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Is your business the next 'Piggy in the Middle'?
- sept. 2014 -

There’s a children’s game that seems to be common place in most of the western world called ‘Piggy in the Middle’ although it does have other names (one of the US names is the somewhat unimaginative name of ‘Keep Away’). 

The game is very simple. It involves 3 people, two of which throw a ball directly between one and another and the aim is to bypass the Piggy in the Middle, and his task is to try and intercept that ball so that he can swap positions and no longer be the Piggy in the Middle. 

In other words, the aim of the game is quite simply to not get stuck in the middle while the other two enjoy the position of being able to exchange the ball directly with each other. It seems like a great analogy for what most of us should be thinking about in the business world right now. When asked recently after a talk I gave at an Innovation Summit about what I thought were the greatest examples of disruptive innovation in recent years, it was really easy to respond. 

It hasn’t been new products, it has been new business models. More specifically, it is the internet based business models that are facilitating a Peer to Peer marketplace and a ‘Sharing Economy’. The two go hand in hand but they should be distinguished. 

The ‘Sharing Economy’ (also known as ‘Collaborative Consumption’) really refers to lower cost of business because you are effectively sharing the cost with other people. For example, Lyft is a car sharing scheme in which you pay the driver for your ride but it costs less because you are effectively sharing the cost of the car with others. A more pure P2P (Peer to Peer) model enables individuals to have direct transactions with one or other and does not require a bigger community or anything to be shared to make the model effective. One of the earliest examples of a P2P business model is called Zopa

I remember when working at Wolff Olins in 2005 that one of the founders of Zopa, the late Richard Duvall, came to our office to give a talk about his new venture. It was to be a P2P lending scheme in which people could lend / borrow money directly to / from each other, thus cutting out the banks and their ridiculous charges. I remember thinking that this was an amazing idea and bound to succeed, but it turned out to be well ahead of its time. It took several years for Zopa to really take off but in recent times the growth of Zopa’s business has gone exponential. Furthermore, it’s done so at the same time as the growth of so many other P2P businesses. 

The most famous one of all is probably Airbnb in which individuals can rent rooms or properties directly off each other, thus cutting out property management companies and negating hotels. It’s a fantastic evolution in business that provides individuals with more options for accommodation at better prices. That is ultimately what innovation is all about, providing better value for people, whether it’s a better product or the same product for less cost. 

The very nature of ‘disruption’ means that it will probably cause antagonism, not least from regulators, who in turn are being lobbied by ‘Big Business’ who don’t want the status quo to be challenged. 

Airbnb is fighting battles against regulators because the tourism business (hotels in particular) don’t like Airbnb taking business off them and complain that Airbnb should be conforming to the same regulations as hotels. Right here in Catalunya, the government has taken a stance against Airbnb, banning many of the properties and fining the company for its operations. However, history has shown over and over again that if there is a need in the market, the market will win and those who stand still trying to hold on to the past will lose. 

So who will lose in a P2P economy? Well the piggies in the middle are the prime candidates. The internet has already disrupted many models by facilitating more direct transactions. For example, most big retailers are just middle men, connecting brands with people. It’s no coincidence that the retail sector has been under great strain across the developed world, with many traditional retailers going out of business or suffering badly. Hotels and property management companies are being disrupted by Airbnb. 

Another one making headlines and causing controversy is Uber, the company that enables people to connect and pay for car rides at a much reduced cost to getting a taxi. Taxi drivers everywhere are furious and regulators may cause some problems for Uber along the way, but eventually the market will determine what services we have. (I concede that taxi drivers aren’t middle men but nonetheless it’s a model being disrupted by the P2P economy). But these are just some of the household names, there are new companies coming out all the time. In the US, there is Poshmark that enables women to buy and sell clothes directly from each other. Zaarly enables us to find people for home services like gardening or renovation and then Task Rabbit facilitates us to find people to carry out almost any kind of task at all. 

The truth is that the P2P infrastructure is rapidly being built so that this new way of doing things could radically transform the world economy. 

A major part of this infrastructure will be Bitcoin and micro payments. Due to the fact Bitcoin can be divided into thousandths of a cent or penny, and transactions fees are so low, it will enable people to directly transact with each other all over the world for the smallest of requirements. Imagine being on the other side of the world to your mother and getting a call from her because she’s had to go into hospital. 

You could find someone to take flowers to her within minutes of getting off the phone for a few dollars / pounds. Imagine you want to get a letter translated quickly into Russian without having to go through a slow expensive translation service company. Or you need to get a photo edited in Photoshop and you don’t own Photoshop or know how to use it. The list is endless. In fact, another business has recently launched called Trustcloud, which will enable individuals to build up their profiles through peer reviews, so that they can be trusted within this new P2P economy for whatever tasks they might offer. It’s a great idea.

Actually, Bithalo is another amazing innovation in the P2P infrastructure that will enable safe transactions and contracts with escrow. That is to say that people can directly exchange goods and services without having to worry about payment and delivery. Neither party within the transaction can lose because the exchange will only be made when both parties are happy that their expectations have been fulfilled. 

So, we could see a new type of economy in which value is created in completely new ways. Eventually employment statistics will become obsolete because individuals will create value differently, and we won’t be fixated on job numbers. Of course, some of these examples I’m using with regards to small errands and micro payments won’t be that disruptive to other businesses, I was just highlighting that the P2P economy has only just begun and that we all better get prepared for all the coming disruption this is going to bring. 

Travel agents, retailers, property management agents and banks are all suffering from being ‘middlemen' and then there are taxi drivers and hotels who are clearly suffering too. Whatever your company proposition, it might be just worth thinking about whether you’re going to be the next Piggy in the Middle. I certainly wouldn’t want to rely on protests, placards and regulators to keep me competitive in this fast changing world.

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