Work, business & professional services

Whether Start-ups Need a Chicken or An Egg

If you have an idea for a start-up, or have already started up, it’s tricky to know where to start. It’s chicken or egg: you can’t sell new services without customers to sell them to. You can’t sell to new customers without a service. This is even more complicated if you offer a digital platform connecting lots of independent service providers with customers.

Three examples are Uber, Airbnb and Etsy. But you don’t have to be a business giant to encounter the same kinds of early challenges.

Harvard Business School defines service as the egg and customers as the chickens (though smarter!). First, you have to incubate the egg. Airbnb had to find people willing to open their homes to strangers. They did this by drawing on customers of Craigslist, the online classifieds site. They worked out they could do it better, with lovely photographs, and entice customers to Airbnb.

Doing it better than the others is crucial. Airbnb started off by employing professional photographers to make people’s homes look better than average. Uber did much the same thing by starting off with black cars driven by professional drivers. This attracted the first customers or early adopter interest. In management-speak, it was “non-scalable”, because they could not profitably keep it up.

Another secret is timing for launch and expansion. Uber chose a time when demand was high - people were on holiday, at conferences, or attending large events. Airbnb launched during a large political conference in Denver and continued to do the same in other cities. This was a clever strategy because it did not actually compete with competitors, who were unable to meet the extra demand.

Each of these was a start-up strategy. These companies went on to harness digital and mainstream advertising to go from 1,000 customers to a million. So if you have a business idea, don’t be chicken – start with the egg.

Bringing the Shoes Back Home

The sports shoe industry is worth a whopping $US80 billion and production is mostly outsourced to Vietnam, Indonesia and China. Now there’s a trend to do the opposite – insourcing with a difference.

Adidas is bringing manufacturing back home to Germany but employing only 160 people, rather than a thousand or more. Its new factory in Ansbach is dubbed Speedfactory and the reason for that is, essentially, speed.

Currently it can take as long as 18 months to design, create and produce a new line of shoes even though 75% of new trainers are in the shops for less than a year. The Speedfactory will dramatically shorten the supply chain, taking less than a week to design and deliver the shoe.

The way it works is top secret but the concept is not. Instead of ordering components and assembling them, Speedfactory will make the parts itself from plastics and fibres. It will assemble them using robots, knitting machines and 3D printers that take instructions directly from a computer design program. The software will be able to test the shoes virtually, before putting them into physical production. A human will do any work needing specialised skill.

The Speedfactory will initially work alongside the big Asian factories, rather than competing with them. Inevitably there will come a time when robots can do all the work and people will no longer be needed. No doubt all shoe companies will want to take advantage of short supply chains and cheap labour costs.

As The Economist notes, it’s a new manufacturing footprint. But there won’t be any footprints on the factory floor. We wonder how all the people who no longer make the shoes will be able to afford to buy these shoes later. Will products made by robots be bought only by the small percentage of the population with paid work? Is this an early example of the re-localisation of manufacturing or of deep automation or both?

Life Without Work

Sometimes a piece of research comes out that seems both obvious and counterintuitive. This is one of those – many young American men are happy having no work at all. They live at home with their parents and they spend their time playing videogames.

On one hand, it seems obvious that playing videogames at home can be entertaining, stimulating and informative and it costs almost nothing to do it. On the other hand, there is other research suggesting American men are in a lot of pain.

Researchers describe this as a “quiet catastrophe: the collapse, over two generations, of work for American men”. Results showed 44% of male, prime-age labor force dropouts say they took pain medication the day before. This is more than twice the rate reported by employed men. Many of them were also abusing the medication.

Even though young men may enjoy their jobless dreamworld of videogames, it does not prepare them for when they want to do other things later in life. Without job experience, they may face a lifetime of low wages, few opportunities, and poor mental health, just as the unemployed currently do.

While this argument does not appear in the research, is it possible there is a segment of men who use videogames to dull the pain of ordinary life? After all, the online world is a fantasy and players don’t need to face any of the problems caused by technology or unemployment.

As one journalist in The Times says, “what if we simply stall at a virtual facsimile of [the world]?” He argues, even if there is work to do, humans may eventually lack the motivation to actually do it. (See our story The Future of Men).

Why the Middle Class Will Suffer

A story in our last issue, Is your job safe from robots?, quoted a Pew report that two thirds of Americans think robots will in 50 years be probably or definitely doing most of today’s human work. An optimistic 80% thought their own profession would be probably or definitely safe.

The story continues as experts calculate the risks of certain jobs being lost. A paper published in 2013 by Frey and Osborne assigned the probabilities of jobs being automated according to the types of tasks. It found social, creative and complex jobs are harder to automate but warned 35% of jobs in the UK, especially working class jobs, were at risk.

Now Frey has updated the risks and says middle class jobs are at risk too. So-called safe jobs, like insurance underwriters, loan officers, credit analysts and motor insurance assessors, are at high risk of being lost. At medium risk of being lost are judges, magistrates, economists, computer programmers and personal financial advisers. Who would have expected the financial or legal professions to suffer?

How dire you consider this depends on whether you take an optimistic or pessimistic view of the market. Pro-market consultants, LEK, claim Britain’s economy responds well to automation and has created more, higher quality jobs. Within 369 categories of jobs, 3.6 million were created and 1.1 million destroyed between 2011 and 2016. Most new jobs were considered to be resilient for the future.

We noticed many of the jobs lost are those traditionally done by women: cashier, bank clerk, telesales, typist, secretary. Many new jobs created are traditionally done by men: programmer and software developer, IT director, mechanical engineer, project manager. Other jobs, like accountant, technical writer or tram driver, are also on the way out.

Meanwhile, we can expect to see no shortage of psychologists, surgeons, occupational therapists or PR executives. In these circumstances, we can certainly see the continuing need for good PR and a therapist.

Full-Time Robots; Part-Time Humans

The future of work, if a roundtable discussion at The Guardian is accurate, will be part time and freelance. The robots will have the full-time work and won’t need tea breaks or superannuation (pensions). In almost every area of work, there will be massive upheaval.

Over a million people work in call centres and are highly likely to lose their jobs to well-trained robots. There may be a part-time human available to answer very tricky, non-scripted questions. In manufacturing, many factories in Asia are already described as “lights out” automated factories where almost nobody works.

Retail has adopted self-checkout, but Amazon has a store in Seattle where people go in and take what they want off the shelves without any need to check out at all. Sensors simply bill their online account. Jobs for shelf stackers will die out completely as robots can do it without making mistakes or getting sore arms.

Driving jobs are covered in our story, Self-driving trucks drive truckies out of work. Agriculture is going the same way with autonomous tractors and combine harvesters, with job losses for seasonal workers and labourers.

Even lawyers might lose their jobs, especially searches performed by junior lawyers and lower skilled workers like paralegals and secretaries. Staff in banks will lose their jobs and many accountants will no longer be needed to read and interpret financial data because machines will do it faster (without yawning).

The good news is health and social care work is the fastest growing occupation today. Robots can do the administration but there is nobody quite like a person when you are sick, frail or upset. Most of these jobs are low risk, but they are also low pay. They are commonly part time and done by women.

The safest sector of all is education. Nobody can imagine a robot taking a class of unruly children. Even so, with many governments withdrawing funding for schools and universities, it will be interesting to see who gets to keep their job and what they are paid to do it.

Some believe we are heading for a two tier society of unemployed, low skilled people and part time, highly skilled knowledge workers. This could create severe social divisions and a level of unrest beyond anything we are experiencing now.