Question

USING HIGH TECHNOLOGY TO DRIVE THE AGENDA FOR A SHARING ECONOMY. As lead mechanical design engineer for BMW’s sprawling manufacturing plant in Spartanburg, South Carolina, Ryan Lambert heads a team of nine engineers responsible for designing and procuring custom jigs, fixtures and other tools for the assembly line. Until recently, the task required spending a lot of time on the phone and email, finding local machine shops with the ability and capacity to execute his plans. That changed a few years ago when Lambert began using Xometry, a Maryland firm that’s often described as “Uber for manufacturing.” Now, he uploads design specs to Xometry’s online platform, which then uses artificial intelligence and algorithms to instantly price jobs and selectively bid them out to a network of some 2,500 pre-screened small machinists scattered around the country. “It allows me to hand over my prints and know I can get the finished product on a set deadline and at a set cost,” Lambert explains. “It makes me more efficient.” It’s a set-up in which each player gets something of value: BMW gets the tools it wants faster and cheaper; the machinists generate additional revenues by getting the opportunity to use an otherwise idle asset thereby creating more work capacity. Like Uber, the ride-hailing platform, Xometry takes a percentage for bringing the two sides together. PROGRAMME BACHELOR OF COMMERCE IN INFORMATION TECHNOLOGY MANAGEMENT MODULE INFORMATION TECHNOLOGY MANAGEMENT 2B TOTAL MARKS 20 MARKS “There’s a huge amount of potential capacity and capability in custom manufacturing that goes unused,” says Randy Altschuler, privately held Xometry’s CEO. “This is about using the sharing economy to make it easier to get things done.” BMW and Xometry are both players in a blossoming sharing economy that is transforming the way many industries conduct business. Only a decade ago, sharing was viewed as an intriguing peer-to-peer idea that wasn’t very relevant for established companies. Today, it’s the latest rage—albeit more evolutionary than revolutionary—with potentially far-reaching implications for how business gets done. “I’ll be very surprised if we’re still talking about the sharing economy five years from now— not because the activity will stop, but because it will simply be part of the way we do business,” says Urvesh Shelat, a Berlin-based venture architect lead at Boston Consulting Group’s Digital Ventures and former ambassador to BCG’s Henderson Institute. Purists say true sharing occurs only when the platform serves as an intermediary and doesn’t own the assets. Others take a broader approach that includes platforms owned by manufacturers or their partners. As sharing spreads into the business-to-consumer and business-to-business arenas, the underlying trend is becoming clearer: a mindset shift from ownership to usage that, played right, can benefit end users, asset owners and the environment. (Sustainability, in the form of getting more out of existing assets, is part of sharing’s appeal.) “People don’t care as much about ownership as they used to. They just want to use things,” says Vibhanshu Abhishek, a professor of information systems at the University of California, Irvine, who studies the sharing economy. “That’s a fundamental shift in the marketplace.” At its core, the sharing economy is a technology play, employing digital platforms to lower transaction costs and match under-utilized assets—be those room space, farm machinery, hospital equipment, clothing or even talent—with paying users. “The algorithm is our most important employee,” says Sebastian Sorger, CEO of LoadFox, a subsidiary of Munich-based MAN Truck & Bus. LoadFox operates a platform that matches European freight forwarders with carriers that have extra space in their trucks. “Humans can’t combine loads as quickly and profitably as the platform can,” he adds. Sharing works best with pricier assets that are used often enough by some to justify ownership, but are needed only occasionally by others who are willing to pay for short-term usage. In a market with frequent and infrequent uses, the model gives manufacturers a way to serve users who would never consider purchasing their products, and to sell more to owners who can monetize their purchases. “[With sharing,] low-usage consumers end up renting instead of forgoing consumption,” says Abhishek. “It’s a win-win-win for the borrower, owner and manufacturer.” The downside is that owning assets is capital-intensive. One key benefit of sharing, says BCG’s Shelat, is the ability to change “capital expenditures into operating expenses,” which frees money for other purposes. In India, where according to BCG only about 15% of farmers can afford to buy tractors, Mumbai-based tractor maker Mahindra & Mahindra runs a platform called Trringo, which allows owners of Mahindra (and rivals’) equipment to share with fellow farmer-users by the hour. Arvind Kumar, formerly Trringo CEO (now with Force Motors), praised the company’s role in “driving rural prosperity by empowering farmers,” and says it has helped achieve several strategic objectives, including expanding the company’s customer base and reputation. “If you think you can’t sell heavy machinery, expensive electronics or high-end fashion in a market because the local population can’t afford it, then this is your way in,” Shelat says.

Having read the above business case, answer all the questions which follow:

a. In the context of this Case Study, explain what is meant by “sharing”, hence explain further what a “Sharing Economy” is. (5 Marks)

b. List at least five [5] benefits of a technology-enabled sharing economy as highlighted in the Case Study. (5 Marks)

c. Explain how a sharing economy can benefit the environment. (5 Marks)

d. Explain what is meant by “more evolutionary than revolutionary” in the context of the Case Study. (3 Marks)

e. Under what circumstances does sharing work best? (2 Marks)

Answer 1

e) Humans can’t combine loads as quickly and profitably as the platform can . Sharing works best with pricier assets that are used often enough by some to justify ownership, but are needed only occasionally by others who are willing to pay for short-term usage. In a market with frequent and infrequent uses, the model gives manufacturers a way to serve users who would never consider purchasing their products, and to sell more to owners who can monetize their purchases.With sharing low-usage consumers end up renting instead of forgoing consumption.

b)can benefit end users, asset owners and the environment

One key benefit of sharing, says BCG’s Shelat, is the ability to change “capital expenditures into operating expenses,” which frees money for other purposes

c) As sharing spreads into the business-to-consumer and business-to-business arenas, the underlying trend is becoming clearer a mindset shift from ownership to usage that, played right, can benefit end users, asset owners and the environment. Sustainability in the form of getting more out of existing assets, is part of sharing.

d)With potentially far--reaching implications for how business gets done.