Circular Economy, Sustainability

Business Models for a Circular Economy: Sharetribe

Company profile

NameSharetribe Oy
Founded: 2011
Founders: Juho Makkonen, Antti Virolainen and Niklas Begley
Industry: Software
Main services: A platform for creating online marketplaces
Sustainability: Sharetribe contributes to the development of a sharing economy by helping its customers build peer-to-peer online marketplaces.

Company history

If you have always wanted to start your own online business, but have lacked the technical skills required to build a website, then Sharetribe is for you! Sharetribe is an online platform that has streamlined the creation of peer-to-peer marketplaces. It allows anyone to build a customized website that can be used as a marketplace or as a platform for peer-to-peer sharing – no programming skills needed.

Sharetribe is simple to use and it only takes a few minutes to get your site running. You can then customize everything from the design and layout of the website to the transaction fees you collect. Because Sharetribe has made the technical side of developing a marketplace much easier, an entrepreneur can now focus on the business development side of things, such as building the customer base and marketing the company’s website.

Sharetribe Oy was founded in 2011, but the company has been in development since 2008 when two of the three co-founders, Juho Makkonen (CEO) and Antti Virolainen (COO) were working on a research project in Aalto University.

According to the CEO of Sharetribe, Juho Makkonen, he and Virolainen were originally developing an online sharing platform for students at Aalto University as part of their diploma work. Students using the site were able to share and rent items such as power drills and course books. At first, there were no business ambitions involved in the project, but after graduating in 2010 the two founders started to consider building a company around the idea.

“We saw the business potential in the concept. At the same time, we both wanted to find a job where we could have a positive impact on society. Around that time people started talking about sharing economy, and so we finally decided to start the company in 2011”, says Makkonen.

After exploring different concepts and doing a shift in strategy, Sharetribe found a working business model and won the Peloton Summer Camp competition in 2013. By the end of 2015 the company had over 500 customers in more than 40 countries, with the customer base having grown 400% in the past 12 months. Makkonen and his team have grand visions for the company:

“We want to do the same to online marketplaces what WordPress did to the publishing industry. WordPress opened up its code in 2003 and today one in four websites around the world is run on WordPress. What we want to do is to make founding a marketplace so cheap and simple that anyone can do it.”

The vision behind Sharetribe is highly connected with an ongoing shift in consumer values from ownership to access, also known as sharing economy. Put simply, sharing economy means that people are more willing to borrow, share and rent resources such as bagsbookstoys or bikes, instead of owning them. By helping people create marketplaces more easily and cheaply, Sharetribe contributes to this development.

It’s important to note that the sharing economy doesn’t always mean shared profits. While companies like Airbnb, Uber and TaskRabbit have helped democratize commerce, these marketplaces are still owned by a selected few individuals. Makkonen wants to change this.

“I think having too centralized ownership is a major problem in the markets. Companies like Uber and Airbnb are all venture capital-backed big players who get all the real profits. What I want to see is more local players being able to develop their own marketplaces where the profits stay with the local owners.”

Combine Sharetribe with 3D printing, the maker movement and crowdfunding sites such as Indiegogo and Kickstarter, and perhaps we’ll soon see the rise of marketplaces where financial assets, production capital, and distribution networks are in the hands of the many instead of the chosen few.

Business model: Sharing platform

Value proposition: We make it easy and affordable for sharing economy entrepreneurs around the world to create and run their own online marketplace.
Customers: Sharing economy and lifestyle entrepreneurs
Revenue generation logic:  Customers pay a monthly fee ranging between $39 – $299. Fee depends on the number of members participating in the marketplace.

According to Accenture’s business model framework, Sharetribe has a sharing platform business model. A sharing platform is either an online or physical platform that facilitates the sharing of resources and decreases the overcapacity of assets. In Sharetribe’s case, the company helps entrepreneurs develop online sharing platforms, i.e. peer-to-peer marketplaces.

 

Accenture’s 5 business models for circular economy. Source: Accenture, Circular Advantage.

Sharetribe is an interesting case because the company has the potential for building a highly scalable business model. According to Makkonen, the team is working hard to develop the core service as solid as possible, with the aim that customers can get excellent service without having to ever contact customer support. To make this happen the team is also planning on expanding the company’s blog so that customers can find as much content and support as they need.

“We want to find more scalable ways of communicating with our customers. Our marketing strategy is based on providing content and information about the same problems our core service aims to solve. We have also had some discussions with potential partners about providing business coaching to our customers.”

Furthermore, Makkonen shares a vision of a complete partner ecosystem.

“We have been thinking about developing an ecosystem of services, where our partners could build on the platform we have developed. We could have our own app store similar to Shopify.”

As with any startup, it’s too soon to tell whether Sharetribe will scale up to become a key player in the markets. However, having a scalable and automated core service that can be customized with partner applications can translate into high profit and growth potential.

In the end, though, having a startup is not all about making a lot of money or even saving the world for Makkonen. Sharetribe team – founders included – works no more than 40 hours a week, and everyone takes normal annual vacations.

“I and Antti have put a lot of thought into why we’re doing this thing. One important reason was contributing to society, but we also wanted to have a balanced life with the freedom to live the way we find best. I think working around the clock and sacrificing your friends and family defeats the purpose of working in your own company.”

Standard
Circular Economy, Sustainability

Business Models for a Circular Economy: PiggyBaggy

Company profile

Name: Coreorient Oy / PiggyBaggy (beta)
Founded: 2011
Founders: Harri Paloheimo and Heikki Waris
Industry: Multiple industries / ICT-enabled services
Main services: PiggyBaggy crowdsourced ride-sharing for goods; Smart service system development and consulting
Sustainability: PiggyBaggy lowers emissions and resource consumption by providing access to already existing mobility, similar to car sharing

Company history

Have you ever needed a particular tool to do some small task, such as drilling a hole in a wall or tightening a loose screw in a bike, but didn’t have that tool available? And then had to either spend a lot of money to buy that tool or a lot of time finding someone who could lend it to you? Or have you ever spent half a day trying to get some mundane task done, such as delivering a book to a library or returning a broken MP3 player back to the store?

I’m sure you have. And I bet you have some tool that you’ve only used a few times in your life, such as a power drill, lying around in your basement.

What if instead of owning expensive equipment, you could rent or borrow the tool you need, or pay someone else in your neighborhood to drill the hole for you? And how about if you didn’t always have to go to the library to borrow books, but could instead pay someone else to deliver the book, or use a library access point near your house?

What if you could live in a world with less stuff to take care of, less hassle over mundane things, and more time to do the things you really care for?

Moreover, what if in this world you could get things done by using fewer resources, less or no gasoline, and less energy. You would pay for services, instead of goods, and would have access to functionality and results, instead of having ownership of the damned power drill.

And even if you do want to own your power drill, the rest of it sounds pretty good, right?

A Finnish company called Coreorient, is trying to build that world.

Founded in 2011 by several ex-Nokia experts, Coreorient is a company that has been involved in developing services and technologies that help people get everyday things done more efficiently and using less time.

The company’s flagship service, PiggyBaggy, is a crowdsourced ride-sharing service for goods. The idea of PiggyBaggy is simple: let’s say you need to deliver a broken laptop to an electronics store for a fix-up. Instead of going yourself, you can use PiggBaggy to get someone in the PiggyBaggy community to deliver the laptop for you in return for a small payment. For example, someone might be commuting past your house and the electronics store and could, therefore, take your laptop on her way to work, giving you more time to do other things.

According to the CEO of Coreorient, Harri Paloheimo, the idea for crowdsourcing goods-delivery came to him when he was returning a broken microwave back to the store. As Paloheimo didn’t own a car, the journey to return the microwave involved taking several buses and a subway.

“When I spent half a day returning a broken microwave back to store, I remember thinking at one point that this doesn’t make any sense and that there has to be a more efficient way to get this done.”

Paloheimo began tinkering with an idea of a crowdsourced ride-sharing service for goods and even tried to get Nokia to do a collaboration with several existing ride-sharing companies. In the end, however, Paloheimo didn’t get the required support from Nokia headquarters and finally, he left Nokia in 2012 to lead Coreorient. The company had already been founded on paper in 2011 by his college, Heikki Waris. Although the men were taking a leap from a big corporation to run a small startup, being an entrepreneur felt oddly familiar to Paloheimo:

“I had been acting as an intrapreneur at Nokia for years before starting my own business. I had imagined that things would work in a more rational way outside big corporations, but I soon realized that the same pitching theater and powerpoint circus that I was used to continuing in the real world.”

Moreover, power points and pitching weren’t the only things familiar to Paloheimo. He was also very used to facing failure:

“They say that you can’t have success before going bankrupt a few times. Well, I hadn’t gone bankrupt, but I had experienced some big failures in Nokia. For example, having to disband a team you’ve lead feels a lot like going bankrupt to me.”

After initial difficulties, PiggyBaggy began gaining momentum and by the end of 2015 the service had over 1500 users and between 700-800 items delivered.

Aside from PiggyBaggy, Coreorient is also constantly experimenting with new concepts and service development and wants to take part in developing a Sharing Economy. However, Paloheimo makes clear that the company wants to avoid becoming similar to Uber:

“We want to frame ourselves as a second wave Sharing Economy startup. The first wave consisted of companies like Uber, which maximized value solely for their end-users. We, however, think about the Sharing Economy and our business from a broader perspective. We want to maximize value for all stakeholders and interest groups involved in our business, not just for ourselves or our customers.”

Paloheimo emphasizes that Coreorient wants to take part in developing business models and win-win-win structures that maximize value for both consumers, the company, and the society at large. As an example of this, Paloheimo talks about Coreorient’s collaboration with the city of Tampere:

“We got funding from the European Social Fund to find ways to activate youngsters that are in danger of becoming marginalized. We are now trying to find ways to use crowdsourcing as a medium for involving young people in society and to help them find a job. Although we use crowdsourcing as our main tool, it doesn’t necessarily involve PiggyBaggy or ride-sharing”, says Paloheimo.

According to Paloheimo, Coreorient has been involved in many similar projects all around Finland. The different experiments have also enabled Coreorient to test different assumptions about the markets and their customers, which helps the company to refine its ideas and services. Armed with this experience, Coreorient is now looking outside Finland to Europe and beyond.

“The experiments we’ve conducted in Lahti, Jyväskylä, Helsinki, and Tampere have confirmed us that our systems and main concepts work. However, now the time for experiments is over and we need to make decisions about where and with whom we want to go on with this. Finland is getting small for us, and we’re potentially looking to expand to Denmark, or maybe India.”

At the moment Coreorient is looking for partners and collaborators to make this expansion happen, while also continuing to develop their core service concepts.

PiggyBaggy Business Model: Sharing Platform

Value proposition:  “Ride-sharing for goods. Convenient. Sustainable. Secure.”
Main customers: 1) People who need help in getting items delivered. 2) Businesses that need low-cost options for purchase delivery.
Revenue generation logic: Two options: 1) Subvention-based: online businesses will pay PiggyBaggy for using it in purchase delivery, 2) Transaction-based: end customers of second-hand online marketplaces will pay PiggyBaggy for using it in purchase delivery.

According to Accenture’s business model framework, PiggyBaggy has a sharing platform business model. A sharing platform is either an online or physical platform that facilitates the sharing of resources and decreases the overcapacity of assets. In PiggyBaggy’s case, excess capacity is people’s time and mobility. PiggyBaggy enables individuals and businesses to tap into the existing mobility in order to get items delivered.

Accenture’s (2014) 5 Business Models for a Circular Economy.

PiggyBaggy is an excellent example of the power of IT and the internet to create new ways of organizing human activity. What PiggyBaggy actually does is that it uses the internet to provide access for tapping into excess mobility and time – something that would have been near impossible to do 20 or 30 years ago. By creating the PiggyBaggy platform, Coreorient has essentially created a new marketplace where the supply and demand for mobility and time can meet.

For example, I might need a book delivered to the library, but I don’t have enough time or I’m otherwise unable to go to the library myself (lack of time and mobility). However, there are hundreds of people going past my house and the library every day, many of whom could pick up my book and return it without making a major detour (overcapacity of time and mobility). PiggyBaggy allows me to delegate my tasks to these people, therefore putting the overcapacity of time and mobility into good use.

According to Harri Paloheimo, Coreorient has at least two potential revenue models for PiggyBaggy. One is based on a subvention model, where PiggyBaggy would essentially enable businesses that do home delivery to lower their costs by using the PiggyBaggy community to deliver customer purchases. Paloheimo elaborates:

“In EU and in Finland it costs approximately 15 euros to deliver a product to a customer. At the same time customers are on average only willing to pay 5 euros for the delivery. This means that businesses lose 10 euros on average per packet delivered to consumers. Our idea is that we could lower these costs and get paid for doing so.”

The other option would be to use a transaction fee-based revenue model, where the customers would be individuals shopping at second-hand marketplaces. Usually, in second-hand shops the end-users arrange the delivery of items themselves, but by using PiggyBaggy they could use crowdsourcing to get their items delivered. PiggyBaggy would charge the transporter around 15-20 percent of the fee he or she received from the customer.

In both revenue models, PiggyBaggy lowers the costs of transportation while also reducing emissions and pollutions from cars by decreasing the overall number of car trips.

But PiggyBaggy is not the only service that Coreorient has been developing. The company has been experimenting with a concept called smart containers. A smart container is essentially a shipping container that is used as an access point for different services and resources. For example, smart containers in Kalasatama, Helsinki have been equipped with library services, organic food services, recycling services, and electric car charge points. Furthermore, the containers can be used as PiggyBaggy delivery points.

How are PiggyBaggy and the Smart Containers connected? Paloheimo shares a vision of a global network of community-run smart service points, connected by crowdsourced goods delivery. According to Paloheimo, this kind of network of services and crowdsourced transportation represents a viable alternative for today’s centralized mass manufacturing and transportation.

Standard
Sustainability

Wicked opportunities in sustainability

While our world has become more dynamic and more complex, so have our problems. Wicked problems, such as climate change, terrorism, social inequality and destruction of natural habitat are extraordinarily difficult to deal with because they are almost impossible to define accurately. However, if we change our perspectives and reframe the issue in a new way we can overcome the wickedness of the challenge.

Wicked problems

“[Wicked problems are a] class of social system problems which are ill-formulated, where the information is confusing, where there are many clients and decision makers with conflicting values, and where the ramifications in the whole system are thoroughly confusing”- Horst Rittel

The definition of wicked problems is as complex as the problems themselves. Wicked problems have been a topic of discussion since the 1970s when Horst Rittel and Melvin Webber published their article, Dilemmas in a General Theory of Planning. The authors explained how wicked problems differ from engineering problems in that they are almost impossible to define.

To illustrate, let’s imagine that you have a rising drug problem in your city. The root problem appears to be a new gang that is importing large amounts of drugs to the city from overseas. After identifying the gang leaders, the city police finally apprehends the gang leadership in a large raid and confiscates all the drugs. For a while it seems that the amount of drug offences is decreasing. Surely the problem has been solved, right?

In reality the opposite is the case. In the following months a violent gang war ensues and the amount of people detained for drug abuse is actually increasing! The reason? By eliminating the dominant gang, the police created instability in the hierarchy between other rival gangs in the city and in the drug markets. This instability was then corrected by a violent power struggle between the gangs that remained.

The police had therefore introduced only a temporary solution to the drug problem. In fact, the real problem is not the use of drugs, which is only a symptom of the underlying cause. The use of drugs and other criminal activity were the result of a variety of other societal problems, such as poverty, racial issues and bad city planning. These underlying, systemic issues were not addressed by getting rid of one gang, which is why the drug problem only got worse.

Here are some other examples of wicked problems:

  • Climate change
  • Global terrorism
  • Nation-wide obesity
  • Acidification of the oceans
  • Deteriorating biodiversity
  • Poverty

All of the above problems consist of several interconnected parts. For example, climate change cannot be reduced to one problem definition with simple cause-effect relationships, because the climate itself is very complex and hard to understand. The climate is not a singular thing, like a mountain is, but the cumulative effect of all the streams of air, water and heat in our planet.

Understanding the nature of wicked problems is absolutely necessary for today’s problem solvers and decision makers because most problems worth thinking about are essentially wicked. It is easy to become paralyzed after realizing how challenging it is to solve wicked problems. However, I believe that by reframing the issue we can unleash our creative thinking and turn the problems into an opportunity

Wicked opportunities

What if I told you that climate change, inequality and other similar issues are only problems if we choose to define them so? In fact, I like to think of wicked problems as signals telling us that change is necessary – that we need to start doing something fundamentally different from what we’re doing now. It means that we need to design new and better economic, social, governmental and physical systems than the ones that are now in place. Therefore, our biggest challenge is in fact overcoming our unwillingness to change.

Change is sometimes very difficult, but whenever there’s fundamental change involved, there are also great opportunities. Furthermore, we humans are experts in change! Just think of how different our world is from a hundred years ago – or fifty, or even twenty years ago. The automobile, the airplane and the advent of ICT have all changed our lives and the society so fundamentally that our forefathers would think they’re in a different planet if they saw our world today. So there’s nothing new to systemic change – it is already happening all around us.

Therefore, what we need to do is reframe wicked problems as opportunities. They are opportunities for creating new value, new business and new, more sustainable ways of living. I am happy and inspired to see many companies, such as Demos Effect, Plantagon, MBA Polymers, Ecovative Design, Piggybaggy, RePack and thousands others, adopting this attitude.

There’s a lot to do, so let’s not waste time trying to solve problems because it leads nowhere. Let’s instead choose to change our perspective and begin creating the world we want to live in.

Here are some suggestions how you can reframe wicked problems:

  • If you or your organization are faced with a difficult challenge, ask yourself whether it’s really an opportunity disguised as a problem.
  • When dealing with a wicked problem in your own life, instead of trying to solve the problem, try to think of ways you can re-design your life.
  • If you hear someone talking about a difficult challenge, try to identify the social systems that are involved in the issue. Then try to think of how we could go around the problem by designing the systems better.

References:

Rittel, H. & Webber, M. (1073). Dilemmas in a general theory of planning. Policy Sciences. vol. 4. pp. 155-169.

Buchanan, R. (1992). Wicked problems in design thinking. Design Issues, vol. 8. no. 2. pp. 5-21.

Standard