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The Future of Work

How The Rising Gig Economy Is Reshaping Businesses

Younger workers all around the world now want to work differently than their parents did. Here's what's in it for companies.

[Photo: Shutterstock]

There's no doubt that the freelance or "gig" economy is on the rise. The latest research estimates that the ranks of the American freelancer now comprise 34% of the U.S. workforce, and while there's some dispute over hard-and-fast figures, it's been argued that by 2040, the economy will be "scarcely recognizable" as a result.

But just how that shift will reshape the next generation of work is much more difficult to forecast, partly because it's so hard to generalize about what roles freelancers will play in companies of different sizes all around the world. Still, the watchword of the new global economy is fluidity, thanks to the rise of freelance work. Here's a look at why, and what it might mean.

The Global Picture

The rise of the freelancer is hardly an American phenomenon. A study from the U.K.-based business group Approved Index recently explored the rate of entrepreneurship on a global scale by calculating the percentage of the population that owns or co-owns a business in each nation. The findings were pretty astounding.

With a massive 28% of its workforce classified as self-employed, Uganda ranks No. 1 in the world for entrepreneurship. That’s pretty remarkable for a nation that was quite recently released from the grip of a dictatorship. Not far behind Uganda is Vietnam, a nation with an extensive history of socioeconomic distress. By 2013, Vietnam had moved up into the category of "middle-income" nations. The Approved Index study reveals that 13.3% of Vietnam’s population is self-employed, ranking it No. 5 for entrepreneurship across the globe. China is No. 11 (10.2%).

While there are many reasons for the rise of self-employment throughout the world, there’s a definite trend under way. Technology is revolutionizing the way we connect, communicate, and relate to the world. Yet one thing that's remained true of workers regardless of geography is that all want to survive and succeed. As technology penetrates more corners of the globe than ever before, that basic desire is growing more complex. Not only do more people simply want work, they now want more control over how they work—whether that's better work-life balance, choosing a passion-driven career, or being their own boss. Put simply, the gig economy makes all those things possible on a scale like never before.

The Value Of "Small"

Freelancers split their time among a portfolio of clients, spreading out the costs of doing business with each one. They're increasingly focused on one specialized area, and their clients know they're working with a subject-matter expert rather than with a large "solutions provider."

So far, it's smaller businesses that are more likely to feel the impact of those changes, since many big companies already have major contracts with partners. Still, the advantages of smaller-scale relationships with specialized freelancers appear to be spreading throughout the entire global workforce.

As a recent PwC report asserts, "Economic shifts are redistributing power, wealth, competition, and opportunity around the globe," and "the expectations of organisations and the aspirations of the people who want to work for them [are] diverging into three distinct ‘worlds’ of work":

  • The "blue" world of corporate capitalism
  • The "green" world of social responsibility
  • The "orange" world of smaller, collaborative networks and specialization

The concerns and interests of each sphere don't always align. And needless to say, freelancers are driving growth primarily within the "orange" sphere, with consequences for the other two, as the PwC analysts argue.

Here's how the rising gig economy stands to reshape businesses of different sizes:

Startups: Entrepreneurs often need to understand that they can’t do everything themselves. If they bring in a freelancer to do a specific task, they're often getting the best possible result for the lowest possible outlay. Since freelancers are usually "management-light," they also let their clients get on with running their businesses rather than consuming their administrative time.

SMEs: Small and medium-size enterprises (SMEs) have been in a squeeze over the past decade. They don't offer the dynamic environment of a startup, but they can’t always offer the same career-growth opportunities as the biggest corporations. In recent years, that's made it difficult for SMEs to compete for high-quality employees. The growing influence of the "orange" world seems likely to give SMEs a little relief from that trend, helping them pick and choose the best possible talent from a growing pool of gig-based professionals.

What's more, those opportunities will take on an ever more global cast. According to the PwC report, the "orange-world desire for autonomy is strongest in China, especially among young people, indicating a generational shift towards greater freedom, entrepreneurship, and specialist skills in this rapidly evolving economy." Half the Chinese respondents in the study said they don't expect traditional employment to be available to them in the future.

Corporations: Large corporations may well see huge benefits from the freelance economy, too, but for them it will require big changes in the way they manage their workflows. There's an obvious advantage to taking on specialized talent for the most innovative and experimental projects, without big companies needing to sunder important relationships with their other major partners.

Expect More "Talent Clusters"

The global reality for many employers—no matter what their size—is that they're losing much of the control they once had over the labor market. As gigging becomes more common, individuals themselves are driving major changes in the world of work. Yes, a paycheck is an obvious motivator, but it's no longer the ultimate one.

One way companies can continue to survive and thrive in the new economic landscape will be to replace certain clearly defined hierarchies with looser talent clusters. As PwC researchers point out, "Looser, less tightly regulated clusters of companies are seen to work more effectively than their larger and potentially more unwieldy counterparts."

Not only does a more robust freelance economy make that possible for more businesses all over the world, it's also the way more people seem to actually want to work. And in that sense, it's a win-win.

Entrepreneur Faisal Hoque is the author of Everything Connects: How to Transform and Lead in the Age of Creativity, Innovation, and Sustainability (McGraw-Hill). Use the Everything Connects leadership app for free.

Copyright (c) 2015 by Faisal Hoque. All rights reserved.

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