Any with all and all with any (to paraphrase a famous motto) – this is the way a big chunk of professional work will be done in the future.
In plain English: any organization big or small will have access to all professionals worldwide and can work with those that are qualified for what needs to get done; all professionals will have access to any client in need of the expertise that the professional can bring to bear.
It will be the ultimate democratization of professional work: privileged access of the past will give way to universal access in the future – both to knowledge and opportunities. The power of large organizations hording knowledge inhouse and charging premiums for selling portions of it will decline; the power of individuals (and small teams) to monetize specialized knowledge will increase.
From the perspective of clients, all electronically accessible professionals worldwide will become one giant “potential virtual team”, the resources of which they can use. From the perspective of professionals, all (open) organizations will become one giant “potential virtual client”, the demand of which they can leverage.
For professional work, this is the way the future “gig-economy” will look like. It will grow beyond being a marginal supplement of internal resources, and it will become the predominant way of working, especially for solving knowledge-focused issues. For lower-complexity tasks, the gig-economy is already quite substantial. Several platforms offer results for clearly defined and simple tasks. Telephone access to external experts has become an established, commodity-like industry, as have recruiting and staff augmentation.
The same development is in store for professional solutions of higher complexity, such as solving strategic issues, opening up new markets, developing new products, improving operations, finding new ways to innovate, identifying acquisition targets and potential buyers, and many others.
Large, global teams, the members of which will typically not belong to the requesting organization, will collaborate online to solve complex issues. The future knowledge enterprise will become smaller and larger at the same time, working with a smaller number of permanent staff but collaborating with a much larger number of external professionals, teams and organizations.
Declining collaboration cost is the enabler.
Technology infrastructure has brought online access to the global professional community; high-quality video communication at zero marginal cost, combined with a multitude of collaboration tools, is facilitating online collaboration on internet-based platforms. As a result, the transaction costs of collaboration have dramatically declined, and working in global virtual teams has become routine in many organizations.
Utilization pressure is the driver. It is affecting not only how organizations are structuring their internal work; more importantly, utilization pressure will cause organizations to completely rethink which portion of professional work should be done inhouse and which part should be outsourced to the global professional community. Here is why.
Managers of professional staff use utilization – typically defined as billable hours divided by available hours – as a key metric for financial success. In management consulting, 70% is typically viewed as an acceptable outcome, with the remaining 30% booked for leave, training, and “beach time” (meaning not assigned to project work). For the management of inhouse professional staff in companies, these numbers may look somewhat different (we believe, they are lower); the underlying economic rationale is the same.
But looking only at “billable” utilization leaves out one factor that is even more important: the “effective” utilization – the time the professional is spending productively on a task compared to the hours billed. What means “time productively spent”? We define effective utilization as the number of hours needed by a (hypothetical) professional fully specialized for a given task divided by the number of hours the assigned professional actually spends (bills or records on internal time sheets).
For example, suppose the client’s issue is understanding the procurement process of an Asian buyer of certain industrial goods. The best person for the task would be a local professional that is intimately familiar with the procurement process of the potential buyer and can advise the client in a compliant way about it, probably being able to do so within just a few hours. The specialist’s utilization would be 100% during the time worked. In contrast, a person, even if being a procurement specialist but not familiar with the local procurement processes, probably would need much more time to get familiar with the local customs and advise the client accordingly. That person’s effective utilization would thus be a small fraction compared to that of the local specialist.
It is the precision of the match between skill requirements of a given task and skill deployment for that task that determines how much time a professional need getting up to speed to solve a given issue. If the match is perfect, meaning if the professional in question has worked on exactly this kind of issue before and has the solution to it at hand, the problem is being solved almost immediately and the effective utilization of that professional for that issue will be the 100% of the 70% billable utilization that characterizes a good utilization level overall. In contrast, if the skills of the assigned professional do not fully match task requirements, substantial initial time is required for the professional to learn the context, understand the issue and what is needed, and to come up with a suitable solution.
In closed organizations, perfect skill matches may be hard to obtain. In today’s competitive environment, typical issues of high complexity require a broad spectrum of granular knowledge and specific front-line industry experience (as opposed to general consulting experience in a particular industry), which even large professional organizations may not have inhouse. This will often result in an internal conflict between billable utilization and effective utilization: more pressure to push up the former will tend to push down the latter.
The economic impact of low effective utilization rates can be substantial. In our experience as former members of large consulting firms, effective utilization will typically less than half of the 70% formal utilization, translating into an overall utilization of just 35%. The low overall utilization rate, driven by low effective utilization, is one of the main factors of pushing up the cost of professional services (or the internal cost of clients, when using their own staff) if compared to working in an open organizational environment with virtual teams of external experts.
The gig-economy offers a dramatic utilization advantage: by definition, both effective and formal utilization add up to 100%, assuming expert teams are properly recruited, vetted, and managed.
Professionals are paid transparent rates exactly for what they do. Any time or effort not spend on the assigned tasks will not count towards compensation. Thus, while the utilization from an individual’s perspective is likely to be less than 100%, the utilization from the perspective the requesting organization (i.e. the client) itself will always be 100%.
As technology is enabling universal access to the “global brain”, competitive pressure will deflate institutional premiums and enforce a new level of discipline on utilization management. Like elsewhere, the result will be an expansion of the “shared economy”, and this time it is not fixed assets but brain power that is being shared. The winners will be those organizations that leverage the global brain and find the best balance between capabilities kept inhouse and resources used from the outside.
And – the winners will be the millions of highly capable individuals anywhere in the world that now will get access to exciting issues, institutions, and the financial rewards that correspond to their capabilities.
Schedule time with us to learn more about how you and your organization can navigate through things like knowledge-economics and become more successful through intelligent insights.