Elephants, Fleas and Other Animals
There is a lot of discussion about the “gig economy” in business circles today, usually focusing on the plight of those at the low end of the pay spectrum: Uber drivers, Deliveroo bikers, Handy cleaners.
But the biggest share of the gig economy is actually professional and white-collar workers, who according to the RSA make up 59% of the 1.1 million gig workers in the UK (compared to 33% in trades and only 19% offering driving and delivery services). These professionals include consultants, lawyers, executive coaches, designers and IT specialists. While some of them are doing gig work as a fill-in between full-time jobs, the majority have deliberately chosen this path. For example, in a recent survey I conducted with Herminia Ibarra and Dena McCallum, we found that 59% of independent consultants saw their freelance status as a deliberate choice, 92% were moderately or very satisfied with their lot, and 50% were making more money than when they worked for a large firm.
It is clear that professional freelancing is a growing and increasingly legitimate career choice. But how new is it really? One of the first management books I ever read was Charles Handy’s Age of Unreason published in 1988, where he described the concept of the “Shamrock Organisation” which had three bodies of workers – a Central Core of high value employees; a group of independent contractors, often professionals; and a staff of temporary workers, often on outsourcing contracts, and typically doing low-end work. Handy foresaw a lot of the changes that are still underway today, with companies having more fluid and virtual labour forces, and with professional people increasingly opting for gig or (in his terms) portfolio work.
In a later book in 2001, Handy used the metaphor of the elephant (the large firm) and the flea (the independent worker). Unlike some authors of the time, he didn’t think large firms were heading for extinction. He saw merits in both models, with the fleas and the elephants coexisting together in some sort of symbiosis. I strongly believe he was right about that.
But he missed something important – the emergence of a whole menagerie of beasts smaller than elephant and larger than fleas. Fuelled by social change and turbo-charged by technology, the range of players in the professional services market is now vast. It includes:
- Virtual firms with a pool of carefully-selected freelancers who they source onto their own projects. Examples are Eden McCallum, a London based strategy consulting firm, The Hoxby Collective in media and design, and Lawyers on Demand.
- Variants of the virtual firm can also be seen. Keystone Law, based in London, has freelancers who operate under a shared brand and with some central services, but with more responsibility for finding their own work. Riverview Law, based in Manchester, uses freelancers to staff its high-volume, fixed-price offerings to large clients.
- Some of these virtual firms are even owned by large players. PeerPoint operates in a comparable way to Eden McCallum, but as a subsidiary of Allen & Overy, a large law firm. Deloitte has piloted a similar model called ForeFront.
- Technology-based firms that link professionals looking for work and clients with projects that need resourcing. Examples are Boston-based Catalant and Tel Aviv-based Workey. Whereas virtual firms like Eden McCallum operate a ‘high-touch’ model based on personal relationships, these technology-based firms use sophisticated algorithms and artificial intelligence to make the match.
- Lifestyle-based services that facilitate connections. For example, Escape the City in New York and London, provides training, work opportunities and community-building events for people looking to get out of “corporate drudgery”. Juggle Jobs in London connects professionals to companies that offer flexible working. WeWork provides co-working space for freelance professionals and entrepreneurs.
So in terms of what’s new about the gig economy for professionals, this is the real story. Demand for professional services is changing, the supply of freelancers is growing, and at the interface between the two we have seen this Cambrian explosion of new platforms and providers, all seeking to make the professional gig economy work more effectively. Some of these new providers will fail, others will pivot to more sustainable business models. But regardless of where things end up, this level of innovation in how work gets sourced and delivered is a healthy development – good for clients and for individual professionals.
So how will the world of professional work look a decade from now? There is a lot of talk of “Disruption:” the incumbents, it is argued, have grown fat and complacent, and are struggling to justify their high cost structure to their clients, or to defend their traditional career model to next-generation talent. This suggests these leaner and more agile virtual firms will grow rapidly, while the established players will be forced into heavy layoffs, or will need to reinvent themselves in a dramatic way.
But as I have already made clear, this argument doesn’t quite add up. The analogies to doomed incumbents like Kodak and Blockbuster are flawed. First of all, services by definition have a human component, so while they can be streamlined they cannot be entirely digitised. Second, the world of professional service work is incredibly diverse: some services are bought on price, some are bought for legal necessity, some are based on personal relationships.
So there are certainly changes afoot. The big established firms are, rightly, looking for ways of automating, simplifying, and improving their offerings. But rumours of their death are greatly exaggerated. They will continue to provide integrated solutions to clients seeking security and risk-minimisation. In the meantime, the menagerie of new providers described above is filling a void at the sophisticated and customised end of the professional services market, while the opportunities for independent contractors are more vibrant than ever before.
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Julian Birkinshaw is a British academic. He is Professor of Strategy and Entrepreneurship at the London Business School, where he is the Academic Director of the Deloitte Institute of Innovation and Entrepreneurship.