Established Companies' Strategic Responses to Sharing Economy

Established Companies’ Strategic Responses to Sharing Economy Threats Many industries are being disrupted by the sharing economy, with online platforms connecting and facilitating transactions between owners of underused assets and users who pay to use those assets for a limited duration. This sharing platform model threatens the way established firms do business, and they need to devise strategic responses to the threats. From an analysis of the responses to the sharing economy by established firms in two industries, we identify the strategies incumbent firms can consider when reacting to the threats.1 Chen Zhang University of Memphis (U.S.) Prajakta Kolte University of Memphis (U.S.)

William J. Kettinger University of Memphis (U.S.) Sungjin Yoo University of Memphis (U.S.)

The Need for Established Companies to Respond to Sharing Economy Disruptors 1

Like barbarians at the gate, sharing economy startups aspire to use their platform-based businesses to ravage traditional industries, steal shares of customers’ wallets and challenge established firms’ asset-heavy business models. Facing this onslaught, established firms must devise strategic responses that put them in a position to avoid being drowned by the sharing economy and, ideally, benefit from it. The sharing economy makes use of online platforms to market owners’ underused tangible or intangible assets that can be shared with non-owners. As a type of platformbased business, the sharing economy has bred a large number of new companies competing against conventional “pipeline” companies (those that succeed by optimizing the activities in their value chains).2 Digital platforms in the sharing economy serve as the focal point of ecosystems that bring together individuals and businesses with underused assets and those who need to rent the assets for a limited duration. Assets being shared via a platform include financial resources (LendingClub), spare time and cars (Uber), extra rooms and vacation homes (Airbnb), time and skills (TaskRabbit), workspace (WeWork) and heavy equipment (Yard Club). 1 Hope Koch, Ping Wang and Iris Junglas are the accepting senior editors for this article. 2 See Sundararajan, A. The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism, MIT Press, 2016; and Van Alstyne, M. W., Parker, G. G. and Choudary, S. P. “Pipelines, Platforms, and the New Rules of Strategy,” Harvard Business Review (94:4), April 2016, pp. 54-62.

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Established Companies’ Strategic Responses to Sharing Economy Threats

Platform-based businesses like these disrupt and threaten established companies through the exploitation of shared assets and the power of network effects.3 Executives in established firms who are familiar with sensing and responding to threats from other pipeline-based firms are often unable to perceive the potential of disruptions from the sharing economy. They are not accustomed to responding to platform-based sharing economy disruptors’ competitive moves that are dynamic, multi-directional and unpredictable. They may not sense how these disruptors from within and outside their industries are shifting the competitive landscape and impacting their core businesses. As a result, established pipeline companies may fail to respond until it is too late, as evidenced by Yellow Cab Cooperative (once the largest taxi company in San Francisco) that went bankrupt because it could not compete with sharing economy threats. In this article, we analyze the unique nature of platform-based sharing economy disruptions and provide guidance to established firms on how to sense and assess potential threats from the sharing economy. We then examine the strategies adopted by various established firms in the accommodation and package delivery sectors in response to platform-based sharing economy disruptors. Based on these analyses, we identify the strategies that can help guide executives in established pipeline businesses in sensing sharing economy disruptions and evaluating alternative responses, and provide recommendations for senior executives in established firms.

Sensing Platform-based Sharing Economy Disruptions

Traditional pipeline businesses have dominated industry for decades by controlling a linear sequence of activities to transform inputs at one end of the value chain to outputs or finished products at the other end.4 Traditional pipeline disruptors typically enter the market by creating value in the low-end market or by 3 Cusumano, M. A. “How Traditional Firms Must Compete in the Sharing Economy,” Communications of the ACM (58:1), January 2015, pp. 32-34. 4 Van Alstyne, M. W., Parker, G. G., and Choudary, S. P., op. cit., 2016.

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creating a new market for different customers.5 They often need to invest heavily to acquire scarce and valuable assets to compete with established firms in the industry. In contrast, platform-based sharing economy disruptors focus on orchestrating the underused assets owned by platform participants and coordinating the transactions between asset owners and asset users. These assets are often diverse and individualized in nature.

Four Aspects of Sharing Economy Disruptors’ Competitive Moves By analyzing the differences between traditional pipeline disruptors, and platformbased sharing economy disruptors we have identified four unique aspects of the latter’s competitive moves. 1. Entry Point. Platform-based sharing economy disruptors may enter the market from not only the low-end segment but also other market segments, including the high end. For example, Airbnb entered the accommodation sector by targeting the low end. It was founded as AirBed & Breakfast, a website to offer short-term living spaces, breakfast and business networking opportunities for travelers who were unable to find hotel lodging in San Francisco. In contrast, Uber initially entered the market at the high end (UberBlack) offering luxury limousine services. A key reason for the multiple market entry points is that sharing economy disruptors do not have the asset constraints faced by traditional pipeline firms. The diversity of the assets owned by individuals joining the platform makes it even more difficult to predict which market segment a disruptor will first attack. Moreover, these diverse assets may create an entirely new market that converts noncustomers into customers.

5 Christensen, C. and Overdorf, M. “Meeting the Challenge of Disruptive Change,” Harvard Business Review (78:2), March-April 2000, pp. 66-77.

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2. Growth Rate. Due to network effects, power law distribution6 and asymmetric competition in the platform-based economy, sharing economy disruptors such as Airbnb and Postmates have experienced, and will likely continue to experience, opportunities for exponential growth.7 Even though many potential sharing economy disruptors do not survive, those that do increase the size of their ecosystems at an accelerating rate.

3. Evolutionary Trajectory and Speed. A platform-based sharing economy disruptor can not only start out in any market segment but also exhibit flexibility in its competitive moves after entering the market. More specifically, a disruptor is able to move in any direction by targeting new markets, mainstream markets and other segments within the industry. By collecting and analyzing data about the demand and supply sides of its platform, a disruptor is likely to identify emerging business opportunities, experiment with various business models, identify which assets are more desirable and profitable, and make adjustments accordingly. For instance, although Uber entered the taxi industry as a premium service, it later launched a ride service with a lower price known as UberX, threatening existing taxi companies from the bottom. In fact, UberX was able to quickly attack the entire core business of the taxi industry.

4. Diversification into Other Industries. As well as moving within the focal industry with flexibility and agility, disruptors can move “well beyond industry boundaries. … They can create strange competitive bedfellows as companies in different

6 A power law distribution is one where a relative change in one quantity results in a proportional relative change in the other quantity, independent of the initial size of those quantities: one quantity varies as a power of another. For instance, the area of a square increases by a factor of four if the length of its side is doubled. 7 Platform Economy: Technology-driven business model innovation from the outside in, Accenture, 2016, available at https://www. accenture.com/fr-fr/_acnmedia/PDF-2/Accenture-Platform-EconomyTechnology-Vision-2016-france.pdf.

industries are affected.”8 As they attract more asset owners and users onto their platforms, they accumulate insights about customers’ demand for complementary services beyond what is currently being offered on the platform. Once these complementary services are deemed profitable, and it is possible for the existing asset owners to offer them, the disruptor can enter the associated new market and compete with a different set of competitors without extensive asset investment. For instance, although Uber started out in the taxi industry, it could expand its offerings by entering new markets, such as package delivery, food delivery and medical logistics. Airbnb has expanded its business beyond providing lodging for travelers and is allowing travelers to book a variety of activities, such as wine tasting, neighborhood experiences, surfing, outdoor workouts and audio tours.9

Table 1 summarizes these four unique aspects of platform-based sharing economy disruptor’s competitive moves. Because of the dynamic, multi-directional and unpredictable nature of platform-based sharing economy disruptors’ competitive moves, executives in established firms who are familiar with threats from other pipeline firms are often unable to fully sense disruptions from the sharing economy. They may be unable to anticipate how these disruptors from within and outside their industries are shifting the competitive landscape and impacting their core businesses.

Checklist for Sensing and Assessing Sharing Economy Threats Disruptors may enter the market in any customer segment or from other industries. Once they achieve a full-blown network effect, they may surpass established firms, making it extremely difficult for an established firm to fight back effectively. The first step for established firms is to sense and assess the threat so they 8 Vazquez Sampere, J. P. “Why Platform Disruption is So Much Bigger Than Product Disruption,” Harvard Business Review, April 2016, available at https://hbr.org/2016/04/why-platform-disruptionis-so-much-bigger-than-product-disruption. 9 Alitcheva, K. K. “Airbnb Wants to Go Beyond Home-Sharing With Debut of ‘Experiences,’” Fortune, November 17, 2016, available at http://fortune.com/2016/11/17/airbnb-experiences-trips/.

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Table 1: Competitive Moves of Platform-based Sharing Economy Disruptors

Within Current Industry

Entry Point

Originates anywhere in market

Growth Rate

Exponential

Evolutionary Trajectory and Speed Multiple directions of evolution, including but not limited to new market niches as well as product or services Speedy evolution

Outside Current Industry

Diversification into Other Industries

can identify whether, how and when to respond. To assist executives in established firms in this task, we have devised the following sensing and assessing checklist: 1. Disintermediation of assets: Do the valueadding activities in this industry allow for disintermediation of core assets that can be coordinated through digital platforms? 2. Underusage of assets: Does the industry have potential access to a large pool of underused assets held by individuals or non-incumbent firms?

3. Existence of disruptors and their entry points: Are there any platform-based companies that have entered the market? If so, in what customer segments (mainstream, new market or other) are they competing?

4. Growth of disruptors: Has the ecosystem of a platform-based entrant grown rapidly (based on indicators such as publicity, funding, participants)? 5. Competition among disruptors: Is the total market share of sharing economy businesses in the industry becoming large? Is there a high level of competition between sharing economy entrants?

6. Intra-industry expansion of disruptors: Do platform-based entrants have the potential to replicate aspects of their business model in other customer segments? 7. Inter-industry expansion of disruptors: Are platform-based companies leveraging connections in other industries?

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Easier, with relatively less capital investment

If the answer is decidedly Yes to some or all of these questions, an established firm needs to formulate a strategic response to the identified sharing economy threat(s).

Strategic Responses to Sharing Economy Disruptors

As illustrated in Table 2, we have applied the sensing and assessing checklist to two industry sectors that have experienced disruption from the sharing economy in the past few years— accommodation and package delivery. In summary, the accommodation sector is more fragmented, with a large number of established firms. However, there is a mature and dominant sharing economy disruptor in this sector—Airbnb. In contrast, the package delivery sector is more consolidated, with a small number of established logistics firms. But many small sharing economy disruptors have recently emerged offering a subset of services provided by established firms, although as yet there isn’t a dominant disruptor. In both of these industries, however, there are enough Yes answers on the checklist to warrant a strategic response from established firms. Below, we examine how some key established firms in each of these sectors are responding to sharing economy disruption.

Strategic Responses of the Accommodation Sector to Sharing Economy Disruption The accommodation sector provides lodging or short-term accommodation for business and leisure travelers. There are a wide range of properties in terms of accommodation size and misqe.org | © 2018 University of Minnesota


Table 2: Applying the Sensing and Assessing Checklist in the Accommodation and Package Delivery Sectors Sensing and Assessing Checklist

Accommodation

Package Delivery

1. Disintermediation of Assets?

Yes. Owning, maintaining and using assets can be separated, as demonstrated by the timeshare business that has existed for decades.

Yes and No. Yes for certain types of activities (such as within city or cross-city delivery of goods that do not require special handling). Individuals owning transportation assets can provide these services. No, because disintermediation isn’t yet possible for international deliveries and for high-end and specialty goods like bio-pharma.

2. Underusage of Assets?

Yes. Many individuals own multiple residential properties, such as vacation homes and second homes. And people owning a single residential property may travel a lot and leave the property vacant for an extended period.

Yes. Many individuals owning vehicles commute or travel on a regular basis. The vehicles often have unused space that can hold packages.

3. Existence of Disruptors and Their Entry Points?

Yes. Several vacation home-sharing platforms, such as Airbnb, FlipKey and HomeAway, exist. Airbnb initially targeted young budget travelers.

Yes, quite a few startups and existing firms offer crowdsourced package delivery. These disruptors have primarily focused on sameday, within-city delivery or cross-city delivery of groceries, food, clothing, gift baskets and other merchandise.

4. Growth of Disruptors?

Yes. Number of listings on Airbnb grew from 50,000 in 2011, to 120,000 in 2012, to 300,000 in 2013 and to 550,000 in 2014—i.e., the platform has grown exponentially since its inception.

Yes. The market for package delivery has grown. For example, sharing economy entrant Deliv raised $28 million in 2016 compared to less than $10 million in 2013. Another entrant, Postmates, recorded 500,000 cumulative deliveries in the U.S. in 116 weeks, but it took only 20 weeks to achieve the next 500,000 deliveries and 10 more weeks to reach 1.5 million deliveries.10

5. Competition among Disruptors?

Yes and No. There is some competition among a few entrants, although Airbnb is recognized as the sharing economy giant that has been growing quickly.

Yes. The package delivery industry is projected to grow 9% annually and exceed $343 billion by 2020.11 Currently, there exists strong competition among new entrants.

6. Intra-industry Expansion of Disruptors?

Yes. Airbnb initially targeted budgetNo evident expansion of market segments yet. conscious travelers and later expanded its offerings to attract a wide range of travelers, including business travelers.

7. Inter-industry Expansion of Disruptors?

Yes. An example is Airbnb’s partnership with Delta in 2016.

the type of complementary services provided. In 10

10 Smith, D. “The hottest delivery startup out of San Francisco is growing like crazy,” Business Insider, March 4, 2015, available at http://www.businessinsider.com/postmates-explosive-growth-2015-3.

Not yet, as disruptors are still in an early stage and need to compete with other players offering similar services.

the U.S., the sector comprises a few large hotel 11

11 Adding Value to Parcel Delivery, Accenture, September 29, 2015, available at https://www.accenture.com/us-en/insight-newdelivery-trends.


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chains, numerous small private establishments and a few platform-based sharing economy companies, including Airbnb, which has built a large ecosystem around its platform and is the major disruptor in the sector. Founded in 2008, Airbnb hosts a peer-to-peer online platform that allows people to list and rent short-term lodging in residential properties. It initially focused on providing short-term living quarters, breakfast and business networking opportunities for attendants of high-profile events in areas with few hotels. Airbnb soon expanded to allow people to share a variety of properties, such as entire homes and apartments, private rooms and boats. As of 2017, it had over 2 million listings in more than 34,000 cities and 191 countries. Its successful implementation of the sharing economy platform model has given rise to disruptors with similar business models, such as Roomorama, FlipKey, 9flats and Wimdu. Given the dominance and sector disruption of Airbnb, conventional players such as hotel chains have found that “it’s tough to put that genie back in the bottle.”12 Below, we describe the strategies adopted by three major hotel chains (established pipeline firms) in response to sharing economy disruption over the past few years.

Wyndham Worldwide Wyndham Worldwide Corporation, a global hospitality company, operates through three business units: Hotel Group, Destination Network and Vacation Ownership. With low capital investments, the Hotel Group unit franchises thousands of hotels offering upscale, upper midscale, midscale, economy and extended-stay accommodation. The Destination Network unit is a fee-for-service business that offers professionally managed vacation accommodation and operates the world’s largest vacation ownership exchange program, connecting vacation suppliers such as individual homeowners with vacationers. Vacation Ownership is the largest business unit of Wyndham Worldwide and is at the heart of its business, generating about 50% of the company’s 12 Vazquez Sampere, J. P., op. cit., 2016.

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total revenue in 2016.13 This unit operates a timeshare business with over 200 resorts and approximately 897,000 owners. It is responsible for developing and acquiring vacation ownership resorts, marketing of vacation ownership interests, consumer financing and property management services. Wyndham Worldwide Corporation has decades of experience in running timeshare businesses and operating vacation exchange platforms such as RCI (Resort Condominiums International, which is part of the Destination Network). Wyndham’s senior executives quickly recognized the similarity between Airbnb’s business model and the timeshare model: “[With] our timeshare exchange and vacation rental offerings, Wyndham Destination Network is a major player in the sharing economy. But unlike the big online marketplaces, our model goes well beyond linking supply and demand. As the world’s largest provider of professionally run private accommodation, we connect travelers seeking the authenticity of homestay with owners looking to rent their property … we offer both of these groups a range of services to ensure a smooth experience.” Stephen Holmes, Chairman and CEO, Wyndham Worldwide

To enable it to compete directly with sharing economy disruptors, Wyndham grew its vacation ownership network through acquisitions. It acquired and invested in several sharing economy vacation rental startups, such as Friendly Rentals, Wimdu and 9flats. It invested in Love Home Swap, a U.K.-based home sharing company, and Veeve, a luxury vacation rental company in the U.K. “Airbnb’s model is very different from ours. They’re a distribution plank; they’re not providing a full vacation experience, which is what we’re doing every day with the peerto-peer plus model.” Gail Mandel, President and CEO, Wyndham Destination Network

13 Wyndham Worldwide Reports Second Quarter 2016 Results, available at http://www.wyndhamworldwide.com/news-media/pressreleases/wyndham-worldwide-reports-second-quarter-2016-results.



Wyndham is not only expanding its timeshare business but also adding vacation rentals and timeshares to the Wyndham Rewards loyalty program, which used to be limited to the Hotel Group. Loyal members can now redeem their rewards points for stays at a large number of condominiums and vacation homes in the Vacation Ownership and Destination Network units. The company plans to fully integrate its loyalty program across most of its timeshare, vacation rental and hotel businesses in the near future. “We believe there are a lot of advantages to having these businesses together; the most recent and notable example of that is the Wyndham Rewards program, which is becoming a “blue [ribbon]” that runs through all of our businesses. … That is something that we think will drive value to all business units and that is a powerful, powerful product. … We’re very proud of what that group has done. … and it’s being embraced by the timeshare business as well as by the vacation rental business to drive more business between the three [units]. [Wyndham Rewards will] be a major factor going forward and will have a positive impact.”14 Stephen Holmes, Chairman and CEO, Wyndham Worldwide

In summary, unlike its competitors, Wyndham Worldwide has recognized the similarities between its timeshare business and the sharing economy business model and believes in the company’s ability to compete with sharing economy disruptors. It has jumped into the sharing economy and grown that part of the business through acquisitions and investments. It is also trying to better integrate its three business units, using its loyalty program as the common thread.

Hyatt Hotels Hyatt Hotels Corporation is a global hospitality company and an owner, operator and franchiser of hotels, resorts, branded residences and vacation ownership properties. In 2016, it had 16 vacation ownership properties with about 1,000 14 Hess, D.“Loyalty program connects Wyndham platforms,” Hotel News Now, October 26, 2016, available at http://www.hotelnewsnow. com/Articles/80166/Loyalty-program-connects-Wyndham-platforms.

units, which accounted for 2% of the company’s total portfolio. Hyatt Hotels is one of the first established firms in the accommodation sector looking to learn from sharing economy disruptors and even partnering with them. Hyatt aims to “become the most preferred hospitality brand—loved and respected by colleagues, guests, owners, operators, community members and shareholders.”15 One of its competitive advantages is its widely recognized brands and their top rankings and awards for service and guest experience. Hyatt senior executives have a broad strategic perspective on disruption from the sharing economy and focus on learning about platforms and their customers. They believe the key to meeting the sharing economy challenge is to focus on learning how consumers’ preferences are changing, and improving the Hyatt brand experience to meet the changing tastes of its core customers. “We’ve always … looked at this whole sharing economy dynamic as a broad consumer issue and a consumer behavioral change. And we’ve always been drawn toward it, not … away from it because we feel … we need to learn from what we’re seeing evolve in the market and how consumers think and how they behave. … [We’ve] been experimenting with how we could potentially extend the brand experience for Hyatt customers and also understand how we may be able to interface with and help support different kinds of stay occasions outside of our hotels.” Mark Hoplamazian, President and Chief Executive Officer, Hyatt Hotels Corporation

For example, in June 2015, the company invested millions in onefinestay, a U.K. startup and upmarket competitor to Airbnb that allows luxury homeowners to rent out their homes or apartments in high-end locations. The purpose of its investment is to learn about the type of experience customers are seeking from sharing economy disruptors.16 Soon after its investment in 15 Hyatt Hotels Corporation Annual Report 2016. 16 Schaal, D. “Hyatt Invests in Onefinestay to Figure Out Sharing Economy Appeal,” Skift, June 1, 2015, available at https://skift. com/2015/06/01/hyatt-invests-in-onefinestay-to-figure-out-sharingeconomy-appeal/.


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onefinestay, Hyatt quietly tested a pilot program at Hyatt Regency London - The Churchill, which allowed onefinestay guests flying to London on a red eye flight to store their bags and/or use a Hyatt guestroom until their onefinestay rental was available.17 “Our approach to learning about the onefinestay platform was about understanding how it could work, but also understanding the use cases. We learned a lot … because we ran various pilots with onefinestay to see how we might integrate it into our hotel business. … We were interested in delivering something that really reflects our brand, is a fulfillment of our purpose as a company and is a commercial model that really will work for us.” Mark Hoplamazian, President and Chief Executive Officer, Hyatt Hotels Corporation

From this experience, Hyatt Hotels gained insights into the preferences of Millennial and Generation Z travelers, who represent a sizable share of the market segment that sharing economy disruptors such as Airbnb attract. Hyatt leveraged its knowledge to launch a new brand— The Unbound Collection by Hyatt—catering to the needs of these customers. The Unbound Collection by Hyatt includes boutique hotels, historic urban gems, contemporary trendsetters and so on that provide unique and shareable experiences to young social-media-savvy travelers. In another response to the growing sharing economy, Hyatt Hotel’s executives recently announced that the company will be focusing on “extending the Hyatt brand beyond our core hotel business into new adjacent spaces that are relevant to our guests.”18 These non-traditional adjacent spaces include food and beverage, wellness, alternative accommodation and so on. Hyatt plans to move into these spaces by building internally, partnering with other companies and by acquisitions. Expanding into adjacent spaces 17 Carson, B. “Hyatt Hotels is dipping its toes into the sharing economy by partnering with the ‘Airbnb for the rich,’” Business Insider, July 21, 2015, available at http://www.businessinsider.com/ hyatt-hotels-introduces-pilot-program-with-onefinestay-2015-7. 18 Sampson, H. “Hyatt Wants to Make a Bigger Push into ‘Adjacent Spaces,’” Skift, November 21, 2016, available at https://skift. com/2016/11/23/hyatt-wants-to-make-a-bigger-push-into-adjacentspaces/.

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to provide customers with full travel experiences is similar to Airbnb’s expansion of its offerings on its sharing economy platform. In summary, given its lack of experience with platform-based business models and its focus on customer engagement, Hyatt Hotels has invested in sharing economy disruptors to learn how a platform business works and how traveler preferences are changing. Focusing on authentic human connection with its core customers, Hyatt then implemented initiatives to launch new brands, offer new services and better leverage its existing assets to improve customers’ experiences with the Hyatt brands.

Hilton Worldwide Hilton Worldwide, a major established global hospitality company, has three lines of business: ownership, management and franchise, and timeshare. As of January 1, 2017, the company owned, leased, managed or franchised over 4,800 hotel and resort properties in more than 100 countries and territories. Of these properties, 47 were timeshare resorts with over 7,000 rooms. Hilton’s business strategy focuses on service differentiation through maintaining the highest level of quality and integrating IT innovations such as mobile check-in and digital key into its service offerings.19 “[Compared] to Airbnb, we are essentially in different businesses. … What we provide for our customers is something different. Our whole business is focused around delivering very consistently a high-quality product wrapped in authentic heartfelt service. Our customers tell us every day that they want more of it, not less of it. I think it’s something very different than what is provided in the sharing economy.” Christopher J. Nassetta, President and Chief Executive Officer, Hilton Worldwide

Hilton’s strategic response to the threat from the sharing economy is somewhat different from other pipeline companies in the accommodation sector. Unlike Hyatt Hotels, which invested in and learned from sharing economy disruptors in the same accommodation sector, Hilton partnered 19 Hilton Worldwide Holdings Inc. Report, August 2016, available at http://research-methodology.net/hilton-worldwide-holdings-increport/.



with Uber, a sharing economy giant that has already attracted over eight million users and provides over one million rides on a daily basis. This cross-sector partnership with a sharing economy platform company enabled Hilton to tap into Uber’s rich information gathered about local destinations and attractions frequented by Uber riders. Hilton also recognized it could attract new customers from the Uber platform without excessive investment or risk. In 2015, Hilton formed a Local Scene and Ride Reminder partnership with Uber to create a seamless travel experience. This partnership allows customers to set automated ride reminders and book an Uber ride to and from a Hilton hotel. Hilton’s guests can also receive local recommendations, such as restaurants and nightspots, that past Uber riders frequently visit, and can easily request an Uber ride to these destinations. The two companies further expanded the partnership by integrating their apps to simplify customers’ travel experiences. Hilton HHonors members can order an Uber ride directly from the HHonors app. Uber customers can view their hotel information, choose their room, check in and request a digital key by using the Uber app during their ride to the hotel. “By partnering with Uber, a leading innovator, we’re helping travelers explore destinations like they’re locals. This is the first time any company has leveraged Uber riders’ most frequented destinations to provide local recommendations. We’re excited to offer these unique benefits for our loyal guests. … More and more travelers self-identify as “foodies” and view dining as a unique way to explore the local culture. That’s the goal of Local Scene: we want to help our HHonors members experience their destination like a local, while eliminating some of the hassle that goes with researching local venues. By leveraging technology, we can close the gap that traditionally existed between hotels and the sharing economy.”20 Rich DiStefano, Senior Director of Mobile Products, Hilton Worldwide

20 “Hilton Aims to Close Gap in Sharing Economy,” Hotel Business, September 30, 2015, available at https://www.hotelbusiness. com/hilton-aims-to-close-gap-in-sharing-economy/.

In summary, lacking knowledge about the sharing economy business model and access to a large-scale platform, Hilton leveraged its IT competency (especially with mobile technologies) to partner with Uber so it could learn about the sharing economy and attract new customers from Uber’s platform.

Strategic Responses of the Package Delivery Sector to Sharing Economy Disruption

The package delivery sector primarily provides express and parcel deliveries of nonpalletized goods that weigh less than 150 pounds. The industry comprises a small number of major players, such as DHL, UPS, FedEx and USPS, that provide domestic and international deliveries through their large logistics networks. The sector is characterized by high shipping volumes, low weights and timely delivery of shipments, and by capital- and labor-intensive businesses. Traditionally, a new entrant would need to invest heavily to build its logistics infrastructure and assets to compete with the dominant established firms. Over the past few years, a growing number of sharing economy startups have entered the package delivery industry by providing a web- or mobile-based platform to connect a network of drivers having underused transportation assets with those who need things delivered. Many of these disruptors are providing a subset of the services that have been traditionally offered by the major players. For example, Deliv provides crowdsourced, same-day delivery to customers of local, online and omnichannel retailers. It operates in over 100 U.S. cities and addresses the “last mile” problem between retailers and customers. Deliv has partnered with major retailers such as Best Buy, Macy’s and Nordstrom. The delivery service is offered at a low cost because Deliv crowdsources it to hourly paid drivers who have a vehicle and a smartphone. Another example of a platform-based sharing economy disruptor in the package delivery sector is Roadie. This platform provides both a local and long-haul personalized pick-up and delivery service by making use of unused cargo space in millions of passenger vehicles on the road. March 2018 (17:1) | MIS Quarterly Executive

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Senders post details of the item to be shipped on Roadie’s web or mobile platform. The sender is then matched with a driver heading in the required direction and meeting the sender’s preferences. The sender can track the item and connect with the driver at any time during the delivery. Another on-demand delivery platform is Postmates, which connects individuals who want to provide delivery services as independent contractors with customers in need of local delivery of restaurant meals, groceries and personal items. Operating in over 100 areas in the U.S., it has partnered with companies such as 7-Eleven, Starbucks, Walgreens and Trader Joe’s. Shyp is yet another disruptor in the package delivery sector. It focuses on the first mile in shipping by hiring freelance bike couriers and drivers to pick up, pack, compare and select carriers, and ship items for customers.21 Shyp helps to streamline and simplify customers’ shipping processes. In addition to startups, package delivery services are also provided by sharing-economy platform disruptors that originated in other sectors (e.g., Uber) and by established firms (e.g., Amazon). In 2015, Uber launched UberRUSH, a low-cost same-day delivery service for goods such as food, flowers and clothing.22 Like services such as Deliv, UberRUSH can be integrated with retail platforms (e.g., Clover and 1-800-Flowers.com) so that customers can choose to use Deliv during checkout. As described below, established firms in the package delivery sector are adopting different strategies in response to the challenges these new entrants bring.

DHL DHL originated as a startup in San Francisco in 1969, providing express delivery of time-sensitive shipping documents between San Francisco and Honolulu, which marked the beginning of its express delivery service. Thus, the company was originally based on a sharing economy business model before the term “sharing economy” was invented. In return for a free plane ticket, DHL 21 Alba, D. “Shyp Makes Couriers Employees Before It’s Too Big to Change,” wired.com, July 1, 2015, available at https://www.wired. com/2015/07/shyp-makes-couriers-employees-big-change/. 22 For information on how UberRUSH works, see https://rush.uber. com/how-it-works.

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asked people to carry ocean freight shipping documents in their luggage and deliver them to custom officials at the port of entry where they landed. In this way, DHL ensured timely delivery of critical shipping business documents and reduced the time it took for goods to pass through customs.23 DHL soon expanded into other regions around the world and later expanded its operations within the U.S. In 2002, Deutsche Post became a majority shareholder in DHL, which became part of the postal and logistics company Deutsche Post DHL Group. Deutsche Post DHL Group operates under two brands: Deutsche Post and DHL. With operations in more than 220 countries and territories, DHL is the global leader in the international express market, with 34% market share.24 It is the market leader in Europe and Asia-Pacific, where it had 41% and 44% market shares respectively in 2014. Consistent with DHL’s 1960s roots in a sharing economy business model, in September 2013, it launched a pilot service called MyWays in Stockholm, Sweden. This service is a crowdsourced platform that connects senders seeking flexible parcel delivery with individual contractors looking for extra earnings and willing to transport parcels on their regular commute past a DHL facility.25 “From our roots as a courier service in the 1960s, we know that sharing is not new. What is new are the tools and attitudes with which people are sharing: smartphones and mobile technologies combined with shifting societal values are allowing companies with new business models to proliferate at unprecedented speed, scale and valuation.” Matthias Heutger, Senior Vice President Strategy, Marketing & Innovation, DHL Customer Solutions & Innovation, and Markus Kückelhaus, Vice President Innovation and Trend Research, DHL Customer Solutions & Innovation

23 Petersen, R. “How DHL Pioneered The Sharing Economy,” TechCrunch, February 13, 2016, available at https://techcrunch. com/2016/02/13/how-dhl-pioneered-the-sharing-economy/. 24 Deutsche Post DHL Group 2016 Business Profile, available at https://www.dpdhl.com/content/dam/dpdhl/Investoren/Veranstaltungen/Reporting/2016/FY2015/DPDHL_Business_Profile_2016.pdf. 25 Botsman, R. “Sharing’s Not Just for Start-Ups,” Harvard Business Review (92:9), September 2014, pp. 23-25.



In addition, DHL recognizes that logistics firms can play a key role in facilitating the pick-up and delivery of shareable assets in the sharing economy and in promoting its growth. By focusing on technological innovations and global expansion, DHL is preparing itself to take advantage of the opportunities created by the sharing economy in various industry sectors. As indicated in a DHL Trend Research report on sharing economy logistics, logistics providers such as DHL can “use their complex knowhow to streamline the pick-up and delivery of shareable assets, lower transportation costs, and thereby grow the overall demand for logistics services.”26 The 2017 DHL Innovation Challenge invited ideas for creating shared and accessible solutions for the logistics industry.27 This crowdsourcing initiative is soliciting original ideas or practical solutions for logistics problems using innovative sharing economy business models. These ideas or solutions may be about latest technologies, new products, service solutions or concepts that allow shared access to logistics services or underused logistics assets and infrastructure, while bringing value to all parties involved, including businesses, consumers and peers. In addition to experimenting with the sharing economy model and preparing to position itself as the logistics provider for transporting shareable assets, DHL has been exploring opportunities arising from technological innovations, with an emphasis on last-mile delivery and cross-border e-commerce package delivery. For example, in 2015, it launched a pilot project, in partnership with Amazon and Audi, that allowed customers owning automobiles to use their trunks as mobile delivery addresses when they placed an order with Amazon. After receiving the exact location of the customer’s car, a DHL driver could access the car’s trunk, place the package in the trunk and close it, which would then automatically be locked. The package would thus be delivered to the customer’s trunk securely instead of being delivered to his or her home. This pilot project tackled the last mile challenge often faced by the 26 Sharing Economy Logistics - Rethinking logistics with access over ownership, DHL, May 2017, available at http://www.dhl.com/ en/about_us/logistics_insights/dhl_trend_research/sharing_economy. html#.WlN8mVWo_IU. 27 DHL Sharing Economy Challenge 2017 - Creating Shared & Accessible Solutions for the Logistics Industry, available at https:// www.dhlinnovationchallenge.com/economychallenge/.

package delivery industry and provided more convenient service to its customers, who no longer needed to worry about being out when DHL tried to deliver their parcels.28 These initiatives have the potential to not only help DHL strengthen its competitive position in its existing market segments but also prepare itself for the asset delivery opportunities created by the sharing economy in various industries.

UPS UPS is the largest package delivery company in the world, with 2015 revenue of $58 billion, 78% of which was from the U.S. market. It operates in more than 200 countries, where its single pickup and delivery network serves domestic and international customers, both commercial and residential. Its logistics network comprises about 110,000 vehicles as well as numerous UPS stores, customer services centers, authorized outlets and drop boxes.29 The company also owns over 200 aircraft and leases more during peak shipping times. UPS has been closely monitoring all aspects of the sharing economy and learning from the disruptors about market demands and dynamics, and about the competitive threats they bring. To prepare itself for the future shift in the package delivery sector, the company has invested in several sharing-economy startups.30 Two notable examples are its investment in Deliv, a crowdsourced, same-day delivery disruptor, and Roadie, another sharing economy disruptor offering both local and long-haul personalized pick-up and delivery services. “We invested in Deliv to take a look at that model, monitor it, understand it, look at how sustainable it is and look at its opportunities. Ultimately, we want to be able to meet our customers’ needs however

28 Stevens, L. “DHL Testing New Delivery Strategies for ECommerce,” The Wall Street Journal, May 15, 2015, available at http://www.wsj.com/articles/dhl-testing-new-delivery-strategies-fore-commerce-1431712723. 29 Williams, S. “UPS or FedEx: Which Company Is Best at Keeping Its Customers Loyal?,” The Motley Fool, May 9, 2014, available at http://www.fool.com/investing/general/2014/05/09/ups-or-fedexwhich-company-is-best-at-keeping-its.aspx. 30 O’Shea, D. “How UPS stays steady in center of e-commerce shipping storm,” Retail Dive, November 15, 2016, available at http:// www.retaildive.com/news/how-ups-stays-steady-in-center-of-e-commerce-shipping-storm/429889/.


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they develop.” Louis DiJianne, Director of Retail and Consumer Products, UPS

“We see this as a growing segment of the industry, so one of the reasons we invested [in Deliv] was to learn more about the market and customer requirements. We see our investments as a way to gather information to make future decisions about our business.”31 Steve Gaut, Spokesman, UPS

The ultimate goal of investing in these disruptors is to learn about customer demand for the types of services they offer, gather customer requirements about the delivery service and learn from the disruptors “who are exploring new business models and building new technologies that can transform the future direction of the logistics industry.”32 Investing in sharing economy disruptors may also provide UPS with collaboration opportunities where its strengths complement the strengths of a disruptor. For example, leveraging its expertise in secure logistics, one of UPS’s licensed affiliates, UPS Capital Insurance Agency, Inc., started providing Roadie with parcel insurance that protected Roadie shipments valued up to $10,000.33 UPS also collaborates with Deliv to deliver online print orders to customers within an hour. UPS’s approach to the sharing economy enables it to learn about customer demand and preferences related to package delivery and improve its service offerings accordingly. In addition, in the future, if and when sharing economy disruptors’ businesses grow significantly, UPS will likely be more knowledgeable about their business models and operations than other firms. Hence, UPS will be in a better position to assess the possibility 31 Reisinger, D. “Why UPS Invested In A Same-Day Delivery Startup,” Fortune, February 24, 2016, http://fortune.com/2016/02/24/ ups-invests-in-deliv/. 32 Roadie Secures $15 Million Series B to Fuel Its On-the-Way Delivery Network, Roadie Press Release, June 14, 2016, available at https://www.roadie.com/press-release/roadie-secures-15-millionseries-b-to-fuel-its-on-the-way-delivery-network. 33 UPS Capital® To Provide Insurance Solution for Roadie Shipments, UPS Press Release, November 2, 2015, available at https:// pressroom.ups.com/pressroom/ContentDetailsViewer.page?ConceptT ype=PressReleases&id=1446469432376-328.

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of acquiring a disruptor before the disruptor’s valuation becomes too high to acquire.

FedEx FedEx Corporation provides a broad range of transportation, e-commerce and business services to customers and businesses in over 220 countries and regions. With annual revenues of $58 billion, this asset-intensive company has four operating units: FedEx Express, FedEx Ground, FedEx Freight and FedEx Services. With more than 50,000 vehicles, FedEx Ground provides low-cost small-package delivery services in the U.S. and Canada. FedEx Express uses its capitalintensive delivery infrastructure to offer an array of U.S. domestic and international package and freight shipping services. This is the largest division and contributed 53% to the company’s total sales in 2016. FedEx has adopted a different approach than either UPS or DHL toward potential threats from the sharing economy. Its senior executives believe that sharing economy disruptors may be unable to become major players in the logistics business because of the industry’s extreme assetintensiveness and the IT-intensive nature of a shipping network. Given the highly organized nature of the logistics business, its massive scale, delivery density and the need for an integrated network, FedEx believes that heavy asset investment is necessary to achieve costefficiency. It also believes that lack of trust and inconsistency of service quality may prevent large-scale adoption of crowdsourced delivery.34 “Customer experience is very critical in that regard. So when you talk about the challenges of building a network, the scale, the input costs, the technology issues and the customer experience required to deliver what customers expect of companies like FedEx and our primary competitors, it’s a pretty tall hill to climb. … We continue to monitor these situations and opportunities

34 Levine-Weinberg, A. “Why FedEx isn’t scared of Uber,” CNN Money, July 16, 2016, available at http://money.cnn.com/2015/07/16/ investing/uber-fedex-startups/.



that pop up from time to time."35 Mike Glenn, Executive Vice President of Market Development and Corporate Communications, FedEx

FedEx’s response to sharing economy disruptors has focused on better leveraging its existing assets and increasing the reach and density of its logistics network. For example, FedEx Express is diversifying to achieve growth in the global market while improving process and cost-efficiency in the domestic network. FedEx Ground is striving to maintain its operating margins through superior service, innovative technology and speed advantage. Overall, FedEx’s long-term strategy is to focus on global expansion while improving domestic operational efficiency and quality. Evidence of its global expansion is provided by the 2016 acquisition of TNT Express, which made FedEx one of the major delivery companies in Europe. In addition, TNT’s extensive logistics infrastructure will enable FedEx to provide better trans-Atlantic delivery to global customers. Thus far, few sharing economy startups have shown interest in international delivery, possibly because of the sophisticated planning and coordination required to connect international shippers with senders. The majority of disruptors in this sector focus on delivering cheaper items, such as food, grocery and clothes, within or across larger cities. There has been less competition from sharing economy disruptors for many other types of delivery services, such as delivery of high-value goods and global delivery. FedEx’s latest strategic initiatives are therefore aimed at building more capital-intensive, largerscale logistics networks and leveraging its existing assets to strengthen its competitive position. Its focus is on markets with greater growth potential and less competition from sharing economy disruptors. Overall, these initiatives have the potential to help the company cope with the sharing economy challenge by focusing on the services that are currently unlikely to be crowdsourced. 35 Bomey, M. “Why FedEx isn’t worried about Uber, Amazon,” US Today, June 17, 2015, available at http://www. usatoday.com/story/money/2015/06/17/fedex-uber-amazondelivery-ups-shipping/28859899/?utm_source=feedblitz&utm_ medium=FeedBlitzRss&utm_campaign=usatodaycommoney-topstories.

Five Strategic Response Options for Established Companies Based on our analyses of established firms’ responses to sharing economy disruptors in the accommodation and package delivery sectors, we have identified five strategic responses that an established firm may consider when faced by sharing economy disruption. These strategies are summarized in Table 3 and are discussed below.

Strategic Response 1: StrengthenBusiness-as-Usual In the asset-intensive package delivery sector, there are many small-size disruptors but no clear leader. Unlike the accommodation sector, where sharing economy disruptors have gained wide recognition and adoption, crowdsourced package delivery is yet to be widely adopted in many cities and geographical regions. Overall, the immediate threat to established firms in the package delivery industry is less than in other industries, such as accommodation. FedEx perceives the sharing economy threat to be less severe because of the extremely asset-intensive and IT-intensive nature of building a logistics network, and its focus is on growing its international delivery service. Without past experience of running a platform-based business model, FedEx has therefore adopted the Strengthen-Business-asUsual approach by strengthening its existing business model. By leveraging its existing assets and obtaining additional assets through acquisitions, it is focusing on growing the scale, delivery density and usage of its logistics network, especially in the global market, where competition from the sharing economy is less intense. This approach will prove to be effective if sharing economy disruptors maintain their focus on same-city delivery and are unable to find an efficient way to pool underused transportation assets and coordinate inter-city and cross-border deliveries. However, as discussed earlier, platform-based sharing economy disruptors’ competitive moves tend to be highly dynamic and multi-directional. Adopting the Strengthen-Business-as-Usual approach therefore requires close monitoring of disruptors from both within and outside the firm’s industry sector. When disruptors change March 2018 (17:1) | MIS Quarterly Executive

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Table 3: Five Strategic Response Options for Established Firms to Platform-based Sharing Economy Disruptors Strategic Response

Description

Example

1. StrengthenBusiness-asUsual

An established firm maintains its traditional business model while modifying its existing assets to better meet the needs of current customers and to attract new customers in market segments with less competition from the sharing economy.

FedEx is growing the scale, delivery density and usage of its logistics network, especially in the global market, where competition from the sharing economy is less intense.

2. InvestLearn-Act

An experimental strategy where an established firm invests in a sharing economy disruptor to learn more about its business model, potential success and customers’ preferences. The learning might result in actions to improve or modify the firm’s existing product or service offerings to better meet its customer’s needs in response to sharing economy disruptors’ threats.

Hyatt invested in onefinestay to learn about the sharing economy model and platforms, and changing customer behavior.

3. Step-Outand-Partner

An established firm can partner with a successful sharing economy disruptor from another industry to attract the disruptor’s customers and offer new products or services to existing customers. The partnership also allows the established firm to access a largescale sharing platform’s ecosystem.

Hilton partnered with Uber—a leading sharing economy disruptor in the taxi industry—to differentiate its services from competitors’. Hilton’s guests can request Uber rides easily to destinations and get recommendations about restaurants and attractions based on data about Uber riders. Uber can also benefit from this partnership by attracting users from Hilton’s customers.

4. Hybrid

An established firm incorporates varying degrees of a platform-based sharing economy model into its traditional business. This implementation of mixed strategies enables a firm to maintain its competitive position.

DHL, having early exposure to aspects of the sharing economy, is willing to modestly alter its business model to include some aspects of the sharing economy.

5. ExpandandCompete

When a significant portion of an established firm’s business model and/or operating philosophy already resembles a sharing economy model, it can grow and strengthen that portion of its business model to directly compete with sharing economy disruptors.

Wyndham competes in the sharing economy with its expanded timeshare business, which it believes has the key aspects of the sharing economy business model. Leveraging this sharing economy potential with superior services, it seeks to achieve better synergy and brand effects across all three segments in which it competes.

their competitive focus and start attacking an incumbent’s main market segments, the established firm may have to consider adopting a different approach and hope it is not too late.

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UPS invested in Roadie to learn more about the threats and sharing economy business model.

Strategic Response 2: Invest-Learn-Act When an established firm has little experience with the sharing platform business model, it may consider the Invest-Learn-Act approach so it can learn about the disruptors and, more importantly, the shift in customer needs and preferences resulting from sharing economy consumption. For misqe.org | © 2018 University of Minnesota


example, like FedEx, UPS lacks experience with platform-based business models. However, given that a larger percentage of its revenue comes from the U.S. domestic market than FedEx, where sharing economy disruptors are competing more fiercely, the potential threat to UPS is greater than to FedEx. UPS has therefore adopted the InvestLearn-Act approach by investing in multiple sharing economy firms, closely monitoring their businesses and learning about customer demands and market dynamics. Similarly, in the accommodation sector, Hyatt views sharing economy disruptors from a strategic and customer-centric perspective. While still maintaining its emphasis on high-quality brand experiences, Hyatt also adopted the InvestLearn-Act approach by investing in disruptors to learn about changing customer preferences as well as the sharing platform-based business model. It then focused on its core customer base by leveraging its assets to improve service offerings. The Invest-Learn-Act approach will prove to be especially beneficial if any of the disruptors invested in by an established firm becomes a dominant player in the sector. The established firm will be in a more advantageous position to collaborate with the disruptor. It might acquire the disruptor’s platform and customers and integrate the sharing model into its existing business, shifting from an Invest-Learn-Act approach to a Hybrid approach. However, the Invest-Learn-Act approach requires a significant amount of slack financial and human resource, a learning orientation and senior management’s willingness to act on the learned knowledge.

Strategic Response 3: Step-Out-andPartner Although Hilton Worldwide’s portfolio includes timeshare properties, it has not yet developed strong platform-based sharing capabilities. Instead, its response to the sharing economy has been to adopt the Step-Out-andPartner approach to maintain and strengthen its competitive position. Hilton leveraged its IT competencies, especially in mobile technologies, to step out of the sector and partner with Uber, the dominant sharing economy disruptor in the transportation sector.

Partnering with a mature sharing economy disruptor from another sector offers multiple advantages. There is less risk because the established firm does not need to invest substantial resources to develop its own sharing platform. Moreover, it can increase its brand awareness among the disruptor’s customers and attract new customers. More importantly, it has the potential to leverage information about the platform participants to improve its own service offerings. However, compared with the InvestLearn-Act approach, the Step-Out-and-Partner approach tends to offer fewer opportunities for learning how the sharing economy business model operates and how to build and manage a sharing platform. In addition, this approach provides limited guidance on how to effectively leverage the information about the transactions accumulated on the partner’s platform to improve the established firm’s products and services.

Strategic Response 4: Hybrid When an established firm already has experience with running a sharing economy platform, it can consider adopting a Hybrid approach by incorporating some degree of a platform-based sharing economy model into its business while keeping its traditional business model. Like FedEx, a significant portion of DHL’s revenue comes from its global delivery service, which has not yet been threatened by sharing economy disruptors. However, unlike FedEx, DHL has asset sharing and an entrepreneurial mindset coded into its DNA, and this has enabled it to adopt the Hybrid approach. DHL is experimenting with sharing economy concepts in its business as well as maintaining its traditional business model with an emphasis on global expansion and innovations in last mile delivery solutions. The Hybrid approach will likely benefit an established firm regardless of whether the sharing economy gains wide adoption in the industry and becomes a major threat to incumbents. An established firm can assess the potential benefits of the sharing economy model in strengthening its competitive position and can adjust the extent of sharing economy offerings in its mixed business model. The Hybrid approach also enables an established firm to gain firsthand experience of building and managing a sharing platform, and thus prepare itself for


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fully embracing the sharing economy in case disruptors become a serious threat to established firms in the industry.

Strategic Response 5: Expand-andCompete When a significant part of an established firm’s business model and/or operating philosophy already resembles a sharing economy model, it can adopt the Expand-and-Compete approach by growing and strengthening that part of its business to directly compete with sharing economy disruptors. In the accommodation sector, Wyndham recognized early on the similarity between its timeshare business model and the sharing economy model. Its executives are also aware of the potential growth of sharing economy disruptors and the threat to the company given the significance of Wyndham’s timeshare segment in its overall business. With decades of experience running the timeshare business and its platform-based business, Wyndham responded to sharing economy competition by growing its timeshare business through acquisitions and investments while maintaining its traditional business segments. By adopting the Expand-and-Compete approach, this established incumbent has the potential to achieve better synergy and leverage its brand strengths across all three of its business segments.

Recommendations for Established Firms

From our analysis of the unique nature of platform-based sharing economy disruptors, we provide three recommendations that senior executives, including business-leading CIOs, can use as they sense and respond to the threats from the sharing economy.

Recommendation 1. Periodically Review the Sense and Response Checklist to Identify Any Changing Conditions Requiring Strategic Action The unique characteristics of platformbased sharing economy disruptors (i.e., multiple entry points and directions of move in the market space, and ease of diversifying into other industries) mean that senior executives 38


in established firms must regularly sense and assess the level of threat from the sharing economy. The agility of disruptors in changing their business models and product/service offerings forces established firms to be on constant look out and high alert at all times. Established firms should formalize the sensing activity by assigning dedicated personnel who are adept at thoroughly gathering and analyzing data about the sharing economy. Such personnel could be part of an emerging technology group or a new product/service development group, or hired as external consultants. The sensing activity involves periodically scanning and mining social media content, news releases of sharing economy disruptors and incumbents’ competitive responses to the sharing economy, to produce a coherent picture of looming threats and opportunities. Established firms need to not only track new and existing sharing economy disruptors but also the actions of other established firms’ competitive moves related to the sharing economy.

Recommendation 2: Choose the Most Appropriate Strategic Response to Sharing Economy Threats The output of each periodic sensing activity should be presented to senior management. If there isn’t a formal forum for presenting the assessment of sharing economy threats, the personnel in charge of sensing should use more informal communication styles and act as educators or confidants to create a common understanding of the severity of sharing economy threats among senior management. Armed with this information, senior management should then ensure that the firm is following the most appropriate strategy for responding to the identified threats. The response strategy will be determined by the firm’s existing platform-based business capabilities and the amount of experience it has accumulated in operating sharing platforms and coordinating activities in platform ecosystems. An established firm should also consider the availability of slack resources that can be invested to build or acquire a new platform or to increase the scale of an existing platform. Other factors to consider include the alignment between the current business processes and sharing platform-based misqe.org | © 2018 University of Minnesota


processes, as well as the company’s culture, core values and beliefs associated with sharing platform-based business. Finally, the firm should have a deep understanding of the strategic responses of its pipeline competitors in the industry as they also respond to sharing economy threats. In choosing a response strategy, senior executives should think beyond the common strategic responses pipeline-based businesses have been adopting in the past and adopt one of the strategies identified in this article.

Recommendation 3: Measure the Effectiveness of the Strategic Response The outcomes of each of the five strategic responses should be measured differently. The Invest-Learn-Act approach requires the learning objectives to be specified upfront, the learning process to be documented during the implementation of the approach and the learning outcomes to be presented to senior management. Initially, the effectiveness of this approach should not be assessed using traditional financial measures. The focus needs to be on the extent of learning and the effectiveness of applying the learned knowledge to improve the firm’s product and service offerings. The effectiveness of the Step-Out-and-Partner approach should be measured based on the extent of learning from the sharing economy partner and the brandawareness benefits gained from exposure on the partner’s platform. The effectiveness of this approach can also be measured by the ability to create exclusive partnerships that can prevent other established competitors from forming partnerships with the same sharing economy disruptor. Similar customized measurements need to be applied to the other strategic responses. Over time, however, these customized measures will likely be supplanted by traditional financial measures of performance.

Concluding Comments

The sharing economy is a significant disrupting force in many industries. In this article, we have provided a sensing and assessing checklist for identifying the threats from the sharing economy and described the options available to established firms for strategically responding to the threats. We have also provided recommendations for senior

executives (including CIOs) in established firms for sensing and responding to sharing economy threats. Throughout the implementation of the strategic responses, established firms should gradually improve their ability to bring about change and create a shared mindset among senior management, middle management and employees about the sharing economy. Established pipeline firms should not repeat the lessons of past companies such as Kodak. Kodak knew it had to change but because it kept measuring the wrong things it could never gain enough buy-in throughout the firm to prevent being surpassed by digital photography disruptors. In the future, the rising tide of sharing economy disruption will hit more and more industries. We believe the checklist and recommendations provided in this article will help established pipeline firms successfully ride the sharing economy wave rather than being overwhelmed by a disruptive tsunami.

Appendix: Research Methodology

To discover established firms’ strategic responses to the sharing economy, we used a multiple-case approach, investigating leading established firms in the package delivery and accommodation sectors. We selected the firms based on market capitalization and revenue data provided by Bloomberg. We investigated their strategic responses to the sharing economy by reviewing and analyzing data from press releases, industry reports, news announcements and their websites. This case-based research approach enabled us to understand the real-world context, where competition between established firms and sharing economy entrants occurs.

About the Authors

Chen Zhang Chen Zhang ([email protected]) is an associate professor in the Department of Business Information and Technology (formerly MIS) at the Fogelman College of Business and Economics at the University of Memphis. Her research focuses on various aspects of IT strategies, open innovation and platform ecosystems. Her March 2018 (17:1) | MIS Quarterly Executive

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work has been published in journals such as Information Systems Research and MIS Quarterly Executive.

William J. Kettinger Bill Kettinger ([email protected]) is Professor and the FedEx Endowed Chair in MIS at the Fogelman College of Business and Economics at the University of Memphis. Kettinger’s focus is practical, rigorous research appearing in leading journals. He has received such honors as a Society of Information Management’s Best Paper Award and directed a SIM APC study of the business drivers of IT value. He serves, or has served on, the editorial boards of MIS Quarterly, Information Systems Research, Journal of the Association of Information Systems and MIS Quarterly Executive. Prajakta Kolte Prajakta Kolte ([email protected]) is a Ph.D. student in the Department of Business Information and Technology at the Fogelman College of Business and Economics at the University of Memphis. Her research interests include IT applications, and business analytics in supply chains and FinTech. Sungjin Yoo Sungjin Yoo ([email protected]) is a Ph.D. student in the Department of Business Information and Technology at the Fogelman College of Business and Economics at the University of Memphis. His research interests include sharing platforms, IT strategy and cybersecurity.

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