Everything you need to know about the changing world of work, according to The Economist

The world of work is undergoing dramatic changes before our eyes. While geographical and industry-specific particularities might exist, the macro shift in today’s open talent economy is global and applies to almost every industry sector. It requires employers and employees to come to terms with a new environment, in which flexibility and adaptability have priority over job security and long-term (if not lifelong) employment, structured environments, and standardized roles and responsibilities.

The shift is principally driven by a few trends that are fundamentally changing the structure of talent and work: technological innovation, demographic changes and globalization. Read more about seven trends that are driving the open talent economy here.

In June, The Economist invited government officials, C-Suite decision-makers and industry leaders to debate and identify solutions to the changing macroeconomic climate, the automation of jobs, the reinvention of the company and how this will affect the future of work, especially in Europe.

a-connect was part of these discussions – here are our key takeaways.

Technology is (so far) creating more jobs for society than it is taking away

AI, robotics and automation are supposedly threatening the need for human labor. But, according to Tom Standage, deputy editor and digital strategist at The Economist, technology is actually creating jobs for society, rather than taking them away. But in the new world of work, employees need to take more responsibility for keeping their skills relevant and up to date, so that they stay relevant for the employment market. For example, the advent of 3D printing means that we need more designers, and fewer people with building skills.

Wages drive productivity, not the other way round 

We have seen a collapse in productivity in many Western economies, despite technological improvements. Sandra Polaski, former deputy director general for policy at the International Labour Organization, said that this is due to a decrease in technological innovation and personnel training. A key driver of this trend is the decline in worker motivation, sparked by low salaries and a lack of job security, trust and respect. Besides increased private investment (in R&D and technology) and public investment (in infrastructure, health and education), as well as improved organizations (in terms of structure and training), a rise in wages will encourage higher levels of productivity – not the other way round.

Europe needs migrants, but it also needs more training and reskilling

With Europe’s aging population and an increase in skills gaps, the European labor market needs migrants, according to Irene Wennemo, state secretary of the Ministry of Employment in Sweden, and Stefano Scarpetta, director for employment, labor and social affairs at the OECD.  But identifying the skills gaps and reskilling employees is more important than the sheer size of the workforce. The Swedish Government, for example, collaborates with private companies to examine and fill skills gaps. Yet training is still biased against those who need it most, with 70–80 per cent of highly skilled workers receiving training each year, compared to only 20 per cent of low-skilled workers.

Don’t get your great talent stuck in a hierarchical system

Organizational structures and hierarchies do not attract talent. In a panel discussion about how to respond to the changing nature of work, panelists were in agreement that companies need to be purposeful. Creating an environment to which employees can bring their ‘whole self’ to work is essential for producing engaged and motivated employees. Panelists also agreed with recent research from the Google Project Aristotle, which said that psychological safety is key to having the best-performing teams. Diane Gherson, chief human resources officer and senior vice president at IBM, gave the example of how IBM remodeled the most-hated performance management program by involving 18,000 staff in the process.

You can’t digitize a ‘gut feeling’

Technology has had a significant impact on recruiting. Digitizing the sourcing and matchmaking processes has changed the way recruiters work and has opened up new possibilities for jobseekers. But according to Jonas Prising, chairman and chief executive officer of ManpowerGroup, recruiting will never be fully automated. It will never be able to capture the company culture and evaluate how a candidate will fit into it – an employer’s gut feeling about a candidate will always be the differentiator.

From ‘one size fits all’ to ‘one size fits one’ – or, how to break HR

The role of HR is undisputedly changing in this new world of work. Francine Katsoudas, chief people officer at Cisco, had to ‘break HR’ to move from a ‘one size fits all’ to a ‘one size fits one’ approach, through a 25-hour ‘breakathon’. The panel agreed that organizations need to enable decisions on the basis of knowledge rather than hierarchy, and that the role of an organization’s culture is to let talent flow to where it can have the greatest impact. The art is to find a balance between having control, stifling innovation and total chaos.

Top-down change programs fail – the new approach is open-source change

Change is hard, but it is also the ‘new normal’. 78% of organizations have gone through a cultural change program in the past five years, according to Clare Moncrieff, human resources principal executive advisor at CEB. With 50 per cent of change programs failing, and 7 out of 10 companies using a top-down approach to change management, CEB recommends using an open-source change approach, which is more about talking than telling. With implementation time decreasing by one third, employee engagement increasing by 38% and intent to stay by 46%, the open-source approach could help change programs have real impact.

Didn’t you forget something? 

Throughout the event, participants discussed how, in the new world of work, the link between jobs and work is breaking down. It was rightfully stated that the focus should shift from job security to employee security. This is part of a bigger trend: a paradigm shift in the way we define work and the workforce. We are all familiar with the classic employment model – companies hire full-time and long-term employees who work 40-hour weeks in a nine-to-five environment. The past several decades have seen a move away from individuals having lifelong careers at single companies, towards the open talent economy, where individuals and institutions make less of a long-term commitment.

We believe it will be crucial for companies to start thinking about how they access and engage with a talent pool that is no longer reachable through traditional recruitment channels, where employers find employees by using specific job descriptions, executive recruiting, and by spending time and effort weeding through an applicant pool to find the ‘perfect’ employee. This model does not translate easily to the open talent economic model.

Since its inception, a-connect has been helping companies to see and feel the winds of change in the world of work, and enabling leading businesses to discover new ways of connecting with exceptional people, maintaining the core belief that access to talent is more important than its ownership.

If you are interested in discovering how we can help you tackle the challenges in the future of work, get in touch.

Challenges and opportunities of the open talent economy

The open talent economy is altering the look and feel of companies across the globe. As the popularity of the on-demand workforce increases – driven by changing attitudes to work and enabled by technology – we are seeing notable changes to company cultures, office spaces, department structures, managerial styles and established job roles across the market. Whether you view these developments as positives or negatives is largely down to your needs and capabilities as an organization or worker. For companies and individuals that are open to change and innovation, there are many opportunities to embrace within the open talent economy. If you’re tied to the old ways of doing things, you might feel out of your comfort zone. To keep up with the pace of change, you need to be open to talking about the opportunities and challenges you might face. Here are just some of them.

Businesses are becoming increasingly decentralized

One of the most widespread implications of the open talent economy is the decentralization of businesses. With the rise of internet connectivity, smart technology and cloud storage, individuals are able to work remotely. This means that the central office hub is becoming less important to how businesses run. Freelancers can easily work from home, and even access the office system. You might see this as a disadvantage as you’re not able to have direct, face-to-face contact with your employees. Alternatively, the cost savings are high, and freelancers are able to operate as efficiently as if they were in the office. According to the Harvard Business Review, more than 1.3 billion people will work virtually in a few years.

With each generation comes a change in attitudes towards the workplace. The open talent economy has prompted a shift that sees new talent categorized as a valuable investment, rather than merely a number on the payroll. As an organization, you have the opportunity to access an endless pool of highly skilled experts, at the exact time you need them. A more mutual relationship is coming to exist between employers and workers, levelling out the playing field. Management will become focused on coordinating and collaborating with teams of independent professionals. Working in partnership, businesses and independent professionals will be able to work towards achieving business goals more efficiently. If you like the idea of rigid hierarchies, you might see this as a threat.

According to Seth Mattison, an expert on workforce trends and generational dynamics, getting out of this inflexible mindset is the biggest challenge facing employers as the employment market adapts. Many companies are bound by “unwritten rules” from years of doing business in a certain way. There is an expectation, for example, that employees start at the bottom and work their way up. But with the open talent economy, independent professionals are able to enter the workplace based on their skills and expertise, and craft new opportunities for themselves along the way. This enables employers to make use of the talent available at that moment, rather than be bound by protocol. At the same time, a challenge will be learning how to manage this complex network of workers effectively.

Companies can craft an instant workforce

One of the biggest advantages of the open talent economy is that it allows employers to fill skills gaps immediately, from a global pool of first-rate talent. It is arguably better to have access to an endless supply of talent than to have someone tied into a contract who can’t do the exact job you need them to at that precise moment. The nature of freelance work means that the professionals are free to start immediately, unlike full-time employees that often have to work a notice period. Some companies might fear that on-demand workers might not be incentivized to ‘go the extra mile’ or feel the same sense of loyalty for their employer, but by carefully curating your talent pool, you can be sure that the independent professionals you employ are fully motivated.

Independent professionals are in charge of their own careers

Freelancing is an attractive prospect to many professionals, and not just for low-level or alternative ‘gig’ jobs: white-collar workers are increasingly turning to freelance work for the autonomy and flexibility it affords them. Job security and long-term financial opportunities are no longer always guaranteed in full-time positions, so many professionals use freelance work for financial gains, increased flexibility, freedom over the work they do, and to open up opportunities within their areas of expertise. There are different types of freelancer – including independent contractors, moonlighters, diversified workers, temporary workers and freelance business owners – spanning a range of disciplines, from big data and trend analysis to project management and product development.

Among the many benefits that freelancers enjoy (the freedom to work from home, a better work–life balance, and the possibility of fewer travel costs, etc.), they also have an increased amount of responsibility over their own pension and financial security. Companies that employ freelancers do not have to pay any of the worker’s Social Security, meaning the freelancer is responsible for the total amount. Some people argue that employers could use this to exploit freelancers – for example, if a company lays off employees only to rehire them in the same roles on a contractor basis (i.e. without the benefits) – but this is something that needs to be looked at more closely in the context of individual companies. In general, most freelancers are well paid and are attracted to the financial gains possible by working on demand.

Is the open talent economy right for your company?

As with any development or trend in the market, there are pros and cons to the open talent economy. Yes, it will reshape your entire business and the way in which you work, but if implemented with an open mind and a solid strategy, it will also save you time, money, and resources. Just remember, you need to have everyone on board if it’s going to work. Don’t just dive in: get your teams, departments and directors together, and start talking about what an on-demand workforce could mean for your company, and how mindsets will need to change to accommodate it.

Here at a-connect, we can help businesses anticipate change, and ensure they have the right skills on hand to embrace challenges. Contact us today to find out more.

How companies are reshaping recruitment through the open talent economy

Hiring new talent used to be a formulaic routine, and an expensive one at that. You might go directly to a recruitment consultancy with a job specification, or perhaps advertise independently, before your HR department sifts through countless applications and calls in candidates to interview. Your new starter would probably need to work a notice period, and then would likely need training once they started. After a lengthy, costly and inflexible process, you’d have an employee who you’d see every day, from nine until five, for years.

However, technology has now enabled significant developments in the way talent is hired and managed, helping employers keep up with the rapid speed of change and innovation in the employment sector. Employers can now connect with independent professionals instantly, assign them to the job that needs doing, and get them started almost immediately. The open talent economy allows employers and workers to operate on an on-demand basis, whether that’s remotely or in the office. This is a necessity for many companies, as, with the volatility of demand and ever-faster innovation cycles, it’s impossible to predict what skills you might need in the future.

What does the on-demand workplace look like?

Traditionally, there were two main types of employees: full time and part time. Though there is still plenty of room for these two within the on-demand workforce, you’re increasingly likely to now see freelancers, contractors and open-source talent working alongside them. Here are different forms of talent that make up the on-demand workplace:

  • Balance-sheet talent: This relates to full-time and part-time employees for whom you carry all associated costs. Fixed and on-demand workforces can work harmoniously together in modern workplaces, with management focusing on coordination rather than control. Even full-time positions are becoming increasingly destabilized, with flexible working hours, work-from-home days and remote working now widely accepted.
  • Borrowed talent: It might seem counterintuitive, but borrowing and lending talent (contracted through another organization) is becoming increasingly commonplace. This allows you to utilize the experience of a professional within your company’s value chain, without the hassle and expense of hiring from scratch.
  • Freelancers: This relates to self-employed staff with a specific skill who can accept or decline work as they see fit, enabling them to develop their own working hours and rates. Freelancers pay their own taxes and Social Security fees, and typically work on an ad hoc basis.
  • Open-source talent: This refers to online global communities of individuals who provide services for free. They are open to anyone who wants to participate in them.

Companies are using the open talent economy to varying degrees. Some organizations might have a pool of regular freelancers who they go to at the same times each year – the director of a quarterly magazine, for example, might bring in a freelance designer every three months to design the publication. Other companies, including Uber and Airbnb, rely solely on on-demand workforces. And some might simply utilize the open talent economy whenever an issue crops up within the company that requires fast, expert attention. Thanks to the rise of smart technology, the hiring process is quicker and more efficient than ever.

A mutual relationship between employers and independent professionals

The open talent economy redefines established notions of recruitment. Rather than the employer holding all the cards, there is now a mutual need for employers and independent professionals to seek each other out – in short, the on-demand workforce has a degree of autonomy. This is because these professionals are experts in their fields, or consultants, providing the exact skills that employers need at that moment. This ‘gig economy’ is not just for the working classes: according to the Wall Street Journal, the demographic most influenced by freelancing is the professional and highly educated white-collar worker, attracted by the flexibility, opportunity and financial gains of on-demand work.

How can employers navigate the open talent economy?

The root of success for the open talent economy is undoubtedly technology. If it wasn’t for smartphones and other internet-enabled devices, we wouldn’t be able to connect with on-demand talent instantly, personally and accurately. But before you think about investing in technology, you need to work on your company’s collective mindset. The open talent economy will change the way you do business: your workforce will become more collaborative, and your hierarchies destabilized. You might encounter a different team every month, depending on how you work. Just remember: being able to access world-class talent is far more beneficial than owning it. If your company can get past this mental hurdle, and think about how you can integrate independent professionals into your team, you’ll reap the rewards.

Utilising the open talent economy might also require you to reshape traditional ways of managing talent. For a start, your HR and procurement departments will need to converse, if not integrate, over matters involving the workforce. The budget for full-time employees is typically managed by the HR department, with procurement taking charge of the consulting budget, but nowadays the business needs to be considered as a whole. If you’re not convinced about the cost-effectiveness of the on-demand workforce, just think beyond salaries: if you consider all the costs associated with your employees, such as recruitment, training, social security and idle time, the open talent economy can bring you multiple cost savings.

Lastly, you need to understand your candidates and how they promote their services. A PCG report found that recruitment agencies are popular with freelancers and business leaders, with 62% and 58% respectively choosing this path. But just 2% of businesses search for freelancers via LinkedIn, despite the fact that one in five freelancers promotes their services on the platform. This shows that there is a discrepancy in where businesses look for the right skills, and where freelancers showcase themselves. With platforms like a-connect curating your talent pool, you’ll always have access to the professionals you require.

Here at a-connect, our independent professionals are highly experienced and have track records in transforming businesses through their areas of expertise. Contact us today to find out how your company could make the most of the open talent economy.

What’s driving the demand for the open talent economy?

The open talent economy has emerged as a reaction to a variety of shifts and fundamental changes in the professional market. The on-demand workforce is not simply a trend: it represents the demands and mind sets of the changing world of work, and the increasing connectivity of all areas of modern businesses – from recruitment and training to customer service and asset management. The ‘drivers’ of the open talent economy can be categorized into four main groups: supply drivers, demand drivers, demographic trends and structural changes. As these factors continue to evolve, the open talent economy will develop with it, providing new ways to meet the needs of employers and workers.

Supply drivers

In order for the open talent economy to succeed, it relies upon a strong, reliable and infinite supply of independent professionals that are aligned with the values that the new work economy represents. The main supply driver of the on-demand workforce has been the exponential increase in the number of professionals who are choosing to go freelance. According to Upwork (a global freelancing platform) and the non-profit organization Freelancers Union, 54 million working Americans (34 per cent of the US workforce) were freelancing in 2015. That’s an increase of 700,000 from the year before. Why? Because job security and long-term financial gains are no longer guaranteed in the traditional workplace, and freelancing allows workers to fill in financial gaps and create new career opportunities.

This increase has been driven by changing attitudes towards the workplace, and towards careers in general. The inflexible nine-to-five routine, where workers would stay with a company for years and work their way up from the bottom, is no longer the only way of achieving professional success. Workers are looking for flexibility and fluidity, and are likely to work with multiple employers, in many locations and across different sectors throughout their lifetimes. This isn’t just the case for low-level work. According to a study by management professor Peter Cappelli, less than one third of the top executives of the FTSE 100 in 2011 started their careers with their current employers, down from 45 per cent in 2001 and more than 50 per cent in 1980.

We are starting to see the impact of a conceptual shift, driven by a new generation of workers that view the workplace as more of a level playing field than a strict hierarchy – and many companies are responding to this, focusing on developing inclusive and sociable company cultures. With an influx of young talent, for most of whom on-demand and peer-to-peer services are second nature, companies are becoming increasingly open to innovation. As well as accepting the idea of outsourcing services and using offshore resources, many organizations are realizing the benefits of employing external talent with highly relevant skills, cutting-edge experience and exciting new perspectives from a variety of industry backgrounds, rather than just relying on candidates that have experience within a particular industry. This will only proliferate as more and more businesses demonstrate the success of the model.

Demand drivers

Corporate pressure is mounting in many companies to refine the workforce and reduce budgets, while boosting performance. As consulting budgets are scrutinized, the open talent economy allows procurement departments to be more efficient in external spending, achieving business aims. The need for on-demand specialist skills is difficult to satisfy in the traditional job market, but through the open talent economy, an employer can quickly and cost-effectively find an independent professional who is available for the exact amount of time needed for the work, and is open to working in whatever way is most suitable.

The volatility of demand and the rapid rate of innovation mean that it’s almost impossible for businesses to predict what skills they might need to invest in for the future. By developing an on-demand and fluid talent pool that transcends borders, your company will have instant access to the most relevant skills and expertise at all times, which will evolve organically to include skills that you might not even have thought of yet.

Demographic drivers

There are two main demographic drivers of the open talent economy: the influx of millennial and Generation Y workers, and the retirement of ‘baby boomers’. The younger generation of workers brings a new approach to work – which places emphasis on work–life balance, flexibility in the workplace, greater levels of autonomy and a more fluid career path – and, as members of the older generation retire, companies are increasingly influenced by the younger culture. Some companies with aging workforces are noticing a shortage of relevant skills (big data and trend analysis, for example), and on-demand talent can help them fill in these gaps. Many ex-consultants are also taking up in-house positions within companies to help them redefine their operations, which has helped many businesses embrace the opportunities of outsourcing and consulting more comfortably.

Structural changes

There are multiple structural developments enabling the open talent economy, and technology is arguably the most important. The rise in internet and connectivity has enabled workforces to decentralize their operations. Companies now have access to videoconferencing software, telepresence and cloud technology, which means that, for many positions, it’s not necessary to be in the office all the time. With computers able to operate faster and store an infinite amount of information in cloud-based software, it’s now possible to collaborate with employees in real time and share official documents securely and instantly, from anywhere in the world.

Working remotely is not only possible, but also extremely effective, and employers can hire on-demand freelancers without having to worry about having the resources and office space to accommodate them. On top of this, freelancers and independent professionals now have more opportunities to tap into online resources and internet communities that can help them develop their skills and careers further. As technology grows more intelligent and powerful, networking platforms will get smarter and more efficient, enabling employers and independent professionals to be matched accurately, quickly and reliably, and work together seamlessly.

Here at a-connect, we can curate your on-demand talent pool to ensure you always have access to the exact skills and expertise you need. From life sciences and agribusiness to financial services and private equity, we have access to independent professionals from a wide range of industries. Contact us today to find out more.

Why companies need to adapt to the sharing economy, not ignore it

There are two ways to make your mark in the business world: innovate, or embrace innovation. For companies like Uber, Airbnb, Kickstarter and Lending Club, revolutionizing well-established industries was at the center of the business model, allowing individuals to book taxis, find accommodation and lend money in a way that’s never been seen before. But you don’t have to develop a new initiative to embrace the sharing economy. Companies simply need to be open to the opportunities of sharing-related technology, and think about how it could fit within their business in order to help them streamline their processes, reduce spending and smarten operations.

In fact, it’s arguable that companies cannot afford to ignore the impact of the sharing economy. Despite the pressures it faces, it is not going away. Why would it? Once a customer or organization has experienced the ease and cost-effectiveness of a sharing economy service, they’re not going to return to the costly and clunky option. As long as there is consumer demand for cheaper, easier and more personalized services, the sharing economy will be around to destabilize traditional models.

From free exchange networks to profitable businesses

The sharing economy, or ‘shareconomy’ as it is colloquially known, is not a new phenomenon. People have been sharing items, services, and even talent within communities for years. The invention of The Freecycle Network in 2003 provided a platform from which people could connect with other traders, and the launch of CouchSurfing, also in 2003, facilitated the process of finding people to stay with. While these networks were based on free, peer-to-peer exchanges, companies like Lending Club, Kickstarter, SnapGoods, Turo and Airbnb have transformed these innovative ideas into viable and profitable business initiatives.

Building consumer confidence

A significant barrier in the growth of peer-to-peer sharing has been trust. The uncertainty of providing your financial details online has put many individuals, investors and organizations off trying out sites like Lending Club. The same problem exists for asset-sharing platforms. This is something that technology has rectified, allowing previous users to post reviews and ratings about their experience, making the services more transparent and building confidence among consumers that these platforms are safe to use.

The trade body Sharing Economy UK is piloting a seal-of-approval Kitemark called TrustSeal among smaller sharing economy-related businesses to help boost consumer trust further. In order to qualify, companies must meet a list of ‘Good Practice Principles’ relating to things such as identity verification, product transparency and customer service. If you’re thinking of venturing into the sharing economy, this is an opportunity to demonstrate your validity, ethos and credibility as a business.

Legislation is a challenge but not a barrier

The sharing economy has encountered hiccups as it has scaled, mainly relating to regulation and taxation, and this is something to be aware of. Global governments are in agreement that some form of regulation needs to be put in place to ensure ‘sharers’ do not profit unfairly from the model. This is felt more strongly in some countries than others: in Australia, the Taxation Office is cracking down on undeclared income; in France and Germany, Uber’s inability to comply with legislation has meant some of its services have been banned; and in some countries, Uber is entirely illegal.

A recent European Commission report was largely supportive of what it called the ‘collaborative economy’. The report said that the largest issue the economy faces is currently regulatory uncertainty, which is halting progress for new services, established operators and consumers. The Commission agrees that the sharing economy is vital to a competitive European economy, and that fair taxation, employment conditions, and consumer and social protection are paramount to keeping the sharing economy in check.

Among the issues discussed in the report were:

  • Market access requirements: In terms of obtaining business authorizations and licenses, service providers should only have to do so when it’s in the public interest. The report also clarified that EU Member States should distinguish between occasional service providers (such as individuals who sometimes rent out a room using Airbnb) and professional users of the sharing economy.
  • Liability: While networks are not ultimately liable for the information they store on a service provider’s behalf, companies should attempt to combat illegal content so as to build trust with their users.
  • Consumer protection: The report stated that consumers should be highly protected from unethical practices, but governments must be sure that occasional service providers are not unfairly restricted by disproportionate rules.
  • Employment rights: Labor law is an uncertain issue within the sharing economy, as there is little to say whether or not someone is considered an employee. The Commission’s report clarified this somewhat, saying that the nature of the work, remuneration and subordination to the platform should all be taken into account when deciding an individual’s employment status.
  • Tax: All service providers need to pay tax on personal income, corporate income and VAT.

How can your company adapt to the sharing economy?

As initiatives like TrustSeal ease consumers’ security concerns about the peer-to-peer marketplace, new opportunities are going to open up everywhere for corporate proponents of the sharing economy. Some companies have invested in sharing platforms (car firm Avis acquired car-sharing company Zipcar in 2013) or started up their own network. The most important thing is to find the right fit for your company and your area of expertise. Start thinking about how you could capitalize on your assets and spare capacity. According to a PwC report, the average office uses just half of its desks. If you have spare desks, then why not share them with other businesses? This will help you maximize the efficiency of your office and resources, and implement new revenue streams – a great first step into the sharing economy.

Don’t just think about what matters now – project yourself into the future and consider how technology and markets are going to change across the next ten years. Thinking ahead will stand you in good stead to become a first-class market leader – an innovator of the sharing economy.

Here at a-connect, we can help you disrupt your industry. Contact us today to find out how.

A brief history of the sharing economy and its future path

The sharing economy in the past: Nomads and the sharing economy 

The sharing economy seems to be a ‘new’ evolvement that has the ability to revolutionize the way we work and interact with each other. The umbrella term is still fresh, but how new is the concept behind it? How did we end up at a stage where peer-to-peer sharing is shaking up existing business models? What is the next big movement that pushes the sharing economy forward?

History teaches us that humans began wandering around as nomads. We moved from one place to another, hunting prey and gathering fruit and nuts. Moving from one place to another meant that we carried as little as we could. This forced us to share whatever we had. Owning too many things was not helpful, and it was disruptive of the nomad lifestyle. There were no intermediaries, no laws and there was no money: everything was peer to peer. The way of living thousands of years ago was a pure form of the sharing economy.

Over 10,000 years ago, we gradually stopped living the nomadic life. We stopped moving with herds of animals and stopped leaving the land when it was infertile. We started to understand how to grow crops and herd animals in one location. This evolvement would gradually launch the agricultural revolution. We became more efficient in everything we did and created a food surplus. This enabled cities and societies to rise. Efficiency and specialization called for more trade with more differentiated goods. In order to govern and drive these efficiency improvements, intermediaries who would enable and simplify trade became stronger. Banks and governance structures emerged as important intermediaries, and money (along with gold) was used more frequently as a means of exchange. Peer-to-peer sharing became less prevalent and markets became the place of trade. Power-driven machines and various new energy sources launched the industrial revolution, which would accelerate what we saw in the agricultural revolution.

The sharing economy today: Using technology to share goods and provide services among peers 

The specialization and efficiency improvements have given us access to countless goods and services. The result of this is that we own too many things that we do not need or do not use frequently. Let’s throw in some figures to contrast what we own vs what the nomads owned. The comparison is obviously not fair, but it still tells a story. Early nomads probably owned fewer than a dozen things (some clothes and a few tools). How many things can you call your own today? How many items are you carrying on yourself right now, and how many items do you have at home?

  • According to the LA Times, the average number of items in American homes is 300,000.
  • British researchers found that an average 10-year-old owns 238 toys and plays with only 12 of them.
  • According to the Wall Street Journal, Americans spend over $1.2 trillion annually on non-essential goods (goods that they do not need).
  • While writing this article, I just counted the items that I have brought with me to work – the number is 64, including what I am wearing and the things in my bag, wallet, etc.

Where is the link to the sharing economy? The essential question is: could there be a better resource allocation by sharing all these non-essential goods that we own? The sharing economy as we know it today utilizes unused or underused resources, capacity and time. This is accelerated by technology as the backbone, and provides a different kind of user experience. Some of the most successful and highly valued companies today are part of the sharing economy umbrella. Everybody has heard of Uber and Airbnb, the two leading sharing economy companies, which are valued in the billions. But more and more companies are joining the billionaire list, like Instacart, WeWork and Lending Club. These companies are more efficient than their traditional competitors. However, they merely act as intermediaries, driving costs up. They are valued in the billions just for enabling sharing through technology and creating a different user experience.

The sharing economy in the near future: Blockchain as a game changer 

The blockchain technology has driven companies acting as intermediaries, even governmental organizations, to be on alert mode. What is the blockchain? In short, the blockchain is a decentralized and distributed ledger that is built on a technology that democratizes the authentication of transactions and relies on thousands of computers on a network to figure out a way to maintain that ledger.

While the technology is still in its early stages, an important aspect for our context is that it enables peer-to-peer trading in a very easy and transparent way, creating trust among parties without the need for an intermediary. Traditional industries and intermediaries, such as those in financial services, have formed alliances to respond to this technology – a move that has the ability to utterly transform and, in some cases, destroy their core business.

Even at a business-to-customer level, the transformation that sharing economy companies and new technologies promise could be significant. The core business of banks is to borrow, safely keep and lend money. If we were able to remove banks as an intermediary, we could get rid of the cost associated with them. Sharing economy companies are a first step toward that. Lending Club or Funding Circle – large peer-to-peer lending platforms – offer individuals and businesses the opportunity to bypass banks. They themselves remain intermediaries and offer lower transaction costs. In an ideal case, I would like to borrow/lend money from/to you or a group of people directly without an intermediary.

Blockchains enable us to send each other money directly and safely by bypassing a bank, credit card company, or PayPal. Despite some challenges, many business experts across different industries are certain that it is only a matter of time until the blockchain breaks through. And the possibilities may be limitless. Will currencies as we know them today cease to exist? Can we get every human being a bank account through the blockchain? Can you marry over the blockchain without somebody or an institution confirming your marriage? Can you simplify your supply chain by tracking and recording each step of a product? Can you vote on the blockchain? Can you hold governments better accountable to their promises? Or, further, can you decentralize governments?

The internet transformed the way we use information. The blockchain has the potential to change the way we interact, share and work with each other. It has the power to disrupt the current disrupters flourishing under the sharing economy.

What will your role be in this evolution? How will this shape the future of business and the future of work?