The Behemoths, Boutiques, and the Breakthroughs

Looking at the Philippine landscape, in a few years I think there will be two major types of firms here in the our country:

sumo

The Behemoth

They are already here, and they will grow even bigger.

I’ve recently pitched to a couple of BPO firms who project to number in the 50,000’s by next year. That is a mind-boggling number of people to manage.

Already, I feel for the would-be HR Heads of these firms.

I think this trend would just continue on the next few years.

Why?

Well, first of all I think the first world will continue to push even more work our way. We have seen this trend happen as more and more processes APART from voice support are gradually entrusted to BPO’s here. We are seeing analysis work done here. We are seeing processes further up the value chain get outsourced here.

In the Daniel Pink’s wondrous book: A Whole New Mind: Why Right Brainers Will Rule The Future, this trend is explained further. It’s a fascinating read.

Also, with the behemoths enjoying great economies of scale in an industry where margins can be thin, I think some contraction will happen where the bigger firms eat up the smaller ones.

The result? We shall typically see companies which number in the thousands (something which was pretty rare just a decade ago, now its commonplace), in the tens of thousands, and perhaps even in the hundreds of thousands – all in one country.

But BPO’s aren’t the only behemoths. Manufacturing firms, semiconductors, banks – these industries also have behemoths. You can see rather large, GROWING firms in these industries as well.

These companies will earn billions, pay employees pretty well, and pump a lot of dollars into our economy.

They will also be marked with very specific job descriptions, repetitive work, and politics.

Nope, contrary to common perception, it doesn't take much to start

Nope, contrary to common perception, it doesn’t take much to start

The Boutique

The other end of the spectrum is growing as well.

Freelance sites such as Elance and Freelancer are reporting record numbers of Filipino freelancers signing up for these sites.

Hundreds of thousands of Filipino freelancers.

Nowadays, a fresh graduate, skilled say, in programming or design can opt NOT to work for any firm and instead strike out on her own.

The number of startups are also growing, with the amount of venture capital available for investment now more available than ever before.

More and more people, wishing an alternative to corporate life and valuing the freedom, will take leaps.

Boutiques, employing any number of people between 1 person to say, around 50 people will continue to sprout.

These will earn around P500,000 – P50 million pesos per annum, fulfilling a specific niche, providing suitable livelihood for its owners.

Do you want to be a behemoth?

A good number of boutiques have dreams of becoming behemoths. It’s the typical startup dream right? You do a Google or a Facebook and employ thousands of people around the globe.

As a former HR guy who managed the workforce of companies ranging from 200-500 people, I DO NOT WANT the headache of managing thousands – especially if I want to manage them well. (A CEO friend of mine once told me once you reach 100 employees, it’s time to split the firm)

I once asked a friend of mine who has owned and operated a boutique ad agency, why don’t you expand?

He told me, “I’m making more than enough. Why complicate things?”

Some boutiques don’t want to be behemoths.

But there is an alternative.

Can you make a breakthrough?

Profit is equal to revenue minus cost.

The trick that so many people try to solve is: how do you increase revenue at an exponentially greater rate than the growth of your costs?

This is tougher than it sounds. If you sell a single product and create a profit margin, the best way for you to multiply your margin is to also manufacture MORE products – this is tantamount to more costs, more people, more complication.

This new information age is making this different though. There are now technology and outsourcing solutions which can help a firm be uber lean and mean. This is what I call the breakthrough company.

Take 37 Signals for example, global provider of enterprise/SME software. In 2012, they had THIRTY TWO employees (down from their 2011 count, at 34 employees). These guys make millions of dollars.

It applies not only to tech. For example, last week in a learning session,  I had the privilege of listening to Raymond Rufino, EVP of The Net Group, a real estate firm which builds and manages several buildings in the Fort Bonifacio area. Their operations involve eye-popping long numbers with a lot of zeroes. Raymond asked the small group, how many employees do you think we have?

“100?”

“200?”

“500?”

Raymond then replied, we have 24 people. (!)

Raymond then goes on to explain they do it by employing great people who multi-task and utilizing a good number of outsourced help.

I think this is the dream – to create behemoth results using boutique structure.

The tools are obvious: technology, a GREAT business model, awesome people, outsourcing.

Let’s buckle down and figure it out, eh?

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