Sunday, 12 April 2009

The rise of the micro-company

I've been reading Tim Ferris' The 4-hour Work Week recently and he identifies that one of the key enablers of the new work is the increasing ability to successfully outsource functions that previously would have had to have been performed in-house.

The theory of the firm supports the existence of large organisations that reduce costs by performing tasks in-house. Thus it becomes cheaper to hire a web designer and pay a full time salary than hiring one only when needed for specific projects.

Decreasing costs of communication and collaboration have flipped this on its head. Sites like Elance mean that professionals can be hired on a project-by-project basis.

There has been tremendous growth in freelance work over the past generation, and in some industries freelance work is becoming so dominant that it is considered bad advice to get a job.

However, there will also be the emergence of 'micro-companies', that are able to serve huge markets with tiny numbers of full time staff. Think Craigslist, with just 23 staff.
37signals called this market the Fortune 5 million.

It's not just internet companies. As Tim Ferris showed in running BrainQuicken, with a virtual assistant and an loose network of support service providers and online affiliate resellers, individuals are able to operate companies that support order books far larger than traditional companies, which require staff to make sales from physical stores.

With the rise of software as a service and online human marketplaces such as Amazon's Mechanical Turk which allow individuals to scale their operations as needed, this could soon become the 'Fortune 1 billion'

1 comment:

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