The Hollywood Way
- And The Rise Of The Micro-Multinational
Producing a movie, if you think about it, is just like any other project. A group of people, who may or may not have worked together, come together to produce a piece of work. Once the work is complete, they go their separate ways, and their distributors use as many channels as possible to sell the movie.
James Wallman, Future Gazers report
More firms will follow this project-based Hollywood model in the future. This modus operandi will impact two key elements of a business: operations and distribution.
Let’s consider operations first. In previous times, work was far more fixed. We went to a specific location and worked a clearly defined set of days and hours, with a stable number of colleagues, using a steady set of resources. Modern business is far more flexible: it’s far easier to adjust the assets, staff, office space, and sales channels we need. Instead of making significant upfront commitments — to key resources like office space, capital and people — we can now operate our businesses in the cloud.
In the future, more businesses will choose remote and co-working, and operate as “cloud businesses”. Instead of high-cost, high-risk outlay, they’ll operate in the cloud — and use the best combination of off-the-shelf technologies to facilitates their business. Recent research shows that companies that use the “startup stack” of technologies, like payments processors Stripe or Paypal, reduce operating costs by 45%, and increase productivity by 45% too1. This also helps a company focus on doing what it does best.
“We’ve grown 20-fold in the last two years,” says Aron Gelbard, CEO of through-theletterbox flower delivery firm Bloom & Wild, “and we’ve relied on a huge number of technology tools to accelerate that growth: from RJMetrics for data and analysis, to Xero for accounting, Shutl for delivery, and Stripe for payments… to build the best possible experience for our customers, we need every element to be the highest quality. Why build that yourself when there are experts with ready-made solutions to all of these challenges out there?”
Besides the computing cloud, Hollywood model firms will access the “human cloud” for staffing solutions. They will hire a virtual assistant or designer via sites like Upwork, Amazon’s Mechanical Turk or Sevendays. Or, they might access real people from an on-demand staffing company like Catapult.
Now, let’s consider what the Hollywood way means for distribution. There used to be two simple ways to think about business size and reach. A firm was either big and global, or small and local. Thanks to cloud computing and globalisation — as provided, for instance, by SendOwl, a platform with sellers in 86 countries and buyers in more than 180 that makes it easy for entrepreneurs to directly sell their digital products — there is now a new paradigm: small and global.
You can already see the rise of micro-multinationals in ambition: 86% of tech startups today aim to serve a global audience, according to McKinsey Global Institute. Besides changing attitudes, you can also see this shift in hard statistics. It used to take British firms 41 months to become international. It now takes 22 months2.
But this isn’t only about tech startups. Consider Blue Parrot Language, the American-Jamaican firm that produced the world’s first and only Jamaican thesaurus, the Jamaicasaurus. In times gone by, this would simply have been a passion project with local reach. Now, the meaning of local has been changed by digital, and Blue Parrot Language sells the Jamaicasaurus around the world. There’s also Australian bedmaker A.H. Beard. Family owned and operating since 1899, the firm broke into the Chinese market in 2013. Since then, it has opened 34 branded shops there, and doubled its revenue every financial year. The business is expecting to have 100 Chinese stores by 2023.
While the internal side of A.H. Beard’s business is clearly traditional — the company has factories and a workforce within each of them that handmake its beds — its external side is following the Hollywood way. Its distributors are riding the wave that is globalisation to increase sales and distribute its finished goods internationally.
At present, only a relative few firms are operating the Hollywood way, that is, distributing globally and operating in a lean, project-based way. According to government estimates, only 9% of small and micro businesses (0-49 employees) and 33% of medium (50-249 employees) British firms export their goods and services3.
And till now, companies with a relatively fixed workforce make sense. As the English economist Ronald Coase showed, in the work that won him a Nobel Prize in economics, firms are currently essential in our capitalist system because of the “transaction costs” of doing business.
“There are negotiations to be undertaken, contracts have to be drawn up, inspections have to be made, arrangements have to be made to settle disputes, and so on,” Coase said in his acceptance speech in 1991.
The firm, Coase worked out, is the most efficient way of handling all these details. But in the future, technology will reduce the friction and shrinks those costs: AI will make project management far easier, for instance. As a result, it will be easier for companies to unbundle, outsource functions to others, crowdsource R&D, and exchange employees for contractors.
We think a far larger proportion of firms will be running their operations in what we call the Hollywood way within 10 to 15 years, as does professional services firm PWC. In its recent report, “Workforce of the future: The competing forces shaping 2030”, the company forecast that in 2030: “Projects quickly flourish, evolve and resolve and specialists move rapidly from one to the next… Near-zero employee organisations are the norm… Organisations are typically stripped-down and nimble, supplemented by talent attracted by the next promising opportunity”.
So, by 2030, many firms will be not only be using all the pay-per-use services in the technology cloud, but also employing people via pay-per-project in the human cloud. This sector is already growing at pace. In 2015, this human cloud market generated between $25.6 billion and $28.6 billion globally. In 2016, those figures rose to between $47 and $51 billion globally.4
Besides the impact of the technology stack and human clouds on the operations of a firm, more firms will take advantage of seamless, friction-free global distribution platforms, and launch with global ambitions.
The time it takes to become an international company will become ever shorter, according to London-based venture capital firm Atomico. As the firm has noted, “international expansion is happening faster than ever… of the 62% of billion-dollar companies that internationalised, those founded between 2003–2008 took an average of 3.4 years to go do so… those founded after 2009 took an average of only 1.8 years.”
OK, so perhaps your small business’s aim isn’t to become a billion-dollar valued “unicorn”, but the statistics illustrate a simple point: it is becoming, and will become, easier for small firms to grown and become international. We firmly agree with Atomico when they say, “As barriers come down, small and fast can win the race”.5
By 2030, most small business in the UK will be operating the Hollywood way. They will be lean — using cloud-based technologies and the human cloud to deliver solutions for their clients. And they will be micro-multinationals — using as many channels as possible, from Amazon to SendOwl, to distribute their goods as widely as possible.
Future Gazers report
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2. Source: Tech City UK - Stripe Startup Stack Survey, 2016.
3. Source: UK SMEs in the Supply Chains of Exporters to the EU, Department for Business, Innovation and Skills, 2016.
4. Source: staffing and workforce firm Staffing Industry Analysts.
5. See “European entrepreneurs are scaling globally in record time: our research into how the world’s most successful companies go global”, Atomico.com, 19 May 2015.