No ratings yet.

Will the sharing economy go down – because of people?

 

As Josie Cox argues, yes, the sharing economy will go down because essentially, people cannot be trusted. For me, this theory sounded a lot like a very pessimistic rage about humankind at first sight, but after thoroughly reading her article on the INDEPENDENT from July 2017, I have to admit that she has a point. Most sharing economy business models do have one dangerous, unpredictable factor: the human, who rarely does anything without maximizing his/her interest.

The article opens its argumentation with an example from China where a start-up offered umbrellas to people on the run (Cox, 2017). Sounds like a good idea to me: the sky opens up, rain starts pouring and you are in the middle of the city – of course without umbrella even though you have ten of them at home. Especially since living in Rotterdam this happened many times to me. However, this start-up was blown up by their unreliable customers: 300,000 of the company’s umbrellas actually went missing after only a few months in business (despite the customers paying an initial deposit for the umbrellas) (Cox, 2017). This, Cox argues, stems from only one thing the business overestimated: the overall trust and reliability of its customers (2017). Consumers, are inherently focussed on satisfying their needs, in this case arriving dry and without too much effort at their final destination. As soon as this need is satisfied, we forget about anything related – and throw the umbrellas into the trash or take it home and forget about it – because returning them would probably mean extra effort for us. (Cox, 2017)

After thinking about this, I actually came up with some other examples by myself: ever went to large American cities where these Lime e-scooters are offered? I’ve seen many of them lying damaged and twisted on the streets, in garbage tons or similar. Well, even think Europe or Germany: I’ve seen multiple sharing bikes being fished out of the Isaar in Munich.

So, I’d partly agree and say: humans, generally, shouldn’t be trusted blindly. The rise of the sharing economy cannot be attributed to any kind of reinvention of the collective good – in most cases it is just more convenient for consumers. I am not booking an AirBnB because I love to share a flat with a complete stranger while on vacation with my boyfriend – I am doing it because it is cheaper than a hotel with the same standard. This in fact, is not necessarily something particularly negative, I just think that it is a factor that is not enough accounted for in sharing economy models.

Any company whose business model relies on the belief that human will do anything else than profit maximization, should be aware of that. Their business is based on “a constant balancing act between greed and trust, value and cost, convenience and risk.” (Cox, 2017) What do you guys think?

 

Cox, J. (2019). The sharing economy is failing because people can’t be trusted. [online] The Independent. Available at: https://www.independent.co.uk/voices/uber-airbnb-sharing-economy-people-cant-be-trusted-a7867301.html [Accessed 7 Oct. 2019].

5/5 (3)

The Digital Assistant: User Experience Strategies in the Automotive Industry

As described in one of the first articles of this course (“Managing our hub economy”, Iansiti and Lakhani, 2017) the automotive industry is about to be fundamentally changed by the emergence of connectivity and autonomous driving technologies. As the authors describe “(…) a new source of value is emerging: the connection to consumers in transit.” (Iansiti and Lakhani, p.88, 2017) the main focus is shifting away from the actual driving experience. A more recent example which I came across during my internship at the corporate strategy department of a large German car manufacturer is the emergence of digital assistants and their integration into cars. Along this example, I want to evaluate multiple different strategic choices automotive OEMs have when being addressed with this rising importance of digital in-car user experience and the pressure of external hub companies like Amazon or Google.

Based on my experience, there are three different strategic options available to OEMs.

First of all, OEMs can decide to fully integrate established digital assistant systems like Amazon’s Alexa as the only in-car assistant system. Generally, this strategy is mainly pursued by lower-budget brands, e.g. Fiat (Meier, 2018). Advantages of this strategy are, that it is a cheap solution offering many different functionalities to its users. This creates high user satisfaction. The dangers and disadvantages of the strategy, however, are great. Firstly, OEMs risk to lose the valuable customer connection that is described by Iansiti and Lakhani (2017). They may lose access to the majority of data produced while the driver is in the car. This loss may hinder OEMs to succeed in future digital business models. Furthermore, this strategy makes car manufacturers very dependent on hub companies supplying digital assistants. Once Amazon “got into” a car, switching costs for the OEM will be high and switching is very unlikely.

A second strategy available is the other extreme: solely providing “home-made” digital assistants. Currently, there is no OEM that is fully pursuing this strategy, if you forced me to name one it would probably be Mercedes Benz with its MBUX and the integrated LINGUATRONIC that comes closest to this strategy (Estrada, 2018). Before we look at the disadvantages to find out why no one is really adopting this strategy, let’s look at the advantages. Compared to strategy 1, this solution provides the highest possible customer connection: the digital assistant may not only impersonate your brand and thereby create unique brand loyalty but also the OEM gains full access to customer data. No matter whether ordering a Starbucks, searching the closest gas station or scheduling appointments at a doctor: the OEM knows everything. This opens the door for new digital business models like in-car advertisements and more. However, as mentioned before, this strategy is not really adopted due to its great disadvantages. The “in-house” development is extremely expensive and resource-intensive as OEMs must go outside their usual capabilities and knowledge. Therefore, it is likely that their assistant will offer less functionalities than the ones provided by industry leaders like Amazon or Google. Large investments may not pay off if users are unsatisfied. As customers are probably used to handling “regular” digital assistants in their homes (e.g. Amazon’s Alexa) they might be annoyed by always switching assistants without any possibility of transferring data from one assistant to the other.

Well, finally, there is a middle way strategy (of course there is). This strategy is widely used by higher-priced luxury brands like BMW or Audi. Here, the OEM integrates two assistants into the car: a “home-made” and an external one. This enables car manufacturers to capture “the best of both worlds” by retaining some access while opening the system to satisfy consumers. Advantages are the higher customer satisfaction and the minimization of the OEM’s dependence on tech companies. However, there are also major costs incurred with this strategic option: the OEM has to develop their own assistant while also optimizing the integration of the external assistant. With this integration, multiple difficulties arise: to what degree is the external assistant allowed to overtake the OEM’s assistant’s responsibilities? Who comes first? And how “deep” can the external assistant’s insights be? How is the interaction between both? Can they hand over tasks to the other? In many cases, these “middle-way” challenges are still unsolved.

Generally, a clear trade-off for OEMs arises: maximizing user satisfaction vs. capturing the value of customer connection and their corresponding data. As tech-companies like Amazon and Google commence with offering their products as in-car services, this trade-off will become increasingly severe. Customers may get high-quality in-car entertainment and services in low-budget cars by using Amazon’s Alexa or even a step before that by using Apple’s CarPlay. This also threatens luxury brand’s main business model: selling interior add-ons like navigation and infotainment systems at a high price. How will luxury brands be able to keep up with Google’s and Amazon’s systems? How will they differentiate once the actual driving becomes decreasingly important? I think there is a lot to come.

 

 

References
Meier, F. (2019). Hey, Alexa! What Cars Can I Talk to With My Amazon Echo? | News from Cars.com. [online] Cars.com. Available at: https://www.cars.com/articles/hey-alexa-what-cars-can-i-talk-to-with-my-amazon-echo-1420700147192/ [Accessed 18 Sep. 2019].

Estrada, Z. (2019). Mercedes uses its new car to launch yet another voice assistant. [online] The Verge. Available at: https://www.theverge.com/2018/1/10/16872494/mercedes-voice-assistant-infotainment-ux-ces-2018 [Accessed 18 Sep. 2019].

Iansiti, M. and Lakhani, K. (2017). MANAGING OUR HUB ECONOMYSTRATEGY. Harvard Business Review.