When Robin Chase co-founded Zipcar, it seemed a unique opportunity to tap into an ecologically minded urban demographic who preferred not to own cars. In fact, she believes the secret to her success – which other companies have also discovered, and you may want to explore – is excess capacity, platforms and peers.
Many people had cars that were sitting idle for large chunks of time while other people wanted occasional use of cars without the burdens of ownership. Excess capacity and potential demand.
BlaBlaCar takes advantage of excess capacity in Europe by arranging shared commuting rides. Apple opened up excess capacity by inviting developers to figure out creative ways to use its iPhone. Waze uses vehicle navigation systems to provide up-to-date route information for drivers. B&B operators have long thrived on excess capacity in their homes, but that is being taken to new levels with Airbnb’s global operation.
Excess capacity “is a low-cost fuel,” Ms. Chase, of Cambridge, Mass., said in an interview. “It should be a magnet for entrepreneurs. We need to think about excess capacity in our own assets, networks, providers like Amazon and experiences.”
But excess capacity is only latent value. Once you spot it, you must make use of it. And that requires two other crucial components: platforms and peer power.
Platforms increase the scale of the opportunity, making it viable for millions of people to use. For Zipcar, Ms. Chase needed a way to bring people together and figure out how to cut the 16-minute processing time for a typical rental car transaction since her rentals might be for only an hour or two.
She also needed a way to make it safe and easy to share cars. The platform can be a mixture of technology and the prowess of a company to turn something that would be complex and expensive – be it renting cars or getting your creative app to market – into something simple and inexpensive. It ensures consistency. “The platform is the key enabler,” she said.
She delineates three ways platforms make excess capacity accessible to others:
Slice it: Zipcar took this approach, moving us from thinking about car possession in terms of years for owners and days for traditional renters to half-hour slices. There are now many companies following that approach in everything from bicycles (Bixi) to health-care administration (Hello Health) to gadgets (Simplist, formerly known as SnapGoods) to hospital gear (Cohealo).
Aggregate it: You can take excess capacity of assets that are individually too small to bother with and group them together to provide more reliability and consistency. Airbnb does this, of course, as does MyBoat.com for buying, selling and servicing boats, and Rover.com for dog sitters.
Open it up: You can open up excess capacity and invite others to create value. The open data movement allows this, encouraging people to come up with new ways to use data.
The third component required for success is peer power, whether it is companies or individuals who offer their own energy to realize the latent value of the excess capacity through collaboration. Every time you post on Facebook or tweet, for example, you are engaging in peer power.
In Ms. Chase’s new book, Peers Inc, she writes: “There are more smart people outside your organization than inside. And this is precisely why Peers Inc is the structure of choice if we want to speed the pace of innovation.”
Indeed, she says the pace can exceed the laws of physics as the three elements work their magic. It took 54 years for the InterContinental Hotels Group to build a 674,000-room hotel chain in nearly 100 countries. Hilton Hotels took 95 years to develop its 715,000-room empire.
Yet Airbnb reached more than 800,000 cumulative total listings in four years. “It could tap the co-investment of a huge number of people around the world. It didn’t have to build its own hotel rooms around the world,” Ms. Chase noted.
“And no matter how big and innovative Apple is, it couldn’t have built all the apps developed over the last few years. Uber doesn’t have to hire people. They just pay them for time working. It changes the economics.”
Exponential growth can occur when you tap excess capacity. It also creates a localized, diverse model: All the networked peers mean the right person or the right room can be accessed at the right time.
Michelin can’t review her neighbourhood restaurant; Yelp does. Your GPS can’t give the same breadth of up-to-date information on commuters that Waze can.
But there are cautions. “Platforms are like mini-governments. They set rules of engagement. Right now everything is decided by the whim of the CEO and people who invented it,” she said.
As the squabbles between Uber and the taxi industry and local governments show, we may have to rethink outdated regulations for this new era to protect the public good but avoid confusing that with protecting the existing industry players.
“This transition to Peers Inc is happening. Companies need to look at how they might be disrupted by new challengers, but also what are the new opportunities they can take advantage of,” she concluded.
Special to The Globe and Mail
Published Sunday, Aug. 02, 2015 5:00PM EDT
Last updated Sunday, Aug. 02, 2015 5:00PM EDT