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Over the last decade, the sharing economy became very popular with many new arising businesses that try to succeed in this competitive market. While Sharing economy businesses (SEB) like Airbnb are prime examples for success, many others fail. In this short blog, I will present several reasons for the failure of such businesses.

In total, Chasin, Hoffmeister, Hoffen, and Becker (2018) have identified 7 major reasons.

1. Lack of platform providers: A major issue is an imbalance between service providers and consumers. If there are too many consumers and not enough providers, a sharing economy business will not be able to function properly. The main challenge for businesses is to recruit a sufficient amount of providers. A lack of participants usually results from insufficient marketing (Chasin, Hoffmeister, Hoffen, and Becker 2018).

2. Insufficient analysis of the sharing market: SEBs are prone to performing only poor analyses of their business idea before designing and creating the service. Oftentimes, there is no market with sufficient size to operate in. Likewise, some markets are dominated by bigger businesses who have more resources and therefore are able to change the rules of markets (Chasin, Hoffmeister, Hoffen, and Becker 2018).

3. Trust and safety concerns: In fact, sharing economy businesses rely on providers of resources and thereby have little control over service delivery and quality. However, consumers need to trust that a provider will deliver the expected service at good quality. Likewise, providers need to trust that consumers will behave in the expected manner and treat resources with respect. Trust and safety concerns are a major impediment to user’s participation in SEBs and firms need to put much effort into creating such trust (Chasin, Hoffmeister, Hoffen, and Becker 2018).

4. Hidden resource requirements: Oftentimes, managers of SEBs tend to be less prepared for the resource demands than managers of traditional businesses. Some managers view their business to be simple and therefore not needing many resources. Such mismanagement increases the risk of failure and often results in lack of financial resources (Chasin, Hoffmeister, Hoffen, and Becker 2018).

5. Unscalable technical design: While a unique benefit of SEBs is their ability to scale up quickly to accommodate increasing consumer demand, this requires a scalable technical solution to it. However, some businesses fail due to insufficient technical capabilities which does not allow them to grow as fast as they potentially could. While the business design often is complex, it should still allow for quick changes to allow rapid growth (Chasin, Hoffmeister, Hoffen, and Becker 2018).

6. Unclear legal environment: Legal barriers are hard to avoid and often are a serious risk to the viability of SEBs. Especially at younger age where firms lack financial resources, challenges with legal requirements can quickly lead to complete firm shutdown (Chasin, Hoffmeister, Hoffen, and Becker 2018).

7. Business termination through acquisition: A further reason why SEBs cease to operate are acquisitions by other businesses. Most acquisitions result in the acquired business’ users being transferred to the acquirer’s platform (Chasin, Hoffmeister, Hoffen, and Becker 2018).

Overall, there are many factors that managers of sharing economy businesses need to consider since they are also prone to failure.

Reference

Chasin, F., Hoffen, M., Hoffmeister, B., & Becker, J. (2018). Reasons for Failures of Sharing Economy Businesses. MIS Quarterly Executive .

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According to Valacich and Schneider (2018), the emergence of the digital world and changes in technology enable new ways of working and socializing. Over the last decade, five IT Megatrends arose which shape the digital future and interrelate with changes in organizations and society. The five IT megatrends are: Mobile, Social Media, Internet of Things, Cloud Computing, and Big Data.

The first IT Megatrend is related to mobile devices. In fact, many people believe that we already live in a post-PC era. In the developing world, we can see that mobile devices often leapfrog traditional PC’s. This has several implications; for instance, consumerization of IT is a major sub-trend, and approaches like Bring-Your-Own-Device to work is a major concern for many organizations. Likewise, there are many security-related issues (Valacich and Schneider 2018).

The second IT Megatrend is Social Media. In the second quarter of 2022, Facebook had 2,93 billion users (Statista, 2022) who share status updates and pictures with friends and family. Many companies harness the power of the crowd by using social media to include people in the process of innovation and other activities. Besides, many organizations use social media to encourage employee collaboration through enterprise social networks etc (Valacich and Schneider 2018).

The third IT Megatrend is the Internet of Things, which refers to a wide range of physical objects that automatically can share data via the internet. The industrial IoT enables the convergence of operations technology and IT leading to mass-produced customized products (Valacich and Schneider 2018).

The fourth IT Megatrend is Cloud Computing. Web technologies facilitate using the internet as a platform for applications and data. While applications used to be kept on individual computers, they increasingly move to being used in the cloud, e.g., the Google cloud with Docs, spreadsheets, calendar, Gmail and so on. Overall, cloud computing enables advanced analytics of massive amounts of Big Data (Valacich and Schneider 2018).

The fifth IT Megatrend is Big Data. The Industrial Development Corporation estimated that in 2013, 4,4 zettabytes of data were generated and consumed. This is equal to 4,4 trillion gigabytes, or similar to 70 billion 64GB Iphones. They forecasted a growth to 180 zettabytes by 2025. This increasing amount of data enhances the ability to detect valuable relationships and further deep insights that can contribute to the success of businesses (Valacich and Schneider 2018).

Overall, these five IT Megatrends have significant impact on society and organizations. While they come along with many benefits, they also create issues for business and need to be manages carefully.

References:
Statista. (2022). Statista . Von https://de.statista.com/statistik/daten/studie/37545/umfrage/anzahl-der-aktiven-nutzer-von-facebook/#:~:text=Die%20Anzahl%20der%20monatlich%20aktiven,Netzwerk%20zu%20dem%20Unternehmen%20Meta. abgerufen
Valacich, J., & Schneider, C. (2018). Information Systems Today, Managing in thee Digital World. Pearson.