Small Businesses Will Inherit the Earth

5/6/09Follow @b_frei

The economy is forcing companies of all sizes to do more with less. The big winners are increasingly the small businesses and specialized sole proprietors. On one hand, they provide the “just in time” component services no longer staffed at the downsized firms, and on the other, they are adept at operating with lean resources and contracting for component services themselves.

This atomization of business is more than a reaction to the current economy. It’s a function of the nature of work today, and of the growing availability of technologies that will soon transform this approach to business-as-usual.

In the U.S. we are increasingly a knowledge worker economy, which lends itself perfectly to digitized deliverables. The ability to provide results electronically (vs. manual labor on the factory floor) greatly benefits small businesses and individual contractors, as geographical location and infrastructure are no longer barriers. More and more opportunities will be available to productive workers to serve countless niches.

The supply side is coming via the fracturing of integrated companies into specialty service firms and contractors. With the pay-for-performance contract, results become the job cost of the contractor. Companies can now hire highly specialized experts, spec out the results they want and pay only when the contractor achieves those results.

As an example, our small company Smartsheet outsources Graphics Production, Press Calendar Monitoring, Case Studies, Website Development, Website QA , Accounting, Video Production, Copy Review, and some Product Testing to different people who work an average of 1 – 4 days per month for our company. In addition, we use crowdsourcing (high volume on-demand outsourced data gathering) for prospect profile information, e-mail addresses, list building, and website keyword surveys, to name a few.

The main barrier to this volume of atomization has traditionally been the “productivity tax” on the coordinator who manages all the players working outside the company. The information overload becomes intense with too many e-mails, spreadsheets, and overhead material with so many separate contributors. The logistics and technological challenges often outweighed the gains. But new online tools are changing all that.

New technologies are making it very easy for delivered work to be traded online. These tools are also departing from the forced project management structure and process that has been the impediment to successful work management technology adoption for the past 20 years. They have been the equivalent of being required to understand how stock and bond trading worked in order to use eTrade.

Collaborative work management tools will be tightly integrated with online work marketplaces (LivePerson, eLance, RentaCoder) as well as crowdsourcing technologies (Amazon Mechanical Turk, Smartsourcing). Think of these solutions as part of a global switchboard that connects real and virtual teams on an as-needed basis in order to accomplish specific work. They will be as universally accessible as Gmail, and available to all. And the important components—the tasks, milestones and deadlines, as well as the team members who own specific responsibilities—will always be clearly visible to whoever owns the end results.

As the overhead costs of internal employees continue to rise from regulated increases in health care, payroll, and other taxes, looking outside the company walls will become more and more appealing. Integrated work collaboration tools enable every business to be a services provider and every business to be a services requestor.

My advice to everyone is to be very good at what you enjoy doing, and be prepared to shop it to the highest bidders around the world. Businesses will pay 3 – 4 times the rate of an internal employee for the same work delivered in a quarter the time with higher quality and less management. In fact, it will become table stakes to stay competitive.

Brent Frei is the co-founder and executive chairman of Bellevue, WA-based Smartsheet.com, an online work management software company. Follow @b_frei

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  • http://www.smartsheet.com Brent Frei

    It was suggested that a real world example might be useful. This post by Maria puts context to the predictions:

    http://www.womengrowbusiness.com/tag/maria-colacurcio/

    There are great efficiencies and great opportunities to improve your earnings if you are organized and embrace the possibilities inherent in the evolving internet-enabled economy.

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  • http://billbennett.co.nz Bill Bennett

    There’s a flip side to this.

    The global recession has massively undercut one of the major advantages corporations have over smaller business — which is superior access to resources and capital.

    This tilts the playing field slightly back towards the smaller organisation.

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