Our first article in this series started to contextualize the current period of major change impacting business.

The collaborative economy, also known as the sharing economy, enables people to enjoy the same lifestyle without having to make so many purchases, thus positively impacting millions of people’s lives.

The idea behind the collaborative economy cover issues and trends such as:

  • New social configurations arising from the Internet and network relationships;
  • Concern for the environment and appreciation of more sustainable habits;
  • Recent global economic crises. In this respect, sharing, lending, renting and swapping are taking the place of buying, thus making the world more sustainable from an environmental and financial point of view.

The collaborative economy

Rachel Botsman’s book What’s mine is yours: how the sharing economy will change our world states that a collaborative economy covers three possible types of market systems, namely:

Redistributive markets

When a used item moves from a place where it is no longer needed to another where it is needed. Based on the principles of reducing, reusing, recycling and redistributing goods.

Collaborative lifestyles

Based on sharing resources such as money, skills and time.

Products and services systems

When consumers pay for the benefit of a product rather than for the product itself. Based on the principle that what you need is not a CD or DVD but the music stored on it. What people need is a hole in the wall, not a drill. This model applies to almost all consumer goods.

Already part of our everyday life, the collaborative economy lends meaning to collaborative trade.

The collaborative economy and its impacts for business

Collaborative trading uses the Internet to integrate a company’s business processes with possible partners, suppliers and customers. Sharing may apply to:

– Planning and forecasting;

– Inventory and supply chain management;

– Product design and development;

– Manufacturing capacity;

– Production and manufacturing methods;

– Logistic processes.

By sharing, collaborative trading companies may:

– Lower their costs;

– Get a full overview of their product’s life cycle;

– Jointly create new products and services;

– Grow their business while acquiring and retaining new customers.

Although collaborative trading might seem to be conceptually complex, in everyday lives it has taken on epic proportions in recent years, and some startups have become major players in their markets.

Take Uber for examples, drivers share their time and vehicle in exchange for money to meet the needs of people who have to go somewhere.

Or local businesses such as Joanninha, a Brazilian website where parents can have their kids’ swap toys with other kids; or Vakinha and Catharsis – crowdfunding websites that help people get donations (collective financing) for certain causes, purposes or projects.

On the corporate level, the many ramifications from the collaborative economy include contractual exchange, companies swapping their services with each other, hiring collaborative services, etc.

One practical application is using collaborative trading to deliver goods sold through e-commerce. In this situation, a company has to make deliveries but instead of hiring a traditional transport firm with its own fleet of vehicles it hires a service and a firm uses collaborative economics to collect goods and deliver them.

In Brazil’s metro regions, express delivery services pay motorcycle couriers or cyclists, using the collaborative economy for retailers’ deliveries.

As the collaborative economy kicks in, organizations have had to adapt their management models to support the trend for relationships to be more dynamic and perhaps a little less formal. This requires redesigned business processes and empowering departments along with internal controls to prevent fraud and ensure compliance.

To facilitate collaborative trade, companies may integrate across their ERP systems; they may share or complement their business ventures and data to become stronger together in relation to their main competitors.

A good example of this would be an autoparts store that wants to get an edge in its market by stocking items such as rearview mirrors in all colors and versions for every model made by every automaker. This is almost impossible from a logistical and financial point of view.

However, it is possible to systematically integrate stocks from all rearview mirror manufacturers and importers. An auto parts store can then carry the depth of stocks required to meet overall demand for rearview mirrors. The same model is applicable for a clear majority of retailers.

This is just one example of how collaborative economy principles are changing paradigms that go back decades ago, when retailers had to buy goods, wait for them to be delivered and then tally them into their stocks before starting to sell them on to their consumers.

ERP systems too are making far-reaching changes to support fast-changing markets. Traditional monolithic ERPs and legacy systems act as straitjackets for businesses because they are incapable of consistently managing the processes involved in the collaborative economy.

A new book on “ERP systems for Omniera – intelligence for planning, managing and running a business” shows how a new class of management systems designed for Omniera are now supporting these models and generating innovative results.