The shared economy: When obstacles can lead to greater results

By Blaine Denton

Although sharing is nothing new, the term “shared” economy” has been spreading rapidly. In doing so, it has changed the global marketplace dramatically. The term has been around since the mid-2000s, driven mostly by new technologies this idea has taken. One such impetus is social media, which has changed the way that people connect with one another. Although the exact moment of inspiration is hard to pinpoint, peer-to-peer sharing is without a doubt one of the biggest influences. A reference to a method of sharing files across the internet, peer-to-peer economies are modeled around the idea of cutting out the middle man. By doing so, users are able to pool their resources to decrease cost and more importantly, increase convenience.

For example, share-ride services, such as Uber, provide an extremely pleasant and, more importantly, convenient alternative to traditional modes of transportation. There are a number of factors that make developing countries in Asia, such as the Philippines, the perfect place to employ such shared services.

Manila, where I spent my Christmas, has the highest population density in the world at 42,857 residents per square kilometer (km). It also has inadequate roads that often lead to traffic congestion, inadequate public transportation and inadequate public parking, all of which make ride-share services a valuable solution. The value is real, and I saw it for myself. Let’s take a moment to dive right into my shared economy experience.

Imagine the tropical humidity surrounding me as I stand on a curbside trying to hail a taxi. But instead, I download the Uber app on my smartphone, and I am able to get a ride at my appointed time. A 30-km trip does take more than an hour because of traffic, but it only costs me PHP 455 (USD 10) and the driver covers the PHP118 one-way toll fee (USD 2.6).

The driver and I exchange pleasantries and rate each other a mutual five out of five stars, and we are both happy and contributing to the other drivers and users who will benefit from this rating system. Uber uses this metric to weed out unpleasant drivers and passengers. Best of all, you can see these ratings ahead of time and opt to wait for highly rated drivers. With my experience with this ride-share service, there would definitely be a next time.

After all, Uber has solved two of Manila’s aforementioned problems. To its credit, there isn’t much it can do about population density, and the next example of a shared economy addresses another problem.

If you’re like me and lack a sense of direction, then a smartphone navigation app has been a lifechanger.

Apple or Google maps are both free to use, constantly updated and fairly accurate. Waze, a smartphone app which provides turn-by-turn information, travel time and route details, adds in one more level of convenience. It allows for user-submitted data such as alternate (faster) routes, traffic and hazard warnings and police sightings, which in the Philippine context means a greater likelihood of getting a ticket for a traffic violation (real or imagined). The more people use Waze, the more accurate it becomes. When I first learned about this, I was left with one question: Why do people bother inputting all the data for other people?

When individual users contribute to Waze, the more points they can receive. These points can be used as a ranking system amongst other users as well as towards the purchase of different avatar pictures. Beyond just the “gamification” of potentially mundane tasks, Waze returns to one of the core tenets of shared economies. Waze is convenient because much of the data collection is automated and free.

One of the central tenets of shared economies is the idea that unused value is wasted value. Clay Shirky, an American writer and consultant on the impact of internet technologies, wrote that “wasted time is wasted value.” The guiding principle of minimal waste helps shape the way that shared economies are developing and in turn, the way they are changing current institutions. If you only have so many resources, you can’t afford to waste them. Instead, shared economies allow users to assess the obstacles in a given system and find innovative ways to overcome them.

Although there are many different forms and variations, ride shares are the prototypical example of a peer-to-peer or shared economy. Services such as Uber and Lyft operate through smartphones by allowing a user to request a ride, which then signals the closest driver. Services such as these arose as a response to wasted resources in the traditional transportation models, and it is clear why ride shares are the go-to examples of shared economies. According to research from the Stanford Energy Seminar, in America, the average car is unused 92% of the time. As such, popularity of these services has grown exponentially, which has invigorated the idea of a shared economy, especially given that Uber has recently been valued at USD 40 billion.

Such services have become ubiquitous in developed countries if not quite household names at this point. According to Mohd Khalid Bin Mohamed Latiff, head of group strategic planning and M&A, PETRONAS Lubricants International (PLI), “Much of the concentration and focus is on developed markets, where the shared economy has been shifting the perception of urban transportation in the consumer’s mind-set.” But it is not hard to imagine that they will become even more popular in developing countries, specifically because these countries provide a greater number of obstacles than other markets.

Gary Parsons, global OEM and industry liaison manager for San Ramon, Calif., U.S.A.-based Chevron Oronite, foresees a future where the shared economy evolves one step further in the direction of convenience by learning to accommodate self-driving vehicles. Such advancements could minimise human interactions because the cars will be able to switch between ride-requests and during downtime, the vehicles should be able to direct themselves to fueling and maintenance services. The end goal of such advancements is, of course, to maximise the car’s utility and to cut down on the 92% of wasted time of the average American vehicle.

Lutz Lindemann, executive board member of Fuchs Petrolub SE, headquartered in Mannheim, Germany, believes that shared economies will probably not directly affect the lubricant industry. He does, however, believe they could result in a “significantly reduced car population in modern cities in the future, which may affect engine oil consumption in mature markets.”

Furthermore, the popularity of online platforms has changed the way people maintain their vehicles. Latiff explained that “Car owners in developed markets are increasingly turning to digital platforms to gain advice related to DIY practices, aftermarket product price comparisons and recommendations in car enthusiast forums. This growth of ‘smart’ consumers has created a unique opportunity for automotive suppliers to offer better customer engagement and build brand loyalty because a significant proportion of these customers relies on online information in their purchasing decision making.”

One of the less discussed benefits of the new wave of peer-to-peer implementations is that much of the data are user generated. Satellite mapping is wonderful, but there is only so much it can do as compared to the knowledge garnered from personal experience. When a product allows for users to have a tangible impact, there is the potential for a greater sense of empowerment. This also leads to a greater sense of ownership or investment in the company that made the product. The most successful products aren’t just great products, they are products that the customers believe in.

More customer involvement also leads to better products – take Wikipedia for example. The world’s largest online encyclopedia is entirely user generated and holds an unbelievable amount of information. Wikipedia achieves this by allowing any member of the site to create and edit articles on a given topic. And although there is the occasional instance of mischief or misinformation, the Wikipedia community holds itself to very high standards. The most dedicated members are able to weed out the bad information within minutes, and they do so not for monetary compensation but because they believe it to be important. Despite the enormous amount of time that any given writer could contribute to Wikipedia, they still come out ahead in the long run. Wikipedia is the perfect example of a shared economy leading to greater benefit. No single person could hold even a fraction of Wikipedia’s archive in their head, but they can learn about virtually any topic because other people are willing to put in the effort on the topics they know about.

The popularity of shared economies, however, is not limited to ride shares, peer-to-peer mapping or various other online developments. The lubricant industry has begun to adopt this approach in a number of different ways but for generally the same reason: to minimize waste and maximise convenience. “Improvements in efficiency are often a driver for the shared economy, and the fuels and lubricants industries are already mature and very efficient in many respects,” says Parsons. He goes on to explain that although used lubricants were utilised in the past as fuel for cement kilns and space heaters, a new trend has emerged where “used lubricants are collected in many countries and re-refined into lubricants that can be used again by another equipment operator. In this manner, the same litre of lubricant is shared by multiple users during its lifespan.”

Whether shared economies will create much of a difference in terms of product demand is up for debate, but Jonathan C. Evans, vice president, technical development, of Midland, Mich., U.S.A.-based Savant Group, explained that they could lead to greater streamlining within companies. Such companies could “operate faster with less red tape, as well as allowing them to react quickly to market changes in a less expensive and more efficient manner.”

Shirky shares similar sentiments, explaining that shared economies allow “cooperation to be built into the infrastructure.” In short, shared economies can allow companies to focus on their strengths while outsourcing everything else. An example of this is seen in how shared economies have been implemented within the lubricant industries. For example, Italian truck manufacturer Iveco and PLI, based in Kuala Lumpur, Malaysia, are co developing heavy-duty engine oils. Singapore has the world’s first shared lubricant park, where competitors Total, Shell and Sinopec are sharing resources due to Singapore’s land constraints. In the renewable space, various partnerships and sharing of resources have emerged between traditional oil players, such as Total and Shell, with renewable product companies such as Amyris and Raizen, respectively. In the additives segment, U.S.-based Lubrizol Corp. and Japan’s Mitsui Chemicals recently forged an agreement whereby Lubrizol will market the latter’s polymer products.

Ian Bell, the U.K.-based technical director of additive manufacturer Afton Chemical, sees this as the way economies can change the lubricant industry. He believes that the “value [of shared economies] will be in discrete and specific areas, not a wholesale shift from where we are.” The shared lube park is not a revolutionary step away from the current system but rather an improvement of current practices in order to optimize results. Bell sees a shared economy working within the industry in three ways. First up are “business partnerships that cross the additive/lubricant manufacturer interface and beyond,” which pool various resources in order to facilitate improved products through shared technology. Secondly, open innovation allows technical challenges to be solved through outsourcing and extensive external networks. Lastly, the sharing of big data across the industry has the potential for a significant effect on the market in terms of technological development – a model seen in both Waze and Wikipedia.

Simon Tung, global OEM liaison at U.S.-based Vanderbilt Chemicals, explained that at the 2014 APEC Summit, shared economies were “often referred to as a final solution for identifying collaborative opportunities to leverage technology and resources.” According to Tung, shared economies allow for products and services to be leveraged in order to enhance their value. He believes that this is particularly pertinent when it comes to issues such as fuel efficiency because a shared economy could “provide collaborative effort for development of a new powertrain system, including the engine, transmission, driveline and other components, and will address major issues and the current development status of automotive fuels and lubricants standards and test methods.”

There are, however, a few obstacles to overcome, obstacles that highlight just how different a shared economy within the lubricant industry is from anywhere else. Bell explained that “the obstacle to deeper and broader shift in this direction is the strong competitive and proprietary nature of much of the information and knowledge that is generated within the industry.” This differs greatly from the earlier examples of Uber and Lyft, where the parties involved have nothing to lose by sharing their resources. Steve Hsu, a world-renowned tribologist and a professor at George Washington University in Washington, D.C., further elaborated on this point, listing tactics counterproductive to shared economies such as “the tightening of technology protection and shifting from filing patents to ‘trade secrets’ and increasingly deceptive advertising and hyperbole being flung about.”

Shirky discusses the dichotomy between the benefits of sharing data and the proprietary nature of certain industries in his book “Here Comes Everybody.” He observes that “[Every] institution lives in a kind of contradiction: It exists to take advantage of group effort, but some of its resources are drained away by directing that effort. Call this the institutional dilemma – because an institution expends resources to manage resources, there is a gap between what those institutions are capable of in theory and in practice, and the larger the institution, the greater those costs.” The institutional dilemma is a double-edged sword whereby those in the industry can benefit from pooled resources but where they also risk giving out beneficial resources to competitors.

That is not to say that the obstacles are insurmountable. There is, indeed, a great need for continued innovation in order to address current issues. “We need to be more efficient. We need to reduce waste. We need to get products to market quicker and more successfully,” says Bell. This then leads one to believe that the real obstacle is not the competitive nature of the industry but rather how to find ways in which the non-competitive goals and resources can be aligned. Once that is done the possibilities for innovation and a reduction of waste via communal resources are endless.