Tuesday, September 15, 2015

Sharing economy - or public service 2.0

There's a Very interesting article in Fast Company about how the majority of services in the sharing economy are failing to attract use.
It confirms many of the findings from my own work.

In the research for the We-economy project, I have not come across any sharing services of the sharing-among-neighbors kind, that are actually making money. Even Street club, the British service operated by Kingfisher DIY stores, has folded its activities into a grassroots organization called Street Bank, supported by grants. I talked to both Kingfisher and to the manager of Street Bank, and they are quite clear, that this sort of activity cannot survive on purely commercial terms.

Clearly, true sharing services can have value beyond money. They can strengthen social cohesion and have environmental benefits – but they cannot generate money in significant quantities. In a sense, that’s actually the point: That they remove revenue and offer savings for participants.

The many different outfits that are currently operating under the ”sharing economy” label really belong to very different categories. There are commercial, micro-rental services like Uber and airbnb – and there are actual sharing services, which by nature are rather non-profit, but may be valuable in other ways.

I believe that this last, non-commercial category of sharing platforms might be considered a new type of public service – like state-owned media or libraries.
Historically, public services have been functions in society for which it was clearly in the general interest of society that everyone had access – but which would not be established if left to the market forces.
The rewards of creating these services might be too long-term, or the rewards might be in-direct, cultural, and hard to monetize. Radio and Television channels, libraries, postal service or the telephone network are examples of large-scale services, which were operated by the public sector. Being public services, they upgraded everyone to the next level of societal participation and thereby supported further development and a higher general standard of living.

I have recently worked in a Danish ministerial think tank on smart cities, and one of my conclusions from those discussions are, that as we move towards smart cities, we will need a basic platform for coordinating everyday activities that is non-commercial – otherwise some very fundamental aspects of what is available and acceptable will be controlled by Google, Facebook etc.
The commercial giants do a great job, but I believe that there is a need for some additional levels of service provided on a non-commercial basis if we want to ensure that everyone has decent access and reasonably equal opportunity to participate and benefit.

Examples of this could be the type of concepts found in the sharing economy:  Services to share tools, meals, houses, cars, gardens and parking spaces. Digital platforms that connect people with skills and a wish to help users that need assistance with small tasks. Electronic bulletin boards, which allow the inhabitants in a local community to announce or discover social and cultural activities.
Such services can connect community members and build up social capital and coherence – and they should be part of the smart cities of the future. But they are not commercially viable.

All of this leads to the conclusion that it is entirely reasonable to explore if the next type of public service suitable for tomorrow’s smart cities should be a ”citizens network”, established and funded by the government.

Talking about such networks in terms of public service allows us to be less apologetic for the fact that you can’t wring enough money out of them to make them work as business – and it allows us to think much more ambitiously about the functionality of the networks.

A citizens’ network featuring these types of services could create better communication among citizens, it could make it much more transparent what takes place in the local community, it could create new ways of participating in local democracy, it could be the ”help desk” for the information society… And the more functions the network would integrate (including private services and local media), the better chances are that it could indeed reach critical mass of use and users to become the preferred app for interacting with all things local.
This could be the next version of a true sharing economy.

Friday, August 21, 2015

Product of the future: This is not your grandfather’s car

An example to illustrate the points I make in my essay on the product of the future: 

The car of the future will still have wheels and be designed to bring passengers from A to B - but almost everything else about it will be different.

Cars are the classic industrial product. Ford’s enormous factories took in steel and rubber at one end, and spit out millions of identical cars at the other end of the production line.
The car of the future can be individually configured in great detail. Already, many car companies provide online tools that enable the customer to specify exactly what color, engine and trim the car shall be equipped with. The next generations of cars will be electronic and controlled by computers so they can re-programmed through apps and updates to the operating systems – it could be for changing the car’s sound, the interior lighting or its driving characteristics. Tesla, for example, recently released a new OS that makes the car able to automatically park and to stay within highway lanes.

The cost of developing and producing the car will increasingly be linked to electronics and software. Navigation, surveillance, coordinating with other cars and traffic systems, entertainment and information to passengers ... No longer are steel and rubber the main expenditure.
The electronic part of the car’s functionality is also where development moves fast - if not exponentially – along with more powerful computers, big data and artificial intelligence.

The car of the future will be constantly connected to the surrounding traffic. It will exchange observations about its position and the traffic conditions. Initially, this will make it easier to manage traffic, avoid traffic jams and find parking spaces, but as the car becomes increasingly automated and self-driving it will need to tightly coordinate with the cars around it.

Today, most cars are personally owned, but a growing number of people use car- or ride-sharing services, or they lease the car. When vehicles become autonomous, it will be a relief for many not to own a car. You will be able to book a car to pick you up, get you to your destination – and then take off to help other passengers. When the car is part of a pool of cars, the business model changes significantly. As does the relationship and attachment that many owners today have towards their car.

Finally, the car is increasingly just one of a number of elements that can be combined to provide a mobility solution. The exact combination of car, train, bicycle or busses, which best solves a person's needs in a specific situation can be composed for the occasion. It is the mobility solution, not the car, which the user pays for.

What will the product of the future be like?

Generally, all products will become part virtual, part physical. They will be connected, reconfigurable and – hopefully – smart. Also, the business model for their manufacturers will be dramatically different.

As we moved forward through history and as technology evolved, our products and devices got more complex. The supply chain and the number of people and skills involved in production kept growing – as did the number of supporting factors that needed to be in place for the device to work.
It’s hard to see that this trend towards greater complexity and connectivity should not continue.

Large supporting infrastructure
An old-fashioned pencil doesn’t require much in terms of supporting infrastructure. An eraser and a sharpener are useful additions, but most of the time, the pencil works well on its own. It’s simple and robust, but as a communication device it’s abilities are rather limited.
In contrast, an electronic tablet is a very different device. It will not work fully without electricity, software, and an Internet connection. Not only can you write words with, you can record and edit video, and you can send it instantly to someone else – or to everyone.

Increasingly complex supply chain
Even producing a simple pencil requires a complex supply chain of wood, graphite, paint and glue – but that is nothing compared to the number of players involved in delivering the functionality of a tablet.
Try to think through how many companies are feeding in to the process – and which consequently need to be coordinated and must adhere to the same standards and conditions in order to cooperate… The network easily extends to thousands of companies and millions of people. Display and chips, electricity, connectivity, various software, GPS signals – plus a whole Internet’s worth of content. It all comes together (almost) seamlessly – and that’s what it takes to produce the next level of utility for users.
The future production of value will take place in increasingly complex networks coordinating large numbers of contributors. Closer collaboration is a pre-condition. No one can produce this type of utility alone.

Hardware and software allows reconfiguration
You can get red, blue, green, hard or soft pencils – and you can get a certain variety of tablets. But tablets are a different species, because it can be completely reconfigured and customized depending on what software is installed.
The value of the tablet comes from the combination of hardware and software. The physical object can be standardized, we may all be using more or less the same phone or tablet – but my tablet is likely to be set up quite differently than yours.

It’s an advantage to have objects and devices, which are similar, so they can be mass-produced at low cost, but which can run a wide variety of applications. However, it’s difficult to make much money from manufacturing commodity items, which are practically the same as everyone else’s. Instead profits will shift towards software and services that run on top of devices.

Connected to the network
Embedding computing power is hardly news. Over the past decades, we’ve seen chips built into everything from toothbrushes to doorknobs.
What happens next significantly changes the game again: When all of those chips connect to the Internet of Things. They will be in touch with everything else; coordinating, exchanging data, adjusting, learning. An increasing part of the value that the product of the future offers, compared with conventional devices, will come from the connectivity. This is where growth will happen.

Smart, contextualized solutions
The product of the future is not a stand-alone device. Whether is jet engine or food processor it will be working in combination with many other devices to create solutions that fit the users’ needs in a particular context. The defining unit in the economy will not be the individual device, but the solution or process, which solves the customer’s current needs. It’s the difference between selling thermostats and selling comfort in a building.
Such solutions will be based on the vast and detailed streams of data that our sensing and communicating objects will create. Ideally, this will result in ”smart” systems, where all sorts of devices cooperate to deliver optimized solutions at low cost.
And again, this points to the basic condition; that value creation will happen in collaboration.

Both virtual and physical
A much greater part of a product’s value will not reside in the physical object. What the product offers will depend on the many services, processes and data, which are layered on top of the physical object - virtual superstructure.  Crucially, the manufacturer of the physical device will not make many of these services. Applications, tutorials, and user forums, support services – these can be created by third parties and users themselves. Never the less, they contribute to the value and competitiveness of the device.

Objects will be individually identified. They will have an address, an increasingly detailed profile, and an Internet presence that others can interact with. The materials that it was made from, and it’s consumption and yield will be tracked throughout the product’s life cycle. In a sense each object will have virtual doppelganger, consisting of all the data associated with it. Increasingly, it will be meaningless to distinguish between the physical and virtual sides of an object’s functionality. And yes, this includes toothbrushes, doorknobs… anything, basically.

Instances, created for the moment
How objects are created may be very different, too. Although, most of our physical objects will still be mass produced and probably more standardized across the globe, many products or parts of products will be made specifically for the user. Flexible robots and 3D printers will make it ever cheaper to customize objects.
Such products exist virtually – basically as a collection of instructions and design, which can be modified or mixed with parts from other companies. It will only be manufactured physically once a particular user has configured it and clicked the “buy” button. 

Just like the utility of a product will emerge when it’s combined with a number of other devices and services to create a solution that fits the current context, the physical product itself becomes a solution, assembled for a specific context. It may never be made exactly the same way again. One could call it an instance.

From finished products to tools for collaboration
This will require a change in approach to design and development. 3D printing naturally lends itself to collaboration and participation from many contributors, including the end-users. For companies, this implies that they may be selling blueprints to parts or selling access to systems that allow users to configure individual instances of an object. However, this business model requires a shift in focus. Instead of designing and delivering finished objects, a company must create tools that invite users and other companies to use the company’s designs and participate in co-creation.

No manufacturing, no distribution costs
One consequence could be that companies drop manufacturing their products altogether. Since the final instructions can be sent and printed out on any printer, a company can distribute globally at almost no cost. Factories may function as local, generic centers, which can print and assemble whatever customers upload for manufacturing.

Old categories and roles are mixed up. It’s hard to distinguish one company from another; they collaborate for a solution, and then regroup with others to generate the next instance. It’s like the “Hollywood economy”, where movies are produced by assembling a new team of actors, photographers, director, distributor etc. for each film.

Access rather than ownership
The way we access products will change as well. If the next level of value for users is a matter of how well a number of products can be coordinated to serve the user in a particular situation, then flexibility is crucial.
It becomes less attractive to own a product permanently, and better to have access to combine lots of different products to match changing needs and circumstances. Already products like carpets, cars, apartments and specialized tools are sold as services, which users subscribe to or rent.
As the cost of coordinating resources and needs fall, more products will be accessed temporarily through digital platforms – as we see in so-called sharing economy. Obviously, this will require new business models – similar to the way the music and media industry has been forced to change.

This changes everything…
All of these changes will affect more or less any product. Whether its cars, hospital beds, tennis rackets, lamps, valves, office chairs, their future version will be different in many of the same ways that a tablet is different from a pen.
They will be connected, networked, coordinated and reconfigured for specific contexts. They will be both virtual and physical, and their main value will not be what they can do on their own, but how well they can be integrated into larger solutions.
Obviously, the companies that produce them will also need to organize their business model and value creation in very different ways in order to thrive in the future.

Fremtidens produkt: Biler bliver noget ganske andet

En eksempel til at illustrere pointerne i mit essay om fremtidens produkt: 

Fremtidens bil vil stadig have hjul og være beregnet til at køre fra A til B, men stort set alt andet vil være anderledes.
Biler er det klassiske industrielle produkt. Fords enorme fabrikker kunne tage stål og gummi ind i den ene ende, og spytte millioner af helt ens biler ud for enden af samlebåndet.

Fremtidens bil vil kunne konfigureres i detaljer. Mange biler tilbyder i dag online værktøjer, der gør det muligt for kunden at angive præcist, hvilken farve, motor og indtræk, bilen skal fremstilles med. Biler, der er elektroniske og styret af computere, vil kunne programmeres og opdateres med apps og nye styresystemer – hvad enten det er lyden, kabinelyset eller køreegenskaberne. Tesla har eksempelvis netop udsendt en ny version af software, der gør bilen i stand til at holde sig i vognbanen automatisk.

Omkostningerne ved udvikle og fremstille bilen vil i stigende grad være knyttet til elektronik og software. Navigation, overvågning, kontakt til andre biler og trafiksystemer, underholdning og information til passagererne… Det er ikke længere stål og gummi, der er den vigtigste udgift.
Den elektroniske del af bilens funktion er også der, hvor udviklingen går stærkt – hvis ikke ligefrem eksponentielt, i takt med stærkere computere, big data og kunstig intelligens.

Fremtidens bil vil være konstant opkoblet og i kontakt med den omgivende trafik. Den vil sende observationer om sin position og om trafikforhold, ligesom den løbende vil modtage data. I første omgang vil det gøre det lettere at styre trafikken, undgå trafikpropper og finde parkeringspladser, men efterhånden som bilen bliver selvkørende, vil den skulle koordineres tæt med bilerne omkring den.

De fleste biler er i dag personligt ejet, men stadig flere bruger dele-biler eller leaser bilen i en periode. Specielt med selvkørende biler, vil det for mange være en lettelse, at kunne bestille en bil, der henter og bringer en til sit destination og så kører videre med nye passagerer. Når bilen er en del af en pulje af biler, forandres forretningsmodellen markant. Det samme gør den tilknytning som mange ejere i dag har til deres bil.

Bilen bliver én af en række elementer, der tilsammen leverer en mobilitets-løsning. Hvilken kombination af bil, tog, cykel, delebil osv. der bedst og billigst løser en bestemt persons behov i en specifik situation sammensættes til lejligheden. Det er løsningen, ikke bilen, som brugeren betaler for.