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What is Value in a Sharing Economy?

In general, value is associated with the cost of obtaining a solution to a challenge. Things that require us to give up more tend to be perceived as having more value. You could make the case that value is determined by the number of features when more features result in higher costs. And little has changed in this regard since Sears, Roebuck, and Company shipped their first catalog.

However, we now live at the confluence of two highly-volatile societal trends. The first is called the Great Fragmentation. The Great Fragmentation is the phenomenon that is aided by the opensource community where everything gets cheaper and simpler. The Great Acceleration is the societal trend identified by Thomas Friedman where the rate of techno-economic change increases exponentially.

What is a Sharing Economy?

The Sharing Economy is a consequence of these two major societal trends. The Sharing Economy is a worldview in which ownership is not cherished. People are more than willing to rent an experience for a given time frame rather than own it in perpetuity. What this means that in general people do not believe that the goods they purchase will maintain value because things are always getting cheaper and simpler.

The seeds of this change were first pointed out in Clayton Christensen’s Harvard Business Review Article called “Disruptive Technologies” back in 1995. In this article, Professor Christensen identified the phenomenon of “good enough” when it came to the delivery of value. To paraphrase, Prof. Christensen said that products improve to the point at which they become “good enough.”

What does a Sharing Economy mean for makers?

As a maker, you must come to terms with the fact that your innovative product will eventually be overtaken by a product that is just good enough unless you find other ways to deliver new value. You may want to consider adjusting how you think about value. You may even want to consider “disrupting yourself” in the words of Prof. Christensen.

For the sake of conversation, You may want to consider value as a socially agreed up evaluation of how well a solution meets the needs of the customer as a specific point in time. This will mean giving up the notion that value is a constant that transcends niches. That value is a quality that is inherent in the processes that are used to create the product in question.

In a sharing economy, value is a checkpoint in time to be both debated and advocated.  Every discussion of value will start with a Google Search or Amazon Review. However, underpinning all of these conversations will be both the Great Fragmentation and the Great Acceleration. There will also be an unspoken understanding that things will always get cheaper and simpler due to the increasing rate of techno-economic change.

What does a Sharing Economy mean for value creation?

Further, value creation will be guided by machine learning because of the Great Fragmentation and the Great Acceleration. For the record, the Great Acceleration is driven by machine learning and voluminous amounts of structured data. Every day it becomes more of a trivial matter to model historical data and simplify once complex operations.

Nothing ever stays the same. They always get cheaper and simpler. Either because of the level of standard education or changes in technical processes. What’s different about the world in which we live in today is the rate of techno-economic change. So makers must always be evaluating what constitutes value and challenge any belief in a stable status quo.

Conclusion

In a sharing economy, value is associated with the cost of obtaining a solution to a challenge. And it is influenced by the confluence of the Great Fragmentation and the Great Acceleration.

Zachary Alexander