& Tuunainen: Four Models of Sharing Economy Platforms

Question 1

(Article: Four Models of Sharing Economy Platforms)

What is the paper about introducing the Four Sharing Economy Models?

Answer 1

• Sharing economy platforms have fostered competition and redefined industry boundaries in a range of businesses
• Competitive advantage because of how they are doing business -> new ways to combine old organisational & market mechanisms to coordinate platform participation

o Business boundaries (internal vs external) became increasingly fluid -> exploit fluidity as strategic asset to coordinate & collaborate without formal organsisation

 Model can help other businesses to understand SE characteristics & respond strategically

Question 2

(Article: Four Models of Sharing Economy Platforms)

What does Multi-sided platforms (MSPs) mean?

Answer 2

Multi-sided platforms (MSPs): centred on facilitating interactions between two or more parties, e.g. eBay  sharing economy platforms are a form of MSPs, but facilitate rental & sharing instead of buying

Question 3

(Article: Four Models of Sharing Economy Platforms)

What are the key Attributes: confluence of three broader socio-economic developments?

Answer 3

Access over ownership, Peer-to-peer economy, Allocation of idle resources

-> Enabled by diffusion of digital technologies; intermediaries mitigate risks, build trust & lower transaction costs

Question 4

(Article: Four Models of Sharing Economy Platforms)

Key Attributes: confluence of three broader socio-economic developments: What is meant by Access over ownership?

Answer 4

1. Access over ownership: on-demand economy - shift from primacy of buying goods towards buying access to goods

Question 5

(Article: Four Models of Sharing Economy Platforms)

Key Attributes: confluence of three broader socio-economic developments: What is meant by Peer-to-peer economy?

Answer 5

2. Peer-to-peer economy: platforms mediate transactions among peers coordinated by trust & reputation

Question 6

(Article: Four Models of Sharing Economy Platforms)

Key Attributes: confluence of three broader socio-economic developments: What is meant by Allocation of idle resources?

Answer 6

3. Allocation of idle resources: collaborative consumption – individuals share privately owned resources against a fee

Question 7

(Article: Four Models of Sharing Economy Platforms)

Key Attributes: confluence of three broader socio-economic developments: What is meant by Allocation of idle resources?

Answer 7

3. Allocation of idle resources: collaborative consumption – individuals share privately owned resources against a fee

Question 8

(Article: Four Models of Sharing Economy Platforms)

What is the Challenge for Incumbent Firms?

Answer 8

• Sharing economy platforms don’t need traditional industry dynamics  network effects are at the core of sharing economy business models and value propositions
• Incumbent firms react to competition from sharing economy platforms in three main ways: (1) through acquisitions of SE firms, (2) though collaboration or (3) through competition (create their own models)
• Main issue: sharing economy platforms face less regulations than incumbent firms, which is seen as unfair  put incumbent firms at a competitive disadvantage through irregular/illegal means

Question 9

(Article: Four Models of Sharing Economy Platforms)

What is Boundary fluidity: ?

Answer 9

Boundary fluidity: loosening of formerly strict distinctions in all organizational fields, contexts and domains -> SE business exploit it (competitive advantage) & make it easy for members to casually participate in value-creation
* Organisational coordination mechanisms used to be applied only within the boundaries of a formal firm, now they can be applied beyond to coordinate individuals participating in SE platforms
* Main issue: platform owners tend to treat their supply-side participants unethically  exploited, left with most of the risk

Question 10

(Article: Four Models of Sharing Economy Platforms)

What are the Organisational Coordination Mechanisms ?

Answer 10

-> Labour is divided into subtasks that have to be coordinated and put together, through:

1. Mutual adjustment: informal communication between people conducting interdependent work
2. Direct supervision: an individual oversees the work of others & instructs interdependent workers
3. Standardisation of work processes: work content is specified in rules & routines
4. Standardisation of output: clarified results of different work; actions are not prescribed
5. Standardisation of skills & knowledge: standardised training & education
6. Standardisation of norms: common values & beliefs

Question 11

(Article: Four Models of Sharing Economy Platforms)

Market Coordination Mechanism: Price schemes??

Answer 11

Involves different pricing schemes that incentivize sharing or renting
Price system: either based on supply & demand, cost of service provision or as compensation to the service provider

Question 12

(Article: Four Models of Sharing Economy Platforms)

Four sharing economy models:

Answer 12

Chaperones, FRachieser, Garderner, principals (siehe article)

Question 13

(Article: Four Models of Sharing Economy Platforms)

Four sharing economy models: Tight vs loose control?

Answer 13

Tight control: platform owner specifies, standardises and monitors all those aspects of platform participation that can be used to keep the costs of transacting low
Loose control: platform owner defines only minimum standards or guiding principles; support activities

Question 14

(Article: Four Models of Sharing Economy Platforms)

Four sharing economy models: High vs Low rivalry?

Answer 14

High rivalry: platform owner prices the service dynamically based on supply & demand algorithm  stimulates participants to contribute more effort to increase service quality & differentiation to maximise their profits
Low rivalry: low when prices, if there are any, are based on compensating or sharing the costs of the supply side

Question 15

(Article: Four Models of Sharing Economy Platforms)

Four sharing economy models: High vs Low rivalry

Answer 15

High rivalry: platform owner prices the service dynamically based on supply & demand algorithm  stimulates participants to contribute more effort to increase service quality & differentiation to maximise their profits

Low rivalry: low when prices, if there are any, are based on compensating or sharing the costs of the supply side

Question 16

(Article: Four Models of Sharing Economy Platforms)

Franchiser Model:

Answer 16

Tight Control, High Rivalry

Franchisers: exert tight control over platform participants through standardised procedures & contracts; foster high rivalry among participants by prescribing service prices based on secret supply & demand algorithms
Value proposition: low cost & efficiency gains
Example: Uber – dictates the fare for the ride & collects a commission fee; competes with taxi companies

Question 17

(Article: Four Models of Sharing Economy Platforms)

Chaperones Model:

Answer 17

Loose Control, High Rivalry

Chaperones: exert loose control over participants (free to offer what they want), owners just set norms, community values & rewards; high rivalry between participants through price recommendations based on supply & demand, but participants are allowed to set their own prices
Value proposition: encourages service differentiation of supply-side participants
Example: Airbnb – treats hosts like community members (norms & values), but makes them compete like self-employed service providers

Question 18

(Article: Four Models of Sharing Economy Platforms)

Principals Model:

Answer 18

Tight Control, Low Rivalry

Principals: exert tight control by dictating the terms of short-term performance-based contracts, standardised rules & monitoring; low rivalry through charging predefined, stable prices for services (e.g. price is determined by therapist’s qualifications)
Value proposition: compete on lower costs & risk mitigation of opportunistic behaviour
Example: Handy – standardisation & control ensure quality; pricing scheme rewards quality work with higher compensation

Question 19

(Article: Four Models of Sharing Economy Platforms)

Gardener Model:

Answer 19

Loose Control, Low Rivalry

Gardeners: exert low control & low rivalry through prices based on predefined, stable categories; participants often don’t earn profits but share costs
Value proposition: self-organisation & community building
Example: Couchsurfing

Question 20

(Article: Four Models of Sharing Economy Platforms)

lessons learned for incumbent firms: : What meant by Understanding the Strategic Intent of Sharing Economy Platforms?

Answer 20

• Incumbent firms need to understand how sharing/renting is facilitated, how control is exerted & how rivalry is promoted -> model helps the analysis, so strategic intent becomes clear
• Platforms may offer different services based on different models & may switch from one model to another

Question 21

(Article: Four Models of Sharing Economy Platforms)

lessons learned for incumbent firms: : What meant by Understanding the Strategic Intent of Sharing Economy Platforms?

Answer 21

• Incumbent firms need to understand how sharing/renting is facilitated, how control is exerted & how rivalry is promoted -> model helps the analysis, so strategic intent becomes clear
• Platforms may offer different services based on different models & may switch from one model to another

Question 22

(Article: Four Models of Sharing Economy Platforms)

lessons learned for incumbent firms: : What meant by Complement Your Product Portfolio with Services?

Answer 22

Complement Your Product Portfolio with Services
* Complementing existing product portfolios with related services is an effective countermeasure against SE competitors  servitisation of private idle resources is what SE firms do

Question 23

(Article: Four Models of Sharing Economy Platforms)

lessons learned for incumbent firms: : What meant by Access New Modes of Innovating?

Answer 23

Access New Modes of Innovating
* Incumbent firms can exploit boundary fluidity to gain access to new sources of innovation  can set up platforms for engaging outsiders in open innovation and crowdsourcing
o Idle resources being harnessed are the creativity, ingenuity and time of private individuals

Question 24

(Article: Four Models of Sharing Economy Platforms)

lessons learned for incumbent firms: : What meant by Engage Consumers in Value Creation?

Answer 24

Engage Consumers in Value Creation
* Consider how to involve consumers or clients more closely by increasing the value of network effects
* Requires a shift in strategic intent, away from competing based on the ownership of unique assets, to generating value based on user participation and community engagement

Question 25

(Article: Four Models of Sharing Economy Platforms)

lessons learned for incumbent firms: : What meant by Ensure Strategic Fit by Optimising the Combination of Organisational & Market Coordination Mechanisms?

Answer 25

Ensure Strategic Fit by Optimising the Combination of Organisational & Market Coordination Mechanisms
* Strategic positioning along two dimensions is crucial because it ultimately determines how participants will be motivated to join the platform, remain active and, ultimately, create value  design a business model that is aligned with the firm’s strategy

Question 26

(Article: Four Models of Sharing Economy Platforms)

What are the 5 lessons learned for incumbent firms?

Answer 26

Lesson 1: Understanding the Strategic Intent of Sharing Economy Platforms

Lesson 2: Complement Your Product Portfolio with Services

Lesson 3: Access New Modes of Innovating

Lesson 4: Engage Consumers in Value Creation

Lesson 5: Ensure Strategic Fit by Optimising the Combination of Organisational & Market Coordination Mechanisms