14 December 2016

Just in case you’ve been living under a non-WIFI-enabled rock, the new “gig economy” refers to workers completing discrete engagements one at a time instead of holding one permanent job with an employer. Most of these engagements are done by freelancers, who are empowered to work when they want, use the tools they want, and choose the jobs they want. Viva la revolucion!

This is not a new concept outside of the corporate world. Take musicians – they have always done “gigs”. They work at a venue for a night, play their heart out, drink a beer, and get paid!

Well, “gigs” are fast becoming a way of life for the rest of us non-musicians, too. In the US alone, almost 54M workers freelance. They decide when to work. And 70% say they wouldn’t stop freelancing to take a traditional job, even at the same pay PLUS benefits!

Being a freelancer rocks! Down with the soulless corporation! Right?

Not so fast. Because the “gig economy” is also secretly powering huge corporate profits! How? By explosive growth in the outsourcing of corporate work. It turns out the unassuming Procurement department is incredibly strategic and a key driver of profits. They are finding just as many advantages in this trend as the freelancers are.

The buy decision is what the gig economy is all about. It's now more pervasive and more attractive for every corporate function.
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I’ve seen this happening first-hand for many years. I’ve spent much of my career creating and popularizing enterprise procurement software. I led Oracle’s procurement applications area for many of its highest-growth years. I was later the founding CEO of Coupa, who, according to Gartner, is far and away the market leader in procurement. Whereas most people see Procurement’s purpose as merely to control spending, it’s real power and value lies in its ability to drive better build vs. buy decisions.

A great example of build vs. buy happened at Mercury Marine back around the turn of the century. They make boats, and they discovered that customers hated their boat seats. So uncomfortable! It turned out they were manufacturing the seats themselves, at great expense. Procurement led the charge to outsource much better seats at a lower cost. The result from this and other “buy” decisions was a less expensive, more comfortable boat. Sales took off, and profits went through the roof. Very, very quickly Mercury Marine was contributing more than 50% of the overall profits at Brunswick, the parent conglomerate company. Brunswick stock nearly doubled.

The “buy” decision is what the “gig economy” is all about. It’s now more pervasive and is becoming more and more attractive for every department and every corporate function. Procurement is able to buy far more goods and services than ever before, and far more effectively. The importance of suppliers and build vs. buy analysis, is being quantitatively proven at scale.

The “gig economy” is teaching all of us what Procurement has always known - that for ‘90%’ of what a company does, buy beats build hands down. Internal teams are horribly inefficient, cost too much, and are often not held accountable for their lack of results. Furthermore, bloated fiefdoms that serve no one often grow rampant within corporations. It’s why startups thrive and are often insanely productive while larger enterprises fail under the weight of their own incompetence.

Do you see the irony? The “gig economy” enables workers to shed their boring and soulless employers. But it also lets corporations shed their inefficient and unaccountable employees.

Companies that want gig-economy efficiency and motivation internally should allow their employees to do the same.
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For “gig economy” workers, there is no corporate laptop or corporate network to contend with. There is no pointless “corporate social network”. Perhaps best of all, there’s no commute and no more useless meetings in oxygen-deprived, fluorescent-lighted conference rooms! But there’s also no corporate org chart to hide in. Work cannot be mailed in.

Here’s a simple but fun example of this: I’m launching a startup called FreeAgent software. Our logo was designed by a visual designer working from Pakistan who I’ve never met. I connected with him and about 20 others designers who competed to win my business on Designcrowd.com. I had a logo I loved in less than a week and for less than $300. And I’d done it before. My prior business, Coupa, did the same thing using Designoutpost.com in early 2006. That logo, from such humble beginnings, now proudly sits atop a building in Silicon Valley. Outsourcing worked incredibly well because the discrete unit of work was clearly defined – a logo expressing certain qualities and emotions, delivered in a standard graphic format. The artist knew what he had to deliver.

It also worked because I didn’t add a bunch of corporate BS by telling the artist, who should know much better than me, how to create the logo. What tools did he use? Adobe Creative Suite? GIMP? On a Mac or a PC or a tablet? I don’t know. Better yet, I didn’t have to care! The artist already selected and mastered tools that worked for him, and that mastery was part of what I’d hired. You don’t hire a gunfighter and then hand him a different gun.

Smart companies are taking this same creative, strategic approach, and are increasingly looking to apply it to insourced work, as well. They are noticing that structuring work into discrete units, often a precursor to outsourcing, can allow that work to be executed far more efficiently inside the company. Supporting functions across a range of corporate areas - IT, Marketing, Sales, R&D, and even HR – are leading a transition to this style of working.

Every function can start to operate this way. Once a structure is created where a specific request is defined and made to a resource that is equipped to fulfill it, work can either be outsourced or insourced as gigs. Employees who have knowledge and history with the company often will be the best choice for some of these gigs. But companies who expect their employees to be as nimble as freelancers need to give employees freelancer-style flexibility in return. Corporate BS, including clunky company-mandated technology, makes such nimbleness impossible. Freelancers usually work where they want, when they want, using their own technology toolkit. Companies that want “gig-economy” efficiency and motivation internally should allow their employees to do the same.

So, this brave new world presents upside for corporations either way. They can outsource discrete projects to freelancers and eliminate overhead, or they can insource jobs more productively with clearly defined and communicated scopes of work. The end result of either path hits the bottomline.

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