Small Business Labs

For Many Boomers, Work is the New Retirement

Transamerica's Center for Retirement Studies recently released the results from their 17th annual U.S. retirement survey. 

As with prior years, it's full of interesting data on the retirement preparations and plans of Americans of all ages. 

Most interesting to us is their section on Baby Boomers. This group is currently entering retirement age in large numbers (roughly 10,000 turn 65 every day) and the oldest members turn 70 this year.

Because of this, Baby Boomers are providing insights on how retirement is changing.

The big change is around work. More specifically the fact that more Americans are choosing to work past the age of 65.

This, of course, is not new news.

We cover this topic extensively in our baby boomer section and have even gone as far as saying we're tired of it (we are). 

But it's an important societal issue and one of the drivers of the growth of independent workers, so we'll continue to cover it.

The data from the Transamerica study on Baby Boomers is in the study chart below (click to enlarge). 

To us the key data point is that two thirds of baby boomers plan to or already are working past the age of 65.

This explains why a record number of Americans aged 65 and older are still in the workforce. It also explains why we are forecasting that growing numbers of aging boomers will become independent workers and small business owners (again, see our baby boomer section for more on this). 

Related to this, the JP Morgan Chase Institute study Past 65 and Still Working: Big Data Insights on Senior Citizens’ Financial Lives shows that about 400,000 Americans over the age of 65 are working via online platform companies like Uber and Airbnb. 

This echos the Intuit On-Demand Economy study, which found 25% of those working via online platform companies are aged 52 or older. A big appeal of these platforms is they provide a very easy and flexible way to work part-time, something older workers value highly. 

It's quite clear at this point growing numbers of older Americans are going to stay in the workforce. It's also clear that many of these older Americans will choose independent work. 

Smart Machines Starting to Offer Business Advice

ZDNet's Intuit plans big digital expansion into small business markets with apps and big data covers a topic we find fascinating - the use of machine learning and big data to develop algorithms and "smart machines" that provide business advice.

Key quote:

Intuit is planning a major expansion of its online Quickbooks business group into a machine learning advice and services platform for creating, managing, and operating all types of small businesses.

Intuit has extensive data on millions of small businesses due to their enormous base of cloud customers.

This gives them a treasure trove of data to develop machine learning based advisory services.

Intuit's not the only company working on these types of services. 

The Big 3 strategy consulting firm McKinsey has an entire division - McKinsey Solutions - devoted to using big data and machine learning to help their clients make faster and more effective business decisions.

And, of course, IBM is betting a big part of their future on Watson, a generalized machine learning system that they are using to provide advice in a wide variety of business and scientific fields.

In the long run machines may even take on high level activities like corporate strategy.

The Harvard Business Review's Designing the Machines That Will Design Strategy suggests one day there may even be a chief strategy robot, which they call the integrated strategy machine. Key quote:

An integrated strategy machine is the collection of resources, both technological and human, that act in concert to develop and execute business strategies.

The good news is they continue to see a role for humans - at least for awhile:

Human beings are still unique in our capacity to think outside the immediate scope of a task or a problem and to deal with ambiguity. Machines are good at executing a well-defined task or solving a well-defined problem, but they can’t think beyond the specified context (at least not currently). Nor can they pose new questions, invent answers beyond what’s being asked, or reframe or connect the problem to a different challenge they’ve previously faced.

The Rise of the Strategy Machines, from the MIT Sloan Management Review, covers much of the same ground as the HBR article. They too see a continuing role for humans. Key quote:

Big-picture thinking is one capability at which humans are still — and will continue to be for some time — better than computers  ... There is a level of sense-making that only a human strategist is capable of (at least for now).

It seems pretty clear that there are tasks where machines are better than humans. There are also tasks where humans are better than machines. 

But in most cases humans using machines are the best solution. 

So I agree with Star Trek's Spock, who said:

“Computers make excellent and efficient servants, but I have no wish to serve under them.” - Star Trek, season 2, episode 24 (“The Ultimate Computer,” 1968)

Disclosure: Intuit is an Emergent Research client.

The Self-Driving Car Race

Lots of recent news and announcements on autonomous vehicles:

1. Uber generated quite a bit of noise with their announcement they are soon going to be testing self-driving cars in Pittsburgh. Bloomberg has a good article on Uber using self-driving Volvo XC 90s in their test. During the tests there will be drivers in the cars to take over if something goes wrong.

My guess is people will travel to Pittsburgh just to ride in these cars. BTW, the Volvo XC90 is a great car on its own, so a self-driving version is bound to attract a lot of attention. 

2. Ford announced plans to mass produce driverless cars and have them in commercial operation in a ride-hailing service by 2021.

3. Google, of course, is still in the driverless car business. But Fortune reports some of their employees have moved on to other ventures because they felt Google is not moving fast enough. 

4. GM has a driverless car partnership with Lyft. Lyft has also evidently been trying to find a buyer for the company the last couple of months, so far with no success. We suspect the capital intensity associated with the autonomous car arms race is likely a factor in their interest to be acquired. 

5. The auto parts companies don't want to be left out, so they are partnering to produce self-driving car systems.

6. Startups are still going hard after this space. An example is Qaunergy, which just raised $90 million to develop sensors for autonomous vehicles.

7. Japanese and European car makers are also working on driverless cars. Most feel they are currently behind in this race.

8. And of course, Apple's secret Titan car project likely includes self-driving vehicles. Titan is so "secret" that even Men's Journal has an extensive article on it.

The New York Times article Uber Aims for an Edge in the Race for a Self-Driving Future summarizes this as a Silicon Valley versus Detroit self-driving car race. Key quote:

Suddenly, it seems, both Silicon Valley and Detroit are doubling down on their bets for autonomous vehicles. And in what could emerge as a self-driving-car arms race, the players are investing in, or partnering with, or buying outright the specialty companies most focused on the requisite hardware, software and artificial intelligence capabilities.

Let the race begin.

***Update: A reader reported this morning that today's Wall Street Journal has an article on self-driving taxis operating in Singapore.***

Corporate Layoffs Make Independent Work Look More Secure

Cisco announced last week it's laying off 5500 employees. This is about 7% of their workforce. Cisco also reported quarterly earnings of $2.8 billion on sales of $12.64 billion. 

Most would consider quarterly earnings of $2.8 billion and an after tax profit margin of 22% pretty good. Cisco's CEO Chuck Robbins seems to think so. He said on CNBC's Squawk Box:

"We are proud of not only the quarter but the year that we just completed. We had growth of 3% on the year. In Q4 we had 2% growth, we had 9% non-GAAP EPS growth, which was a record for us ..."

So if the year was so good, why lay off so many employees? 

The answer is Cisco's markets and business are rapidly changing. Key article quote on this from Cisco's CEO:

"We work in an environment where the markets are changing faster than anything I've ever seen," Robbins explained.

The environment Robbins is characterizing is one marked by, as he puts it, evolving customer expectations, technology transitions, the dynamic global economies, and the headwinds brought about by shifts in the geopolitical landscape."

These changes mean to stay competitive Cisco has to restructure. And that means layoffs. 

So what does this have to do with independent work?

The answer is job security, or more to the point the lack thereof. 

In today's highly competitive and rapidly changing business environment, even profitable and successful firms like Cisco are restructuring and laying off employees.

Cisco is not an outlier.

Fortune's Cisco's Layoffs Are Just the Tip of the Spear for Tech points out many tech firms are laying off employees. And it's not just tech firms. Even firms long viewed as paternalistic and life time employers are letting workers go.

The Wall Street Journal's At Kimberly-Clark, ‘Dead Wood’ Workers Have Nowhere to Hide covers this company's shift from away from being a lifetime employer. Key quote:

For generations, having a job at Kimberly-Clark meant having a job for life. The maker of household products such as Huggies and Kleenex paid its employees above-market salaries and avoided layoffs ... That’s over ... Turnover is now about twice as high it was a decade ago, with approximately 10% of U.S. employees leaving annually, voluntarily or not, the company said.

Holding workers close through good times and bad is “not sustainable” any more, said Liz Gottung, the company’s human-resources chief. “If you look at when we started implementing the big pieces of the company’s people strategy, when you map that to our stock price and our business results, you can see the clear correlation.”

In other words, providing traditional levels of job security for employees is not good for business. 

All of this means traditional jobs are not as secure as they once were - and independent workers have noticed. 

The chart below (click to enlarge) shows how independent workers view their security compared to traditional jobs.

In our spring 2016 MBO Partners State of Independence survey, 43% of independent workers surveyed reported being independent is more secure than holding a traditional job. This is up from only 33% reporting independent work being more secure in 2011.

Only 24% reported independent work being less secure, down from 29% in 2011.  On third (33%) reported both types of work are equally secure. 

In other words, 3 out of 4 independent workers consider independent work to be more or equally secure as traditional employment. 

Self-selection clearly plays a role in this data. The people answering this survey question are all independent workers who are, on average, more risk tolerant than people who have traditional jobs. 

But the majority of these folks tell us that having a single employer who could restructure and lay them off at any time - even they are doing a great job and their employer's business is doing well - is less secure (or at least no more secure) than having the control and multiple sources of income that come with being an independent worker. 

While we don't have data from the MBO Partners State of Independence study prior 2011, we know from other surveys that independent work was considered less secure than having a traditional job by most independent workers as recently as a decade ago. 

Declining job security is a long term trend that dates back at least to the 1980s. But Great Recession exposed many more Americans to this shift and a lack of job security is a reason often cited by independent workers for why they chose independent work. 

We see no signs that traditional jobs are getting more secure - just the opposite. We think Cisco like restructurings and layoffs have become a permanent way of doing business.

Which is one reason why we continue to forecast growing numbers of independent workers.

Staffing Industry Research Firm Says There are 44 Million Gig Workers

The Staffing Industry Analysts (SIA) recently released a study showing that nearly 30% of the U.S. workforce are gig workers. This works out to be about 44 million Americans.

They also found that contingent workers represented $792.4 billion in staffing buyer spend.

That's a lot of money and you can see why corporations are trying to better manage this spend.

SIA is an analyst firm that provides advisory services on contingent staffing and workforce solutions.

Their clients are large corporations that employ contingent workers, staffing firms and tech companies that provide HR and/or contingent workforce related related products and services. They are experts on the use of contingent talent by corporations. 

They surveyed 7,700 U.S. workers for this study and found that 29% identified as contingent workers.

They break down this group into the following categories (percentages add to 33.6% due to some workers reporting being in multiple categories):

• Temporary workers assigned through staffing firms, 6.2%
• Human cloud workers, 6.4%
• Independent contractor/self-employed with no employees, 15.5%
• Temporary employees sourced directly without the use of a staffing firm, 3.6%
• Statement-of-work consultants employed by a consulting firm, 1.9%

SIA has a broad definition of gig work that is very similar to one we use. Key quote on their definition from the study article:

The term contingent work and “gig work” are used synonymously by Staffing Industry Analysts instead of a more narrow definition of gig work that includes only limited duration tasks facilitated by an online platform. Staffing Industry Analysts describes the latter as “human cloud workers.” As a note, Staffing Industry Analysts’ definition excludes firms such as Airbnb and Zipcar that are part of the “sharing economy” but not part of the gig economy.

Their human cloud worker estimate, about 2.8 million, is inline with our findings and the findings of other sources. 

Their overall estimate of 44 million is also inline with other estimates. It is a bit higher than the estimate of roughly 40 million found in the 2016 MBO Partners State of Independence study but is lower than the 54 million found in last year's Freelancers Union/Upwork study. 

The differences between the three studies are mostly due to differing definitions of gig work. Adjusting for these differences, the 3 studies are pretty consistent in their findings. 

Access to SIA's full research is not cheap, but they provide several useful free resources.

We regularly read their CWS 3.0 online magazine and are fans of their Staffing Stream blog. Both provide excellent information on how corporations view and use contingent talent as well as general information on the gig economy.

The World Economic Forum's Top 10 Emerging Technologies for 2016

I'm a bit behind on my reading. So I just got to the World Economic Forum's Top 10 Emerging Technologies for 2016 list, which was released in June. 

Nanotech plays a big role in the list with 3 (assuming you include "organs-on-chips" in nano). Health/bio related also come in with 3. There are 2 power related and 2 IT related (3, if you include autonomous vehicles in IT). 

The 10 are:

1. Nanosensors and the Internet of Nanothings

2. Next Generation Batteries

3. The Blockchain

4. 2D Materials

5. Autonomous Vehicles

6. Organs-on-chips

7. Perovskite Solar Cells

8. Open AI Ecosystems

9. Optogenetics

10. Systems Metabolic Engineering

The WEF list provides excellent, short descriptions of each. They also have a good summary article on the list.

The Rise of Employee Free Businesses

It used to be hiring employees was the goal of almost all small business owners. This is no longer true. 

As the Your Story article Running an employee-free business without compromising on scale and quality points out, you no longer need traditional employees to start and scale a small business. 

Key quote:

With the emergence of workflow automation, machine learning (or artificial intelligence), talent marketplaces, collaboration tools, and a curated network of independent operators, you can be one person, sitting at home in your pyjamas, doing the work of a hundred people and making more than just decent money each year, legitimately and efficiently. There are numerous examples of these pyjama-wearing, globe-trotting multi-millionaires out there.

Elaine Pofeldt's Forbes article Want To Create A $1 Million E-commerce Store? This Community Aims To Get You Past The Finish Line provides more examples of employee free businesses.

Her article describes a community of over 1000 micro ecommerce companies with each member generating $250,000 or more in revenue. The majority of these firms are solopreneur businesses. 

We've been tracking these "employee free" businesses for the past 5 years through the MBO Partners State of Independence in America study series. In 2016 we found that there are about 5.4 million U.S. solopreneur businesses that use contract labor instead of hiring traditional employees.

We also found they spent about $95 billion hiring other independents over the past year. This is the equivalent of hiring about 2.3 million full-time workers.

Interestingly enough, these businesses are not considered "employer businesses" and not included in most government statistics on U.S. small businesses. Instead, they are counted as "non-employer businesses" and excluded from most studies on entrepreneurship and small business growth.

We, of course, think this is a major mistake. 

This is because by not recognizing that more firms are going the employee free route, many studies are finding entrepreneurship in America is declining. 

The Washington Post's The decline of American entrepreneurship — in five charts is a good example of this type of thinking.

Because of our work tracking these solopreneur firms, our view is entrepreneurship is not in decline in America. Just the opposite, we believe entrepreneurship is the strongest it's been in the past few decades.

We'll have more on this topic in the coming months. 

Ageism Means More Self-Employed

The Washington Post's Baby boomers are taking on ageism — and losing covers something we hear about often in our research - age discrimination.

We hear about it mostly from baby boomers who tell us it's one of the reasons they became self-employed. 

The reality is companies on average prefer younger workers over older ones. Because of this, age discrimination has become a major challenge for baby boomers.

Key quote from the article:

Often needing to stay in jobs longer than they anticipated to shore up savings depleted during the Great Recession, or simply wanting to remain active further into their lengthening life spans, they’re coming up against a strong preference in America for youthful “energy” and “innovation.”

Age discrimination is common across most industries which, of course, is a problem for the growing numbers of aging boomers who want or need to to continue working. 

We cover the trend of older Americans staying the in workforce extensively in our baby boomer section. For those looking for a shorter version, the recent New York Times article Of Retirement Age, but Remaining in the Work Force nicely summarizes the topic.

Key quote on the growth of older workers:

In May 2000, 12.8 percent of those older than 65 held a job. By this May, the number had climbed substantially, to 18.8 percent.

The combination of older people wanting or needing to work coupled with age discrimination means more older workers are choosing self-employment.

Not only does this avoid age discrimination, it also provides much more flexibility - something most older workers want. 

The Kauffman Foundation's annual Entrepreneurship Index nicely shows the shift to entrepreneurship and self-employment by older Americans. Click to enlarge their chart below.

Expect the trend towards older entrepreneurship to continue, and not just in the U.S. but globally. This is due in large part to demographics. The world is getting older and by 2030 there will be 56 countries where there are more people 65 and older than under the age of 15.

One Week in the Coworking Boom

We've gotten a lot questions about our recently released coworking forecast.

While many think the forecast is too conservative and that coworking is growing faster, others wonder if we aren't too optimistic and if our forecast should be lower.

We readily admit this is a tough industry to forecast. But it's also clearly growing really, really fast.

For example, we took a look at just news from the past week on coworking space openings in the U.S. and Canada.

We did this doing a simple set of Google searches. This probably understate the number of new spaces opening or announcing their plans to open. 

We found 62 U.S. and Canadian space openings or announcements over the prior week. 

We don't know if this was a representative week, but if it was it would indicate over the course of year there would be a bit over 3200 new space openings or announcements in the U.S. and Canada. We're not going to try to this for the entire world (our coworking forecast is global) because it would be way too much work for blog post.

But if there are 3200 new spaces over the next year in the U.S. and Canada alone, the folks who think our coworking forecast is too conservative are correct. 

Here are some of the more interesting example from this week's news:

Canada related:

According to CBC News, Saskatchewan's 1st co-working space had an open house. An alert reader (see the comment below) pointed out it is one of 7 coworking spaces in Saskatoon. 

According to the Calgary News, Coworking is booming in Calgary.

According to BetaKit, Toronto's RNDMWRK WANTS YOUR NEXT COWORKING SPACE TO BE A BAR. I know I wish my coworking space served Moosehead beer. 

If you happen to be in Vancouver on August 19th, stop in at L'Atelier Coworking's Opening Party!

U.S. related:

Thirllist says Philly is in the Middle of a Coworking Boom

The Richmond Times Dispatch covers a new space in Richmond's suburbs. This is a good example of the growing number of suburban spaces.

Another example comes from Denton Texas, where the Denton RC reports the opening of a new space in this Dallas Fort Worth suburb.

Continuing the coworking bar theme, SF's Historic Jack’s to Become Another Coworking Space Called Bar Works. I doubt they will serve Moosehead.

Regus continued its coworking push opening one of their Spaces spaces near Google in Silicon Valley.

Covo Coworking, another coworking space combining food, alcohol and coworking had their opening party last week in SF. It's a tap room at night, so maybe they will have Moosehead. Covo's Cafe is pictured below.

This is just a subset of the coworking news for last week. Coworking really is booming.

The Growing Role of Small Business Coaches

We recently conducted a study in partnership with the sales and marketing automation company Infusionsoft on how small businesses define and achieve success.

We were surprised by one of the findings. This is the extent to which successful small businesses are using coaches.

We didn't set out to study this topic. We didn't even have questions on the use of coaches in our interview guide. But while conducting in-depth interviews with 26 successful small business owners, we kept hearing about business coaches.

And when we went through the interview transcripts, we found almost all had mentioned using business coaches.

We consistently heard several reasons why the small business owners we interviewed use coaches. 

First, business has gotten more complex and is changing more rapidly. There simply is no longer the time to “learn while doing” or the margin of error to “learn by making mistakes” as in the past.

Because of this, small businesses are turning to expert coaches to provide guidance on working through complex problems quickly. 

The small business owners we interviewed also said they used coaches to improve their management and leadership skills, help them set and achieve goals and work through difficult business problems and decisions.

Coaches also provide emotional support, especially around facing fears and having the confidence to move forward. Most of those who are using coaches interacted with them on a regular basis, in large part due to the emotional support they provide.

Coaching doesn't come cheap. For example, coaches hired through the Emyth coaching network costs a minimum of $1500 per month and can go as high as $3,000 or more per month.  Their coaching framework is below (click to enlarge).

The small business owners we interviewed said good coaching was extremely valuable and well worth the cost. 

But they also warned that not all coaches were effective or worth their fees and suggested conducting due diligence prior to hiring a coach.

We were aware that coaching had become a big business. It's part of the personal services boom we've been following for many years.  

We also know that small business coaching has been around a long time and that there are a number of large and well respected coaching programs. Vistage, for example, says they have over 21,000 people participating in their small business coaching program.

Despite reputable programs like Vistage and lots of satisfied small businesses, the coaching industry overall has a less than stellar reputation. There's also been little research on small business coaching. These two reasons explain our surprise at this study finding.

Interestingly enough, few of the small business owners were surprised. They said they learned about coaches from other small business owners and they generally thought the use of coaches was pretty common. In fact, they were surprised we were surprised.

This shows the value of getting out of the office and talking to real people - you learn things.  

We will diving deeper on this topic in the coming months.