Small Business Labs

Uber Promotes Worker Flexibility

Uber's "180 Days of Change" campaign, which is designed to improve the Uber driver experience, is getting a positive response for both the media and drivers.

That Uber drivers have earned over $50 million in the 50 days since they added tipping has certainly been well received. 

So have their most recent announcements, which are an array of driver app updates that give drivers more control over their schedules.

Key quote from USA Today's Uber Adds Another Driver Perk; Pre-set Destinations:  

For example, drivers now can choose six daily destinations, up from two, that they would like their rides to get them near. Also, those destinations can be pre-set with their preferred arrival times. The Uber app then aims to funnel rides to drivers based on those preferences. Drivers also will get an alert if an incoming ride will take more than 45 minutes.

The reason these changes are viewed positively is that Uber realizes flexibility is one of the most important reason most Uber drivers drive for Uber. Again from the USA Today article:

"What we've heard over and over from drivers is that what they value most is flexibility," says Aaron Schildkrout, Uber's head of driver experience.

As part of their campaign, Uber and a group of university professor collaborated on an academic study on the value of flexibility to Uber drivers.

It's a wonky paper that most won't want to bother reading. But the key findings are summarized in article Quantifying the Value of Flexibility for Uber Driver-Partners. 

The an quicker summary is most Uber drivers drive part-time and they highly value the flexibility provided by partnering with Uber. 

The study chart below shows a scatter chart of number of hours per week Uber drivers drive. The purpose of the chart is to show the elasticity of labor for Uber drivers.

But is also nicely illustrates that most Uber drivers drive less than 15 hours per week for Uber. 

Regular readers will not be surprised by these findings.

Our work has consistently shown that most people who work for on-demand marketplaces like Uber, Lfyt, Task Rabbit, etc., do so because they offer highly flexible, low friction part-time work.

We've also consistently found a large percentage of those working in the on-demand/gig economy do so to supplement their income. 

This academic study is yet another set of findings finding this.

The Drivers of Contingent Workforce Use by Enterprises

We attended Upwork's Work Without Limits Executive Summit last week. This event was focused on the future of work and targeted at large enterprises.

    

The attendees were senior HR, procurement and business unit leaders from major corporations.

The summit sessions and informal conversations provided an excellent opportunity to hear from a variety of corporate executives on why they are increasing their use of contingent labor, especially through the use of online talent marketplaces like Upwork.

Three key drivers were consistently cited:

1. The need for speed: Pretty much all the participants agreed that their organizations needed to move faster. They also agreed that the use of outside talent often resulted in the faster delivery of results than other alternatives. They felt this particularly true if the required deliverable was a discrete, specialized task - which brings us to driver #2.

2. Work is shifting from jobs to tasks: Companies are chopping up jobs into bite-size tasks and giving them to the best person available. That person could be could be a traditional employee, or it could be a outside contractor. Increasingly, it's an outside contractor.

This is due to the outside contractor having specialized skills, or simply being available. With organizations choosing to run lean, often internal employees don't have the bandwidth to take on new tasks. This means the fastest way to get the work done (driver #1) is to use outside talent.

3. The need for external teams: This may seem paradoxical given driver #2, but it's not. Firms are increasingly looking to outside contractors to provide completed projects. These projects often require a team of people with specialized skills to complete a variety of tasks.

This is leading to more independent workers to create either formal or ad hoc teams that can bid on larger and more complex projects.

Often these projects are sub-projects in a broader task. For example, building a marketing app as part of a new product roll-out. This task requires a team to accomplish, but is simply one of many tasks required to complete the entire project.

Interestingly, none of these drivers are new.

But technology - and especially technology for managing distributed workers and teams - has reached the point where these these shifts are happening at an accelerating rate.

Also interesting is how corporations are reacting to these drivers.

As with any major change, they are starting small.

Most of the firms attending the event are still in the experimental stage, building pilots and developing high ROI use cases. 

But it was clear from our conversations that these firms are seeing strong results from their pilots. Most are already moving beyond experimentation into broader deployment, or planning to do so quickly. 

Upwork announced their new Talent Services Division at the event. They describe this as "the world's largest talent agency". This initiative has features that help corporations with all 3 drivers discussed above.

Spend Matters analyst Andrew Karpie's article Upwork Launches Talent Services Division to Enable Enterprise Use of Online Freelance Workforce provides an excellent analysis of this new effort. Please refer to Andrew's article for more details.

Drone Sales Taking Off

Over 3 million drones are expected to be sold in the U.S. 2017, with 4.45 million forecast to be sold in 2018.

This data comes from The Consumer Technology Association via the Axios article Demand for Drones is Exploding. The chart below (click to enlarge) is from the article.

Most of these drones are for personal use, but a growing number are being used in business. Examples include real estate and insurance photography and broadcast TV. 

More advanced applications are also starting to happen, including 3D mapping and the inspection industrial equipment such as power lines, train tracks and dams.

We recently toured the facilities at the University North Dakota's Center for Unmanned Aircraft Systems. 

The first thing we learned is real drone people don't call them drones, they are unmanned aircraft systems, or "UAS". 

And every time we said "drone", they looked at us quizzically and asked "do you mean UAS?". 

We also learned the University of North Dakota was the first to offer degree programs in unmanned aircraft systems and has the largest drone pilot training program outside the military. 

They are also doing extensive research on drones and helped developed the Grand Sky Business Park, the nation's first (and maybe only) business park focused on drones.

There's no doubt the use of drones (oops ... unmanned aircraft systems) is going to continue to grow at a rapid clip.  There are simply too many solid business use cases for this not to happen.

What's a Good Job and How Many Are There?

The Georgetown Center on Education the Workforce has started a project on "good jobs", with a focus on good jobs that don't require a university degree. 

According to their first report, there are 30 million American workers without a college degree who have a good job. This is a little less than the 36 million good jobs that those with college degrees have.

To put this into perspective, there are about 75 million U.S. workers without a college degree. So about 40% have good jobs as defined by Georgetown.

The obvious question is what's a good job? 

As you can see from the study chart below (click to enlarge), Georgetown defines a good job as one that pays at least $17 for a full-time job for those under the age of 45, and $22 per hour for those over the age of 45. 

Not surprisingly, the share of good jobs going to those without a college degree has fallen over time. In 1991 60% of good jobs went to those without a college degree. But by 2015 this share had fallen to 45%. 

The report goes on to break down which industries produce good jobs and who has them by demographic group. 

We find this work quite interesting primarily because it puts a stake in the ground in terms of defining a "good job". 

This has been a huge issue in the debate around the gig economy, with many arguing gig economy jobs are "bad". But despite describing them as bad, we've seen little on the topic of what would make them good, or what makes any job good. 

Over the next couple of months we're going to dig into this topic in more detail, using the Georgetown definitions and findings to compare gig jobs with traditional jobs.

It should be interesting.

Small Business Owners Getting Older and Not Planning to Fully Retire

According to Barlow Research, the average U.S. small business owner is 60.3 year old.

As the Barlow chart below shows (click to enlarge), 57% of small business owners are over the age 60, up from just 38% a decade ago.

Barlow defines small businesses as those with revenues between $100,000 and $10 million. This range includes the vast majority of U.S. employer small businesses.

Also interesting is Barlow's findings on small business owner retirement plans. In general, small business owners are not the retiring type.

They found average small business owner with plans to retire is planning on retiring at age 67. 

But 7 in 10 of those plan to work at least part-time after their "official" retirement.

Also, only 68% of small business owners report plans to retire. Almost 1/3rd (32%) reported they plan on working indefinitely.

So if you do the math, you find only about 20% of small business owners plan on fully retiring.

We've long covered the topic of delayed retirement in our Baby Boomer section. Most baby boomers are reporting they plan on working longer than prior generations, either due to need or choice.

In the case of most small business owners, it's mostly choice. Small business owners tend to find business ownership fulfilling and want to continue.

Barlow Research is a research firm that provides in-depth information on business customers to the banking industry.  They are an excellent information and insights on the small business sector of the economy. We turn to them often in our work.

Patreon, True Fans and the Return of "Patron Funding"

In 2008 Kevin Kelly wrote a prescient essay called "1000 True Fans".

Key quote:

"A creator, such as an artist, musician, photographer, craftsperson, performer, animator, designer, videomaker, or author - in other words, anyone producing works of art - needs to acquire only 1,000 True Fans to make a living."

According to Kelly, if you have 1,000 True Fans (defined as people who will pay for your content) you have a large enough audience for your work to generate enough money to live. 

Since that essay crowdfunding has become a large industry, but it's been mostly focused on the funding of physical products.

More recently there has a been a growing trend towards the funding of artists and other creatives through "patron funding" models. These are sites that allow fans to subscribe to the creative output of individuals. 

A good example is Patreon, a site that allows creators to build subscription services that allow access to their work. 

According to the New York Times article Suffering for Your Art? Maybe You Need a Patron, Patreon currently "has one million “fans” who each contribute an average of $12 every month to their favorite artists on the site."

Originally designed for musicians, Patreon now has a wide range of "creatives". 

A good example is Naked Bakers.

The Vice article How NSFW Content Makers Found a Home on Prateon describes Nakde Baker as an R rated video series "that let's patrons of the show watch the "Baker" whip eggs, sift flour, and add her wet ingredients to her dry ingredients in the nude."

NSFW is a an acronym for "not suitable/safe for work".  

Subscribing to Naked Bakers costs a minimum of $3 per month, with the average subscriber paying $10 per month. The Naked Bakers, BTW, also gardens and cleans in the nude. 

While the relatively new Naked Baker show is not a huge hit, it's generating enough revenue that the "Baker" has quit her day job. 

One driver behind the shift to patron funding is advertising revenue models are becoming harder to make work. This is due to what some are calling the adpocalypse, which is the advertising revenue declines many content sites are seeing. 

The other driver is the growing awareness that a relatively small number of patrons can generate a decent living. As Kelly pointed out in his essay:

 "If you keep the full $100 of each true fan, then you need only 1,000 of them to earn $100,000 per year. That’s a living for most folks."

Patron funding is not new. During the Renaissance royal houses provided room, board, materials and business support to talented artists of the day.

Today, thanks to the Internet and platforms like Prateon, you don't have to be a Medici, or even rich, to be a patron.

This democratization of patronage is a good thing for artists and content creators. We believe this model will continue to expand, providing a growing alternative revenue source for a variety of independent workers.

Yes, Celebrity Dogs, Cats and Even Hedgehogs Have Agents

The Dog Agency is a talent management company focusing exclusively on animal influencers. By that we mean animals (mostly dogs and cats) with active online followers. 

Key quote from the New York Times article This Instagram Dog Wants to Sell You a Lint Roller:

There is now a talent agency based in New York that represents social-media celebrity animals. It is called the Dog Agency, though its 80-creature stable also includes a hedgehog, a pig and a pair of finger monkees with over a million followers.

The celebrity hedgehog is named Atticus. His Instagram feed includes ads for various products. Atticus, who writes surprisingly well for a hedgehog, even comments on the products. 

For example, Atticus likes Burger King's Cheesy Tots. This despite being an insectivore and likely lactose intolerant. But hey, most of us eat things we shouldn't. 

According to the founder of The Dog Agency, pets are great influencers:

"Pet influencers outperform human influencers in terms of engagement and virality, their posts are engaging across every age and gender, and consumers have an innate positive reaction to pet content and, in turn, associate those positive feelings with the given brand partner. In a nutshell, brands get more value from adorable pets."

Because they are such great influencers, celebrity pets "are making $10,000, to over $15,000 per piece of sponsored content". 

In addition to being pet talent agents, The Dog Agency also curates the popular Dogs of Instagram (4+ million followers) and Cats of Instagram (over 8 million followers) feeds. 

Regular readers know we like pet trends here at Small Business Labs.

We often make fun of these trends. But the trend towards pet humanization is an important trend with a broad range of economic, cultural and social implications. 

The rise of pet celebrities is an interesting example.

Tech Jobs Moving to the Midwest

U.S. companies have long moved work overseas to save money. But a long emerging trend of moving work to lower cost areas of the U.S. instead of overseas appears to be gaining steam.

The New York Times article Hot Spot for Tech Outsourcing: The United States looks at the outsourcing of software development tasks to lower cost U.S. cities, mostly in the Midwest.

Although lower cost U.S. cities are more expensive than outsourcing overseas, rising salaries and costs overseas is making outsourcing there less of a bargain.

Meanwhile, locating in the U.S. has a number of advantages.

Having work done in the U.S. greatly reduces issues and problems associated with  navigating time zones, cultures and languages that are common with international outsourcing. 

The nature of software development and product design has also changed in ways that make domestic outsourcing more attractive. Key quote from NY Times article:

... companies in every industry need mobile apps and appealing websites, which can be made smarter with data and constantly updated. That software is best created by small, nimble teams, working closely with businesses and customers — not shipped to programmers half a world away.

Regular readers know one of our favorite trends is the paradox of place. 

The paradox is even though the Internet and connective technologies has made working remotely easier than ever, people and companies are increasingly clustering together in fewer, more valuable locations.

But despite the paradox, there are a growing number of signals indicating that companies - and workers - are becoming more distributed. 

The talent marketplace Upwork, for example, released a study earlier this year showing that work conducted via their site is increasingly moving from high cost areas of the U.S. to lower cost areas. 

Another example is the growing trend towards "near-shoring" - locating manufacturing in the U.S. to be closer to customers and supply chain partners.

Also driving this shift is cities like San Francisco and New York have become so expensive, it's simply become hard for companies and their employees to locate there,

LinkedIn's Labor Arbitrage Comes To Silicon Valley covers the shift to lower cost locations by many Silicon Valley firms. Key quote:

The advantages of these remote locations include lower salary costs, higher standards of living for employees, greater ability to retain employees, less competition and consequently higher retention.

A number of domestic outsourcing firms have sprung up to tap into this trend. The New York Times article covers the Midwest-based Nexient, whose tagline is "100% U.S. based software partner". 

Technology is, of course, the other driver of this shift. Next-generation chat, video calling, and project management software make it easier to coordinate work with and manage remote teams.

But paradox of place continues to be, well, paradoxical.

IBM and other major corporations are reducing telecommuting and ordering more people back to the office. 

And according to NewCo Shift, Co-located Outsourcing is The Newest Trend In Tech Outsourcing. Key quote:

In person, face-to-face, co-location is the most effective form of communication, especially when you are faced with brainstorming and solving complex issues. Software development is often complex. And, the more that companies rely on technology to be a differentiator, the more complex it becomes.

So the trends indicate there will be both more distributed work and more co-located work. We believe both will continue to happen, at least for the next 5-10 years. 

But we also think in the long run distributed work will become more common as technology reduces the problems associated with distance.

The short video below (less than 1 minute) give a quick overview of the Midwest's Silicon Prairie.  

42% of Young Small Businesses Use Contract Workers

The U.S. Federal Reserve released the their Report on Startup Firms. This is the second in a series of reports based on their 2016 small business credit survey. 

The focus of the report is credit experiences of startups with employees, which they define as firms 5 years old or younger that have at least one traditional full or part-time employee.

Startup firms make up about one third of small employer firms. They tend to be smaller, less profitable, but faster growing than mature small businesses (those who have been in business more than 5 years). 

There's a lot of interesting data in the report. But one set of data really jumped out at us.

According to the study, 42% of small startup businesses use contract labor. Also interesting is the median number of contract employees at startup firms is 3. 

This is interesting because the median number of traditional full and part-time employees at startup firms is also three.

This means contract workers are possibly about half the workforce at young small businesses. 

We say "possibly" because the survey didn't go into detail on how much contract workers are working at these firms. It also didn't go into detail about the split between part-time and full-time workers at these firms. 

So there's no way of knowing from this data what share of the firm's work is done by contract workers.

But fairly recent IRS data shows contract labor usage by small businesses has been growing quite rapidly. 

So it's safe to say contract workers are an important talent source for young small businesses.

Book Review: Thriving in the Gig Economy

"How to capitalize and compete in the new world of work" is the tagline for the book Thriving in the Gig Economy. This nicely summarizes this useful guide to the shift to independent work. 

The book starts with an excellent overview of the gig economy.

This includes a discussion of the various terms used to describe the gig economy, such as the sharing economy, the on-demand economy, etc., and how they differ.

There's also an in-depth review of many of the key gig economy studies.

After the overview, the book turns to the nuts and bolts of becoming and building an independent worker business.

This includes chapters on:

• building an independent worker brand
• setting prices
• marketing and selling services
• the role of online marketplaces
• legal aspects of independent work (taxes, business structure, etc.)

The advice in each of these chapters is both practical and explained in a way that makes it easy to apply. 

The author of Thriving in the Gig Economy is an independent work pioneer and founder of a consulting firm - M Squared Consulting - that relies heavily on independent consultants to staff their projects. 

Given this background, it's not surprising the book is targeted at skilled professionals considering or already working independently. 

We think baby boomers looking for their next gig will in particular find this book useful, especially the sections on online talent marketplaces and building an independent brand in a digital world. 

Our research shows aging boomers are very interested in independent work.

It also shows they often aren't up to speed in terms of the digital skills and knowledge that are helpful in succeeding in an independent "encore" career. 

But anyone interested in the gig economy will learn much from this book.