Platt Perspective on Business and Technology

Telecommuting and the marketplace transition to the telecompany 3 – defining the business model in a telecompany and virtual business context 2

This is my third posting to a series in which I outline and discuss a new and emerging business approach that is coming to have tremendous impact, and both on marketplaces and economies and on how we do business, and on individual employees as they plan for and carry out careers (see Part 1: defining the term and putting this business model into perspective and Part 2: defining the business model in a telecompany and virtual business context 1 .) And I begin this posting by acknowledging that the preceding statements include a significant oversimplification, where I reference telecompany business models as if they clearly, cleanly all fit a single unified pattern. That is in fact not true and my goal in this series installment is to divide most businesses that would follow a telecompany approach as fitting one or the other of two fundamentally distinct business models:

• The costs constraint telecompany model, with its focus on limiting fixed operating expenses, and
• The shifting opportunities-oriented telecompany model with its focus on capturing new and emerging, and even fleeting sources of competitive advantage.

The costs constraint telecompany model: The best place to start a discussion of this business model is from an historical perspective and from the lessons of recent history, beginning with the start of the Great Recession. When the economy started its downward spiral amidst all of the uncertainty that financial institution failures and roaring deficits were creating, businesses and business owners saw great impending risk. Businesses downsized, and both to meet reduced need for their products and services, or at least reduced customer activity and revenue generation in their markets. More than that, businesses began to downsize in attempts to get ahead of the curve, and before they had excess staff that their business levels and revenue streams could not sustain. And unemployment started to go up and up and up and this simply contributed as a self-fulfilling prophesy to concerns that we might be entering a second Great Depression rather than a recession.

Without delving into the recovery efforts taken to emerge from this with government stimulus packages in the United States, and with a focus on austerity measures in the European Economic Union – and without delving into the differences in results these approaches have yielded, I simply note that in the United States, a real recovery began to take place and both for business activity and for increasing growth in stocks and other investment values. But here, primarily considering the United States as a working example, job growth and reduction of state, regional and national unemployment rates did not develop in keeping with upticks in the marketplace and the economy as a whole. This was definitely not the first recovery to take place with at least a significant delay in real improvement to the unemployment numbers but this quickly came to be seen as the most extreme such disconnect to have happened.

• Business owners and analysts talked about fear and uncertainty in the marketplace and for would-be employers, and about how they were not willing to take the chance of bringing in new employees again who they might have to let go and after taking on the expenses of bringing them in and up to speed at work, but before they could recoup those up-front costs.
• At the same time business owners and analysts spoke of increased efficiency, according to which fewer employees, and certainly fewer in-house employees could do more and produce more and individually contribute more towards the overall corporate bottom line. So fewer new hires were needed anyway.
• And increasingly when new hires were being brought in they were hired part time or by other means so as to evade having to offer them benefits packages with their associated additional expenses. And increasingly they were being brought in as contract workers and as temporarily hired free agents and not as direct in-house employees of the business itself at all.

This is a trend that has affected businesses regardless of basic business model deployed, but it has also led to development of businesses for which most employees are outside consultants or contract workers. And as an extreme case and end-point to this trend this has led to the development of true costs constraint telecompany model businesses. And I expect that we will see more of them arising and more businesses shifting towards that business model in coming years. In this, pressures and lessons learned from the Great Recession have helped to shape something of a paradigm shift, at least in opening up a new, now viable business model option.

• I would argue that with the economic and marketplace pressures already developing pre-Great Recession and with our increasingly ubiquitous and real time systems of communication and collaboration, telecompanies have become an increasingly viable standard business model approach anyway (see, for example An Open Letter to Jobseekers About Long Term Changes in the Job Market and Employability – 1 and its Part 2 continuation.) That is perhaps where businesses more fitting the shifting opportunities-oriented telecompany model would enter this story, and they increasingly will. (See below for a more detailed discussion of this business model and its implementation.)
• But the economic and marketplace spasms of the Great Recession have accelerated the process of developing telecompanies per se and certainly for promoting a more costs constraint telecompany model approach and if not as an element of a pure play model, then as a part of a more complexly structured, hybrid business model.
• The important point here, however, is that economic pressures and uncertainties, the presence of a large skilled and experienced workforce to draw from, and increasingly developed and vetted processes and capabilities for bringing in and working with consultant and other outside workers have collectively made the costs constraint telecompany model a more viable and attractive option, and if not as a fully followed business model at least as a means of capitalizing on new forms of efficiency.

And with that as at least an orienting start on outlining the costs constraint telecompany model, I turn to consider an alternative path to the telecompany that is also going to become increasingly important in the economy and to the overall workforce: the shifting opportunities-oriented telecompany model. And I will discuss that in my next series installment. Meanwhile, you can find this and related postings at:

Guide to Effective Job Search and Career Development – 2 (as a supplemental posting),
Outsourcing and Globalization and
Macroeconomics and Business.

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