The Fourth Industrial Revolution — the developing business environment that is characterised by disruptive technologies — has led to many exciting young startups seeking to transform the staffing industry. Much is made of the clash between “old” and “new”, with many predicting the demise of incumbent staffing firms because they are slow to adapt and ill-equipped to thrive in the 21st century.
But are these predictions greatly exaggerated? Staffing companies, from boutique firms to large, multinational organisations, offer real value to their customers in a way that off-the-shelf, “cookie- cutter” technology solutions cannot by leveraging the huge benefits associated with their superior infrastructure, track record and industry-specific expertise.
Nevertheless, many young technology-enabled businesses have an undeniable value proposition, from automating and streamlining historically manual and complex work streams, to improving data flow, integrity and auditability and enabling new and immersive customer experiences. Young businesses and the inventors, visionaries and disruptors who drive them have the entrepreneurial spirit and fresh perspective that are essential to progress.
In reality, we do not see the success of incumbent staffing businesses and new disruptive startups as mutually exclusive. There are a number of reasons for this:
Building technology in-house is hard. If it was easy, everyone would be doing it. Building technology in-house requires considerable financial and time commitments and even those firms with the deepest pockets have had their fingers burnt by initiatives which have suffered from repeated delays, spiraling costs and ineffective end products. There is, therefore, a role for third-party technology developers and vendors that can get their product right and sell it.
The industry is complex. Staffing businesses have spent years fine-tuning their models, cultivating relationships and navigating compliance. While each of these can undoubtedly be improved by the implementation and utilisation of technology-enabled solutions, the experience, industry know-how and proven track-record of incumbent staffing businesses are incredibly hard to replicate without collaboration between incumbents and newcomers.
Collaboration is king. Many of the emerging technologies that are considered cornerstones of the Fourth Industrial Revolution require some form of collaboration in order to achieve their full potential. A distributed ledger of verifiable candidate data that can be transferred in a secure and auditable manner, for example, could, subject to ensuring data protection compliance, revolutionise the industry by cutting overhead, reducing delays and improving the suitability of applicant recommendations. Such a solution is possible but would require buy-in from a number of industry stakeholders.
Adapting via M&A
Defying the naysayers, we expect to see an increase in M&A activity as incumbents seek to acquire young technology businesses with well-developed solutions that can be integrated into the acquirer’s legacy systems and adapted to fit their individual, specific needs. Perhaps more importantly, these acquisitions also bring talented developers in-house.
This acqui-hire model is tried and tested in the technology space. Take Facebook, for example, which recently announced the launch of Libra, a digital currency based on blockchain technology that seeks to improve financial inclusion by providing a medium of exchange between its close to 2.4 billion users. Those close to the blockchain sector were not surprised — in February 2019, Facebook acquired Chainspace, a London-based startup that utilised blockchain technology to develop a decentralised payment facility. This was just one of a number of acqui-hires undertaken by Facebook as it developed its own solution.
For staffing businesses without Facebook’s appetite to delve into the acqui-hire market, there remain opportunities to join consortia and negotiate multidisciplinary joint ventures with competitors and technology startups, which may provide the critical mass required to produce meaningful solutions without the risks associated with M&A. We expect to see an increase in such activity in the coming years.
