Peer-to-peer as a business model, Part VI (concluding)

Part I          What is the peer-to-peer business model?

Part II          How does it work?

Part III         Relating the p2p model to the internet business model

Part IV        Impact of p2p

Part V         How businesses can use p2p

Part VI        Issues and what’s next

  

Issues

The biggest issue now is that wrought by change.  There is fear in the affected industries and among lawmakers, in part fuelled by vested interest.   Many do not understand the innovation brought by p2p models and the permanency of the consumer economy.  While the sharing economy in the US is facing some legalities, this is not so in Asia probably because Asia is not a land of lawyers!  Or maybe it’s not sufficiently developed yet.  Nevertheless consumer protection laws could be enhanced to protect the user of the services (but not protect the affected sectors).  And maybe less stringent interpretation of local laws for those in the p2p businesses because after all, it is ridiculous to apply draconian laws meant for businesses to individuals. A p2p marketplace is a facilitator while the business practitioner is an individual, not a company.  A restaurant sits hundreds of patrons a night, a p2p chief maybe one family.

The question is what.  P2P firms involve transactions that if they were conducted in the more traditional business would face the kind of government regulation that are imposed on them.  Does a supplier, mostly individuals in a p2p marketplace require a local business license?  Do the latter have to register in all locations where services are provided?  Like eCommerce was, should there be less tax to encourage this sector?  Who is liable if something goes wrong?

And this leads to litigation when something does go wrong as the laws of probability dictates.  Should laws that apply to a restaurant be equally applied to a home chef?  In such matters take inspiration perhaps from the internet way of development - for something new, get it going quickly, fix (improve) it as we go along.  Approach it with simplicity, not complexity.

Internet connectivity is another.  In many parts of Asia, the cost and quality of broadband may deter would-be marketplaces entrepreneurs.  This is unfortunate because p2p is an emerging economic model that can create new jobs and increase income for citizens.

What next?

In general, any business that has elements of consumer-to-consumer dealings could be next (transformation).  Those where consumer resources is involved, the middleman commerce and where information plays a significant role are especially ripe.  The following are speculations but they are fascinating possibilities.

The financial industry which is famously opaque and profits massively from it and its middleman role between peers of consumers and businesses seem certain to be impacted.   This statement is an early whiff of what’s ahead.  “Some regulators have big hopes for peer-to-peer lending: Andy Haldane of the Bank of England, suggested earlier this year that the upstarts could make conventional banks obsolete” – page 24, Economist, 15 Dec 2012.  It is not just p2p lending, p2p factoring or p2p payment systems, p2p currencies like Bitcoin or a future variation will make an impact.  And it is really the consumer economy that is going to drive this trend forward.  But the banks, their regulators, politicians, vested interests and big money means it’ll take a long time but eventually it will pop.  The financial industry will be transformed.  You cannot stop a tsunami.

I came across this, applying its principles to socio-political systems.   “In 2005, Michel Bauwens, former strategic director for a telecommunications company, Belgacom, wrote an essay on "The Political Economy of Peer Production," which put forward such views with enthusiasm. P2P for Bauwens is a "third way" that is neither socialistic nor capitalistic, that involves the creation of value "through the free cooperation of producers" with the profit motive or central planning. Though that may sound like airy philosophizing, P2P in this sense is pertinent to business strategies. Since then, some theorists have come to use P2P as a term for their social and political views.”  I’m no social scientist and this sounds like material for the next George Orwell novel but he has a point.  Again it has to do with the emerging consumer economy and also the democratisation affect of the internet.  This leads to the act of governing.

P2P seems a natural for governments only because governing is about people.  In many parts of Asia where centralising has resulted in the abuse of power and corruption, peer-to-peer, the opposite of centralisation may have a part to play, not in replacement but in complementing centralised governing.  Some services by bypassing gatekeepers must improve transparency, reducing corruption.  Or simply involving the crowd will go a long way.  It can also make governments smaller by giving a bigger role to society.  Perhaps the philosophy of Big Society should make a comeback.  In short, social enterprises could be encouraged while the bureaucracy could use p2p to supplement government services.

And since I started this post with technology, I’ll end this section with technology.  With the interest in autonomous driving which requires that cars ‘talk’ to each other, interest in p2p as a technology will increase.  Self-driving cars is a peer model.  Similarly, the internet-of-things (eg. everything in the house is connected; the lights, doors, electrical appliances) is peer-to-peer so is collaborative robots for manufacturing.  The technology of peer-to-peer will surely be further developed.

Conclusions

The peer-to-peer model is based on the idea of connecting peers directly to each other for an exchange of things of value between them.  A powerful new business paradigm, it seeks to monetise or benefit from these exchanges by turning a previously latent resource, the consumers into a productive resource.  In the process, prices are reduced.

P2P has given rise to the consumer economy.  Rather than just consuming, the consumer now also produces.  While still in its infancy, it is already proving transformative, creating new types of businesses while disrupting others.  The big loser is the middleman industry which looks likely to shrink further.  For the economy, it increases productivity and makes the market more efficient.  It also stirs up the local economy. 

P2P together with crowdsourcing will make the consumer economy a serious pillar of the future economy.  In the process, regulations will change, towards what is really the industrialisation of consumers.  Perhaps the term itself ‘consumer’ will also change because they now don’t just consume.

And the original Napster model may return to haunt the music honchos.

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©Chen Thet Ngian, internetbusinessmodelasia.blogspot.com (2013).  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chen Thet Ngian and internetbusinessmodelasia.blogspot.com with appropriate and specific direction to the original content.

The peer-to-peer business model Part V

Part I          What is the peer-to-peer business model?

Part II          How does it work?

Part III         Relating the p2p model to the internet business model

Part IV        Impact of p2p

Part V         How businesses can use p2p

Part VI        Issues and what’s next

Applying p2p to businesses, a quickie!

P2P is used by those in the sharing economy, by conventional firms or in tech.  It can be used directly or indirectly.

Today p2p is used mostly by startups as online marketplaces.  They are the first to spot the sprouting of a new class of opportunities, something entrepreneurs do.  The first wave always leads to broader use in businesses later.  But progressive ones could take a leaf from them now and apply its principles. 

One method is to craft platforms, aligning them to specific corporate objectives be it marketing, sales, R&D or business development.  Create activity amongst clients and prospective ones.  Then mine the results, be it dialogue or a piece of work.  It is also an excellent way to carry out surveys, to track trends and for product developments.  Note though that this works mostly in the consumer space. 

A business could encourage enthusiasts to influence creation, say, of a new line of health-conscious dishes for a restaurant chain using p2p indirectly.  Some will become clients though that’s not the point.  An architectural firm could develop an online site for the crowd to design bungalows, buildings or interior design.  This keeps the firm in tune with consumer trends, directly.  A percentage could become customers because it is convenient to after they have outlined what they like.  A furniture maker could create a design website, a combination of a visual blog and easy-to-use design tools, for peers of retailers (partners) to design, re-design and discuss furniture pieces.  Since retailers face the customers on the ground, they have a good perspective of likes.  The chatter and creations would provide data to the furniture maker for specific pieces to manufacture.  Indirectly this increases sales though again that may not be the point.  It is used to tracks consumer trends, become more customer savvy, produce more saleable items.  The skill here is the ability to seed peer activity.

This new business method is obviously contrarian (for now).  Most executives will find it hard to accept, never mind trying to understand then apply it.   But should a company deploy it, a good approach to use skunk works popularised by the book, “In search of excellence”.  Set up a separate unit away from the headquarters until successes can be demonstrated.

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©Chen Thet Ngian, internetbusinessmodelasia.blogspot.com (2013).  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chen Thet Ngian and internetbusinessmodelasia.blogspot.com with appropriate and specific direction to the original content.

The peer-to-peer business model, Part IV

“Peer-generated, peer-consumed”

Part I           What is the peer-to-peer business model?

Part II          How does it work?

Part III         Relating the p2p model to the internet business model

Part IV       Impact of p2p

Part V         How businesses can use p2p

Part VI        Issues and what’s next

Impact

Let’s look at the impact of the p2p model; positives and negatives.

A company can use p2p to lowers costs, improve productivity, innovate and to improve sales.  Perhaps augment its core business by tapping on the consumer economy or simply use it to improve business.  Primarily though, it is used to engage potential clients.  These were covered in part II and III.  Evidently, it cannot be applied to everything.  Those in the consumer space and where information is involved are candidates.

P2P creates a new class of business based on consumers, not consumption but production - the sharing economy.  This is good for the economy and jobs.  A new sector, there is much room to grow especially in Asia.  And for a change, the consumer benefits as well, monetisation of consumer resources can only be good for the populace.  P2P has given rise to a new consumer economy that should benefit any country.

But it threatens traditional businesses because they are being reimagined.  Not always though.  Because p2p creates an entirely new category of consumer-derived business, a luxury hotel chain could spin off a unit to handle less moneyed clients ala AirBnB model, thereby expanding its business footprint.  Similarly a restaurant could facilitate enterprising home cooks, perhaps by first accrediting them, to offer private cooks.  I’m sure there are better applications.  But some types of businesses will be affected, perhaps those in the traditional consumer businesses especially in the services sector to do with consumer resources; travel, tourism, banking, consumer services (taxi, real-estate, car rentals, insurance, home services).  The book industry could transform again, beyond the long arms of Amazon.

The middlemen sector, the basis of so many businesses and a huge part of any economy are especially affected.  While the internet is already causing them pain (it makes direct trade easy), the p2p business model in particular will transform it another level.  In a way, the new-generation middlemen are the online marketplaces but as this post explained (part I), they now serve mainly as an information business, not trading (but some still do).  That’s redefinition.

There is no doubt we are still in a period of great change.  We are moving away from the industrial age deeper into the information one.  And as anything to do with change, it is disruptive.  The sharing economy is another agent of change.  This consumer-to-consumer business will have many sectors reimagined.

Economically speaking, there must be transformation since p2p adds an entirely new producing class, the consumers.  One day it may contribute to the computation of a country’s GDP.  But this can be taken advantage of, even now.  The jobless youth, a seeming recent phenomenon in many parts of Asia would have another option for work.  And to further the domestication of the economy, the middle class and below who have the most to benefit can earn extra.  But first they must be given the opportunity.  With p2p marketplaces still a novelty in Asia, agencies could promote this sector while the lawmakers take an enlighten touch ie.mostly keep out of the way for these firms.  Besides production, monetisation of consumers’ spare resources can only be good as it better allocates use of resources.  Previously unusable personal resources can now be put to productive use.

In the next post, we'll look at how p2p can be applied by companies.

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©Chen Thet Ngian, internetbusinessmodelasia.blogspot.com (2013).  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chen Thet Ngian and internetbusinessmodelasia.blogspot.com with appropriate and specific direction to the original content.