Overview

Robin Chase, the co-founder of the trailblazing car-sharing company Zipcar, proves uniquely qualified to describe the collaborative – as well as powerful and disruptive – a business model she calls “Peers Inc.” It’s revolutionizing commerce by matching “excess capacity” with a “platform for participation” and a diverse user spectrum. The “Inc” is the organization with the resources to develop a platform; “peers” are the individuals who use that platform as a springboard for innovation. Chase’s work covers a lot of ground, and it is sometimes hard to follow, but she is challenging people to create platforms and contribute their talents.

3 Key Points

How a “Peers Inc” organization differs from conventional enterprises,
How Peers Inc structures change business for individuals and companies, and
What challenges Peers Inc companies face.

Take-Aways

In 2000, Robin Chase co-founded the revolutionary car-sharing platform Zipcar.
“Peers Inc” is the name she chose for her business model. An “Inc” has the resources to develop a platform, and “peers” are the participants who create by using the platform.
The building blocks of Peers Inc are “excess capacity, platforms for participation and peer power.”
Companies such as Airbnb and Zipcar found new uses for the untapped potential of something that already exists.
Opening up excess capacity accelerates the pace of innovation.
Platforms organize, simplify and standardize, making participation easier and cheaper.
Peers become microentrepreneurs and enjoy greater flexibility and independence.
Peers Inc organizations benefit from high-paced iterative and exponential learning.
The four developmental stages of Peers Inc organizations are “controlled kernel, everybody welcome, power imbalance and power parity.”
The Peers Inc paradigm renders many existing regulations and business models obsolete.

Summary

The Birth of Zipcar

One morning in 1999, Robin Chase’s friend Antje described watching someone hop into a shared car in Berlin. Antje wondered if the shared-car concept would work in her New England city of Cambridge, Massachusetts. Chase grasped the idea’s potential because she was its target market. Her husband drove their car to his office, where it sat in a parking lot. The couple didn’t want the hassle and expense of owning a second car. Chase co-founded Zipcar believing that renting a car should be as easy as withdrawing money from an ATM. Users could rent cars as needed, and their availability would be cheaper and more convenient than owning a car.Initially, investors were wary of the sharing-based business model. They didn’t agree with the three building blocks pivotal to making Zipcar work: first, that people would be willing to share cars; second, that the technology enabling the service would not be too expensive or complex; and third, that users would respect the rules. Zipcar’s initial investment dollars went to developing and perfecting Internet and wireless technology that cut transaction costs to almost zero – in contrast with expenses of $8 to $12 each for a traditional car rental. Reserving a Zipcar on the website took registered users around 20 seconds. Technology also ensured that only the person who booked a car would be able to unlock it.

“Peers Inc combines the best of people power with the best of corporate power.”

When Avis purchased Zipcar some 13 years after its launch for $500 million, the company boasted more than 750,000 members using 10,000 cars in the United States, Canada and the United Kingdom.

“The collaborative paradigm values economic agency, resilience, passion, learning, autonomy and unique contribution.”

“Peers Inc”

Since Zipcar’s inception in 2000, firms such as Airbnb, BlaBlaCar and Lyft have raised billions in capital. The Peers Inc economy has three drivers: “excess capacity, platforms for participation and peer power.” On the Inc side, businesses, governments and organizations provide resources, “industrial strength” and expertise to create platforms. Peers contribute “individual strength”; they engage with the platforms and share their knowledge, networks, time and energy to create products and services.

Excess Capacity

BlaBlaCar founder Frédéric Mazzella recognized the surfeit of empty seats in privately owned automobiles. He developed a platform matching motorists and ride seekers. In 2013, more than 10 million travelers used BlaBlaCar to find transportation across Europe.

“For most people, opening up assets – letting strangers play in your yard – means a loss of control, a loss of quality and lost value in a hard-won brand.”

When Apple released the iPhone in 2007, users were stuck with AT&T’s network and SIM cards. Hackers and application developers resented Apple’s exclusivity and sought to bypass the lock. Within a few months, Steve Jobs and Apple released a software kit so developers could create their own apps. The iPhone app store opened in 2008; by 2015, it offered more than 1.2 million apps. Developers created a similar number of apps for Google’s Android.

“We are all helping each other learn from experience now, without quite so much painful learning from our own mistakes.”

Google originally created Google Maps for in-house use. When it gave developers access to its map data in 2005, hundreds of innovators generated new services. Finding novel utility for excess capacity harnesses the untapped potential of something that already exists.

Platforms and Peers

Platforms organize, simplify and standardize a new business model. A platform’s creators invest time, money and resources during development. An entity such as a company, university or government does the technical work and then releases the platform for peer participation. Platforms render excess capacity accessible by “slicing it, aggregating it and opening it.”

“Nimbleness is the asset, I tell entrepreneurs, that wins out over the money and scale of established companies.”

Companies such as Zipcar take available assets and reformat their use into segments that match consumer needs. Zipcar customers can rent a car for 30 minutes, one hour or several hours. Other firms such as Airbnb and BlaBlaCar produce value by aggregating untapped capacity. Airbnb enables people to rent out rooms or their entire homes. Within four years of launching, Airbnb was competing with giant established hotel chains. Airbnb could not have succeeded if it had had to build physical assets from scratch. By unlocking the surplus of existing rooms and homes and empowering hundreds of “micro-hoteliers,” Airbnb came to host 25 million guests by 2014.

“We are at the beginning of the new collaborative economy, which thrives on sharing, openness and connectedness.”

Under President Barack Obama, the White House launched the data.gov website, which unsealed government data to developers. People and organizations employed the collected and paid-for statistics in many ways. The Weather Channel uses federal climate data; SaferCar makes it easier for people to check the safety ratings of new or used vehicles; and Trulia uses district and park data to improve real estate searches. Not-for-profit firms created the Global Hunger Index and established Aqueduct, a water-mapping tool.

“Peer Power”

An accountant in Copenhagen named Carsten leased a spare bedroom in his home through Airbnb. Seven months later, he quit his job to manage the two rental apartments he’d purchased. Mohammed, an Uber driver in New York City, works as much or as little as he needs to supplement his income. Gretchen sells crafts on Etsy, enjoying the flexibility that her corporate job lacked.

“When public or private assets are newly pooled, it allows us to extract more value out of previously inaccessible excess capacity.”

Jordi Munoz was living illegally in San Diego with his pregnant wife when he cobbled together an autopiloted drone from Wii and toy helicopter parts. Chris Anderson, former editor of Wired, saw a video of the drone and contacted Munoz. They set up 3D Robotics, which had more than $21 million in revenue in 2014.

“Opening assets up delivers more value and more innovation than keeping them under lockdown.”

Peer participation has many advantages. People can choose when to work rather than waiting for an employer to hire them. They advance according to merit and performance. They enjoy independence and flexibility. Opening excess capacity accelerates innovation. Drawing from the intelligence, talent and expertise of a large number of people elicits more problem-solving power than closed organizations can offer. For a readily apparent and amazing display of creativity, consider the millions of iPhone apps people developed in the first six years of its platform, or the millions of individuals making videos for YouTube or creating audio files on SoundCloud. The ability to contact others when you need them lets you gain from their experiences instead of having to learn from your own mistakes. For example, telemedicine systems facilitate real-time collaboration among doctors worldwide.Peers Inc organizations benefit from exponential learning that outpaces traditional business formats. Compare two language-teaching businesses: Rosetta Stone promises the equivalent of a semester of a language class through audio and print lessons that you absorb over 55 to 60 hours. In contrast, Duolingo reduced that time to 34 hours. Duolingo compiled data showing where users struggled and made corrections accordingly. Having thousands, if not millions, of people use a single platform reduces the time and effort developers need to identify and correct gaps, weaknesses and problems.

“There are always more smart people outside your organization than inside.”

Peer diversity and customization offer consumers other benefits. Previously, people had to choose between one-size-fits-all offerings from a big supplier like a hotel chain or a customized item from a smaller but more expensive provider. Peer companies provide the full range of products and services. Their offerings are local, flexible and tailored to each customer.

“Companies that are organized as Peers Inc will grow bigger, learn faster and be smarter than their closed, we-do-it-all-ourselves counterparts.”

Phases of Development

Peers Inc organizations progress through four stages, from inception to maturity:

“Controlled kernel” – The Inc develops the platform for participation and strives to engage as many people as possible while ensuring a minimum level of quality. Developers face myriad decisions and challenges in shaping the platform to facilitate peer participation. Calculating the appropriate amount of structure involves trial, error and adaptation. Some platforms place limits on peer choices. For example, Zipcar users participate via a specific range of options. In contrast, open platforms such as Android place few constraints on users.
“Everybody welcome” – The platform gains traction and begins to steeply climb up the growth curve. While developers may savor the first wave of success, growth brings issues. A few peers may become power players and curb access to entrants or to those who participate at a lesser level.
“Power imbalance” – The Inc side of the Peer Inc equation starts to operate in its own interests rather than share equal value with its peers. For example, Lending Club began as a site facilitating peer-to-peer lending. Its success drew the attention of institutional lenders, and they began using the platform. Today, the majority of loans from Lending Club and its rival Prosper come from entities such as hedge funds and foreign banks. As lending platforms increasingly cater to the power players, individual investors don’t enjoy the same benefits.
“Power parity” – Founders and developers establish equality by advocating, supporting and protecting peers via open standards, enabling users to organize and communicate.

“Institutions have internalized lessons that no longer apply and they continue to rely on strategies that no longer make sense.”

Peers Inc Issues

The US government is an Inc that has created massive platforms, including the Global Positioning System (GPS) and the Internet. Opening these to public use bred an infinite variety of applications. In 1996, the United States allowed partial access to GPS, and in 2007 it opened the system completely. By 2013, two billion navigation systems bringing in $200 billion in revenue were in operation. Millions of peers have devised creative uses for GPS, from tracking whales, children and cattle to finding lost keys.

“Where the industrial economy concentrates power and wealth, the collaborative economy succeeds by distributing it.”

The Peers Inc paradigm renders many existing rules and regulations obsolete. The meteoric rise of Uber spotlights its drivers’ struggle for fair treatment and the resistance of traditional taxi services to the new competitor. The government should protect peers, microentrepreneurs and freelancers by guaranteeing them access to health benefits, minimum wages and safe working environments. Governments should permit new platforms to form and experiment, revise tax and regulatory standards to ease compliance for platform creators, decouple benefits from full-time employment and develop a “contractor’s bill of rights.”Established businesses resist the changes the Peers Inc model introduces. Large companies find it difficult to make the transition from producing proprietary knowledge, systems, products and services – that patents, contracts and copyrights protect – to participating in a format of shared abundance. Peers Inc organizations are already jeopardizing established industries, however, many forward-thinking firms are welcoming the change. For example, when Lego users hacked the software for Mindstorms in violation of its copyright, Lego embraced their initiatives, and the company regained its slipping popularity.

“When you can connect and share assets, people and ideas, everything changes, not just how you rent a car.”

Big businesses have legitimate reasons for resisting change. Wall Street investors pressure public companies to produce short-term results, making it difficult for them to make modifications that need months or years to bear fruit. Excess regulation hampers some types of organizations, such as utilities. Well-known firms are vulnerable to the lawsuits that a small start-up may avoid. For example, YouTube ignored copyright issues that the more established Google Video could not.

The Costs

Platforms raise capital in three ways: “public financing, private investment financing and crowdfunding.” Private investor money often comes with strings attached. The platform must provide shareholder value even to the detriment of external concerns like sustainability practices. Balancing a responsibility to investors with a commitment to peers remains an ongoing challenge.Some companies manage to please shareholders while improving society. “Beneficial corporations” or “B corps” have social and environmental goals as well as financial objectives. These companies include The North Face, Patagonia, Etsy, Warby Parker and Change.org.

About the Author

Co-founder and former CEO of Zipcar Robin Chase has started three more businesses.Chase is one of Time’s “100 Most Influential People in the World.”