I recently discovered an excellent new book by Rachel Botsman and Roo Rogers, entitled What’s Mine is Yours. Reading this book gave me one of those rare “Aha” moments when someone succinctly summarizes a number of trends that I’ve been observing into an elegant thesis. The subject of Rachel and Roo’s book is an emerging class of business models collectively called Collaborative Consumption. The authors identify three sub-classes of collaborative consumption:
1. Product Service Systems
These are businesses that provide consumers with the benefit of using a product without needing to own the product outright. Current high profile examples of such product service systems are ZipCar, Netflix and RentTheRunway, which allow consumers to drive cars, watch DVDs and wear designer clothes, without needing to own any of them. While these examples are all relatively new, the concept of a product service system has much older roots. The classic example that I learned in business school was Interface Carpet, as discussed in Paul Hawken’s seminal book, Natural Capitalism.
2. Redistribution Markets
These are services that efficiently enable the redistribution of used goods from where they are not needed to where they are. The classic examples of redistribution markets are EBay and Craigslist. Recently, a number of new companies have been established to provide redistribution services for a specific product category, such as ThredUp which is developing a children’s clothes redistribution service, and one of our own portfolio companies, Gazelle, which redistributes used consumer electronics.
3. Collaborative Lifestyles
These companies help people exchange and utilize underutilized assets such as time, space, skills, and money. The highest profile example of a collaborative lifestyle company is Airbnb, which provides a market for people to rent their spare rooms to travelers looking for an alternative to a hotel room. Another wonderful example is the British company LandShare which connects people with spare land to people looking for land to farm.
The common technologies that enable these three collaborative consumption business models are online social media and mobile apps. The companies use these tools to build efficient, trust based marketplaces that match consumers who want to share resources and exchange goods. They also use they power of social proof and social trust to give consumers comfort that they can collaborate and exchange with people who they’ve only ever met online.
The Collective Power of We
At Physic Ventures, one of the key themes in our Sustainable Living investment practice is “Resource Efficiency”, or as it’s commonly known, the 3Rs of Reduce, Reuse, and Recycle. We have invested in EnergyHub, which helps consumers reduce their energy consumption, WaterSmart, which helps consumers reduce their water consumption, Gazelle, which enables the re-use of consumer electronics, and RecycleBank, which incentivizes consumers to recycle.
The component that most struck me about the collaborative consumption model is that the services provided by these new companies all require a network of users to be successful. Unlike the original 3Rs of Reduce, Reuse, and Recycle, which are mostly individual behaviors, collaborative consumption models rely on the positive impact of collective behavior. This is an extremely powerful trend that we are beginning to invest behind at Physic Ventures and we refer to as the transition from Me to We.
The success of this new generation of Collaborative Consumption business models suggests that consumers are increasingly looking to adopt products and services that not only benefit “Me”, but also benefit the collective “We”. Data from our resource efficiency companies, EnergyHub and WaterSmart show that consumers will adopt new services and behaviors if they save them money. RecycleBank has demonstrated that adoption of positive impact actions can be further accelerated by the use of rewards and incentives. However, where these companies really begin to gain traction with consumers is when they show their users the positive impact of their collective actions.
RecycleBank reports the tons of landfill avoided by a community using their service. EnergyHub and WaterSmart report the tons of carbon and gallons of water saved by the communities using their services. It is this collective positive impact that most excites their users and demonstrates the power of these collaborative behaviors. I’m excited that we’re rapidly transitioning from an era when only “Me”-type business models were successful to a new era where “We” models lead the way. Rachel and Roo’s book is an excellent primer on this brave new collaborative world.