Georgetown alumni reveal what makes the sharing economy tick. Spoiler alert: It goes way beyond sharing.
By Sona Pai
Illustration by Peter and Maria Hoey
The story of the sharing economy used to go something like this: You buy a power drill. Now you own it. But most of the time, you don’t use it. So why not rent it out?
The concept is as old as having neighbors, but it began to take off in new ways about the time the Great Recession hit. In those early years of the 21st century, a perfect storm of economic hardship and techno-logical advancement cleared a path for a different way of doing business.
The internet, smartphones, and social networks made it easy to match supply with demand and, in the process, unlock excess capacity from things people already owned. People could share their cars, rooms in their homes, their designer handbags — you name it — and make some extra money. Consumers could get access without paying the price of ownership. Companies started cropping up to be the matchmakers, creating marketplaces that made it easier and easier to participate in the sharing phenomenon.
Today, the sharing economy has grown from novelty to normal — and it isn’t slowing down. A 2015 PwC report projected key sectors in the sharing economy have the potential to increase global revenues from around $15 billion in 2014 to $335 billion by 2025 — an increase of more than 2,000 percent.
Sharing economy titans such as Airbnb and Uber have pried open lucrative new markets in entrenched industries, created alternative income streams for a changing workforce, and redefined the customer experience.
And they have done it by recognizing that success in the sharing economy goes beyond the drill. It comes from learning from the problem-solving process and then using those lessons to solve the next problem.
“These companies tend to attract and hire imaginative, creative people,” says Betsy Sigman, distinguished teaching professor of operations and information management at Georgetown University’s McDonough School of Business. “And imaginative, creative people tend to keep asking, ‘What else can we do?’”
Among those imaginative, creative people are Georgetown McDonough graduates who are pushing the sharing economy forward.
TURNING PROBLEMS INTO POSSIBILITIES
Like superheroes, companies in the sharing economy often are defined by their origin stories — the lore of the startup. Uber began as a black car service. Airbnb was born from a couple of air mattresses on a loft apartment floor.
“I remember when I first heard about Airbnb,” says Laurence Tosi (C’90, MBA’94, L’94), Airbnb’s chief financial officer and a member of Georgetown University’s Board of Directors. “The buzz was a bunch of people in the hospitality business saying it would never work. It’s just kids couch surfing.”
Those little startups grew up fast.
Airbnb enables individual entrepreneurs to make money with what is most likely the most valuable asset they’ll ever own: their home.”
—Laurence Tosi (C’90, MBA’94, L’94), CFO, Airbnb
According to the Wall Street Journal and Dow Jones VentureSource, Uber currently is valued at $68 billion, making it the most valuable private company in America. It operates in more than 560 cities worldwide, and its CEO recently told reporters it serves 40 million monthly active riders. Airbnb comes in second, with a re-ported valuation of $31 billion. The company operates in 65,000 cities in more than 191 countries and has served more than 160 million guests.
Tosi joined Airbnb in 2015, after making a name for himself as a forward-thinking, tech-savvy finance and operations leader at NBC, Merrill Lynch, and The Blackstone Group. When Airbnb’s founders approached him, he immediately saw the potential in what they were building.
“I’d always been focused on the nexus of technology and automating things and expanding markets,” he says. “What was different to me about the sharing economy was the size and scale of what these companies have been able to accomplish. It’s totally unprecedented in any market.”
Tom Maguire (MBA’14), general manager for Uber’s New England region, joined the company in 2015 after first getting to know the company as a satisfied customer. His employee experience sealed the deal.
“The people here create an electric culture — no two days are the same,” he says. “They’re the kind of people who won’t get up from their seat until they’ve solved the puzzle. They’re not afraid of ambiguity. They thrive on it.”
Both Tosi and Maguire talk about their companies in big-picture terms, going beyond the ride across town or the vacation rental.
“It’s really about technology, not necessarily about transportation,” Maguire says. “It’s a technology platform that started with taking someone from point A to point B, but the opportunities from there are wide open.”
Likewise, Tosi sees Airbnb’s potential on a grand scale, as an opportunity to do good for the economy, the environment, and the social fabric. “Airbnb enables individual entrepreneurs to make money with what is most likely the most valuable asset they’ll ever own: their home,” he says. “We offer the most efficient reuse of assets you could possibly imagine. You don’t need to build more hotels or take over more land. And, in a world where there’s so much division, we actually connect people.”
It’s a technology platform that started with taking someone from point A to point B, but the opportunities from there are wide open.”
—Tom Maguire (MBA’14), General Manager, New England Region, Uber
That 30,000-foot view sounds aspirational, but it is built on real-world experience and observation. Once Uber had teams, processes, technology, and infrastructure in place to connect riders with drivers, new possibilities opened up for how to put those building blocks to use. For example, carpooling for multiple riders on the same route, delivering food from local restaurants, and even delivering Christmas trees. The system is in place; now employees imagine what else can be done with it.
It was the same story with Airbnb. Once a platform existed, new innovations emerged from paying attention to how people used it.
For example, some of Airbnb’s most popular hosts took time to show their guests around or take them out for day trips and pub crawls. Spotting the value in this trend, the company started packaging experiences led by resident guides.
“We thought the experiences would be for travelers, but we learned many of them are consumed by locals,” Tosi says, “which means a San Franciscan going on a kayak tour near the Golden Gate Bridge is doing something they’ve never done before even though they live there.”
In both cases, the path to growth has followed the traditional best practice of staying true to core competencies and building on them. The superpower behind sharing economy success is realizing that those core competencies go beyond specific products, services, or even technologies into the realms of connection, community, and creativity.
“The unique thing about these companies is they’re always pushing to try new things to serve the customer,” Sigman says. “They’re flexible. If it works, great. If it doesn’t, they just learn from it and move on.”
THE IDEA IS THE EASY PART
New startups in the sharing economy tend to fall into two camps: slight variations on existing ideas (think Grubhub and other food delivery services) and new ideas that take the fundamentals of successful sharing economy companies in new directions (“the Uber of …”).
In 2016, Mark Switaj (MBA’12) founded a company squarely in the second camp. “As we like to say, we are the Lyft or Uber for medical transportation,” he says.
Switaj’s company, RoundTrip, provides nonemergency medical transportation via a technology platform that has a user experience similar to that of Uber and Lyft. RoundTrip partners with existing medical transportation companies to equip their vehicle fleets with smartphones, and offers hospitals and patients an app they can use to coordinate rides to medical appointments on demand.
“The medical transportation industry might not seem incredibly exciting, but it is to me,” Switaj says. Why? “It’s just so broken.”
Switaj worked as an EMT and eventually director of business development with American Medical Response, the nation’s largest ambulance company, and subsequently chief operating officer of its sister company, EmCare. He saw firsthand how inefficiency and lack of coordination created serious problems for patients in need of care.
“3.6 million patients per year miss or delay medical appointments because of transportation problems,” he says.
That data point, from a study conducted by the Transportation Research Board, set the stage for RoundTrip, along with this one from RoundTrip’s own surveys: The nonemergency ambulance industry operates at about 35 percent efficiency. That means in a 10-hour shift on the road, a vehicle is involved in moving a patient for only 3.5 of those hours.
Switaj envisioned a platform that could solve multiple problems: Connecting frustrated patients and their hospital social workers, who coordinate patient transportation, with underused vehicles already on the road. He knew he had a solid idea, but he and his team did their research before getting it off the ground. The question he needed to answer: Can I get people to switch from using the telephone to using our system?
“We spent hours and hours with our software developers, sitting with social workers, nurses, care navigators,” Switaj says. “We met with ambulance companies, EMTs, paramedics, and wheelchair vehicle drivers. I had software developers riding along in vehicles to understand what it is we’re building.”
Switaj and his team tested their software with users, iterated, and tested again until they found the combination of aesthetics and ease of use that worked.
The medical transportation industry might not seem incredibly exciting, but it is to me. It’s just so broken.”
—Mark Switaj (MBA’12), Founder, RoundTrip
The result, RoundTrip, launched in September 2016 and currently serves the New Jersey, Philadelphia, and Delaware areas. Switaj says that besides the efficiency and convenience he set out to create, new benefits are emerging in the way his customers foresee using the service. In the near future, social workers will have the new opportunity to intervene on the spot when patients decline a trip because the app can provide an instant connection between social workers who are ordering rides and drivers who are providing them.
“They could immediately call the patient to say ‘Why aren’t you coming in today? What can we do to make this happen?’” Switaj says. “It’s powerful stuff.”
POWERED BY THE PEOPLE
By its nature, the sharing economy is about connecting people: riders and drivers. Vacationers and home-owners. People who need a thing with people who have the thing.
Although each of those individual connections is a one-off experience, as a whole, they form the core of a company’s brand. They are the threads that weave a community out of users and providers, and that com-munity can, in turn, become a company’s most valuable asset.
“The vast majority of our company’s growth comes from the community itself,” says Tosi, referring to the way Airbnb hosts become guests, guests become hosts, and word-of-mouth travels faster than any ad.
One way sharing companies — including Airbnb, Uber, and RoundTrip — build those communities is through ratings, which have become table stakes in the online consumer experience.
“Consumers have learned to make decisions based on the number of stars they see,” Sigman says. “They’re more likely to buy something with ratings than something without them.”
In many cases, ratings are a two-way street. After all, sharing economy companies are built on providing optimal experiences for both providers and consumers.
“The community kind of self-regulates,” Tosi says. “People try to be friendly and accommodating because you don’t want a bad review that will hurt your business if you’re a host or your ability to stay somewhere if you’re a guest. There’s a trust built in the community that helps us proliferate the brand.”
At Uber, driver and rider ratings give the company a real-time check on quality. “It’s how we understand what the rider is looking for, as well as the driver,” Maguire says. And the company recently took the ratings concept a step further with Compliments — a new feature that lets riders give more nuanced feedback for particularly good experiences and shows drivers that their efforts to create those experiences matter.
By innovating new experiences and new avenues for connection, the most successful companies in the sharing economy have seemingly created something out of nothing. They still provide goods and services, but in doing so, they tap into intangibles like employee creativity, trust between strangers, and a powerful sense of being part of something bigger than a transaction.
“It’s that collision of the millennial generation, the technology of apps, the internet, the desire for community, that connectivity,” Tosi says. “Once those things connected, it created a quantum change. It was just inevitable. And now, we’re seeing the evolution of those companies.”
Published in Georgetown Business magazine, Spring 2017