The unmaking of a making economy

Most people by now will have heard some buzz about the ‘sharing’ or ‘on demand’ economy. Few will realise how staggering it’s growth has been.

 

Consider this. There are now more Uber rides in NYC than in yellow cabs. There will soon be more Airbnb nights than the world largest hotel chains. And according to Mary Meeker’s recent report more than 1 in 3 of the US Workforce are freelancers, sharing their spare time on sites like PeoplePerHour, Upwork, Fiverr and others. And these are all companies that are less than a decade old!

 

We are going from a nation of ‘making’ things for consumption, to one of ‘sharing’ them. There is no question that whatever the underlying commodity is – transportation, food, accommodation, or your skills & time, – more of it will be shared than bought within the next few years.

 

Production, retail and traditional distribution as we know it will therefore shrink. The divide between a Producer and a Consumer is getting blurred and will only carry on doing so until it breaks down completely. Producers now compete not just with other Producers of the same or similar thing, but with Consumers who already own and share it. A cabbie competes with anyone who has a car and rides for Uber, Lyft etc; an in-house employee competes with the now estimated 54+ MM people who freelance in the US alone and are available to be hired on-demand; and hotels compete with your and my spare bedroom or vacation home.

 

In that evolution, power in the value chain has shifted dramatically, from the craftsmen & blacksmiths who possessed scarce skills of production; to corporations that commoditised those skills, powering mass production and driving craftsmen to virtual extinction; and now to consumers whose ‘cost of production’ is lower than both and in many cases  virtually zero.

I predict that the birth sharing economy will be cited 10 years from now as equally disruptive and revolutionary as the industrial revolution itself. By the end of the decade the consumption on such C2C (consumer to consumer) platforms will radically belittle that of the ‘making’ economy as we know it today.

 

Another trend that’s ‘in the ‘making’ will accelerate that as it becomes more economical for mass consumption (or production, however you want to viwe the glass) is 3D printing. Already this drivable car was printed in just 44 hours, and researchers are making 3D printed jet engines!

 

Moore’s law will prove right in 3D printers much like it did with personal computers, meaning that the power of 3D printers will double every two years and cost will halve. Eventually they will become mainstream – everyone will have one churn out stuff they need ‘on demand’ in their back yard. Even body organs!

 

This will have major implications for practically every industry, from medicine, food, fashion, the making economy at large and, yes, EVEN the sharing economy.

We may just find ourselves go from sharing things that companies make or build, to things we make entirely ourselves!

We’re getting SKUed !

 

The reason I’m so excited about our latest product SuperTasker is not just because it’s a cool product (and looks pretty according to my unbiased opinion of course !;) that solves a real need in a novel way. More importantly its driving a new macro trend which is way overdue : the introduction of SKUs for services.

 

SKUs (Supplier Keeping Units) are now second nature in the world of physical products.  They are the classification of all things made and sold. The worlds all encompassing ‘product catalogue’. Each SKU is tied in with specific product specs. So buying the same SKU anywhere in the world, through any site or retail store means the same thing pops out of the box. In other words: standardisation.

 

We take this for granted now but SKUs have marked a fundamental shift from a nation of blacksmiths to mass production and standardisation. Before the industrial revolution buying a table, or a bottle of ketchup meant going to a craftsman, blacksmith or the local farmers market. What you got that day would differ to what you’d get the next.  In a nice ironic turn of events that serendipitous discovery in the purchasing process is now finding its way back spurring new hot businesses like Birchbox and Plated amongst many others. Too much standardisation can get boring. But we wouldn’t have come this far if we weren’t able to standardise production to feed a nation en masse.  No doubt our standard of living has massively improved since then. You can buy mass produced items for a fraction of what a craftsman could afford to charge you however hard you bartered.  In economic terms:  we reaped ‘economies of scale’.

 

Yet in intangibles we are STILL a nation of blacksmiths. Try getting a simple logo done on 5 different platforms. The cost will vary drastically as will the quality, and other service elements bundled in the purchase such as number of revisions or the ‘return’ policy.  It’s a hit and miss experience, much like buying goods was before mass production.

 

Some argue that one of the reasons is that you can’t commoditise creative work.  Well. I’m sure that’s exactly what the blacksmith or craftsman in the case above would have said before Henry Ford put them out of business.  There is creativity in virtually EVERY production process. Whether you’re making a table, a pair of shoe laces, a home made ketchup recipe or a logo. There is no reason for them to differ.

 

That’s what we are fundamentally doing at SuperTasker. We are the world’s first catalogue of SKUs in digital services. And we aim to eventually expand to more. But for now we ‘stick to the knitting’ as they say. A design edit, a WordPress fix, an Infographic or creative banner production, to name just a few, are all SKUed. In other words we define what the cost should be, the delivery time, the penalty on lateness, the quality standard (all the ‘producers’ are curated and trained to that standard), and those other service elements like number of revisions per purchase and refund policy. We leave no guesswork to the ‘craftsman’ or the customer. It’s SKUed.

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Freelance and contract hiring are shaping our future workforce!

CIO magazine included one of my predictions today in the top 6 tips for 2015 in an article titled “6 IT Workforce Predictions for 2015”

“The global economy in general is moving to a contract or freelance workforce. It’s now a $1 billion worldwide market, and projected to be $5 billion in the next five years,” says Xenios Thrasyvoulou, founder and CEO of PeoplePerHour and SuperTasker.

“The flexibility benefits for both employees and employers are hard to beat; the ability to find exactly the talent you need for exactly the job you need them for is one of the drivers, as well as the desire for specialization without having to pay a premium long-term for a full-time employee,” says Thrasyvoulou.

Read the full piece here >>

The Future of Work: the evolution of labor marketplaces

Operating in the labor / outsourcing space for almost 10 years now (first with an offline business and then online) this is something I’ve spent a lot of time thinking about and in many ways have been part of its evolution. What does the Future of Work look like? In this post my aim is to highlight the trends that I think will shape it versus the applications and solutions it will manifest itself in.

  1. The West-East playing field will level out

The outsourcing industry has its origin in the labor rate arbitrage between developed and developing economies. The first labor marketplaces like Elance & Odesk were in essence online versions of the Wipros & Infosys’ of this world, connecting businesses in the more developed Western economies with cheaper labor where it was abundant in the East, mainly in IT services. They emerged to piggy back on the newly minted IT industries in India in the 90s.

That rate arbitrage is narrowing today as the economies of India & China and other emerging markets are growing faster than the West inflating prices (including that of labor) and hence closing the gap.

Secondly, as these economies mature they start developing a middle class and an SMB (Small & Medium Sized Businesses) sector – the backbone in any economy that’s the essential channel for distribution of wealth downward from the gorillas at the top of the food chain – the big corporations and national institutions.

Much like those gorillas, these SMBs turn to the west to adopt some of the best practices that have matured over decades. The ‘freelance consultant’ is to those SMBs what the McKinseys of this world and the Harvard MBA franchise has been to the gorrilas at the top. They hire them to help with the things they are weakest in, from basics  like writing sales and marketing collateral, design & UI, to business management advice social media marketing and so on.

PeoplePerHour.com was founded largely on this premise. From the start we focused on nurturing a freelance workforce in the West which is still over 70% of our total. Most of hiring happens ‘semi-locally’ (i.e. not onsite , the work sill gets done remotely, but in same geographic region) or from companies in the emerging economies  hiring talent in Europe or the US.

As I argued in a previous post I also believe that this may well be the rebirth or the once might export economy of Western nations.  With manufacturing on the decline and unable to compete with lower cost economies in the East, the next wave of exports may well be skills and services that are more in abundance in the West and scarcer in emerging markets, the gap being bridged by the emergence and growth of online labor marketplaces.

  1. Marketplaces 3.0: the rise of End-to-End (e2e) solutions

We are entering what I believe is the third generation of marketplaces. The ‘1.0’ era was all about liquidity (Craiglist). ‘2.0’ was about building trust via reputation systems, social validation (eBay, Airbnb, Etsy) to help in the discovery process as inventory exploded making discovery more challenging. Now, ‘3.0’ is making discovery redundant or unnecessary altogether (you don’t interview your taxi driver on Uber or Lyft and equally you don’t select your tasker on SuperTasker). These are what have been termed e2e solutions, going deeper at both ends – supply & demand – to remove friction in the experience.

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The future of marketplaces

Marketplaces are some of the hardest businesses to build (as our own testimony at PeoplePerHour shows). They are complex beasts with lots of moving parts, the parts need constant tweaking and polishing, and the sum of the parts – when they are put together properly – is greater than the whole (the ‘network effect’). It takes a lot of hard work, analysis, creativity and most of all persistence to get to what’s commonly called ‘critical mass’. But once you do marketplaces are some of the most defensible and beautiful businesses.continue reading »

Are you thinking long-term enough?

Warren Buffet was once asked by Jeff Bezos a long time friend of his: “you are the second richest man in the world and yet you have the simplest investment thesis. How come others didn’t follow this?”  To which Warren Buffets responded: “because no one wants to get rich slowly” 

In a nutshell that’s what’s wrong (or rather what’s not quite right) with a lot of the investment community today, from public markets to private equity investors and unfortunately it trickles down into too many companies. You can’t time-box success. You can’t sprint a marathon. And you can’t measure success with speed but only by the  magnitude (and significance) of the end result.  Building to flip is easy. Building to last is difficult and you cannot take short cuts.continue reading »

Who stole my fruit?

The last decade or so has been paradise for entrepreneurs mainly because as the world shifted more online and on mobile devises there was so much low hanging fruit up for grabs.

Times are now changing. This is not to say that there’s no longer opportunities. There will always be. But now they are shifting to much harder problems to solve.

Much like any new revolution. When industrialization happened, anyone with a conveyor belt a-la Henry Ford’s could churn half-decent products out the door that would sell. Not for very long but they’d sell.

Today to compete in manufacturing you need state of the art equipment, R&D and people. And you probably need to be in China to compete on price.

The same is happening in technology I believe. The name of the game for the past two decades was getting content and inventory online and creating tools to make it discoverable. Starting with the browser, then directories like Yahoo and Craigslist, then search engines like Google, then social networks like Facebook and now Instagram.continue reading »

How the power of the crowd will transform business

One revolution that’s in the making today is that of the crowd.  There’s  lot of literature around it but it hasn’t yet transformed business in the way i think  it inevitably will.

The staffing industry today is a whopping $450 Bn market. Of that only a mere $1Bn has been captured online. That’s 0.2% penetration.

If we compare that with commerce which leads services, there’s somewhere between 10-15% of the total value of commerce transacted online today and that’s projected to increase to over 50% in the next decade.

In relative terms the market of eServices is where eCommerce was in 1996!continue reading »