Fast Company

Loans, Relays, And The Power Of Community: How RelayRides Uses Technology For Social Good

For every business chasing the next must-have tech to stay ahead of the game, there are dozens reaching and failing to beat the competition. How can you choose the right strategy? The former director of Kiva shares what she's putting into practice at RelayRides.

An essay from Passion & Purpose contributor, Shelby Clark, former director of Kiva, current CEO of RelayRides, the world’s first peer-to-peer car-sharing service backed by Google Ventures.

It’s a small world. And it’s getting smaller. By making it possible to easily make a connection with billions of people around the globe, the Internet has eliminated the notion that a neighbor is someone who lives next door. My career has focused on this principle, and has explored ways to connect people online for the greater benefit of society. I believe the question that could both define and challenge our generation is: how can we leverage online connections to generate offline impact?

As we find new ways to answer that question, the world will become a smaller, and better, place. I’ve thus far worked toward this goal in two fields—finance and transportation—but countless other opportunities remain.

My quest was inspired while helping to build a young nonprofit startup called Kiva.org. Kiva connects people in the First World with a few extra bucks to microentrepreneurs in the developing world who need a small loan to start a small business—selling baked goods, say, or running a general store.

A decade ago, nobody thought sane people would loan total strangers halfway across the globe hard-earned money on nothing more than a simple promise to repay. Now they do. Technology has empowered people to develop relationships, reputations, and trust with the “strangers” they fund, and Kiva has quickly become one of the fastest-growing nonprofits in history—on target to raise about $100 million in loan capital in its fifth year of existence.

I then took what I learned at Kiva and moved on to my next challenge, tackling the consumption and environmental concerns associated with cars and traditional car ownership. RelayRides, a company I founded in 2008, is built on those same principles that made Kiva thrive.

Say that one of your neighbors has a car sitting idle, while at the same time you need a car. It seems like a logical conclusion that you two should be connected, but without technology this would not be possible. RelayRides provides a simple interface to find the neighbor with the car you need, at the location and time you need it.

RelayRides also integrates in-vehicle technology, which eliminates the need to exchange keys, making the transaction convenient. We also provide a bilateral rating system that keeps both owners and borrowers honest and respectful of the community. While these needs and general concepts have existed for decades, we could never have built the business without the advent of new technology.

From these past experiences I’ve noticed that a few of the same threads create a fabric of new and innovative ways to connect people for the betterment of society. Specifically, a service should think offline, establish trust, and empower its community.

Think offline. As the Internet has grown, more opportunities have emerged to connect with others online to establish or improve relationships, or to find and disseminate information. However, there have been only limited ways to translate online interaction into offline impact.

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Both Kiva and RelayRides have leveraged the Web to create new ways to connect offline resources, money, and cars, respectively, when connections could not have been made previously. Kiva represented the first opportunity for the average consumer to connect directly with a microentrepreneur halfway across the world. It allowed the lender to learn about the borrowers’ personal situations and needs, and created a safe and easy way for the lender to contribute to borrowers’ loans.

RelayRides has an even more tangible and visible relationship to the offline world. It’s easy for borrowers to see the thousands of cars sitting idle in their community. However, there was no way for them to leverage the idle resource. Car owners had no idea that people in their neighborhood would pay them to use their cars when they would otherwise be sitting on the side of the street, and even if they did, they lacked the infrastructure and insurance to make the connection possible.

Establish trust. In a world where strangers used to be anonymous, the Internet has given people an identity.

Reputation systems are incredibly powerful tools to establish trust where none previously existed. People must know that they will be held accountable for their actions, and that disrespecting the community will neither be tolerated nor go unnoticed. Kiva prominently displays the repayment rate to a lender considering making a loan. Defaulted loans never disappear from the system, helping to ensure that loans continue to be repaid. To date, Kiva’s repayment rate is a staggering 98.9 percent—something the average bank would kill to have.

Similarly, RelayRides has developed a robust peer-to-peer rating system. Before borrowers choose to borrow a car, they can check what others said about it. If a car owner doesn’t keep the car clean or well maintained, borrowers will know that, and the car owner will consequently enjoy fewer rentals.

In addition, borrowers are held responsible for their actions, and may be banned from the community for returning cars late or dirty. By creating a reliable system that keeps members responsible for their actions, the quality of the service is enhanced, but more importantly, members know they can trust the service and, in turn, the community.

Empower the community. One thing I learned at Kiva and quickly saw at RelayRides is that the community is smarter, more creative, and more effective than any company can be. When a service relies heavily on its members, it must give those members a way to be heard and drive the direction of the service.

Kiva did not realize this early on, so its passionate community created Kiva Friends, an independent way to organize and be heard. Kiva Friends is a forum where the entire imaginable gamut of Kiva issues is discussed, from marketing strategies to conversations about quirky loans. Kiva Friends also created a number of useful tools that Kiva didn’t provide, such as Kiva Toolbars with links and RSS feeds. It was also a mechanism for lenders to band together to protest when Kiva made a decision the community didn’t like.

My favorite story about Kiva Friends tells what happened when someone noticed a loan they felt was inappropriate: seemingly funding an illegal activity. Kiva Friends organized an around-the-clock schedule for members to put the loan in their checkout basket, without actually completing the “purchase” of the loan, thus preventing anyone else from funding the loan. For over twenty-four hours, Kiva Friends passed around responsibility for blocking the loan, taking turns as it subsequently expired from each member’s pending checkout basket. The community would not cease until Kiva finally removed the loan.

I learned this principle --the unstoppable power of community-- at Kiva, and continue to think of ways we can leverage our RelayRides community to get smarter and provide a better service. Regardless of the amount of research we do, we’ll never understand a neighborhood as well as someone who actually lives there.

We’ve developed a RelayRides Ambassador program, which allows someone to self-organize a critical mass of members (four cars and fifty borrowers within a one-mile radius); once that legwork is done we’ll come in and set up the service. The RelayRides ambassadors understand their own community, what their needs are, and the best way to spread the word—all things that would waste time and money for RelayRides to figure out on its own. The result is a better service for members, more communities with better tailored coverage, and fewer impediments and unnecessary costs for RelayRides as a business.

While communities have long been a part of some companies, it’s clear to me that this connection is the future of business. Cultivating and leveraging communities makes clear sense for the bottom line because it provides better service and coverage at a lower expense. In addition to potentially being profitable, it is good for the community.

As our world becomes more fragmented with the myriad diversions and divisions that seem to be splitting people apart, a renewed emphasis on association and commonality is absolutely critical. And it is my thought that by leveraging this latent desire for community, it’s not only businesses that can flourish, but also the people they serve.

Reprinted by permission of Harvard Business Review Press. Excerpted from Passion and Purpose: Stories of the Best and Brightest Young Business Leaders. Copyright 2011 John Coleman, Daniel Gulati, W. Oliver Segovia. All rights reserved.

[Image: Flickr user Erik J. Gustafson ]

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