Is "Thinstaffing" the Future of Shared Services?

In 2010 I was leading shared services innovation work at a large consumer products company. To help "bring the outside in" I organized a meeting between our executive team and a small Silicon Valley startup that had developed an interesting solution to collect and retrieve information from any device. Now for a confession. This meeting was one of the "top 10 meeting fails" of my career. The comments from the start-up can pretty much be summed as follows… "Why would we waste our time working with you? You’ll burden us with unnecessary requirements and long drawn out meetings – just like the one we’re having now. We’re adding about 5,000 new users to our platform weekly and the numbers are growing exponentially. Maybe we’ll talk again in a year or so. Here’s the phone number for our newly hired 23-year-old business development guy. Feel free to grab some snacks from the kitchenette on the way out." You can imagine the shock from our executive team. (Fortunately the snacks helped keep everyone calm). After decades of having big consulting firms so eager for our business, it was humbling to have a lowly technology startup express absolutely no interest in having us for a client. At that moment I knew the world was changing. Around that same time I had finished reading Clay Christensen’s book entitled "The Innovator’s Dilemma". In summary, the book highlights patterns associated with market disruptions. Spoiler alert – industries are commonly disrupted by low cost offerings that address needs of underserved segments in the market. The idea of market disruptions got me thinking about my "epic fail" meeting from a different angle. All I had to do was "follow the money" to the underserved portion of the market. The startup had an opportunity for massively larger profits by focusing on the consumer side of the marketplace. They could obtain economies of scale that typically aren’t achievable from directly selling to enterprise customers. Furthermore, by focusing on the consumer market, it was easier to standardize their service offerings. They built something once and it’s sold over and over again. And last but not least, they didn’t waste valuable time and resources running through the gauntlet of the enterprise sales cycle. [eventpdf] On the surface this might not sound radical; however, the meaning of the word "consumer" has expanded to include any employee equipped with a corporate credit card. The back-office has serious competition from low cost, user friendly, business solution providers. And the number of competitors is increasing every single day. Think about it. How many people in your organization are using solutions like Yammer, Skype, or Dropbox? Maybe there’s a sales team in your organization running an unsanctioned CRM solution. How would you even know? The future of shared services becomes very interesting if we start projecting these trends forward. Referring back to common market disruption patterns outlined by our friend Clay Christensen, it’s worthwhile to assess the lower end of the shared services market. Often, this provides a glimpse of what the future might look like. That means spending some time with small business owners to learn about how they are managing their needs. Sometimes referred to as "thinstaffing", today’s small business owners are tapping into high quality back-office capabilities. Most services offer free trials, low monthly payment plans, and simple user license fees. This means they can obtain shared services without the need to hire full time staff or make capital-intensive investments in systems or software. They are empowered to run a full scale business with a thin staff (hence the name) and because most solutions have built in API’s, integrating information across different functions and solutions is relatively easy. A few solutions that might come to mind include Zen Payroll, Freshbooks, Zenefits, Shopify, Shipwire, Legalzoom, or Web.com. It’s inevitable "thinstaffing", in one form or another, will eventually work its way up-market to larger organizations. The forces are already at work: Large companies are facing direct competition from employees using freemium and "consumerized" enterprise solutions. The "Bring your own phone" phenomenon is just the beginning. Let’s not forget that each phone is a mini-computer connected to an app store that is exploding with access to business solutions. Mid-tier companies are always looking for new alternatives to reduce their costs and manage the challenges of growth. The cost-benefit equation, along with ease of use, often favors non-customized offerings. And, as small businesses become big businesses, the "thin staff" solutions they used as start-ups will continue to scale with them. If this is true, then it’s easy to envision a phenomenon where the proverbial shared services "pendulum" swings the other way. While it sounds counter-intuitive, over the next five years we will likely see increases in decentralization of service organizations. This will enable organizations to obtain scale benefits and lower costs of "consumerized" offerings. Additionally, it provides localized team leaders more flexibility, which translates into higher levels of end-to-end leadership accountability. Within shared services organizations the role of the shared services business relationship manager could shift from being the single point of contact for traditional shared services, to being the manager of all the services that are procured in the open marketplace. This wouldn’t be a big change from their current role, but would require more external focus. Additionally, this would likely strengthen their relationships with sourcing and procurements organizations. Of course, with the desire to anoint yet another "c-suite" title, one could also imagine a new role such as the "Chief Integration & Administration Officer." We could affectionately refer to it as "Ciao". Their role would be to ensure API’s feeding information from the various solutions are rolled up and analyzed to enable visibility and leadership decision-making. Admittedly this is all purely speculation with a little bit of fun. There are a variety of factors like corporate politics, competing economic models, and entrenched players that will work against any dramatic disruptions in the shared services industry. Not to mention the fact that there are plenty of legitimate business needs that require specific solutions which can’t yet be obtained in the open marketplace. What’s most important is that we continue to maintain an eye toward the future. New sources of business value, like "thinstaffing", are emerging all the time. Business solutions are also getting easier to test and validate. Truly, there’s never been a more exciting time to be in the shared service industry than right now. [Note: if you liked this article, please use the buttons on the left side of the screen to share it across your LinkedIn groups – and contribute to this discussion by posting your thoughts in the comment section, below. Thank you for being part of SSON's community - Barbara Hodge]

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