Small Business Labs

3D Printing Moving Past Prototyping to Large Batch Manufacturing

After literally several decades of hype and hope, it appears 3D printing may finally be starting to deliver on its promise to change manufacturing.

The shortcomings for 3D printing have been they aren't economical for large scale manufacturing, they don't produce parts as strong or reliable as traditional manufacturing methods and they are limited by the types of material they are able to use.

In particular, 3D printers have not been good at printing metal parts. 

All three of these shortcomings are rapidly changing. 

One example is Voodoo Manufacturing. 

They've created a network of 160 3D printers that is able to produce parts fast and cheap, at prices competitive with traditional injection molding in order quantities up to 10,000 pieces. They expect to be competitive with injection molding on up to 100,000 pieces in the near future. 

This is a big shift. Up until very recently 3D printers were only cost effective for small batches of 500 pieces or less. 

Another 3d Printing company, Carbon 3D, has developed a 3D printing technology that matches the strength and reliability of parts made using injection molding. 

Carbon also claims the ability to do larger scale production manufacturing.

And Desktop Metal claims their 3D printers can fabricate metal parts cheaply and quickly enough to make the technology practical for widespread use in product design and manufacturing.

Investors clearly believe in these companies. Both Carbon and Desktop Metal have raised over $200 million in venture backing. 

The elite strategy consulting firm BCG also thinks 3D printing is about to take off. Key quote from their article How to Position Your Company in the 3D Value Chain:

In 2015, the entire 3D-printing market—which includes products made from plastics, ceramics, and metals—totaled $5 billion. BCG expects this market to triple by 2020 ... and reach $350 billion by 2035.

Small manufacturing companies and Makers have long been active users of 3D printers.

And just as desktop publishing and desktop movie editing systems enabled the growth of small and solo media and entertainment firms, 3D printing will drive the growth of small and solo manufacturing firms.

EY Embraces the Gig Economy

The "Big 4" accounting and consulting firm EY recently announced GigNow, an advanced technology platform that sources and matches qualified independent workers with projects at EY.

Key quote on why EY developed GigNow:

“The trend of contract professionals demanding more flexibility to support new types of career paths is upending the way we find and engage talent. At EY, we see this as a strategic imperative to transform the way we attract the best talent for short-term assignments, especially during bursts of business activity. The launch of GigNow enables us to systematically engage the right talent, for the right opportunities at the right time.”

Key quote on GigNow's impact on contractor hiring at EY:

"With GigNow, the number of people working as contractors on short-term assignments at EY is expected to grow significantly over the next several years ..."

GigNow is similar to PWC's talent exchange and other private talent clouds. Corporations of all kinds are developing these platforms for the same reason as EY - to attract the best talent.

EY also announced EY Badges, a certification program that will allow EY employees "the ability to digital credentials in skills that differentiate them in the market, such as data analytics, AI, data transformation and information strategy."

Key quote on earning Badges:

Badges will be earned based on the same standards around the world – through world-class learning, fulfilling required experiences and making a contribution to the broader community, such as coaching colleagues, presenting to clients or publishing an article that educates others about the acquired skill. There will also be four levels of badge distinction (bronze, silver, gold and platinum), with defined criteria to be met in learning, experiences and contribution to earn each badge.

It's not clear from the announcement whether or not GigNow contractors will be able to earn Badges. But given the other announcements, it's likely this will happen.

And being certified by a firm like EY has obvious advantages to independent workers.

EY's announcement is yet another example of corporations moving to embrace the gig economy. And as we recently pointed out, gig economy companies are pivoting to serve this large and growing market. 

Graham-Cassidy Healthcare Bill Likely Bad for the Independent Workforce

The quick summary of our analysis of the Graham-Cassidy healthcare bill on independent workers is:

• Low and moderate income independent workers would likely be worse off due to the reductions in medicaid and elimination of subsidies provided by the ACA (Obamacare).
• Older independent workers (aged 50+) would likely be worse off due to potential changes in how insurance companies can charge older Americans.
• Those with preexisting conditions could be much worse off due to reduced protections related to preexisting conditions.
• Those who develop new healthcare problems could be much worse off due to reduced protections related to preexisting conditions.
• Young, healthy, relatively high earning independents are potentially better off.
• The number of independent workers and self-employed will likely decline due to problems getting health insurance as an independent worker.

This last issue is a big one for independent workers. One of the best features of Obamacare is it detaches health insurance from jobs, making health insurance portable. This greatly reduces health insurance related job lock, allowing more people to become self-employed and start small businesses.

It's likely under Graham-Cassidy the availability and portability of health insurance available to independent will be reduced, at least in some states and likely many states.

It's also likely that some states will allow insurance companies to charge more for preexisting conditions and also charge older independent worker more than allowed under Obamacare.

Combined, we think these changes will increase health insurance job lock and reduce the number of people who choose to become self-employed or start small businesses.

Because of these reasons, we think the Graham-Cassidy bill is bad for independent workers and the independent workforce.

Despite our negative view of the bill, there are parts of it we like. We think providing more flexibility to the states - a major objective of the bill - is a good idea. 

But the bill seems at best half-baked, rushed and lacking specifics. For example, the reason we say "likely" and "could" above because the bill lacks the specifics required to analyze its impact on independent workers in a definitive way.

As hard as it is to believe, there's not even enough specific information to understand the bill's impact at a broad level on healthcare or health insurance. 

John McCain summed up the lack of information nicely when he said last week:

“Nor could I support it without knowing how much it will cost, how it will affect insurance premiums, and how many people will be helped or hurt by it.”

Republican Senator Joni Ernst's response last week to a question about the impact of medicaid cuts is also telling:

“Well, I’d have to see the numbers ..."

In other words, she doesn't know. Nor will she know prior to the vote, which is planned for this week, because no new numbers will be available by then.

Normally the Congressional Budget Office (CBO) does an analysis of the impact of new bills. This isn't happening for the Graham-Cassidy bill because the Senate isn't giving the CBO enough time or information to do a detailed analysis prior to the vote.

Several groups outside of government have released analyses of the impact. All the groups who have done this have stressed their studies are speculative due to a lack of information around the bill's potential impacts. 

Avalere Health's analysis shows that Medicaid funding to the states would be reduced by $713 billion over the next 10 years. 

The Brookings Institution's analysis found the bill would reduce the number of people with insurance coverage by around 21 million. 

The Kaiser Family Foundation's analysis shows the impacts of the bill on a state by state basis. Their analysis shows thirty-five states plus the District of Columbia would face a loss of funding and almost all states face a potential loss of federal funds for their traditional Medicaid programs. 

All of these studies are quite negative on the bill. 

We tried to find a positive analysis of the bill from a non-partisan source, but failed. This is because we've been unable find a non-partisan healthcare related group in favor of this bill.

The insurance industry, hospitals, consumer activists, the AARP advocacy group and organizations such as the American Medical Association, American Heart Association and American Cancer Society all oppose the bill.

Despite widespread opposition and a lack of understanding what the impact on the healthcare system would be, Republicans hope to pass this bill this week.

The reason is politics. 

Passing this bill has become a political exercise with few on either side caring about what's actually in the bill. Republican Senator Chuck Grassley went as far to say:

“I could maybe give you 10 reasons why this bill shouldn’t be considered. … But Republicans campaigned on this so often that you have a responsibility to carry out what you said in the campaign. That’s pretty much as much of a reason as the substance of the bill.

For those more interested in the substance of the Graham-Cassidy bill than our Senators appear to be, see the Kaiser Family Foundation's analysis.

Cycling Between Traditional Jobs and Independent Work to Become More Common

MBO Partners released a list of their 10 predictions for the next decade of independent work. The list covers a lot of ground and all the predictions are interesting.

But the predictions that caught our eye related to MBO's forecast that people are increasingly going to cycle between traditional jobs and independent work.

The two predictions that cover this are:

1. By 2027, more than half of the workforce will be, or will have been, an Independent.

Over 40 percent of the adult workforce reports currently or previously having worked as an Independent. In the next decade, that number will grow to nearly 60 percent.

2. Independence will become an episodic destination, not an end state.

Satisfaction levels for Independents are the highest they’ve ever been, but many will return to traditional work to gain new skills, cycling back to independent work several times.

The first prediction - that by 2027 over half of the workforce will have spent time as independent workers - is based on data from the annual MBO Partners State of Independence study series. 

This study found that a bit over 40% of working adult Americans had spent some of their career working in a traditional job and working independently. The trend on this has been consistently upward since the study was first started in 2011. 

The related prediction that independent work (freelancing, independent contracting, etc.) will become more episodic is also based in part on data from the State of Independence study.

This data shows that over the study time frame (2011-2017), the number of people who moved between traditional employment and independent work consistently has increased. 

An example is the data showing a slight decline in the number of full-time independent workers over the past 2 years. This is due to the strong traditional job market attracting people back to traditional employment.

Most of the returnees are "reluctant independents", who are people who prefer traditional employment but were working independently for various reasons. 

But some of the returnees are people who are going back to a traditional job to gain new skills or are attracted by new opportunities. 

At the same time, others are leaving traditional jobs and becoming independent. These folks are attracted by the autonomy, control and flexibility independent work provides.

This is especially true for highly skilled, high earning workers who continue to move to independent work in growing numbers. 

The cycling back and forth between traditional jobs and independent work is part of a broader shift towards what LinkedIn founder Reid Hoffman calls "tours of duty". 

These are 2-4 year assignments between a company and an employee with the expectation that many will leave the firm for other opportunities at the end of a tour. 

Th break down of the traditional social contract between corporations and employees is leading to growing numbers of firms turning to tour of duty type assignments. Employees are also increasingly realizing they're effectively "free agents" even if they have a traditional job.

These shifts leading to more people spending some of their career as independent workers, even if they prefer traditional employment.

We certainly agree with MBO Partners that independent work will increasingly become episodic. So will traditional employment.

See MBO's press release for their other independent work predictions.

Disclosure: MBO Partners in an Emergent Research client and we work with them on the MBO Partners State of Independence study series.

The Staffing Industry Analyst's Human Cloud Framework and Taxonomy

Last week the Staffing Industry Analysts (SIA) released The Human Cloud, the Gig Economy & the Transformation of Work.

It nicely covers the topics mentioned in the report title. Key quote from the report on the size of the "human cloud":

"SIA estimates that total human cloud spending reached between $47 and $51 billion globally in 2016. The business-to-business (B2B) segment of the human cloud grew approximately 20% year-over-year, with remote work arrangements accounting for 80% of human cloud revenue and highlighting flexible work location as one of the benefits of the human cloud. 

The report is excellent and well worth reading. We particularly liked their definitions and their human cloud framework and taxonomy.

The SIA defines the human cloud as:

... an emerging set of work intermediation models that enable work arrangements of various kinds to be established and completed (including payment of workers) entirely through a digital/online platform. In many cases (although not always), the platform also supports "the enactment and management" of the work (to a greater or lesser degree).

SIA does not include job boards or social networks in their definition because they don't enable or support work arrangements through to their completion.

They've also defined three human cloud subsets:

Online staffing platforms: enables hirers and independent workers to enter into, transact and complete work arrangements. Upwork and Fiverr are examples.

Online work services: these platforms enable the delivery of specialized services that are performed by independent workers. Uber, Lyft and Handy are examples 

CrowdSourcing: These are platforms or marketplaces like Amazon Turk that allow for work to be broken into tasks and performed by a distributed "crowd" of many workers.

As the SIA chart above shows, there is overlap among the various types of human cloud services and service providers.

We like the SIA's taxonomy and definitions and plan to use them going forward. 

The report goes on to say that the global size of the gig economy is $3.5 trillion.

To put that into perspective, if the gig economy were an independent country it would have the 4th largest economy in world (smaller than Japan, but a bit bigger than Germany). 

So the gig economy is big. 

Click here to go to the report's press release and landing page.

Drones for High Value Deliveries

We hear a lot about drones delivering pizza here in the U.S. We also hear about driverless cars delivering pizza. We obviously like pizza delivery. 

But the startup company Zipline is delivering much more important items with drones. Since 2016 they've been using drones (more properly referred to as unmanned aircraft systems) to deliver blood and medical supplies in the African nation of Rwanda.

The drones are fixed winged unmanned aircraft systems, which the locals call "sky ambulances". They drop off medical supplies by parachute to remote hospitals and clinics located in hard to reach areas of the Rwandan countryside.  

Zipline's fixed wing drones have greater range, can carry more cargo and handle bad weather better than the traditional quadracopter drones. Key quote from the Backchannel article AFRICA’S DELIVERY DRONES ARE ZIPPING PAST THE US:

Zipline’s rugged, fixed-wing drones have already made over 1,400 flights and delivered 2,600 units of blood, even during bad weather conditions involving heavy rain or wind in Rwanda. 

Starting next year, Zipline will add deliveries in the much larger country of Tanzania. Key quote from their press release announcing the new service:

Beginning in the first quarter of 2018, the Tanzanian government will begin using drones to make up to 2,000 life-saving deliveries per day to over one thousand health facilities, serving 10 million people across the country.

Almost all new technologies start out being used in high value applications. This is because, generally speaking, new technologies are expensive

Over time as costs come down, the new technology spreads to broader use in lower cost and value applications. Like pizza delivery. 

As we've recently covered, drone sales are taking off. This is true for both hobbyist sales and industrial sales. Expect to see this trend continue, especially due to the growing number of high value drone applications.

Wireless Data Usage Continues to Explode

Wireless data consumption in North America has grown 9 fold since 2012.

This comes as no great surprise, but the numbers are still impressive.

The chart below illustrating this is from the Axios article America's insatiable wireless appetite.

According to the article: 

• In 2016, there were 291 million unique wireless subscribers in North America, representing 80% of the region's population.
• There are now more mobile subscriptions in the U.S. than people.

We often point out that every time we make a mobile computing forecast we think it's too high. And so far every time we've made a mobile computing forecast, it's turned out to be too low.

We don't forecast smartphone data usage. Just as good. No way we would have forecast data usage to grow so quickly.

After a Decade of Strong Growth, Craft Brewing Industry Shows Signs of Slowing

In 2016, a new craft or micro brewery opened in the US on average every 11 hours. Pretty amazing.

Also, the roughly 5,300 U.S. craft and micro breweries produced 24.6 million barrels of beer in 2016. This was about 12.3% of the beer industry's 2016 volume. 

More impressively, craft and micro brewers 2016 sales totaled $23.5 billion, which was 21.9% of the U.S. beer industry's revenue. 

But despite these frothy numbers, there were also some sobering craft beer stats in 2016.

Volume sales growth slowed from 13% in 2015 to 6% and sales growth declined from 16% in 2015 to about 10% in 2016.

So while the craft beer industry is still growing, the growth is starting to slow.

The financial analyst firm Harding Loevner's report CRAFT BEER IS GOING FLAT. CAN CRAFT SPIRITS CONTINUE THE INSURGENCY? nicely covers the reasons behind craft beer's slowing growth. 

A big reason for slowing growth is craft beer is a victim of its own success. Key quote:

... the groundswell of newcomers resulting from lower barriers to entry has fragmented the market, making it increasingly difficult for craft breweries to stand out from their peers and grow their brand. 

Another reason is the big brewers are fighting back. They are releasing their own craft style beers and acquiring craft brewers.

According to the Brewers Association, large brewers acquired micro brewers that produced roughly 1.2 million barrels of beer in 2015. This was about 5% of the entire craft beer production in 2015. 

Harding Loevner also points to market saturation as a source of declining growth. Their analysis shows an estimated 75% of the US drinking age population resides within 10 miles of a brewery.

Price is also an issue. As the Harding Loevner report says, "there are natural limits to how much of the market will pay $17.49 per six-pack (the current retail price of a Dogfish Head “Flesh and Blood IPA” on Craftshack.com)."

So is the craft beer boom over? 

No. And it's especially not over globally. As the Harding Loevner chart below shows, there's plenty of room for craft beer growth globally.

Also, there are still pockets of high growth here in the U.S. 

According to CBS MarketWatch's Craft-beer glut starting to take its toll on sales smaller micro brewers are doing much better than larger ones. Key quote:

The 5,000 small brewers shipping fewer than 100,000 barrels a year had an average volume growth last year of 14%, double the growth rate for the craft category overall, according to Beer Marketer's Insights.

At the same time, the article points out that "shipment volumes declined for 16 of the top 36 craft-style U.S. brewers last year."

So the more micro the brewery, the more likely it's doing well.

Our interest in the craft brewing industry is due to the fact that it's such a good example of a barbell industrial structure. 

In this structure industries are comprised of a few global corporations on one end and a large number of small, micro and solopreneur businesses on the other.  

As the barbell evolves, the number of mid-sized businesses decline in number. These firms lack to the scale to compete with the global giants but are too big to match the agility and flexibility of smaller firms. Mid-sized firms also are attractive acquisition targets for the global giants.

We've been following the evolution of barbell industry structures for over a decade and we often use the beer industry as an example. The reason is the beer industry is such a clear example the barbell. 

But it's not just beer. Almost every industry we've looked at is moving to a barbell structure.

See our Industrial Structure section for more on this topic.

The Gig Economy Pivots to the Enterprise

Over the past few months there's been almost a stampede of gig economy companies talking about the corporate market and/or announcing new services, products or initiatives aimed at serving large corporations.

Examples include (but aren't limited to):

• IT talent marketplace Gigster announced g a new funding round that is fueling a "pivot to the enterprise". 
• Talent marketplace Upwork announced a new division - called Talent Services - targeted at corporate users of online talent.
• Creative talent marketplace Fiverr announced Fiverr Pro, which targets enterprises.
• Crowd talent provider Gigwalk announced a partnership with Deloitte to jointly target enterprises. 
• Coworking giant WeWork revealed that large enterprises are fueling their growth.
• Airbnb expects their corporate business to quadruple in 2017.
• Uber and Lyft have been gaining share in the corporate market. 

This is quite a shift for the gig economy.

Most of these firms - and most other gig economy firms - have focused on consumers or small businesses. 

Upwork, for example, pointed out in one of their studies last year that over 80% of their revenue came from small businesses. WeWork's customers were almost exclusively freelancers and startups as recently as 2 years ago. And Airbnb only had 250 business customers in total in 2015.

All these firms now get a sizable share of their business from larger corporations and are looking to this sector for additional growth. 

So what's going on?

Three things. First, big companies are starting to embrace the gig economy. 

As the Fortune Article The Gig Economy Isn’t Just For Startups Anymore points out:

Increasingly Fortune 500 companies and global giants like Samsung are turning to online freelancing platforms like Upwork and PeoplePerHour to find designers, marketing staff, IT specialists and other knowledge workers.

Driving this shift is corporations are looking for faster ways to hire and utilized specialized talent. And they're finding online talent marketplaces provide these benefits.

Second, the gig economy has matured and most corporate employees have used gig economy services as consumers. Because of this, they are expecting to use them on the job and companies are responding by changing their attitudes and policies on the gig economy. 

And third, gig economy companies are recognizing that the enterprise market offers a lot of opportunity and they are creating new programs, services and even specialized business units to go after this market.

We expect that gig economy use by large corporations will continue to accelerate and be a key driver of the next round of gig economy growth.

The Number of STEM and Accounting Grads Rapidly Increasing.

Emsi's article STEM Majors Are Accelerating in Every State, Just as Humanities Degrees Are Declining covers the rapid increase in the number of college student graduating with STEM (science, technology, engineering and math) majors.

Key quote from the article:

Since the Great Recession, the number of STEM majors in bachelor’s degree-and-above programs has mushroomed, going from 388,000 graduates in 2009-10 to 550,000 in 2015-16—43% growth.

The article also points out the number of humanities graduates has slightly declined. This despite an overall increase in college graduates during this period.

The shift towards STEM education reflects the growing awareness that STEM jobs tend to be more plentiful than jobs for humanities grads.

This is also reflected in the growing number of accounting students (see chart below). It's another field with excellent job prospects for grads. 

 

We'll have more on the rising number of accounting students in the near future. 

Emsi, BTW, is an excellent source of information on all things related to labor markets. Their blog provides in-depth articles and is also a great source of labor market data.