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What the Future of Work Means For Your Business: A New Model of Labor

The Future of Work is fueling this creative destruction and transforming business models. Why does is matter to you and how can you effectively position your organization?

Beyond delivering hilarious commercials, GE has been hard at work on ‘digital transformation’ over the past 5 years.

In 2014, they produced more than $1 billion in revenue from productivity solutions (highlighting the success of their “industrial internet” software platform Predix). In 2015, they announced the creation of a new business unit — GE Digital — and in 2016 reports came out that GE Digital had more than 1,500 employees in their San Ramon, California office.

GE-Commercial

According to GE’s chairman Jeff Immelt: “Every industrial company is a software and analytics company” — and by all accounts, Immelt was leading this trend.

That is until he was fired in October of 2017.

For those that understand the future of work, GE’s digital transformation fell for the classic shortcoming Albert Einstein describes as:

“We cannot solve our problems with the same thinking we used when we created them”

They wanted to create the company of the future. They knew the way to do this was through digital transformation. Yet they followed the models we’ve been using since the first industrial revolution.

Unfortunately, this dilemma isn’t unique to GE.

Due to what Ray Kurzweil calls the Law of Accelerating Returns — the exponential rate of change in a wide array of complementary evolutionary systems (i.e. technology) — every business is now facing the wrath of accelerated creative destruction. As strategy and innovation leader Innosight puts it, “about half of S&P 500 companies will be replaced over the next ten years”. They go on to say, “Imagine a world in which the average company lasted just 12 years on the S&P 500. That’s the reality we could be living in by 2027”.

What does this mean?

For incumbents, it means the shattering of their foundation. But for those that can identify, create, and capture value in environments of extreme uncertainty — opportunities are endless.

In the following article we will discuss how the Future of Work is fueling this creative destruction and transforming business models. We’ll do this by answering three questions:

  • What is the Future of Work?
  • Why does it matter to your business model?
  • How can you position your organization?

What is the Future of Work?

Next to Artificial Intelligence or Blockchain, the term “Future of Work” is a vague and overused buzz word.

According to McKinsey’s Technology, jobs, and the future of work Report:

“The world of work is in a state of flux, which is causing considerable anxiety — and with good reason. Automation, digital platforms, and other innovations are changing the fundamental nature of work. Understanding these shifts can help policy makers, business leaders, and workers move forward.”

According to Accenture’s Harnessing Revolution Report:

“The very concept of work is being redefined as different generations enter and exit the workforce amidst a rapidly changing technological landscape. The new leadership imperative is clear: Create the future workforce. Now.”

According to Deloitte’s Report:

“Driven by the acceleration of connectivity and cognitive technology, the nature of work is changing. As AI systems, robotics, and cognitive tools grow in sophistication, almost every job is being reinvented, creating what many call the “augmented workforce.” As this trend gathers speed, organizations must reconsider how they design jobs, organize work, and plan for future growth.”

Some of the most comprehensive and revealing research on the Future of Work comes from a report by MIT Technology Review that compiled every study they could find on the impact of technology on job destruction and creation:

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While the research provides no one conclusive finding, what it shows is a vastly changing landscape companies will be responsible for navigating in the near future.

What does this mean for businesses today? They must embrace a new model of labor.

Why Does the Future of Work Matter to Your Business Model?

The old paradigm of business modeling was the systematic and sequential organization of primary and secondary activities, generally associated with Michael Porter’s Value Chain. The objective was efficiency, and two common levers were vertical integration and top-down management.

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Due to technology & the future of work, this new paradigm is one of applying a networked ecosystem through the integration of information systems and technology, shifting the competitive drivers away from efficiency and towards product leadership through innovation.

“Business models have transitioned away from systematic & sequential organization to a networked ecosystem of information systems & technology.”

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Digital transformation from value chain to value network possible digital transformation scenario for the financial industry

Why is this important?

For GE, following the model of Porter’s value chain meant solving a new problem with the same solution. According to Alex Moazed — founder of Applico — this same solution was represented by GE attempting to drive innovation within the organization. According to Moazed:

“Even more challenging, true digital transformation will almost always fail if executed from within the organization. Why? Because the change is so disruptive that the existing organization chokes it off. For GE Digital to have succeeded, it needed to be separate from GE.”

Learning from GE, how can your organization avoid following the old paradigm and instead apply a networked approach to this Future of Work? By understanding what’s driving this: a New Model of Labor & Automation.

“Driving value through this new paradigm requires understanding and wrapping your business model around a New Model of Labor & Automation

A New Model of Labor

Is it realistic to believe that by 2020, 43% of the US workforce will be in the form of freelance labor?

On the other end of the spectrum — is it realistic to believe that labor will stay in its current ownership W-2 format?

While both hold merit and skepticism, the underpinning objectivity points to a problem that first reared its head in the 1980s. While productivity shot to record highs, wages stayed constant due to a problem McAfee and Brynjolfsson call the “decoupling of wages and productivity”. As we see in the chart below — while the grey line of productivity shot up, the blue line of median family income stayed constant.

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Yet this decoupling was only a preview for what the 2008 financial crisis had in store. While prior wages were stagnant, post ‘08 these wages were only created in the form of part-time labor.

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Then in 2012 came the birth of talent-management platforms — a labor model made possible by the convergence of the internet & cloud computing. Through these platforms, part-time workers could be matched with part-time gigs in a way that shifted “freelance” work from a cost-cutting decision to a smarter alternative for both sides. And as we see in the chart below, since their inception they’ve driven a “Gig Economy” that’s seen impressive year over year growth.

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What these charts leave out is a separate force arguably providing the anchor for this transformation.

According to an Accenture report, as talent and skills gaps grow, as many as 40% of companies experience shortages that drastically impact their ability to adapt and innovate. The solution? Freelancers. According to the same report, 79% of executives agree that the future of work will be based on projects, not roles. Clearly executives are open to transitioning their workforce towards freelancer inclusion. What will happen next is the connecting of this willingness with execution through the Talent-Management Platforms fueling the transition to a Gig Economy.

“The Future of Work will see the Gig-Economy as an equal, if not better, model of labor over traditional full time employment”

Building Around a New Model of Labor

It’s no secret that there’s a shortage of development talent. According to a report from the Tencent Research Institute, there are only 300,000 AI engineers worldwide, while one independent AI lab the publication this number dwindles to 10,000 when needing individuals to spearhead new AI projects. While these specialists with just a few years of experience yield salaries from $300,000- 500,000, the majority of companies are locked out of this talent. Further, according to Christopher Null, acquiring talent doesn’t mean they’ll stay — citing research from BambooHR that roughly one-third of new hires quit their jobs after about six months.

What’s happening is a fundamental shift in the nature of work. Harvard Economist Lawrence Katz calls this the future of self-sufficient artisans. Mark Bregman, CTO of NetApp describes this by saying, “In contrast to the past–from the late industrial era into the early computing era–today’s most sought-after talent operates like Renaissance artisans”.

“The nature of labor will transition from ownership engagements to self-sufficient artisans.”

If you remember from above, this “Renaissance” is driven by the Gig Economy — a model that 43% of the US workforce will be operating in by 2020. In this landscape, the matching and managing of talent will transition to talent management platforms just as retail transitioned from brick & mortar to Amazon. Just as the most attractive product evolved from the store window to crowdsourced ratings & reviews, so too will the modern-day DaVinci transition to looking like a product on Amazon.

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Matthew R Mottola, Automation & the Future of Work Presentation

What we’re seeing is called disintermediation — the removal of intermediaries in a supply chain or transaction — or what once needed humans can be replaced by algorithms. It is a force ubiquitous throughout all industries, companies, and even roles and tasks, yet the effects of it have only just begun. Wave 1 of disintermediation came through external disruption of entire industries — think Trip Advisor & Amazon. In the near future, we’ll see the same disruption, only in internal departments as “network” business models transition to relying on talent-management platforms for matching and managing talent. In wave 3, we’ll see not only departments, but individuals transitioning to these platforms as they evolve from matching and managing to augmentation. As a report by Forbes on Gigster’s role in creating this future puts it:

“Certain tasks, like invoicing, can be time-consuming and can limit the amount of work one freelancer can handle. Soon, that could change, given the increase in platforms that use artificial intelligence tools designed to help remove the more mundane tasks and free up workers for more complex projects. Dickey explains that at Gigster, they use automation to augment their freelancers — “making them ‘superhuman’.”

“Similar to how retail transitioned from brick and mortar to Amazon, labor will transition from ownership to talent-management platforms”

In order to embrace this, companies should adopt an access over ownership labor model. Accenture calls this a liquid workforce, and in their report tell us:

“To achieve their ambitious goals, leaders are refocusing on an often overlooked factor: the workforce. They are looking at technology as not just a disrupter, but also an enabler to transform their people, projects, and entire organizations into a highly adaptable and change-ready enterprise. In short, business leaders are realizing their new liquid workforce can become their new competitive advantage.”

Companies can unlock this liquid workforce by integrating talent-management platforms into their business model network. They can also reap the benefits of:

  • Access to elite talent
  • The ability to keep up with current technology
  • The ability to unlock on-demand innovation versus in accordance with “quarterly forecasts”
  • Insights generated from outside of the building — a central premise to innovation (Lean/Agile calls this Genchi Genbutsu)

Summary

We can’t solve tomorrow’s problems with today’s solutions… even if you have awesome commercials.

But where do we start?

We start by asking the question: what is it that one thing we can do better than anyone else? Once we arrive at this core competency, we then ask how can we wrap networked value around it?

Rather than ownership of a severe supply shortage (digital talent), we need to tap into an access over ownership model enabled through talent management platforms. Companies like Gigster are trailblazing a new model of work that enabled us networked capabilities companies five years could only dream of.

The option is yours — create tomorrow with solutions of today — or lead your digital future through the networked options of tomorrow?

The Gigster Blog is the official publisher of Gigster company news and updates. You can find insights into the company culture as well as pieces about design, engineering, and startups.

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