Our capacity to imagine things collectively or create useful fictions is key to human achievement. In his book, Sapiens: A Brief History of Humankind, author Yuval Noah Harari points to the limited liability company as one such product of collective imagination. And indeed, the notion — and the reality — of the company has been a very useful construct.

The first “imagining” and birth of the company as an organizing structure helped capture efficiencies and drive down the frictional costs inherent to production and exchange in markets. Reinforced by command-and-control mechanisms, employees shared the goals of the company itself and acted in the best interest of the enterprise.

But the transition to superfluid market conditions is driving two major changes. Digital technologies and other forces are driving down the frictional costs of accessing markets and conducting commerce, taking away one of the prime reasons companies were formed in the first place. Secondly, companies and labor are becoming less aligned; the growth of the gig economy is a manifestation of this trend.

That is not to say that companies don’t serve other purposes. While crowdfunding has gained traction, corporates still enable aggregation of capital at a large scale. Companies also can be socially responsible actors, contributing positively to society. But the reduction of friction and the growing misalignment of labor are important enough to suggest vital changes are afoot. If the company as we’ve come to know it is ultimately a useful fiction — one imagined and put into practice for tackling the imperatives of a past age — it can and should be reimagined for a new age.

EYQ recently convened 22 senior business executives, technology experts and thought leaders to discuss the future of companies as organizing structures in this more frictionless future. They concluded that not only will companies change dramatically, new structures will emerge that perform some of the same roles as traditional companies. Following are eight of the key ideas surfaced by our roundtable participants.

Organizational transformations

1. Tomorrow’s companies will be ultra slim and composed of entrepreneurial teams.

“Companies will eventually need to break down the corporate structure, remove middle management, and distribute their workforce around the tasks related to building and selling the product or performing the service. This goes against 50+ years of corporate structure, but the bloat it creates dooms that structure as markets near superfluidity. You don’t notice how hard it is to steer a large and slow ship.”

– Joe Procopio, Chief Product Officer, Get Spiffy, Inc.

With fewer market frictions to manage, companies of the future will be extremely lean. Organizationally, they will be built around teams. These teams will be assembled around tasks and employees will no longer be cascaded by role. Teams will be autonomous, self-driving and supported by intelligent machines. Some workers may be employees, while others will be freelancers.

In particular, large middle-management layers, long the glue holding companies together, will be a casualty of the superfluid market transition. Many of the traditional, repeatable roles that middle managers play, including planning, resource allocation, scheduling and overseeing the performance of human workers, will be assumed by machines. Application programming interfaces (APIs) already perform some of the tasks that once would have required human managers, for example, distributing ride shares across a driver workforce. One of the world’s largest hedge funds, Bridgewater Associates, is building an algorithmically driven management software called PriOS, which is expected to make three-quarters of all Bridgewater’s management decisions by 2020 or so.

Top leadership will be defined by how well they drive collaboration across these independent teams. One seemingly plausible model for the future could be an organization with a C-suite and a number of loosely connected teams staffed by engineers and data scientists, with specialist skills brought in, as required, on a contract basis.

2. Access will supersede ownership — everything that can be outsourced will be outsourced.

“Companies are emerging that make it 100 times cheaper to do something that was capital intensive by providing plug and play infrastructure-as-a-service. As these types of services grow, the marginal cost of doing virtually anything will approach zero, which should greatly increase market superfluidity.”

– Mike McCormick, Associate Partner, GreatPoint Ventures

The arrival of the internet and the subsequent reduction in market friction jump-started the unbundling of the company, a trend that continues to this day. Maintaining large workforces, doing a wide variety of tasks in-house and investing heavily in capital equipment are rapidly becoming passé as they detract from a company’s agility. As the digital and physical worlds coalesce, everything that can be “rented” or provided as a service will be.

Adopting the everything-as-a-service (XaaS) model will extend beyond delivering core information technology, such as software (SaaS). We are beginning to see companies offering manufacturing as a service, micro grid as a service and robotics as a service, among others. From a strategic standpoint, this shift implies that companies must continually reassess which bundles of activities remain (or become) synergistic with the core business, and make constant adjustments to organize around these activities.

3. Standing up a new enterprise will become easier.

“It’s getting easier to create a company by linking together specialized utilities. Today, you can build a big company very quickly by using off the shelf — or, more accurately, off the network — capabilities.”
– Chris Meyer, CEO, Nerve LLC

The platform economy and “as-a-service” revolution will continue to make it easier and less costly to stand up a new business. Entrepreneurs increasingly can leverage a variety of modular, scalable services that give them immediate market access, distribution channels and more. It’s become clear that platform ecosystems serve as foundations for new value creation. Amazon Web Services has significantly dropped the cost of building and hosting a new website. Access to third-party tools continues to expand. A 2017 survey of more than 200 German startups saw 90% of respondents agreeing that access to new and inexpensive tools makes it much easier to launch a startup today. It was cited as the number one factor (before government support) in making business building easier, with roughly 75% of startups leveraging more than five third-party tools. [1]

APIs enable entrepreneurs to build new tools or services on top of existing platforms. Changes in application development architecture have led to micro services, or applications split in many small, independent and configurable pieces that can be mixed and matched to help startups iterate and scale much more quickly than before. The range of services that can be custom curated, linked together and plugged into the operations of a new company continue to proliferate. It’s not too farfetched to suggest that a future entrepreneur could see their good idea grow into a unicorn without writing a single piece of code.

[1] “Founding a Startup has Never Been Easier: How Third Party Tools help German Startups Expand and Scale,” Techstars,https://www.techstars.com/content/accelerators/founding-startup-never-easier-third-party-tools-help-german-startups-expand-scale/, accessed date.

4. New structures, including autonomous companies, are emerging.

“There could be [entities] that run themselves without executives or managers or board of directors. This may happen if radical experiments in technology can automate the operations of a company whose only business functions are (1) to vote on what projects to fund (2) to disburse funds to and collect payments from those projects.”

– Anand V, Managing Partner, Anasup Consulting

Some of the trends reshaping companies are well noted. Technology allows employees to work anywhere and at any time. Entire company infrastructures are now available on laptops and even mobile devices. More company functions are performed on rented resources hosted in the cloud. Customer interactions increasingly are handled by bots. In sum, it’s become entirely possible to create entire companies that exist more or less virtually and in the cloud. For example, TaxJar, an SaaS company that automates online sales tax calculations, reporting and filings, is a virtual company. It has no central office and all of its employees work in different locations. Diversity in the types of companies that can execute virtually will continue to expand.

With blockchain technology, experiments with autonomous organizations have begun to take place. These organizations are leveraging the concept of smart contracts where the purpose (e.g., raising funds and voting on which projects will be funded) and governance of the enterprise are enshrined in code and run on distributed ledger technology. There clearly are new ways to pursue a value-creating proposition besides building what we think of today as a company.

Labor readjustments

5. Work will get done by freelance collectives that also create their own opportunities.

“The number of employees working for one company for an unlimited time is rapidly declining. The number of freelancers is increasing. This means that organizations will put out challenges or chunks of work that will be addressed by a group — a collective of freelancers, project managers and entrepreneurs. When a particular project has been finalized, the collective will dissolve again.”

– Arnold Beekes, CEO, Chance Busters

The composition of the workforce has been changing for some time, driven by greater use of freelance labor as the lifetime employment model fades. In the future, organizations will arise that have no permanent employees. Today, online labor platforms connect companies to individual freelancers to perform specific tasks. Tomorrow, organizations will also put out challenges that require collectives of people. Freelancers will be part of many different collectives simultaneously. In a proactive fashion, these collectives also will create new opportunities for themselves — becoming independent innovation units. They will find different avenues for getting projects off the ground. For example, a collective could approach established companies to become sponsors of a specific concept or raise financing through crowdfunding mechanisms to launch a new idea.

6. Becoming places of purpose and learning makes tomorrow’s companies sticky

“In the midst of a sea of enterprises of value creation made up of atomized contributors constantly forming and dissolving, companies might be the patrons of inventive thinking. They will represent rare institutions of continuity and durable shared purpose. Some people will gravitate to them because they want to be part of something enduring and much bigger than themselves.”

– Julia Kirby, Senior Editor, Harvard University Press

In a world of contractors and freelance collectives, companies with which fluid workers want to be associated need to develop compelling “personalities.” Part of the equation will be to develop, communicate and live a clearly articulated purpose — one that attracts and retains the best talent, freelance or otherwise. People are fulfilled emotionally through their association with the company.

In an era of unprecedented change, future companies must also strive to become true learning organizations. Senior leaders need to play a strong role in fostering and modeling continuous learning habits, as well as in supporting enablers. That will require leaders to extricate themselves from “management” and be actively involved in continuous internal and external discussions of genuinely uncertain issues to react instantaneously to changing conditions. The world is only getting faster. Moreover, a company’s learning environment and mechanisms must be agile and flexible enough to encompass a more diverse talent portfolio of freelancers, partners and other nontraditional labor assets. People will be attracted to those gigs that leave them smarter than they were before.

Competition redefined

7. Future companies will compete on innovation not efficiency.

“As markets become superfluid, we will see a shift from defining success as achieving greater efficiency to defining it as building capacity for innovation. In a superfluid world, efficiency is table stakes … . Creativity will constitute the basis on which firms win or lose — that is, it will become the most appropriate fitness measure for most companies.”

– Julia Kirby, Senior Editor, Harvard University Pressrs

The technologies — artificial intelligence, robotics and more — that are moving us toward a superfluid age continue to exact new operational efficiencies and increases in productivity. Think chatbots for customer service, industrial robots in factories and blockchain-enabled back-office functions for banks, among other examples. As company activity becomes less and less about managing transactional and other kinds of frictions, the opportunity

for a company to compete on efficiency is vastly reduced.

Rather, a company’s ability to drive innovation that results in new value creation will be the most important determinant of its competitive positioning— and longer-term survival, for thatmatter.

8. Competition will become ecosystem based.

Superfluid market conditions will lead to “the emergence of ecosystems and platform business models versus more traditional asset-intensive and / or vertically integrated companies.”

– Ryan McManus, Senior Vice President, Partnerships & Corporate Development, EVRYTHNG

The digital changes driving superfluid markets have given rise to a set of large platform companies. Network effects, scale, high switching costs and other advantages appear to be securing these entities a competitive edge and dominant market position for years to come. People love the products and services they deliver; they’ve become an integral part of our lives. Another reason for their sustained market dominance is the fact that other kinds of companies have succeeded by riding on these platforms to create their own market power.

Many platform companies stand at the head of rapidly developing ecosystems. Cross-industry ecosystems that have formed around artificial intelligence are a good example. Besides platform-company-based ecosystems, other types of intercompany ecosystems are forming. In some cases, they are responses to the emergence of large global problems, such as climate change or chronic diseases, beyond the scope of any one company or industry to solve.

In the past, companies competed against companies in a single industry. The future of competition will be ecosystem based. This will require ecosystem thinking and the development of new capabilities. Not only will organizations need to qualify and select competing ecosystems in which to participate, they will need to determine their specific roles. Successful ecosystem membership will require operational and cultural transformation to create and leverage horizontal value chains, as well as new collaboration tools and ways to measure progress.

So will companies remain relevant?

“What about a future where companies reach peak profits, speed, and efficiency, but the human experience becomes miserable? In our desire to evolve the corporate model, we should not forget that there is more to life than just creating profits and efficiency … . We can reach peak levels of profitability if we reduce every business to its core and strip out the ‘experience.’ But then we will find no joy in spending the profits.”

– Falguni Desai, Global Head of Strategy, Electronic Trading Technology, Credit Suisse

By definition, human creativity — minds collaborating and competing — is full of friction. Some might say that’s where the fun resides. And for the impending age of superfluid markets, the sustenance of places, physical and virtual, where people collide and create is a good thing. Superfluid technologies from artificial intelligence to blockchain undoubtedly will remove more friction from markets, driving changes in the ways that companies organize and compete. Companies will continue to morph and new kinds of structures will emerge that perform the activities of traditional companies in completely new ways. But what’s often overlooked is the tremendous social value that traditional workplaces provide. Humans are social beings. Even in routine work environments, many people find the act of going to work each day to be with colleagues of significant importance. Looking forward, people will continue to be motivated and fulfilled by associating with others in enterprises of common purpose, regardless of the structure. Even as modes of commercial activity change dramatically, the idea of the company remains a potent one. Setting aside its meaning as an entity formed and guided by laws, a company can also be a crucible where creative humans come together to ideate and build, not just products and services, but solutions for making our world a better one. While large companies weren’t designed to nurture bonds between people, the social aspect has helped sustain the construct. As the construct of the traditional company erodes, people will find new ways to replace that social value and it will be fascinating to watch what kinds of new collective activities arise and thrive.

for companies to consider

1. Are you competing on efficiency or creativity?

2. What internal capability will you obtain next as a service?

3. What will you manage with algorithms and what will you manage with people?

4. What’s your machine advantage and what’s your human advantage?

5. How are you making your brand sticky for top talent across all categories of workers?

6. Will the company you are today be a company that’s right for tomorrow?