The Sharing Economy meets the Internet of Things

This post has been reblogged by IBM and is reproduced on their Tumblr sites. The original is available below in its entirety.

Noise over what has been called Collaborative Consumption – and elsewhere The Sharing Economy – has been increasing in volume for some months now. Kickstarter, a crowdfunding business that exists to let people from anywhere in the world donate to singular projects, is a great example of this new philosophy. The company has played roles in funding films, games consoles and civic projects like the construction of bridges. Zeitgeist has made use of sites likes AirBnB and Housetrip to stay in lovely, very affordable apartments in places like Paris and New York. These diverse businesses aren’t necessarily united in a single cause to drive the sharing economy, but they are all trying to make use of what some economies, particularly in the West, excel at producing: surplus.

It’s an acknowledgment that there are physical items we own that we don’t actually need, which are eminently transferable – for a certain period of time – to others, with the market more or less dictating price (it’s this last point that removes any assertions or complaints of the idea being some sort of socialist utopia). At its root, the idea has been seen in media consumption for several years now; we’ve written often about the new customer mantra of ‘access trumps ownership’, where people prefer to stream their content rather than have it on a shelf. This is a bit of a sea-change in how we view ourselves. As a very astute article in The New Yorker pointed out earlier this month, we have often defined ourselves by what we own,

“For most of the past century, Americans have been the world’s greatest consumers. And usually consumption has meant ownership: just before the Great Recession, the average American household owned 2.28 cars, and had more television sets than people. But these days a host of new companies are trying to disrupt the paradigm… beneath all the hype is a sensible idea: there are a lot of slack resources in the economy. Assets sit idle—the average car is driven just an hour a day—and workers have time and skills that go unused. If you can connect the people who have the assets to people who are willing to pay to rent them, you reduce waste and end up with a more efficient system.

Zeitgeist believes that the increasing popularity of another evolution in business – that of connected devices – will dovetail nicely with the sharing economy. The widespread use of connected devices, known as the Internet of Things, is broadly based on the idea of having products that are intelligent enough to know what they are being used for, when they are being used, and how to make sure the user gets the most productivity out them. Connecting said product to the Internet is usually a pretty good way of doing this. At its simplest, it is the much-ballyhooed Smart Fridge, that knows when it’s running out of milk and orders more for you online without having to bother asking you. In reality, it is things like the Nest device, a (very) smart and (very) beautiful thermostat device.

Zeitgeist was at London’s Bloomberg HQ earlier this week for Social Media Week, a series of events usually dominated by a great deal of hot air. Fortunately this was not the case with the Internet of Things event. It quickly became clear that without the Internet of Things, collaborative consumption would plateau very quickly. There were fascinating projects like Pachube, which relied on crowdsourcing data in real-time via Twitter from an aggregation of sensors, allowing them to communicate with one another and at the same time. This information is not only not proprietary, it is meant to be built upon. It was used during Japan’s Fukushima disaster for crowdsourcing radiation data. 2000 feeds were set up after 10 days; Android apps, SMS alerts were built, all by different people, a great example of product and information being shared and being improved by being open to collaboration. On a more humorous level, Zeitgeist was also privy to hearing about Addicted Toasters, where the toaster is not just connected to the owner’s smartphone, or to the Internet, but also to other toaster’s in the network. If it sees that others are toasting more bread, it gets ‘jealous’. By which we mean of course that if it decides it is being under-utilised, it will decide it is time to go to the next person on the waiting list who wants to use a toaster. It does this by dialling into the FedEx API and getting itself shipped to that next person in line. The speakers, Usman Haque, said this was not just about “remote monitoring or control, but participation with others in how people make sense of local environments and how products are shared”. While the Addicted Toaster may be smart, and ostensibly aware of a network of other toasters, many aren’t holistically connected with a wider infrastructure. The driverless car, which companies like Tesla and Google are road-testing as I type, is set to bring about this next evolution, as described last week in an excellent article in the Financial Times. If we do come to a time when – as was suggested at the Bloomberg event – every product has its own IP address, then it means that every product is a lot more easy to track, and necessarily a lot more easy to lend to others. For, if a device is unique and ‘intelligent’, it should hypothetically recognise your own needs when you need it, and another’s when someone else has need of it. A world with fewer items can be pretty cool, too, if pretty small, as entrepreneur Graham Hill demonstrates with his New York apartment that is one room, or eight, depending on how you look at it.

All this sharing undoubtedly has positive implications for sustainability; a lot less produced means a lot less waste. There are potentially huge lifestyle impacts as well, which may not be as comforting. The New Yorker, again:

“It isn’t just companies and regulators who will have to be flexible, though. Workers will, too, since the sharing economy requires people to function as micro-entrepreneurs… They are all independent contractors, working for themselves and giving the companies a cut of the action. This has certain attractions: no boss, the ability to set your own hours, control over working conditions. It also means no benefits, no steady paycheck, and the need to always be hustling; in that sense, it fits all too well with the free-agent nation we’re increasingly becoming. Sharing, it turns out, is often a hell of a lot of work.”

Microsoft’s ‘New Coke’ moment – On knowing when your customer is dissatisfied

Microsoft has been trying its hand at a bit of innovation of late in an attempt to raise some of its lost brand equity, and stem the larger market decline in PC sales, which has recently started accelerating. (On a side note, Deloitte have a caveat to these figures, saying the true measurement is in usage, not units).

One of the ways this innovation has come about is in the release of its Surface product, which has interested many but earned the ire of erstwhile manufacturing partners as Microsoft has pursued its own path, making the product in-house. Its new operating system, Windows 8, has struggled to gain traction with consumers. The president of Fujitsu, one of Microsoft’s partners, declared interest to be “weak” back in December last year. The most obvious step-change from previous iterations is the slate screen that greets users upon booting up. On proceeding through this, users then come to a more familiar Windows layout.

In yesterday’s Financial Times, Microsoft said it was preparing to “reverse course over key elements of its Windows 8 operating system”. Envisioneering analyst Richard Doherty was quoted as saying it is the biggest marketing fiasco since New Coke. The only difference being, Doherty comments, that Coca-Cola acknowledged their error three months in, whereas Microsoft is pushing eight months now since launch; Coca-Cola conversely paid more attention to what its customers were saying about the product. “The learning curve is definitely real”, said head of marketing and finance for the Windows business, Tami Reller.

IDC research tells a discouraging story for businesses relying on PC sales

Today’s FT featured an editorial entitled “Steve Ballmer was right to gamble on change”. Opening with a quotation by Bill Gates, saying that to “win big you sometimes have to take big risks”, the editorial cites Kodak as a primary example of a company that refused to take risk, and ended up succumbing to creative destruction at the expense of trying to protect legacy revenue streams. We’ve written before about Kodak and creative destruction. The editorial calls for a revival of a “climate of creativity” at the company, and certainly that is what Ballmer is trying to instill, very nobly and with good reason. Zeitgeist’s bone of contention is with the following, seemingly logical statement,

“…disruptive innovations are disruptive precisely because the new technology does not appeal to traditional customers. Instead, it appeals to the customers of the future.”

We would argue that Microsoft’s customer base is made up overwhelmingly of what might be considered “traditional” customers. Users who find familiarity with a long-established incumbent, who have no interest in OS alternatives like Linux, Apple, Android or Mozilla. They are not looking for a revolution. By all means change your product, but it must evolve, not look like a completely different way of computing when you switch it on. This point is confirmed nicely by a recent piece in Harvard Business Review, which details how to get customers to value your product more. The author, Heidi Grant Halvorson, describes the importance of knowing the right emotional fit for your customers’ mindset. The article elaborates,

“motivational focus — whether he tends to view his goals as ideals and opportunities to advance (what researchers call “promotion focus”), or as opportunities to stay safe and keep things running smoothly (“prevention focus”). While everyone has a mix of both to some extent, most of us tend to have a dominant focus.”

We would argue that users that prefer Microsoft Windows OS to other systems would strongly fall into the latter category. Change is perhaps inevitable, but Microsoft are choosing a precarious path with such radical changes aimed at a group little interested in such fundamental alterations to the way they interact with such an integral device.

Media and Entertainment – Revenue vs Cost

“Old-media guys are always asking, ‘When will revenues rise to meet our cost structure?’ The answer, I say, is when hell freezes over.”

 – Clay Shirky, author, Here Comes Everybody: The Power of Organizing Without Organizations

This quotation appeared in an article by Michael Wolff published last year in Vanity Fair. The article, on internet predictions, touched on how advertising rates are often 10% of what you might get from TV or print. Studio executives are waiting nervously for the time when Blu-ray and digital sales will make up for the increasingly lean profits from DVDs. But perhaps this just won’t happen. What then for the sector?

Last week, Zeitgeist was privileged to hear from Marc Ventresca, lecturer in Strategic Management at Oxford University’s MBA program at Saïd Business School. Where supply meets demand, price emerges, hence the market dictates the price. The economist Schumpeter, though, posited the issue of “disequilibrium”. The key question then being not “how capitalism administers exisiting structures, … [but] how it creates and destroys them.”

What does creative destruction – of which Alan Greenspan was a key exponent – mean then for the media and entertainment sector? No one seems to be daring to look this far into the future currently and guess how we re-combine, re-purpose and reposition the sector. Is the answer to be found in Sony’s new Blue Violet format, or is something more radical needed? Also in the works from the same company is “Ultraviolet”, an aggregate service that “will help identify content, devices and services from a spectrum of familiar entities – including studios, retailers, consumer electronics manufacturers, cable companies, ISPs and other service providers – that will work together”. Something of this nature might reduce regulatory arbitrage, as well as consumer confusion. As Mr. Ventresca pointed out last week after the lecture, it is the platform that is now of paramount importance for consumers, even over the content itself.