Keystone Column 25 – The collaborative economy

Interesting trends – the collaborative economy

One of the most disruptive innovations in recent years has been the rise of the collaborative economy. The collaborative economy enables individuals and businesses to offer and use services and share assets via online platforms. Be it sharing houses (airbnb) or car journeys (uber), services in the collaborative economy are widely offered via online platforms today. By its very nature innovation changes the established way of doing things, challenging incumbents to either evolve or become irrelevant. Procurement training for buyers is a clear emerging need for commissioners of emerging solutions.

Traditional operators have varied in their responses: while some have sought to adapt their businesses models to compete in this rapidly growing sector, others have reacted by trying get authorities to ban/restrict the new operators. As the collaborative economy takes root in the EU, national and local authorities are responding with a patchwork of different regulatory actions. This fragmented approach to new business models creates uncertainty for traditional operators, new services providers and consumers alike and may hamper innovation, job creation and growth. The EU Commission has responded by issuing guidance on how existing EU law should be applied to this dynamic and fast evolving sector, clarifying key issues faced by market operators and public authorities alike:

• Service providers should only be obliged to obtain business authorisations or licenses where strictly necessary to meet relevant public interest objectives. Absolute bans of an activity should only be a measure of last resort.
• Platforms should not be subject to authorisations or licenses where they only act as intermediaries between consumers and those offering the actual service (e.g. transport or accommodation service).
• Member States should differentiate between individual citizens providing services on an occasional basis and providers acting in a professional capacity, for example by establishing thresholds based on the level of activity.

The EU Commission’s intervention represents a common sense approach in a time of great change, aiming as it does to differentiate between individuals and businesses, and to discourage outright prohibition. Regulation should aim to protect the public interest, but regulators should recognise that people have always innovated to shape the world around them, and always shall. Protecting inflexible incumbents from the need to adapt to a changing world is rarely in the public’s interest. Rather, procurement training and the collaborative economy need to be brought together more strongly.

After the trenchant arguments of both sides during the Brexit campaign – which leave has won, this does show that the EU is capable of common sense, consensual and reasonably rapid responses to change. If there are aberrations from these guiding principles, it will be because of national oddities (like Italy’s fire safety laws – try and get an iron in a hotel in Italy and you’ll see how far they go – can a professional airbnb service comply with these local rules?).

Innovation – adapting to the collaborative economy

Lynk is an example of how traditional operators can adapt and compete in new collaborative markets. Lynk is a Dublin based taxi booking app founded by Noel Ebbs in 2015 in order to provide taxi drivers and firms with a means of competing with Uber and other car hailing/pooling services. Instead of taking a commission on each journey booked through its app, Lynk charges taxi companies or drivers’ co-ops a licensing fee for use of its software. Lynk currently has a staff of 75 and is used by over 1,500 professional drivers in Dublin. It is a good example of how procurement training and the collaborative economy are intimately related. An understanding of procurement concepts and collaborative economy opportunities allows businesses like Lynk create opportunities.

Lynk is now preparing to enter the UK and US markets. The company will launch in the UK this summer and has over 12,500 drivers signed up to its network. This will be followed by entering the US east coast market, where it has 5,000 drivers signed up in Washington, New York, and Boston. As it is utilising its already developed software, the roll-out costs are relatively modest: €12.5 million to enter the UK (Uber has spent hundreds of millions growing its market share).

“We have a very, very simple model”, says Ebb. “The rollout is very simple – what’s allowing us to do this so cheaply is that we can roll out to existing taxi businesses that are there, but that have no way of challenging the major international apps. But now they do.”