Friday, 15 November 2013

The peer-to-peer business model, Part III

Part I          What is the peer-to-peer business model?
Part II          How does it work?
Part III         Relating the p2p model to the internet business model
Part IV        Impact of p2p
Part V         How businesses can use p2p
Part VI        Issues and what’s next

Contrarian but it works
applicable internet methods, rules and systems

Following from the previous post, the internet is the common link for p2p business models and enabler as it reduces friction to carry out business activities and scaling it to commercial quantities.  But it is contrarian.

The p2p method of production and business model based on the wimp of consumers is not obvious to a common person or to most businesses, not least in Asia. It seems to be based on hope and not something certain like Hertz stocking up cars for rent.  Managers like certainly and a level of control.  The internet model seems to be based on chance but in fact it relies on the 0.001% effect over the huge number of internet-connected owners of, say, cars.  This law of large numbers is based on probability.  And it works.  You only need a very small percentage of the like minded among the huge number of people online to kick something off.  [Previously they find it hard to find one another.]  Then the networking effect takes over, at least for those who got the approach right.  That 0.001% result in sufficient volumes to make p2p firms viable as going concerns and workable for conventional companies.

Directness, an effect made easily possible through the internet made the p2p business model viable.  A peer with spare resources is found and connected directly to another who wants to use it.  This effect reduces prices by removing layers off the traditional middleman who depended on non-transparency of indirect trade.  Each layer brings the price up.

Co-creation is a calculated method of crowdsourcing where a company can deliberately engage the crowd to co-create a better specification of a widget, for example.   Co-creation depends on a niche crowd around a platform fashioned to seed their engagement.  A firm could use co-creation for example by seeding chatter between peers and then mine, say, their likes.  Obviously this cannot be used on everything and initiatives should be around consumers.  Things that appeal to passion are more likely to work.  Fans of an author discussing his works could lead to more sales for a publisher.

The following, while not specific to p2p models are nevertheless universally deployed by them.

Relentless focus on user experience.  Businesses always say that customer service is critical but the new generation of internet companies seem to have taken it to another level...make it three.  Just compare the user interface of these online companies to the websites of traditional firms.  I think this is to do with the extreme competitiveness of the internet industry where your competitor is only a click away.  Or it is just the business culture of the internet economy since the pioneers of the sharing economy have little competitors.  Probably both!  This leads to another, the principle of simplicity.

Again notice the zen-like minimalist look of what I call web 2 companies.  It gives the impression that they are facilitating users who want to get in, execute then get out as fast as possible.  No distractions.  Compare this to the complex web designs popular with the first generation of web companies (and most of today’s corporate websites).  These were influenced by the traditional media design where white space cannot be wasted.  Web 1 firms’ design model is to ‘keep a viewer on the site as long as possible’.  Page hits so popular pre-2000 is no more the best means to value advertising rates and then this should only apply to media firms (but seems everywhere).  Strange that you still see the hit counters in many corporate websites even today in Asia.  Simplicity is an important aspect of user experience.

Because the environment now is voluminous, p2p marketplaces use the search model made popular by Google.  But this is inevitable.  Hertz could list the cars for rent because they have limited stocks.  Not so with peer owners since the mass means that the traditional directory (look up) model does not scale.

There are other internet eco-mechanisms relating to p2p that can be applied by companies including immediacy and open platform.  Understanding the culture of openness is another.  It is basic with the p2p model and many iconic web companies seem natural with it.   But I will end this topic here.

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