As Nigel Phair notes, the disruption of existing business models can cause confusion.

The sharing economy is thriving, thanks to the arrival of smartphone apps, social media, and a tightening economy. Yet the growth of the sharing economy has brought with it confusion over rules, rights and responsibilities.

“The sharing economy [is] an economic model in which individuals are able to borrow or rent assets owned by someone else.”
— Henrique Schneider, “Creative Destruction and the Sharing Economy: Uber as Disruptive Innovation”, 2017.

The sharing economy model is most likely to be used when the price of a particular asset is high and the asset is not fully utilised all the time.

Airbnb and Uber are two of the best-known examples of the sharing economy. Other examples growing in number are co-working spaces, shared equipment, shared technology, shared transport, and even the possibility of shared staff.

In 2016, PricewaterhouseCoopers predicted that transactions in Europe’s five most prominent sharing economy sectors — collaborative finance, peer-to-peer accommodation, peer-to-peer transportation, on-demand household services and on-demand professional services — could see a 20-fold increase to €570 billion by 2025.

That’s just Europe.

It makes good business sense to consider tapping into that potential income.

The governance implications of a sharing economy

While the sharing model often makes economic sense, it raises questions about how to manage risks, security, and even safety. When you don’t own or even co-own the shared item, where does your responsibility begin and end?

The nature of governance is changing. The sharing economy is changing traditional two-party relationships into relationships with multiple parties, all with different rights, obligations, and expectations.

Uber had to deal with all these questions during its set-up, and continue to re-visit them as the company expanded — sometimes controversially.

  • Is Uber a taxi service? In February 2017, the Federal Court of Australia ruled that ride-sharing is a taxi service. That classification determined the amount of tax its drivers must pay.
  • How do you manage individual performance under a sharing economy?
  • Is Uber legal in all states?
  • Are Uber’s drivers regarded as employees or independent contractors, and how does that affect its employment responsibilities?
  • Are Uber drivers entitled to Workers Compensation?
  • Who is responsible for public liability if something goes wrong and there’s an accident or injury?
  • Uber’s directors have had to battle over and redefine almost every aspect of their business, despite the simple concept it was intended to offer.

Exposing governance gaps

Current regulatory frameworks were established when there was a clear ownership of the property or service. Under a sharing economy, there are no such clear boundaries.

f you are a director of an organisation entering the sharing economy space, you should understand that there may be no precedents for you to follow.

  • How will you manage the sharing of tangible and intangible assets?
  • How do you measure and value assets such as time and money?
  • How will you manage and monitor the use of tools, stationery, equipment, and consumable items?
  • How do you safeguard your employees, if you have them?
  • How do you manage equity between the sharing businesses?
  • How do you keep abreast of regulatory changes affecting your business?
  • How will you maintain the “peer-to-peer” approach that has been so important in establishing the sharing economy?
  • How will you use and manage social media to support your sharing economy?
  • How will you insure yourself, your business, your service and your team?
  • Under a traditional business model, governance requirements are clear. The new sharing economy model means sending directors back to the beginning to analyse every aspect of their organisation.

While the future may appear to be filled with nothing but questions, it’s actually a time of new opportunity. The first organisations to tap into the sharing economy may be able to secure a wonderful competitive advantage, and seize the opportunity for growth.

Updated 26 October 2017.