- Almost all industries are changing or being affected in some way by the growth of the gig economy.
- For this reason, entrepreneurs should expect it to be easier and cheaper to outsource work functions.
- When hiring internally, don’t be in a rush and focus on expanding with employees who add value.
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The said “concert economy“is here to stay. It is not a temporary and limited phenomenon, and it neither started nor ended with carpooling. Rather, it is a universal development of the labor market that will ultimately affect all industries. As such, entrepreneurs should consider what this development means for their hiring and strategy decisions.
Twenty years ago, I worked in web systems development. Around this time, a few brave souls tried to spread their wings and worked as freelance coding consultants. Selling their expertise as contractors by the hour, they were recruited by software development companies when a project required more convenient keyboards than those available in-house.
Today, the structure of the software development industry is very different. Its methods are more standardized and the processes more mature. Now, rather than a quirk, freelance architects, coders, and designers are a common occurrence. In other words, while there are still full-time job opportunities, the profession has become much more concert-oriented.
Ridesharing has been a much faster change, from downstream taxi companies to private drivers working their own hours for Uber or Lyft. That being said, it’s the same development. Industries and businesses fall apart over time. This development is here to stay.
Read more: I am a UX designer who earns over $ 300,000 per year working 3 jobs
Industries and businesses disintegrate over time
We’ve gotten used to seeing businesses as the heart of the market, and it’s not for nothing. But if there are companies, they are transitory phenomena. Sustainable businesses often have to reinvent themselves to stay business. IBM, for example, he started making machines, moved on to calculators, then computers, and then eventually moved to consulting.
It’s a perfectly natural evolution. Economically speaking, the company is a temporary solution. As I say in my book “The production problem: a new theory of the firm“, the company allows new production to be implemented beyond what can be created by a simple contract. In other words, companies do what the markets cannot. However, markets eventually catch up with the company, by subsuming it.
The same goes for entire industries – born out of a novel innovation, competitors emerge and break down into more specialized companies, supporting basic innovation. While this process may take decades, if not centuries, the pace of change appears to be steadily increasing. There are few or no constants on the market.
How to think about hiring
This means that entrepreneurs should expect it to be both easier and cheaper to outsource functions. This, in turn, means that the relative cost of doing things in-house will increase. As an entrepreneur, it is important to recognize that this is the general trend and to integrate this knowledge into the strategy of the company. It should also be recognized in the way the startup treats hiring. Here are three basic rules to consider:
1. Delay hiring as long as you can
This is already common practice in startupsbecause hiring is expensive and the cash flow situation is precarious. But there are good reasons not to hire unless it is necessary, even if there is enough cash to afford it. Consider the state of your industry: is it in a growth phase and should competitors and partners grow or lay off employees? There is a risk that hiring means biting more than you can chew. This is particularly the case in mature and standardized industries.
Entrepreneurs tend to avoid outsourcing because it is expensive. Costs should be avoided, but not at the expense of flexibility. Outsourcing means it’s much easier to adapt the production scale to changes, so the extra expense can be part of a cost reduction strategy. It all depends on what you expect from your industry – if companies are likely to lay off employees, hiring can turn out to be catastrophic.
3. Focus on your core competency
It’s common for entrepreneurs to want to keep things in-house so they can control their operations. But you probably don’t have a full-time accountant or CPA on your staff. Why? Because accounting is now a standard service competitively offered in the market. Previously, this was done in-house and companies were reluctant to outsource this service because the information is very sensitive. The same will soon be the case for IT services. What else will become standard market services? The best way to avoid growing in the wrong place is to focus on your core competency, where your startup creates value.
Given the nature of the market, the odd-job economy is not new. It’s just a new name for a development that has always been going on, but it’s now complemented by modern and very effective information. Technology. Entrepreneurs need to recognize that every business is a solution and is subject to a common lifecycle. It helps to formulate strategies and make decisions in the startup.