There has been a lot of talk about China’s new “sharing economy”. Articles in the New York Times, Fortune, Bloomberg, and the South China Morning Post have all cited ride-sharing (Didi), bicycle rentals (ofo, Mobike), and the micro-rental services for batteries, basketballs, and umbrellas as part of a new China “sharing economy”.

But this is not really true.

The term “sharing” is misleading. And it all misses a much more interesting phenomenon: the emergence of a new type of Chinese disruptor.

Here’s my take on what is really going on.

Point 1: There is no new Chinese “sharing economy”.

First, some terminology, as I think this is creating most of the confusion. Keep in mind, nobody really knows what the “sharing economy” is. It’s a legacy term that is pretty confusing. For example:

• If I put my home on Airbnb, that would be considered “sharing” in the most traditional sense because it is a peer-to-peer transaction and uses an asset outside of the traditional hotel market.
• However, if I list 5 contracted apartments on Airbnb is that still sharing? That isn’t peer-to-peer and it is pretty similar to a small hotel or rental business.
• Does a personal asset have to be deployed into a market to be sharing? If 10 different people rent the same ofo bicycle for 20 minutes during a day, is that sharing or a rental? It seems like both. And if that is sharing (as many claim), then isn’t different people staying in the same hotel room over time also sharing?
• What about sharing labor instead of tangible assets? If you contract a designer through a company like Elance, is that sharing? It’s peer-to-peer. Does it have to be a physical product to be sharing?
• What about Spotify and other music or video streaming services? The customers are no longer buying the songs. Can you share products that are intangible like media?
• And what about fractional ownership of jets or vacation apartments? That is a type of collaborative consumption. Also sharing?

You can basically play this game with any business that people describe as “sharing” because the terminology is so fuzzy. And the biggest problem is that sharing implies a physical product or asset, when so much of what is going on in these businesses is with added services, data, labor and intangible assets.

So my recommendation is to forget the term sharing economy. The key to understanding what has been going on in China with companies likes Didi, Ofo, and the others, is to ask the right question. If you get the question right, everything becomes pretty straghtforward.

Point 2: The question is “access vs. ownership”.

When I get confused about a business situation, I think about the point of purchase. I walk myself through the purchase process (feel hungry, go to store, etc.) and then ask what I care about when I buy (speed? healthy? cheap?). In this case, the question the consumer asks him or herself at the point of purchase is should I buy this or rent it? Or should I own it or access it?

This decision between ownership and access is where both consumer behavior and business strategy diverge along two very different paths. And most of the best thinkers (Michael Porter, etc.) refer to these new companies not as part of the “sharing economy” but as innovators in the “access economy”.

Think about how different access and ownership businesses are.

If you want to own a bicycle, there are lots of factors you consider: price; style / look, brand / reputation, premium vs. economy product; new vs. used, and so on. You also think about the bikes that are actually available at your local retailer (route to market), the distance to the store from your home, storage requirements when not using it, frequency of usage; and so on. There is a lot going on in the consumer decision when it comes to owning a durable good. And successful bicycle manufacturers, like Taiwanese Giant Bicycles, are structured specifically to compete on these factors. If you look at their priorities, you see a focus on design capabilities, manufacturing cost and scale, sales and marketing, securing access to retail space, etc.

Now consider if you just want to access (i.e., rent) a bicycle for a while. You ask yourself very different questions. What is the price per hour? Can I rent by the hour or do I need to take the whole day? Is there a bike rental store near where I want to go? Where do I drop it off when I’m done? Do I need a lock and helmet? What if it breaks down? And so on.

Access businesses are mostly about two factors: price and convenience. Note: they can also sometimes compete on greater selection (think Spotify, a type of access business based on large selection). But price and convenience are the two important factors for this discussion.

In all these new China businesses, I think the right question is access vs. ownership. And the big factors for access are price and convenience.

Point 3: China is seeing a wave of “digital disruptors” in access and convenience.

What has really changed in the past 1-2 years in China is the arrival of smartphones, mobile payments, GPS and a very dynamic mobile app ecosystem. Other technologies like smart locks and kiosks have also arrived but these are less important.

For thinking about how these types of new digital tools and processes impact businesses, I refer you to the work of Jay Scanlan at McKinsey & Co. He has some great frameworks for this (an outstanding paper is located here). But his main point is that digital disruption can impact demand, supply or both. And it can be mild or extreme in each of these.

Rather than go through a bunch of theory, I’m now just going to jump to my conclusion and say that most of what we have been seeing is China with companies like Didi, Ofo, and the micro-rentals is new digital tools being used to disrupt Chinese access businesses – and mostly via increased convenience on the demand side. Plus low price. With the exception of Didi, these are classic disruptors.

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Ok. That was a bit of theory. In Part 2, I go through the new Chinese companies specifically and flesh it out. But I thought it did require some basic terminology first. Just remember:

• Forget the term “sharing economy”.
• Instead, think “access business” vs. “ownership business”.
• New digital tools and processes (especially smartphones and mobile payments) can disrupt demand, supply or both.
• Most of what has been happening in China is digital disruption in access and convenience.

This is continued in Part 2 here.

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I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

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