples of sharing startups that have become heavyweights, forcing their old-school rivals -- hotels and taxis, respectively -- to catch up or perish.
So, the sharing economy, in some form, is here to stay. But what's just as interesting is how the sharing economy is clearly shaking up traditional business models. The next phase is up to thought leaders and innovative startups. They have to decide where the sharing economy is headed, in light of the rise of the "internet of things' (IoT) revolution -- meaning the proliferation of internet-connected devices like wearables, home automation devices and cloud-based gadgets.
IoT devices will play a critical role in reshaping and defining the sharing economy.
Why sharing works
The sharing economy model works for several reasons: "Sharers" share at their convenience; consumers have easy access to goods and services; and the organizational model is simplified and streamlined.
Consumers love the convenience and competitive pricing of the sharing economy model. Successful sharing businesses make a consumer choice a no-brainer. Why pay more for a less convenient or worse product or service?
The businesses behind shared models utilize hierarchal and technological organization and innovation, rather than actually maintain and implement the goods and services themselves. That responsibility is passed on to their contractors. Uber, for instance, doesn't need to own and maintain a fleet of aging yellow Crown Victorias the same way Airbnb doesn't need to own any real estate.
These companies become middlemen, a concept which is not new, but that now comes embellished with technological capabilities to connect buyers and sellers in an unprecedented manner.
As it turns out, being a successful middleman today leads to serious profits: PricewaterhouseCoopers estimates that sharing-economy businesses generated $15 billion in revenue in 2014, a figure which will grow to an estimated $335 billion in 2025.
The current scope
Uber and Airbnb are the biggest success stories of our brave new shared world, so much so that starting your vacation now entails catching an Uber ride from the airport to your Airbnb. Gone are the days of flagging down a grumpy taxi driver to get to your bland hotel.
Next, innovation and the IoT will push the sharing model into uncharted waters, and those businesses and individuals that can keep pace will find success. While Airbnb and Uber are the best-known examples of the sharing revolution and its resulting shake-up, they're just the tip of the iceberg. Below that tip lies untapped sharing potential, begging the question: What's next? Well, what else can we share?
What else can we share?
Low-use, high-cost seasonal items like boats, barbecues, scooters and or fishing/skiing/snowboarding equipment are ripe targets for the sharing economy's continued growth and expansion.
These items require a substantial initial investment and frequently end up being underutilized, collecting dust in someone's garage. So, by applying the sharing model to these items, owners will conceivably be able to recoup some of their initial cost, and renters will be able to access them for reasonable one-time fees, rather than buy these pieces of equipment outright.
It's a win-win for all parties, and the kind of sensible transaction upon which the sharing economy is founded.
Beyond equipment items, there are services and spaces that are prime candidates for the shared model, and these will come with community-boosting benefits built in.
Think about future garden-sharing services, where landowners will connect with neighbors seeking garden space to plant veggies. Handymen and skilled contractors will advertise their services and connect with local residents who require project assistance. Babysitters will link with nearby parents. Virtually all goods and services, old or new, will operate via an innovative sharing platform.
The 'internet of things' will make sharing easier.
The internet-of-things, the vast network of internet-connected devices, from cellphones and fitness trackers to smart-refrigerators and home automation devices, will provide a stage for bleeding-edge innovation as the sharing economy expands and new possibilities emerge. IoT objects will make sharing accessible to a wider range of services, things, and people.
Consider these hypothetical-but-realistic futuristic shared economy scenarios: A neighborhood pitches in to purchase a communal automatic lawnmower. Buying a robot lawnmower for your own home is an unnecessary and over-the-top purchase for most people, but when you're sharing the cost with your neighbors, it becomes a much more agreeable idea.
The same applies to a robot vacuum, or better yet, a fully functioning housekeeping robot: It may be hard to justify buying one for yourself, but not when you're splitting it with other residents in your apartment.
Or perhaps you and your neighbors can outsource the neighborhood block patrol by splitting the cost of a security robot. Or a group of surfing enthusiasts can pitch in for a flashy selfie camera drone, allowing everybody a chance to film his or her surf sessions without breaking the bank. The potential is there, and the innovation and ideas will catch up.
Where does the profit come from?
It's realistic that in the near future these devices will be mostly autonomous -- that robot lawn mower will have perimeter scans of the entire neighborhood and a schedule of when and which lawns to manicure. We'll be responsible only for changing the batteries and emptying out the grass cuttings -- if even that. Users will be able to book time slots to use IoT devices through the cloud, and maintenance may be minimal.
But the big question is, where will future sharing companies make a profit beyond the initial sale of the product?
First, the lower price barrier and communal nature will mean that a product that isn't a realistic purchase for one person will become plausible for a group of people, for example. That means that a company will have a group of customers associated with each product, versus just one customer. That opens up more opportunities for cross-sales, after-sales and servicing and maintenance opportunities.
For example, the neighbors that buy a lawnmower robot could be targeted with promotions for additional gardening equipment or other home-are robots. These products could be used more frequently once they're part of a shared ownership, so they would require additional maintenance, repairs and services, which could be provided by the company for a profitable fee.
Businesses that can identify, target, and capitalize such scenarios before they become commonplace are the ones that will succeed. The future of the sharing economy will require strategic and critical thinking. But it can be done: We aren't tasked with reinventing the wheel; we just need to rethink the way the wheel is used.