May 24, 2019
Have you heard of Deutsche Bank, an international bank that employs 91,000 employees worldwide and has a market cap of around $16bn, first established in 1870? Of course you have, but have you heard of Adyen, a Dutch based global payments company started in 2006 with 900 employees that currently has a market cap of $21bn? Probably not, but how has a recent start-up achieved such a valuation compared to such an established global brand, and with just 1% of the workforce? You would probably respond by saying, “ah, but that’s the power of platform businesses”, and you would be right.
Adyen processes payments through its platform for large companies like Amazon and Facebook and has cost and scale advantages over traditional incumbents. Driving down costs, especially through the utilisation of new technologies, and needing only a small number of employees, is a key driver for competitive advantage and valuation.
The platform revolution is disrupting whole industry sectors and disintermediating incumbents. Their rise however has not been without controversy. The ability of platform businesses to monitor and manage their independent workforce has created an ‘information asymmetry’, with an increasing power transferring from ‘labour to capital’.
Uber’s eagerly awaited IPO has coincided with driver ‘strikes’ in the US and internationally. Ubers 3 million drivers, who are independent workers, timed their action to highlight the lack of transparency as well as levels of pay and working conditions. As independents they do not have employee benefits such as paid time off and health insurance.
But workers are also utilising new technologies to fight their cause. Take Organise (www.organise.org.uk) that started in the UK in 2017. This is an online platform that allows workers to raise concerns about work issues and start a national campaign for change. Organise believes that workers within organisations are unable to communicate together effectively in order to share issues and created a platform to enable them to collectively take action. A current campaign to challenge low pay at a major book retailer has backing from some 10,000 staff and customers that was started by a post from an individual worker.
Organisations who engage independent workers are of course in a difficult position in their ability to offer benefits, without running the risk of them being categorised as ‘employees’ and thus have to tread a narrow path. Platform players are increasingly aware of their need to respond to the evolving requirements of their workforce, both employed and independent, in order to protect their brand, maintain investor confidence and create a stable workforce.
Board discussions around strategy increasingly focus on the existential threat of agile competitors who will disrupt suddenly from ‘left field’. As consultants and academics, we are often asked by senior executives: “But how can we beat them at their game? How can we to become a platform business before it is too late?”
In our book we write extensively about this subject. We have used the term ‘Flex’ to describe how organisations and individuals can better understand, plan and execute actions that will enable them to transform and thrive in the emerging world of mass automation.
Data from a recent study of senior executives using our ‘Flex Index’™, a tool that enables organisations to benchmark where they currently are in terms of ‘Flex readiness for change’, shows some interesting results. Most organisations felt positive about their technology and platform strategies, but were far less confident around its implication for workforce, national policy, and ‘responsible change’, as their strategies were rolled-out at scale and across geographies.
How organisations engaged with key stakeholders and migrate from employee to independent workforce models, were low down the scale of understanding. These are crucial factors that are likely to wrong-foot organisations as they implement their strategies.
Successful platform businesses will not only be winners in tech prowess or customer acquisition alone, but also will be super-savvy in balancing future workforce costs, needs and efficiency. This is the ‘Art of Flex’ and understanding your position in this triangle is a first step to ‘platform bliss’.
Please contact us at firstname.lastname@example.org if you wish to be amongst a core group of innovative companies that are pioneers in the Flex Movement.
by Tony Felton, Robby Mol, Arturo Bris