35 Journal of Business Models (2021), Vol. 9, No. 1, pp. 35-42 The study investigates a business model transformation of a service provider on a sharing economy platform using a dynamic business model perspective. The study takes an inductive approach and draws on a set of semi-structured interviews, observations and other sources from a longitudinal single case study. The study is among the first ones to depict the process of the business model transformation of a service provider on a sharing economy platform along four dimensions: re- source structure, organization structure, value proposition, and process dimension, i.e. “trial-and- error experimentation”. The study also uncovers the service provider’s multiple channel API (appli- cation programming interface) strategy whereby the provider uses API to cross-list the listings on various online platforms. This strategy has implications for other providers and platforms within the sharing economy context. Business Model Transformation of a Service Provider on a Sharing Economy Platform Olga Novikova1 Please cite this paper as: Novikova, O. (2021), Business Model Transformation of a Service Provider on a Sharing Economy Platform, Journal of Business Models, Vol. 9, No. 1, pp. 35-42 Keywords: Business model transformation, sharing economy, hospitality, multiple channel strategy 1 Hanken School of Economics DOI: https://doi.org/10.5278/jbm.v9i1.4281 Abstract Journal of Business Models (2021), Vol. 9, No. 1, pp. 35-42 3636 Introduction During the last few years the phenomenon of sharing economy, also referred to as collaborative economy or even on-demand economy, became almost ubiq- uitous. Even though some argued that the term has been misleading (Slee, 2015), the sharing economy has firmly accommodated itself in the popular press (Economist, 2013; Karsten, 2017; Owyang, 2016) and has also found its way into the academic research (Laamanen, Pfeffer, Rong and Van den Ven, 2018; Mitchell and Strader, 2018). The sharing economy is an umbrella concept (Ac- quier, Daudigeos and Pinkse, 2017) that covers di- verse sectors and a variety of organizational forms and practices, both for-profit and non-profit (Schor, 2014; Sundararajan, 2016). Examples of companies disrupting traditional industries are abundant and range from accommodation marketplace Airbnb in hospitality industry (http://airbnb.com), to trans- portation network Uber (http://uber.com) and car- sharing company Zipcar (http://zipcar.com) in trans- portation industry, to peer-to-peer landing platform Zopa (http://zopa.com) in finance, and online course platform Coursera (http://coursera.org) in education (Botsman, 2012, 2013; Owyang and Samuel, 2015). Despite a surge of attention to the sharing econo- my, little is known about the business model devel- opment of service providers that constitute one of the pillars and driving forces behind the growth of sharing economy. Studying business models within the sharing economy is particularly important be- cause of their novel nature and a potential to disrupt established industries (Dreyer, Lüdeke-Freund, Ha- mann and Faccer, 2017). This paper aims to enhance knowledge on business model evolution in the con- text of sharing economy, with a focus on business model transformation of a peer service provider on a sharing economy platform, which has been identi- fied as important but under-researched area (Beno- it, Baker, Bolton, Gruber and Kandampully, 2017). This will be achieved by answering the following ex- ploratory question: How does a hobbyist peer provider in sharing econo- my develop its business model in the process of be- coming a professional service provider? The longitudinal study is based on the data obtained from interviews, analysis of company documents, discussions, and observations of a sharing economy peer service provider from Finland. The paper be- gins with a review of business model literature to an- chor this research in its specific context. Then, the methodology section is presented followed by the empirical findings. Finally, findings, limitations and future research directions are discussed. Approach The primary intention of this research was the explo- ration of the business model development in the con- text of sharing economy in a particular case of a peer provider on a sharing economy platform. The study was designed as a qualitative single case study (Yin, 2003; Demil and Lecocq, 2010) due to the explorative nature of the research question and limited amount of research conducted in the area of business model development within the particular context. The data for this study has been collected through semi-structured interviews, participatory observa- tions in the meetings, discussions and analysis of company documents, available for the years 2013- 2018, to ensure triangulation of various methods (Gib- bert, Ruigrok and Wicki, 2008). In addition, website information, publicly available digital documents and other online media resources were used to deepen the understanding of the studied phenomenon. Such approach has been pursued to ensure the robust- ness of the study (Creswell, 2007; Denzin and Lincoln, 2003). The data was collected during five years period from 2013 to 2018. As typical of inductive research, the analytical process was iterative and overlapped with the data collection (Yin, 2003). The data collec- tion consisted of several phases. Initially, 11 interviews with the peer provider and users of the particular peer provider services on Airbnb platform were conduct- ed. Further, 12 interviews with both professional and non-professional peer providers on Airbnb platform were conducted in order to uncover the motives, chal- lenges and actual processes of hosting on the peer- to-peer platform. Additionally, interviews with sharing economy experts were conducted to gain deeper un- derstanding of the sharing economy phenomenon. In total, 30 interviews (ranged from 45 minutes to 1 hour 30 minutes) were conducted for this study. Journal of Business Models (2021), Vol. 9, No. 1, pp. 35-42 3737 The interviews were recorded and later transcribed, followed by a coding procedure where firstly basic codes were identified and summarized, and later grouped into meaningful themes using thematic cod- ing procedure (Miles, Huberman and Saldana, 2013). The secondary data was triangulated towards the insights obtained from the interviews. Based on the data derived from the interviews and company docu- ments a factual timeline of critical events in the pro- cess of firm evolution was constructed. The emerging findings were iteratively discussed with the peer pro- vider to gain further insights and sharpen the under- standing of their business model development. Key Insights Case description The empirical setting of this study is hospitality con- text of the sharing economy, with focus on a service provider or ‘host’ on a peer-to-peer accommodation platform Airbnb. The service provider of this case study is located in Finland. The peer provider has started its operations in 2011 by becoming an indi- vidual host on Airbnb platform with two properties. In 2013 the host has decided to establish a venture that would focus on a branded hotel experience. At the same time, together with like-minded entre- preneurs he created a business entity that rented several apartments in Helsinki in order to further list them on Airbnb platform. The apartments were co-called themed apartments, with every apartment named and decorated according to a certain theme. In 2014 the company has expanded its offering to over 20 apartments, whereby apartment’s interior design was streamlined and themed apartments lost in importance. In 2014, after observing the declining occupancy rates for the apartments listed on Airbnb platform, the case company ’s board of directors has decided to list the apartments on different hospital- ity channels, such as i.e. booking.com and hotels. com. The cross-listing of properties on multiple on- line channels and subsequent increased exposure of the apartments to potential guests have raised the occupancy rates and enabled to further expand operations by doubling the amount of apartments to rent. At the same time, an own website and brand were created, whereby apartment rental bookings began also through an own channel. As of 2018, only 7% of company ’s revenue came from Airbnb, com- pared to 100% before, around 50% of revenue came through booking.com, and over 30% - from its own channel. The growth of the business entity through multichannel strategy has allowed to strengthen the brand and potentially expand the provider’s value proposition towards becoming a service provider to other peer providers within sharing economy hospi- tality space. Resources and competencies The resources of the organization may be developed internally or come from external markets, while the competencies refer to the abilities and knowledge of managers to develop the services their resources can offer (Demil and Lecocq, 2010). The experience, di- verse knowledge, expertise and skills of co-founders and shareholders of the company that evolved into a professional service provider have played a substan- tial role in the business model creation and develop- ment. Shareholders’ complementary capabilities regarding the value network aspects, such as legal, real estate management, property sales and technol- ogy have been instrumental for the company. In the process of business model development, the host has acknowledged the financial resources as a major challenge in sustaining of business operations. Organizational system The organizational structure pertains to the organi- zation’s activities and relations it has established with the stakeholders in order to utilize and exploit its resources. It encompasses the activities and value network consisting of relations with its suppli- ers, customers, competitors and regulators (Demil and Lecocq, 2010, Amit and Zott, 2001). The organi- zational system of a service provider consisted of online platforms, customers, government, city and professional organizations and competitors. Value proposition The value proposition of a peer provider has changed with the process of the business model evolution. Starting as an individual host on Airbnb platform with focus on experience accommodations, the peer provider has formed a business entity and ex- Journal of Business Models (2021), Vol. 9, No. 1, pp. 35-42 3838 panded its offering. Later, faced with the challenge of booking calendar synchronization, peer provider adopted a multichannel API strategy, and was able to increase exposure and absorb the demand on vari- ous hospitality channels (Beritelli and Schegg, 2016). Finally, own brand Experience Living was created and expanded, with a potential future focus on be- coming an operator for other peer providers Discovery driven approach In the process of business model transformation the peer provider has adopted a discovery driv- en approach. As McGrath puts it, “discovery driven processes demand that business model assump- tions are both articulated and tested. Having come up with an idea that an executive thinks represents an opportunity, the next step is to validate whether it can really deliver a compelling result for the com- pany” (2010: 258). In the process of discovering the right approaches as new information is revealed, the peer provider has embraced an interplay of “tri- al–and-error experimentation” i.e. exploration and exploitation of emerging opportunities (Ahokangas and Myllykoski, 2014; Sosna, Trevinyo-Rodríguez and Velamuri, 2010). Indeed, the peer provider has revealed the instances reflecting on the process of trial and error in business model development: “We made many mistakes during this past. We hired a lot of cleaners, service people. That’s not scalable, then you are stuck with your human resource cost.” [Peer provider] “Now we are trying to outsource scalable resource model, when we don’t have any people on our HR and we pay per cleaning/service.” [Peer provider] Trial and error learning (Sosna et al., 2010) is influ- enced by cognition of the entrepreneur, in form of cognitive maps that can be conceptualized as per- ceptions of environmental cognitions coupled with own prior knowledge. This is reminiscent of the no- tion of ‘entrepreneurial judgement’ as put forward by Penrose (1959), the ability to discover new ways of dealing with known problems, perceive productive possibilities outside of the established routines and engage in the process of carrying out new combina- tions of resources in development of a venture (Gho- shal, Hahn and Moran, 1997; Langlois, 1995). Multichannel API strategy During the process of professionalization, growth has become one of the provider’s major objectives: “We need to keep up pace of multiplying every year, other- wise it dies. We just need to keep up growing, and the big- ger multiplier we can achieve, the better.” [Peer provider] Observing the limited demand on Airbnb platform as one of the major obstacles for growth, peer pro- vider has pursued a multiple online channel strategy with the use of APIs. Beritelli and Schegg (2016) find out in their recent study on traditional hospitality channels, that the multiple online channel strategy seems to be the more effective approach to maxi- mizing bookings online, regardless of the platforms chosen. In this study ’s case, the sharing economy provider has utilized APIs in order to synchronize booking calendar across channels. Application programming interface, or API, is “a way for two computer applications to talk to each other over a network using a common language that they both understand” (Jacobson, Brail and Woods, 2012). The API, in its simplest description, is a contract that al- lows software to communicate with each other and share information. APIs are becoming enablers of omnichannel selling and diverse service business models and could be most useful in creating new business models and streamlining selling across all channels. The greatest revenue potential they pro- vide is removing barriers to growing revenue by in- tegrating platforms and apps so organizations can launch new business models and scale fast (Jacob- son et al., 2012). So far APIs has been looked upon as a tool for organizations (Zachariadis and Ozcan, 2017). However, with users of sharing platforms be- coming businesses in themselves, a new potential use for API is emerging. Indeed, the peer provider has acknowledged the revenue optimization and commissions management that was enabled by the multichannel API strategy: “Until everyone is linked to every sales channel, you have competitive advantage, where you can optimize revenue according to sales channel demand and everything, you can charge a bit lower price on Airbnb because Airbnb has significantly lower commission, than booking.com.” [Peer provider] Journal of Business Models (2021), Vol. 9, No. 1, pp. 35-42 3939 Discussion and Conclusions This study has explored the process of business model development in the context of sharing econo- my, with a focus on the professionalization of a peer- provider on a sharing economy platform. The study is the among the first ones to depict the adopted strategies of the service provider, that have been identified as important but under-researched areas in the emergent literature on sharing economy (Be- noit et al., 2017). Embedded in the Penrosian (1959) dynamic view of the firm growth and consistent with the conceptu- alization of Demil and Lecocq (2010) and George and Bock (2011), the study presents the business mod- el development along four dimensions: resource structure, organization structure, value proposition, and process dimension, i.e. “trail-and-error experi- mentation”. The peer provider has adopted a discov- ery driven approach in the process of business mod- el transformation, whereby embracing the interplay of “trial-and-error experimentation” with emerging opportunities (Sosna et al., 2010) and exercising ‘en- trepreneurial judgement’ in carrying out new com- binations of resources in creation of a new venture and development of its business model (Ghoshal et al., 1997; Langlois, 1995, Penrose, 1959). The study contributes to the emerging literature on dynamic perspective of business models with its focus on ac- tual process of business model development (Wirtz and Daiser, 2018; Wirtz, Göttel and Daiser, 2016) in a new context of sharing economy. It also introduces the concept of API – application programming inter- face – as a strategic tool utilized in business model development. The findings of this study have practical implications for online sharing platforms and peer service provid- ers. The increasing impact of the sharing economy on hospitality industry has been noted (Zervas, Pros- erpio and Byers, 2017). With IT as enabler of sharing economy (Puschmann and Alt, 2016), it is conceivable that more individual hosts would pursue the path of professionalization. The adaptation on multichannel API strategy might create a further impact on tradi- tional hospitality industry by increasing competition within online booking channels. Furthermore, some (Slee, 2015) have argued that majority of hospitality platforms’ revenue comes from hosts with multiple listings. The multichannel strategy and potential creation of own sales channels decreases host de- pendency on sharing economy platforms and can have implications for the supply of listings to the platforms on which they rely in their growth strategy (Lane and Woodworth, 2017). Finally, multi-channel API strategy has a potential of a wide-scale adapta- tion within peer service providers on sharing econ- omy platforms as APIs enable omnichannel selling and diverse service business models. Limitations and future research directions This research was carried out as a longitudinal sin- gle case study therefore its findings are not general- izable on a larger population. Multiple case studies, as well as quantitative studies on the process of pro- fessionalization within the sharing economy could be carried out to shed light on the potential effects the professionalization and multichannel strategies may have on sharing economy platforms, as well as hospitality industry at large. Further research could study in detail what effect the professionalization of peer provider has on the business model of platform provider, and whether peer service provider professionalization is benefi- cial for the platform provider in a long term. Additionally, studies on peer service providers in dif- ferent cultural and geographical settings would shed light on the dynamics and differences in the devel- opment of professional service providers. Also, this study has focused on a peer provider in hospitality setting. Future research could investigate whether and how the professionalization occurs in different in- dustry context and how the value is created in the in- terplay between consumer, provider and the platform. Journal of Business Models (2021), Vol. 9, No. 1, pp. 35-42 4040 References Acquier, A., Daudigeos, T. and Pinkse, J. (2017), Promises and paradoxes of the sharing economy: An organ- izing framework, Technological Forecasting & Social Change, Vol. 125, pp. 1–10. Ahokangas, P. and Myllykoski, J. (2014), The practice of creating and transforming a business model, Journal of Business Models, Vol. 2, No. 1, pp. 6-18. Amit, R. and Zott, C. (2001), Value creation in e-business, Strategic Management Journal, Vol. 22, pp. 493-520. Benoit, S., Baker, T., Bolton, R., Gruber, T. and Kandampully, J. (2017), A triadic framework for collaborative consumption (CC): Motives, activities and resources & capabilities of actors, Journal of Business Research, Vol. 79, pp. 219–227. Beritelli, P. and Schegg, R. (2016), Maximizing online bookings through a multi-channel strategy, International Journal of Contemporary Hospitality Management, Vol. 28, No. 1, pp. 68 – 88. Botsman, R. (2012), Welcome to the new reputation economy, WIRED Magazine, Vol. 9, available at: http:// www.wired.co.uk/magazine/archive/2012/09/features/welcome-to-the-new-reputation-economy (accessed 10 August 2015). Botsman, R. (2013), The sharing economy lacks a shared definition, available at: http://www.fastcoexist. com/3022028/the-sharing-economy-lacks-a-shared-definition (accessed 15 December 2015). Botsman, R. and Rogers, R. (2011), What’s Mine is Yours. How Collaborative Consumption is Changing The Way We Live, Collins, London, UK. Creswell, J. (2007), Qualitative inquiry and research design: Choosing among five designs, Sage Publications, Thousand Oaks, California. Demil, B. and Lecocq, X. (2010), Business model evolution: in search of dynamic consistency, Long Range Plan- ning, Vol. 43, pp. 227-246. Denzin, N. and Lincoln, Y. (2003), Strategies of Qualitative Inquiry, Sage Publications, Thousand Oaks, California. Dreyer, B., Lüdeke-Freund, F., Hamann, R. and Faccer, K. (2017), Upsides and downsides of the sharing econo- my: Collaborative consumption business models’ stakeholder value impacts and their relationship to context, Technological Forecasting & Social Change, Vol. 125, pp. 87–104. Gibbert, M., Ruigrok, W., and Wicki, B. (2008), What passes as a rigorous case study? Strategic Management Journal, Vol. 29, No. 13, pp. 1465–1474. Ghoshal, S., Hahn, M., and Moran, P. (1997), An integrative theory of firm growth: Implications for corporate organizations and management, INSEAD Working Paper Series, 97/87/SM. Jacobson, D., Brail, G. and Woods, D. (2012), APIs: A Strategy Guide: Creating Channels with Application Pro- gramming Interfaces, O’Reilly Media, Kindle Edition. http://www.wired.co.uk/magazine/archive/2012/09/features/welcome-to-the-new-reputation-economy http://www.wired.co.uk/magazine/archive/2012/09/features/welcome-to-the-new-reputation-economy http://www.fastcoexist.com/3022028/the-sharing-economy-lacks-a-shared-definition http://www.fastcoexist.com/3022028/the-sharing-economy-lacks-a-shared-definition Journal of Business Models (2021), Vol. 9, No. 1, pp. 35-42 4141 Karsten, J. (2017), Sharing economy offers flexibility and efficiency to consumers, available at: https://www. brookings.edu/blog/techtank/2017/01/09/sharing-economy-offers-flexibility-and-efficiency-to-consumers/ (accessed 20 October 2018). Laamanen, T., Pfeffer, J., Rong, K. and Van den Ven, A. (2018), Editor’s introduction: business models, ecosys- tems, and society in the sharing economy, Academy of Management Discoveries, Vol. 4, No. 3, pp. 213-219. Lane, J. and Woodworth, R. (2017), Hosts with Multiple Units – A Key Driver of Airbnb Growth, CBRE Hotels’ Americas Research. Langlois, R. (1995), Capabilities and coherence in firms and markets, In Montgomery, C. (Ed.), Resource-based and Evolutionary Theories of the Firm: Towards a Synthesis, Kluwer Academic, Norwell, MA and Dordrecht, pp. 71-100. McGrath, R. (2010), Business models: a discovery driven approach, Long Range Planning, Vol. 43, pp. 247-261. Miles, M., Huberman, A. and Saldana, J. (2013), Qualitative Data Analysis: A Methods Sourcebook, Sage, London. Mitchell, A. and Strader, T. (2018), Introduction to the special issue on “Sharing economy and on-demand ser- vice business models”, Information Systems and e-Business Management, Vol. 16, pp. 243-245. Owyang, J. (2016), Honeycomb 3.0: the collaborative economy market expansion, available at: http://www. web-strategist.com/blog/2016/03/10/honeycomb-3-0-the-collaborative-economy-market-expansion-sxsw/ (accessed 31 August 2018). Owyang, J. and Samuel, A. (2015), The new rules of the collaborative economy. The threat to traditional compa- nies can’t be ignored, available at: https://www.visioncritical.com/resources/new-rules-collaborative-econ- omy/ (accessed 01 August 2016). Penrose, E. (1959), The Theory of the Growth of the Firm, (4th edition 2009), Oxford University Press, Oxford. Puschmann, T. and Alt, R. (2016), Sharing Economy, Business & Information Systems Engineering, Vol. 58, No.1, pp. 93–99. Schor, J. (2014), Debating the Sharing Economy, Great Transition Initiative. Sosna, M., Trevinyo-Rodríguez, R. and Velamuri, S. (2010), Business model innovation through trial-and-error learning: the Naturhouse case, Long Range Planning, Vol. 43, pp. 383-407. Slee, T. (2015), What’s Yours is Mine. Against the Sharing Economy, OR books, New York and London. Sundararajan, A. (2016), The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capital- ism, MIT Press, Cambridge, MA. The Economist (2013), All eyes on the sharing economy, 9 March, available at: https://www.economist.com/ technology-quarterly/2013/03/09/all-eyes-on-the-sharing-economy (accessed 10 April 2015). Wirtz, B. and Daiser, P. (2018), Business model innovation processes: a systematic literature review, Journal of Business Models, Vol. 6, No. 1, pp. 40-58. https://www.brookings.edu/blog/techtank/2017/01/09/sharing-economy-offers-flexibility-and-efficiency-to-consumers/ https://www.brookings.edu/blog/techtank/2017/01/09/sharing-economy-offers-flexibility-and-efficiency-to-consumers/ http://www.web-strategist.com/blog/2016/03/10/honeycomb-3-0-the-collaborative-economy-market-expansion-sxsw/ http://www.web-strategist.com/blog/2016/03/10/honeycomb-3-0-the-collaborative-economy-market-expansion-sxsw/ https://www.visioncritical.com/resources/new-rules-collaborative-economy/ https://www.visioncritical.com/resources/new-rules-collaborative-economy/ https://www.economist.com/technology-quarterly/2013/03/09/all-eyes-on-the-sharing-economy https://www.economist.com/technology-quarterly/2013/03/09/all-eyes-on-the-sharing-economy Journal of Business Models (2021), Vol. 9, No. 1, pp. 35-42 4242 Wirtz, B., Göttel, V. and Daiser, P. (2016), Business model innovation: development, concept and future re- search directions, Journal of Business Models, Vol. 4, No. 2, pp. 1-28. Yin, R. (2003), Case study research: Design and methods, Sage Publications, Thousand Oaks, CA. Zachariadis, M. and Ozcan, P. (2017), “The API economy and digital transformation in financial services: the case of open banking”, working paper No. 2016-001, SWIFT Institute, 15 June. Zervas, G., Proserpio, D. and Byers, J. (2017), The rise of the sharing economy: estimating the impact of Airbnb on the hotel industry, Journal of Marketing Research, Vol. 54, No. 5, pp. 687-705.