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By Andrea Potter, Director, Ernst & Young LLP, Member of EYQ
By 2030 there will be approximately 3.2 billion skilled people on this planet. All that separates them from every business in need of talent — small or big — is search and information, says Stephen DeWitt, CEO of Work Market.
In physics, certain fluids have the unique property of zero viscosity: they flow without friction. These liquids are called superfluids. Similarly, a new generation of technologies and innovators is bringing us closer to a state where traditional frictions or inefficiencies in markets — including labor markets — are greatly reduced or even eliminated.
The concept of superfluid markets resonates strongly with Stephen DeWitt, CEO of WorkMarket, an online labor automation platform in which cloud-based software empowers businesses to create, manage and pay a flexible workforce. As DeWitt explained during a recent interview at the NewCo Shift Forum, “WorkMarket’s sole purpose for existence is to create a frictionless exchange between skilled labor and every business.”
The viscosity of traditional labor markets
Labor markets have long been plagued with frictions and inefficiencies. Chief among these were high search, information, and matching costs — from both the employer and employee side of the equation. Searching for the right candidate or the right company was like looking for a needle in a haystack. Lack of sophisticated search tools and a state of imperfect information helped, in large part, to drive the emergence of a constellation of labor market intermediaries. These intermediaries, including newspapers, labor unions, and employment agencies, helped to match employers and employees, but at a steep price.
The arrival of the internet made the matching of employers and employees a more fluid process. New digital intermediaries in the form of electronic job boards and aggregators arose. For prospective employees, looking for jobs became easier, as electronic job sites permitted search across different categories such as industry, location, and skills. The friction of individual networking was reduced as social networks also became places to connect with others, create a personal brand, search for jobs, and be discovered by recruiters. Online labor markets greatly expanded the potential pool of suitable applicants for employers, becoming part of the everyday arsenal of human resources departments and recruiting agencies alike. These tools, by and large, reduced some of the frictions in labor markets. But they failed to address the fact that the very nature of work itself is changing.
The emergence of superfluid labor markets
Back during the Industrial Age, companies arose, in part, as a mechanism for reducing the transaction costs of participating in markets. As a result, companies became large and multi-disciplinary. As the internet began to reduce market frictions, companies began to unbundle. Key business processes — from finance to IT operations — were outsourced.
Yet despite these changes, companies today still maintain large, permanent employee workforces. In fact, nine-to-five permanent workforces are the largest cost center for most enterprises. At the same time, the recruiting industry remains focused on enabling such a workforce. This is at odds with what is happening in the broader world of work.
Multiple technologies, including artificial intelligence, robotics and blockchain, are converging to drive superfluidity in labor markets. Robots have already replaced jobs that require manual processes. They are now moving up the value chain to capture white collar work. Work has been disaggregated into tasks, some of which can be completed by machines and some which can be dispersed to humans both inside and outside company walls. Smart bots might shortly supplant some forms of operational management. As efficiencies become the table stakes for succeeding in the superfluid era, the only thing that will shortly matter for companies is their ability to create value. And value creation will be highly dependent on leveraging the best and brightest talent, whether it resides inside or outside of the organization.
DeWitt refers to this paradigm as the “modern mosaic of labor.” He says that a company “is not competitive anymore if its labor resides just within its own four walls. Labor has to be anywhere. It can be W2s; it can be 1099s.” For particular tasks, companies need immediate access to the best person for the job — whether that person is a current employee, an independent contractor, or the temporary employee of an agency. And that is precisely why the WorkMarket platform started with a focus on freelancers.
As a superfluid labor exchange, WorkMarket uses algorithms to provision a client’s work request by decomposing that request against specific variables of that task (e.g., location, time, skill, background, cost, or other parameters) and searching across that company’s universe of internal and external talent. As DeWitt explains, “WorkMarket can look across that universe based on your parameters and say: Jane Smith gets the work. A note comes up on her phone: You’re set to do this task. Accept it? Yes. Now Jane goes and completes the task and uploads it through the system and it’s accepted. She gets paid right then. The entire process — no paper, no people, no time. The amount of time it took to provision that work was the speed of light and running that entire process across an impossibly large supply of potential people was as easy as ordering a pizza.”
Superfluid solutions such as WorkMarket, eliminate some of the biggest frictions from labor markets — searching for the best qualified person, verifying that the person has the attributes they claim, negotiating and securing contracts, and facilitating payment. These are frictions that companies have traditionally paid hefty prices to recruiting agencies to ameliorate. As DeWitt points out, “The most valuable company on earth right now is Alphabet, the parent company of Google. They federated search. We are doing the same thing here. Everything inside WorkMarket is frictionless. We don’t make money on anything that people in the labor world used to make money on. In our world, access between people is a right.”
And from the point of view of the skilled worker? Each becomes an unshackled enterprise of one. Now that’s superfluid.
The topic of superfluid markets and their impact on companies is one that EYQ will be exploring at Innovation Realized 2017 — the two-day retreat presenting a uniquely creative, dynamic and interactive environment in which participants will examine innovation, collaboration and growth in a digital world.
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.