City sharing

A look into the sharing economy and its opportunities for Danish municipalities

A new generation is leading the way towards a different form of consumption. An economy where citizens rent, lend and share goods instead of buying them. This is named the sharing economy.

The sharing economy in your municipality

Recently, your neighbouring municipality launched an initiative where local citizens are able to invest in local civic projects – crowdfunding for local development projects, like the local playground or large-scale tourist attractions. Citizens are joining the municipality in investing in the projects that matter most and provide the best value to the local community. The initiative was launched, because citizens were unsatisfied with the prioritisation of budgets, and because the local administration was looking for new ways of attracting affluent citizens with money to invest.

Although this is a thought experiment for Denmark, it is not far from being reality. The sharing economy is moving into the private as well as the public domain, offering new opportunities for citizens and municipalities alike. Rather than seeing the sharing economy as a threat, we argue that collaboration and dialogue supported by technology can pave the way for great opportunities in the pursuit of delivering higher levels of public service.

What is the sharing economy?

Lisa Gansky, one of the most well-known thought leaders on this domain, has defined the sharing economy as “the interconnectedness of people and how technology gives access to goods and services”. The most famous sharing economy company in the private sector is the online platform Airbnb, which lets private people rent out their homes to other private people through a userfriendly interface. This not only enables optimisation of resources, but also creates a more authentic travel experience and community feeling between peers.

The sharing economy is here

In 2011, Time Magazine announced that the sharing economy is one of ten ideas
that will change the world.

Recently, we have witnessed the emergence of a new breed of peer-to-peer (P2P) platforms that are designed for sharing goods and services which generate benefits without resulting in ownership of material goods. The phenomenon of sharing has been around as long as mankind, but the key differentiating factor is that technological advances enable networked platforms that support the sharing economy enough to operate at scale. Platforms that are not only made available for the private domain, but also provide opportunities for organisations across cities and municipalities.

The sharing economy offers a new business model that creates value from the sharing of underutilised assets and thereby marks a move away from ownership and towards access. Although there are regulatory challenges when this new business model competes with more traditional models, there are undoubtedly financial benefits from increasing the utilisation of assets, also to be harvested across the public domain. Besides being able to solve a financial challenge for municipalities and delivering more and better public service with decreasing budgets, the sharing model also has the potential to deliver more community-based benefits, like increased community feel and intimacy between administration and citizens.

Cities at the front of innovation are exploring new ways of participating in and benefiting from this emerging ecosystem. Portland and San Francisco have partnered with Airbnb to make tax collection easier and to promote local businesses through the Airbnb platform (a win-win). Seoul declared itself a “sharing city” back in 2012, which entailed municipal support to infrastructure and the dissemination of platforms for sharing economy initiatives.

Motivated by economic, social and environmental challenges that the city was facing, the sharing city has backed grassroots citizen-driven sharing in the form of
bookshelves, libraries, gardens and common tool warehouses, but has also supported tech start-ups and other organisations working to catalyse more sharing in Seoul. The city acts as partner for emerging sharing initiatives
and is succeeding with recovering a sense of trust and community, reducing waste and overconsumption and activating the local economy.

The similarities between these city approaches to support the sharing economy are two-fold: 

  1. The cities recognize that the sharing economy offers much more than just optimizing resources. This includes better public service, environmental and social benefits that expands beyond an improved community-feeling between all participants.
  2. Technology is perceived as an enabler rather than a driver, unlike many of the “smart-city” initiatives that have failed because they have tried to let technology
    dictate the needs of their citizens.

5 drivers of the sharing economy

Excess capacity 

The most important ingredient in the sharing economy is citizens who share or exchange excess resources. This can include anything from bikes, tools, clothes to office equipment and much more. Sharing is not just spurred by technology, but is also enabled by a growing population and higher degree of urbanisation.

Technology

The sharing economy is characterised by a very close affinity to contemporary communication technologies as consumers are leveraging social media networks to create communities to trade, swap, rent or barter goods, skills, services and expertise, and thus enabling a match of supply and demand in real time.

Environmental awareness

The non-materialistic lifestyle of the sharing economy is characterised by an increasing environmentally aware citizen. Sharing their belongings with others creates a positive impact on the environment.

Re-engineering of consumption

Consumers are more likely to choose access over ownership, and this is facilitated by the widespread adoption of peer-to-peer-shared access models. The growth of shared models could be motivated by an antidote to materialism and overconsumption as a response to the financial crisis.

Resurgence of community

The financial crisis has also spurred a sense of community in society. The distrust of old-model companies has fuelled consumers’ willingness to consider alternative businesses, brands and lifestyles. The platforms work because they are self-governed by the communities, and any disputes are resolved by a decentralised, transparent and peer-policed system.

Sharing economy in the public Drivers of the sharing economy

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The sharing economy is more than optimising resources

The sharing economy has grown on the foundation of dividing scarce resources better. This is good for the environment and makes financial sense for companies and public institutions alike. The development in technology with geotagging, mobile payments and social network profiling has enabled this growth, and the dense urban populations have provided a critical mass for these sharing initiatives.

However, the sharing economy gives plenty more opportunities than just optimising resources. When we look abroad, cities across the globe, equivalent in size to Danish municipalities and even regions, have embraced the possibilities within the sharing economy to provide better and more engaged public service. As an example, Seoul, South Korea, declared itself a “sharing city” back in 2012. This entailed municipal support to infrastructure and the dissemination of platforms for sharing economy initiatives. The motivation behind this was founded in economic, social and environmental challenges that the city was facing and, moreover, it was a catalyst for creating new business opportunities and re-establishing trust-based relations with its citizens.

Cities do not have to become companies themselves or think up new sharing concepts, but through established companies they can enter into collaborative arrangements, enabling them to provide a shared service or promote sharing services so their citizens can achieve social and economic benefits. Cities like Portland, Oregon, and San Francisco, California, have partnered with Airbnb in the Shared City initiative to enable hotel taxes to be collected through the Airbnb service. Through the Shared City initiative, Airbnb will work with the local tourism organisations to promote small businesses alongside other tourism images of the cities and, in order to more fully support the city as a whole, will begin collecting the local hotel tax.

Looking at Danish initiatives, there are still only few examples in the municipalities, one being the reserved parking spaces for ride-sharing cars in Copenhagen, described below. However, the sharing economy can be an inspiration for coming up with new initiatives which are attractive for both municipalities, citizens and employees. The initiatives should be aimed at tackling pressing issues in society. Imagine if the city could provide an easy way for citizens to visit lonely elders and keep them company? Or if there was a good way for businesses to share leftover food with homeless people? Or if children could find study buddies at the same academic level? These examples also create a strong community feeling and will brand the city as attractive for new families.

7 ways the sharing economy creates value

1. Saving costs and resources

The sharing model enables municipalities and cities to save on costs and resources. Letting products stay longer in the cycle of use by enabling the city to share resources internally, it reduces the demand for new products and thereby costs.

2. Servicing citizens better

We see a tendency towards citizens preferring access over ownership of goods. This is an opportunity for cities and public institutions to cater for the demand from citizens and thereby deliver a better service.

3. Branding your city

Providing opportunities for citizens to share will brand your city as environmentally and socially aware. This will attract a new segment of young people with greener values and ideals. In addition, it could be a way for low-populated areas to welcome new citizens by being at the forefront of the sharing movement.

4. Helping the environment

By enabling citizens and institutions to share resources instead of buying and thus producing more, it has a positive impact on the environment and the city’s green accounting.

5. Forming alliances

For cities wanting to start sharing initiatives, it can be a good idea to start by partnering with companies or other cities already in the sharing economy. The partnership means that the effort of gaining knowledge and experience as well as building technology can be shared.

6. Testing pilot schemes

The sharing economy might not work for all cities and municipalities, and it can be difficult to assess which projects will work. The sharing initiatives can be tested with very few resources and a low investment as a pilot scheme to see if it will actually work and can then be scaled as needed. Another benefit is that it is possible to gain insight into the behaviours and demands of the citizens.

7. Creating a stronger community

The reason why many sharing platforms work is because they create a sense of community feel among users. The same can be replicated in parts of cities, where citizens are able to share local resources. This strong sense of community will retain and attract citizens to the city.

Sharing economy in the public 7 ways to create value

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Technology is the enabler, not the driver

As a precursor of the sharing economy, the concept of “smart cities” gained ground in the early 2000’s. The world saw a string of extremely ambitious projects, building smart cities from scratch. Smart cities that turn to digital technologies in order to transform how cities are run. Where these projects are admirable in their ambition to create high-tech cities with goals like becoming CO2-neutral, more effective and centralised city administration, security of energy supply etc., this approach has proven to fail in many cases. The approach that can be described as top-down, focusing on hard-ware rather than people, fails to deliver as promised and often combines high costs with low returns.

Digital technology will continue to transform how cities, municipalities and governments are run; the move into the sharing economy cannot happen without the support of digital technologies. There is a vast amount of potential for making communities and cities smarter through digital technologies, and organisations like Nesta suggest that we reverse the approach and create the transformation through collaboration with the citizens, bottom-up. They call it “collaborative technologies”.

Through collaborative technologies, citizens are leveraging social media networks and internet-based platforms to create communities to trade, swap, rent or barter goods, skills, services and expertise. The companies and organisations in this economy become facilitators of interactions rather than middlemen between production and buyer. The ongoing expansion and proliferation of this type of network would be impossible without dedicated IT infrastructure and creates possibilities for a level of service and ad-hoc coordination that is brand new. As a result, organisations are able to customise offerings and sustain a relationship with their customers/citizens based on the interactions they facilitate and thereby the information they collect.

The alternative to the “smart city” top-down approach is therefore a bottom-up approach where organisations leverage the potential of networks and communities between citizens with the goal of optimising city resources, collecting data and making better decisions for all stakeholders involved. It is not the digital technologies in themselves that should drive innovation and the collaborative development of cities/municipalities, but rather the collective intelligence of its citizens enabled by digital platforms.

How to succeed with digital transformation in the sharing economy

Two things are needed for organisations in order to succeed with this approach.

  • Broad knowledge of available technologies and how to implement them.
  • Extensive competencies in establishing and facilitating collaboration between stakeholders, from government agencies to local citizens – enabling empowerment of the end user.

The point being that you cannot rely on digital technologies to do the work for you, no matter how brilliant they may be. Success comes from involving/empowering the users/citizens both in the shaping and usage of digital platforms and in the implementation of digital technologies. 

Any city, municipality or government agency that set out to change the way they run their “business” must be aware that this is a major transformation, not only for the organisation itself, but also for all the stakeholders involved, including the citizens. Rather than putting technology in the centre of the transformation, this type of transformation requires that people come first. Once the technology is in place, it is up to users and facilitators to collaborate to create the expected impact and effect.

5 prerequisites for succeeding with digital transformation

1. Effect

To create sustainable change and effect, organisations must excel in their effort to identify, clarify, communicate, pursue and follow through on the key business effects, including societal impact. This must be done with equal focus on business and behavioural effects, such as practices, behaviour and learning.

2. Importance

Significant transformation relies on a genuine experience of importance across the stakeholder map. To make a difference, professional expertise must be converted to action through professional change management. Everything you do holds the potential to increase the level of importance, ownership and commitment.

3. People

Your efforts only make a difference when you succeed in getting the right people in charge with the right team – and bringing people together along the way. The best only; with the capacity and influence to change the status quo and bring (appropriate) disturbance. You need to understand who these people are.

4. Authenticity

Trust is a prerequisite for change. The successful change leader therefore demonstrates high integrity and continuously builds trust in all touchpoints. It is driven by credibility, reliability and intimacy – truly caring for the mutual benefit of the change.

5. Energy

How you stage the change basically determines if you drain or energise the stakeholders. Each interaction must be facilitated professionally to create the right
atmosphere and build energy to drive the change.

Sharing economy in the public Implementation principles

Cases

Parking for car sharing and urban gardens – the City of Copenhagen

In 2006, the City of Copenhagen launched a programme aimed at promoting car sharing by allowing shared cars to park for free at designated parking spaces around town. The municipality provides 150 spaces across the city where certain zones are free all day and others allow for free use only at certain times a day. The car owners must be able to provide a car sharing licence, which can be obtained by a car sharing club.

Recently, the municipality has also encouraged citizens to use empty public spaces for urban gardens, which are shared and run by local citizens. In this way, citizens are able to grow vegetables and have a designated outdoor space in the middle of the city.

Collaborative Government – MuniRent

MuniRent is a company that offers the same service to governments and public agencies as Airbnb does to private consumers, except MuniRent is not facilitating the exchange of housing but instead the sharing of equipment and personnel.

One example is Oregon Department of Transportation (ODOT) that has moved from verbal agreements and sharing over email or phone to implementing the MuniRent platform to support and encourage sharing and to increase the utilisation of their heavy equipment. Nearly a year after implementation,
the Oregon work crews (each crew is equivalent to a small city in Michigan) are averaging between 1-3 transactions a day. They have clocked 5,800 days of reservations for equipment that is in steady use.

Invest in your city – Neighborly

Neighborly call themselves a “community investment marketplace” and offer a platform for people to invest directly in the places and civic projects they care about. Thereby, Neighborly also becomes a platform for municipalities and cities to offer its citizens investment opportunities in local projects like education or infrastructure.

In August 2015, Neighborly sold the first ever microbonds for a public project to support the San Leandro Unified School District (SLUSD). A form of crowdfunding for public projects. Microbonds enable investors to participate in specific municipal bonds that match the type of infrastructure project they would like to support. Neighborly believes that this is just the beginning of transforming civic finance for good.

Key takeaways

  1. Initiatives based on sharing economy principlescan, besides optimising resources, also providebetter service to citizens, help the environmentand brand your city.
  2. Technological advancement creates possibilities;however, the focus should always be on the peopleand their needs, not the hardware.
  3. In order to succeed with implementing sharingeconomy projects, organisations need knowledgeof available technology and how to implementthem as well as competencies in facilitating collaboration between stakeholders and the end user.