Innovation and the Access Economy

The rapid and disruptive ascent of the sharing economy has fundamentally changed the competitive landscape. Not only has it resulted in approximately 17 companies valued at $1 billion but reflects a deep seated shift in how products are consumed, services delivered and business conducted.

Companies like Uber, Airbnb, Alibaba and Facebook are the largest providers of transportation, accommodation, retail and media content, yet they own no cars, no real estate, no inventory and produce no content.

In many ways, this reflects a more poignant change in how we access things.  While the expansion of access is the interesting story, if is often last amongst efforts to reconcile the many characterizations of the sharing economy (e.g., is it really sharing?). To be fair, there are many reasonable critiques of the sharing of the economy (see Schor, 2014; Ekhardt and Bardhi, 2015; Kesher, 2015;  Hill, 2016; Slee, 2016).

The purpose of this post is not to examine such critiques or debate what constitutes the sharing economy. Rather, it is more interesting to explore how web-based platforms have transformed market dynamics premised on access and the corresponding term of the ‘access economy’. The access economy assumes consumers place grater importance on lower costs and convenience than fostering social relationships with a company or other consumers. In this respect, the research of Ekhardt and Bardhi (2015) observed that many consumers prefer the advantages of renting because it allows “convenient and cost-effective access to valued resources, flexibility, and freedom from the financial, social, and emotional obligations embedded in ownership and sharing.”

This is an important insight not only in terms of companies pivoting from business models premised on ownership to renting but also understanding how firms can change how they access the resources that drive innovation. In doing so, it is important to briefly consider two secular trends in the global economy observed by Lakhani et al., (2013):

1.   ‘Digitization’ –  the transformation of material objects and their increasing ‘information shadow’ and now their representation as digital goods. Consequently, “material and physical objects can now be created, represented, modified and transformed with the same relative ease as software goods.” This allows for task decomposition in many parts of the economy.
2. The increasing number of actors who can participate in knowledge production at very low costs. Advancements in internet and related technologies have democratized the tools of knowledge creation, significantly reducing the costs of knowledge dissemination, communication and coordination. As a result, this has made it easier to find and access distributed knowledge (regardless of geographic location).

More and more physical products have digital dimensions with aspects that can be broken down. Combined this with greater numbers of people with knowledge and skills that can be accessed from anywhere, and it creates new opportunities for companies to find and tap into creativity and innovation outside of their organizational boundaries.

In recent decades, firms have increasing seen the value of moving from a closed innovation  model (i.e. the old school R&D department) to more open and fluid arrangements with external networks and communities, whose knowledge and capacity can be leveraged to co-create and innovate. Consequently, this led to what Henry Chesbrough coined ‘open innovation’.  Open innovation refers to “the use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use of innovation.” In other words, companies should use processes that use and integrate ideas both external and internal into their platforms, architectures, and systems to advance innovation.

Open innovation elevates the role of collaboration in marking it essential to a firm’s competitive advantage. For organizations utilizing open innovation strategies (e.g., LEGO, Apple, Toyota and even NASA) is about being able to access technology, human resources, etc. through both conventional partnerships and dispersed networks like on-line communities.

In this respect,  not only are we seeing changes in business models reflecting the emphasis on access (i.e. renting vs. owning) but the need for new organizational designs to accommodate even reconcile the logistics of open innovation vs. closed. This highlights the need for ambidexterity in organizational design because it is increasingly difficult to innovate in closed model alone.

The present age is connected by increasing array of digital networks that are increasing the speed of exchange, range of knowledge dissemination and opportunity for collaboration. Accessing the power of the crowd is a path to innovation. It offers companies cost-effective access to valued resources and financial flexibility.  Companies can have access, if they are open to it.

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