A proposal in how crowdfunding can change the way we work.

Table of contents
1 Crowdfunding can change the way we work in future
1.1 Crowdfunding may lead to higher growth for organizations
1.2 The problem in current enterprise crowdfunding systems
1.3 State of the art research relevant to crowdfunding
1.4 Summary of research findings supportive to enterprise crowdfunding
2 Process model for equity and lending enterprise crowdfunding
2.1 Four phases of an enterprise crowdfunding model
2.2 The stakeholders of an enterprise crowdfunding model
3 Qualitative interviews held with 3 employees
3.1 Questions for the qualitative interviews
3.2 Summary of interviews held on enterprise crowdfunding
3.3 Considerations derived from interviews
4 Summary and conclusion
5 Bibliography
6 List of tables and figures

Crowdfunding can change the way we work in future

Crowdfunding is a form of seeking financial support from a crowd. For those who seek financial support from a crowd, crowdfunding is a form of financing for a specific project from those who freely lend or invest money directly. Using crowds to generate and fund ideas to create innovations has demonstrated remarkable success. It comes to no surprise that corporations in search for organic growth want to utilize the form of idea generation and assessment through crowds. A new term called enterprise crowdfunding is not yet widespread and rests on principles of crowds used to create, collect, and assess ideas to support innovation. Enterprise crowdfunding utilizes the crowd of an internal organization of a business or corporation without the existence of hierarchical structures. Companies such as BMW, Audi and IBM have implemented crowdfunding into their internal organization. Enterprise crowdfunding as it is currently being applied is using single rewards or donation types of crowdfunding incentives to motivate participation. One-time financial benefits and recognition for engagement have an effect on decision-making, participation and an impact on the success of crowd-work and thus influence the success of crowd-work to be a fundamental element of future organization. Understanding motivational factors for employees to participate are an essential element for enterprise crowdfunding to work. An assumption is, that providing a lending and equity-based crowdfunding type to employees for their participation and collaboration will allow for crowd- work to form roots into organizational structures and secure long-term employee participation and talent retention. Thus, a crowdfunding methodology for lending and equity-based model is proposed for organizations seeking to implement an internal enterprise crowdfunding model fostering employee’s intrinsic motivation and supporting extrinsic incentives derived from successful innovations.

1.1 Crowdfunding may lead to higher growth for organizations

According to the scholar Henry, private investment saw a significant growth with the liberalization of stock markets. In a study conducted with 11 developing countries 9 countries experienced on average over a period of three years a 22 percentage higher growth rate than in their non-liberalization time. (Henry, 2000) This explains that involving private people into an otherwise non-liberated market would increase investments. Furthermore, a personal investment can bind people to a company or a project. With this it would be interesting to conduct further research in understanding how people are motivated to stay with a company or contribute towards a project when financial interests are present. Commonsense would suggest that people who have vested interests will be motivated to take care of their investments. From an interview conducted earlier this year with Siemens innovations manager it came apparent that employees participating in an enterprise crowdfunding campaign were requesting to invest their private money and financially support projects. This leads at least to the fact that there seems to be an interest from employees to participate in investment opportunities or support projects with their private money. Typically, a stock option program is restricted to senior management and thus is not available to all employees. Besides, stocks from a company reflect the total operation and external factors also, thus employees have a limited influence. An enterprise crowdfunding model where an investment can be linked towards an innovation or project would be more suitable for employees, as their performance could be linked directly with the project they vest. According to Franke and Klausberger an enterprise crowdfunding system is interesting as it can co-exist with a hierarchy organization which means it can be implemented without organizational change. (Franke et al., 2013)

1.2 The problem in current enterprise crowdfunding systems

Equity and lending forms of crowdfunding exist in form of open innovation between companies and individuals. An equity and lending type of crowdfunding has not yet been established for internal idea management inside an organization. Enterprise crowdfunding, which is restricted to internal organization is to date limited to donation and reward-based crowdfunding. Understanding that financial incentives and extrinsic motivation can be beneficial to intrinsic motivation, a methodology needs to be introduced to existing enterprise crowdfunding to allow for equity and lending forms of support for projects. In addition to providing a process and methodology for equity and lending enterprise crowdfunding model it is important to consider what elements need to be addressed when implementing such a system. In order to provide with a suitable model research will provide insight into understanding what key influencers exist. Based on current scientific insights a model for enterprise crowdfunding in equity and lending is introduced. Finally, qualitative interviews with employees will provide feedback on the concept of enterprise crowdfunding and highlight any concerns and interesting questions.

1.3 State of the art research relevant to crowdfunding

Thus, in the development of crowd work and new world of work, an enterprise crowdfunding environment would have potential to assist a form of new renumeration in a crowd work environment. Thus, it is important to understand how lending and equity forms of crowdfunding can be incorporated into enterprise crowdfunding models. Until now only donation or reward- based enterprise crowdfunding exists.

1.3.1 Why do people engage in crowdfunding?

In a study, Bretschneider argues that people engage in crowdfunding for financial returns, to collect rewards like products, for altruism, for fun, or because they identify with projects and project teams and want to support small-business owners’ innovative ideas (Bretschneider et al., 2014) The reasons that employees engage in enterprise crowdfunding differ that employees are able to articulate diverse unmet needs in new ways, and they are able to satisfy those needs through collaborative action. (Muller et al., 2013) However, according to Brown et all enterprise crowdfunding is still a very new concept and needs further research. (Brown, Boon, & Pitt, 2017) Thus, it is interesting to understand why participants engage in a crowd work type of environment and how this could be utilized for an enterprise crowd working environment. Against this backdrop, Kleemann and Gosh have analysed these conditions in open source and open content projects – when contributions are unpaid, extrinsic motivators are nevertheless often present. Subsequently career-related benefits and the desire to acquire new knowledge, to share expertise with others, and to reach common goals. (Kleemann et al., 2008)(Gosh, 2005) Further research by Schroer and Hertel indicate that strongly participating individuals reported an unfavourable personal cost-benefit balance. Participants are aware of the imbalance but possess an immanent willingness to participate anyway. (Schroer & Hertel, 2009). Franke and Klausberger conclude from their findings that participants are more likely to accept and to contribute when they perceive the project as being fair for them, participant obtain rewards (tangible or not), have intellectual rights over the ideas they submitted and have their say in making the related decisions. (Franke et al., 2013) This leads to further interesting research in how decision-making influences crowdfunding systems.

1.3.2 Decision-making in crowdfunding systems

A study by the scholar Reitzig points out that employees may tend to support ideas that are created by near and close colleagues, especially if they are part of a smaller subdivision inside an organization (Reitzig & Sorenson, 2013). Feldmann elaborates in his study that participants in an enterprise crowdfunding system may be prone to heuristic and system-1 decision making (Feldmann et al., 2014). And in his subsequent study, Feldmann et al, identify that idea quality, novelty, relevance or feasibility of a project played a minor role in employees to back and fund projects (Feldmann & Gimpel, 2016). These findings strongly indicate that system 1 thinking and nepotism might influence enterprise crowdfunding which limit the benefits for enterprise crowdfunding to be beneficial in an organization. If system 1 thinking reduces the quality in idea selection, then more emphasis should be paid to developing a model that supports system 2 thinking. Gómez, who suggests that further research would prove useful to understand how far employees could invest their private capital in the company’s projects. (Gómez et al., n.d.) It could be, that bringing in the concept of money may lead participants to system 2 type of thinking and decision making. Insights into concepts of money are warranted.

1.3.3 The concept of money and its implications

The assumption is that when employees would invest their own capital, they would invest cautiously and diligently. There are numerous studies that highlight the issues about introducing the concept of money and extrinsic rewards. Caruso points out that merely activating a money concept in people’s minds can make them more favorable toward existing social structures and more likely to see social inequality as acceptable (Caruso et al., 2013). Activating a monetary concept has also been shown to reduce people’s helpfulness toward others. Vohs suggests this and also indicates that even subtle reminders of money elicit big changes in human behavior. (Vohs et al., 2006) Although the concept of money bears disadvantages, Cholakova and Clarysse suggest that a combination of non-financial rewards, for example what is understood as call reward and pre-order, can be combined with financial rewards, as lending with interest and equity, without reducing the willingness of the funder to support the non-financial objectives. (Cholakova & Clarysse, 2015) It is therefore important to look into motivational theories about participation into crowdfunding systems.

1.3.4 An excursion into cognitive and social psychology for participation

The scholar Kreps summarized his analysis derived from cognitive and social psychology that individuals seek for rationales to justify an action when performing a task. An employee will rationalize his efforts based on the level of enjoyment for the task when there is no extrinsic incentive provided. Thus, if the enjoyment increases so will the efforts towards a task increase. Kreps indicates if extrinsic incentives are put in place, employees will focus efforts to reflect those incentives with a gradually increasing aversion towards the efforts. Thus economic incentives should only complement towards intrinsic motivation when the economic incentive emphases an unpaid kind of work. (Kreps, 1997) Lazear suggests that extrinsic incentives towards employees diminish intrinsic motivation and to reduced levels of efforts resulting in lower profits for employers. However Lazear also indicates that intrinsic motivation mostly is superior to extrinsic incentives but in certain cases extrinsic incentives can lead to significant increases in worker effort and employer profit (Lazear, 1996) Against this backdrop the overjustification effect needs to be considered. An effect of overjustification arises when an anticipated external reward like money or rewards reduce the intrinsic motivation of an individual to perform a task – a secondary motivation replaces an initial motivation. The overall effect of offering a reward for an action that was previously unrewarded is a shift towards extrinsic motivation and can weakening intrinsic motivation if it preexisted. (“Overjustification effect,” 2020) An overjustification effect only occurs when repeated and anticipated rewards are provided. Thus an overjustification effect in the case of enterprise crowdfunding would not happen easily, because returns from equity or lending investments are not certain, but it is important to consider overall payout magnitude and frequency in a lending and equity based crowdfunding system. Importantly Jirjahn indicates in his study that similar patterns arise in different types of performance pay regardless of individual based or group based performance pay and profit sharing. (Jirjahn, 2016) The study by Hennessey could indicate that a culture focusing on intrinsic motivation could deflect the negative effects of extrinsic rewards. In a study by Hennessey children were examined how extrinsic motivation would influence their creativity. The study concludes that if people are focused on intrinsic motivation and learn to see external incentives as secondary, they are able to maintain intrinsic motivation and sometimes even show increases in creativity when adding extrinsic motivation. (Hennessey & Zbikowski, 1993) In the same light, have scholars interviewed many professional artists who claim that contracted work can enable them to perform exciting work. Amabile points out that professionals who believe that reward programs reflect the importance of their contribution, their encouragement and creativity can be increased towards their success. (Amabile, 1993) Therefore it is misleading to categorically state, that bonuses will always decrease motivation in challenges and creativity. When handled in a careful manner, incentives can promote intrinsic motivation and creativeness (Eisenberger & Cameron, 1996). None the less the predominance of evidence shows that providing rewards for tasks in a spontaneous or in a routine setting will destroy both intrinsic motivation and imagination. (Hennessey & Amabile, n.d.) In general, a majority of scientific research strongly supports intrinsic motivation to outweigh extrinsic motivation so more research is needed towards motivation and incentives.

1.3.5 Motivational synergy and entrepreneurial creativity

The scholar Amabile offers a very clear explanation of the idea of intrinsic motivation influenced by an individual perception of a task which is interesting, involving and challenging and extrinsic motivation with the reasons for the person to participate in a task. If the reasons have to do with the task as a means of positive, skill-exercise experience or self-expression, then the individual is intrinsically motivated. If the motives have to do with the task as a way to some external goal, or an answer to some external influence, then a person is driven in an extrinsic context. Amabile suggests that the dominant psychological view is that extrinsic motivation works in opposition to intrinsic motivation. Amabile indicates that the general understanding is if strong extrinsic motivators are introduced for engagement in a task, intrinsic motivation for the task will decline. Against this backdrop, Amabile continues to explain that there are numerous factors that can be seen as extrinsic motivations that encourage creativity, such as rewards and appreciation of creative ideas or clearly defined overall project objectives or even regular feedback on the progress on tasks. (Amabile, 1997) Also, research by Deci and Ryan has introduced the idea that under very specific situations rewards can have either no impact or even a positive impact on intrinsic motivation and creativity in their cognitive evaluation theory. (Ryan & Deci, 2000) A motivational synergy described by Amabile suggests that extrinsic motivators can be combined positively with intrinsic motivation. The extrinsic motivation which would support competence or deeper involvement with a task would support intrinsic motivation and creativity. Essentially intrinsic motivation needs to be high so that information and enabling extrinsic motivation will be conductive. Due to the various definitions of creativity and its influence from intrinsic and extrinsic motivation the scholar Amabile introduces the term entrepreneurial creativity. Entrepreneurial creativity as Amabile suggests is the creation of new and useful ideas for businesses in organizations or start-ups. Entrepreneurial creativity needs a combination of intrinsic and extrinsic motivation which Amabile refers to as a motivational synergy. Enabling extrinsic motivation that is linked to entrepreneurial creativity is support for skill development, enabling achievement of a task and confirming competence. Amabile, therefore, argues that entrepreneurship in its form is a particular form of innovation. (Amabile, 1997)

1.4 Summary of research findings supportive to enterprise crowdfunding

In summary we can understand from scholars that entrepreneurial creativity is closely linked to systemic motivation, where the ideal form for entrepreneurs is a combination of extrinsic incentives and intrinsic motivation. Close attention needs to be paid to the frequency and amount of extrinsic incentives in order to avoid any overjustification effect and lose intrinsic motivation of participants. In summary the concept of money can lead to negative social behavior, but for people contributing for free may find this to be unfair. We also understand that in a crowdfunding system which are donation or reward-based, a decision making by participants can tends to be heuristic and lead to automated behaviors and system 1 type of thinking. The quality of decision-making is therefore influenced heavily by the interest to participate, which leads back to the initial question understanding motivation for participation. Thus, a crowdfunding system that supports equity end lending could introduce the concept of money as well as make contributions transparent and valued. Equity and lending crowdfunding will require participants to use system 2 thinking if they decide to invest their personal money. Process model for equity and lending enterprise crowdfunding

Nepotism might still prevail but in a form of individuals rationales to justify an action or donation. Crowdfunding can also provide for a simple solution for renumeration in a crowd work environment. The following will provide with a simple proposal for an enterprise crowdfunding process model for equity and lending incentives.

2 Process model for equity and lending enterprise crowdfunding

The suggested process model for an enterprise crowdfunding system is divided into 4 Phases and broken down into seven sections. These four phases consist of preparation, crowdsourcing, crowdfunding and incentives. For crowdsourcing and crowdfunding there are numerous methodologies and process models available, however non are described in a very detailed manner. The following proposal is therefore developed by own account and outlines deliverables with description for each item.

2.1 Four phases of an enterprise crowdfunding model

The first, also regarded as the preparation phase focuses on the problem identification by the executive team and to develop a problem statement with support from the innovations team. The second or crowdsourcing phase is broken down into two sections. Section II summarizes the set-up of the crowdfunding system and platform as well as the launch of idea sourcing campaigns towards the employees. The section III, as part of the crowdsourcing phase contains sessions held by the innovations team to generate and refine ideas, and an evaluation from innovation team on submitted ideas by employees. The third phase is the crowdfunding phase in which ideas are selected by the crowd of employees. Section IV provides room for the crowdfunding platform set-up and launching of ideas to employees. Section V entails the collection of followers and their feedback, developing ideas into a more formal project plan and proposal with initial marketing tactics to support the formulation of ideas into innovations. Section VI and the final section of the crowdfunding phase focuses on the launch of the plan proposal and innovation to the crowd, with the official request for funding and the type of funding. With successful funding achieved, projects enter the final phase of incentive, where projects are approved by the executive board and evaluated on a regular basis based on milestone achievement and work performed. Payout to the crowd is based on the achievement of deliverables and milestones which are evaluated by the innovation team or by a nominated and independent team of experts.

2.2 The stakeholders of an enterprise crowdfunding model

While the previous process model explained deliverables, the following description tries to elaborate on the major stakeholders in an enterprise crowdfunding model. The identified stakeholders are the executive team, the innovation management team and employees that are providing ideas to the crowd as well as employees that provide the funding.

2.2.1 The employees as Investors in an enterprise crowdfunding system

The employee as funder can influence an innovation by providing funds in return for equity and dividends or interests from lending. Based on two psychological mechanisms outlined by Amabile a positive combination of intrinsic and extrinsic motivation is possible. Especially with high levels of intrinsic motivation, synergistic extrinsic motivators provide positive effects and informational and enabling extrinsic motivation also are favorable towards creativity and intrinsic motivation. (Hennessey & Amabile, n.d.) Therefore, equity and lending should be introduced to employees at an early stage of installing an enterprise crowdfunding. Where the intrinsic motivation for employees is still high to participate. The rewards from equity and lending should be infrequent and the amount of payout should be not foreseeable to reduce the probability of an undermining effect.

2.2.2 The employee as innovator in an enterprise crowdfunding system

If funds are raised by employees in return for stringent control measures, then this may weaken entrepreneurial creativity of these employees. Troublesome is, if these employees and entrepreneurs find themselves in circumstances where their sense of self-determination is undermined, they may well begin to cognitively and emotionally disengage from the specific project, and their creativity may decline. Finally, and perhaps most importantly, the extrinsic motivators of tangible reward – such as winning financial funding or achieving generous profit margins – will enable the employee as entrepreneur shift his motivation towards financial rewards. (Amabile, 1997) In an enterprise crowdfunding system creativity can easily be lost if stringent control of a project is handed to executives or funding employees. But entrepreneurial creativity can be increased by presenting the funds primarily as a means of enabling the employee’s entrepreneurial activity. (Amabile, 1997) Thus, funding needs to be clearly linked towards deliverables and milestones and comprehendable to the crowd of employees acting as investors.

2.2.3 The innovation team and crowdfunding platform

First and foremost is the innovations team responsible for the crowdfunding platform and its communication between participants. The innovation team is also responsible for assisting the executives in identifying strategic innovation fields which the crowd should provide ideas for and fund these. Furthermore, is the innovation team responsible for proofing and evaluating ideas as well as for marketing, providing service to the crowd and supporting the employees as entrepreneurs with the formulation of ideas and project proposals. In regards to evaluation of progress of projects, a team of experts could be nominated by the crowd and probably make more informed and accurate evaluations than an innovation team. In cases of high-tech for example a group of experts nominated for a period of time would provide for a more realistic evaluation of a project progress.

2.2.4 The executive team and its responsibility

The executive team most importantly needs to support the framework under which a crowdfunding system can develop and foster employees to generate ideas and provide with the support. This means that the executive team will need to provide an environment for employees to support projects with funds as well as time and knowledge. Essential for the executive team will be to accept that a crowdfunding platform must coexist with an existing hierarchical organization form and be independently managed.

3 Qualitative interviews held with 3 employees

In order to understand what implications and enterprise crowd funding has on employees, following interviews were conducted. Two male and two female candidates were interviewed of which all are part of organizations that have not yet implemented a crowdfunding system. The objective of the qualitative interviews was to understand the motivation or for participation and expectations for rewards.

The profile of interviewed parties:

  1. A. Kargol. (age: 40, male, profession: Controlling, Verbund AG – energy sector)
  2. M. Henner (age: 38, female, profession: Marketing, Hypo NOE AG – banking sector)
  3. T. Veit. (age: 37, female, profession: Clinical Manager, Baxter – pharmaceutical sector)

3.1 Questions for the qualitative interviews

The following five questions were the basis for the qualitative interviews. Many more questions for deeper understanding and clarification were asked.

  1. Have you or someone you know submitted new business ideas to your employer?
  2. Under what circumstances would you support and pursue these ideas?
  3. How motivated would you be to do this in your free time? in exchange for shares?
  4. How motivated would you be to buy shares / invest your own money into the project?
  5. What would you seem appropriate as compensation if you would pursue this project together with your current profession?

Based on these questions a number of interesting topics and dormant questions were uncovered leading to blind-spots and further research leading to some simple and introductory suggestions and answers. Many of these blind-spots and topics of interest will need to be analyzed in more detail to provide a scientific answer.

3.2 Summary of interviews held on enterprise crowdfunding

Interviewee Marlis Henner confirmed that she was aware of a project that was nominated by an employee, but due to lack of management commitment the project was badly implemented. M. Henner mentioned that the project team was not linked to the success of the implementation. M. Henner would consider an extrinsic incentive to be motivating for her to participate on such a project but would closely follow the system before investing private money. M Henner would prefer to invest if her salary would contain an element of capital that she would be able to invest. Private money linked to company project would not motivate M. Henner to invest her money because she would feel her money could be locked into a project and limit her options when leaving company.

Interviewee Alexander Kargol confirms that he himself had an idea to improve efficiency in the company he works for. He states that executives had lack of interest to pursue his idea. If the idea was accepted and supported, then a team would have implemented this idea. A. Kargol would differentiate if the project would be part of his work or part of free time. He mentioned that at a recent project where he contributed freely had received a financial reward. A. Kargol stated that for interesting projects he would be willing to support with his free time and also stated that he would be interested in investing his own money on these projects. A. Kargol finds extrinsic rewards to be beneficial for a company and in terms of such an enterprise crowdfunding system he mentions that dividends should be related to the project similar to how these are handled with shadow shares. Just for financial benefits A. Kargol would not necessary spend his free time, but interesting would be a system that could allow for both financial gains as well as worktime compensation or time off work. A. Kargol finds an ECF model could positively influence an employee retention and commitment towards projects initiated by the company. A. Kargol sees that 30% of work time could be allocated to projects or even a day per week. He clearly indicates that the framework for worktime needs to be set first. A. Kargol finds that management and thus hierarchical organizations are hindering in idea generation, selection and implementation.

Interviewee Tina Veit is working in a division where work is done based on very strict protocols. She mentioned that in her division idea generation and innovation is not sought after. T. Veit however would be interested in supporting innovations financially if they were proposed to her as part of a crowdfunding campaign. Lack of transparency or visibility limit her knowledge about innovations in other divisions of her organization.

3.3 Considerations derived from interviews

An equity or lending type of enterprise crowdfunding is not necessarily for every idea for project. It also needs to be considered that not all projects at an early stage necessarily need financial support. Funding rounds can be introduced at the later stage or spread over multiple stages. The Innovation management team together with the crowd should be able to decide whether a project should be nominated for financial support. Following sections will try to provide answers to questions that were raised during the interviews.

3.3.1 How much could an employee invest in enterprise crowdfunding?

Important at this point is to limit the amount of personal investment an employee can provide. A portfolio investment of high-risk investments can be in the area of 10% to 20% but not limited to this. Because the risks of crowdfunding investments and lack of common rules across the EU, the European regulations have granted a proposal on 19th December 2019 under which the EU Commission is developing policies for equity and lending crowdfunding to be regulated and become legal. Part of this proposal will include a maximum of 5 million Euro funding, the percentage of investment based on individual income and authorizing bodies to supervise crowdfunding. (“Agreed,” 2019)(Commission welcomes agreement to boost crowdfunding in EU, n.d.) Unclear is what regulations will apply for an equity and lending enterprise crowdfunding.

3.3.2 How to deal with further funding requirements?

The term pre-emption right is an industry standard that set a legal framework for businesses that seek further funding. Pre-emption rights ensure that existing investors have the right (but not the obligation) to invest in future fundraising rounds of a business in order maintain their level of shareholding in a company. In such a case venture capitalists and business angels have rights to provide funding when further funding rounds are sought after by the business. Such a right has been implemented to protect investors capital. Typically, such a protection is only available to professional investors with a majority share. If an investor does not act upon the right to provide further funding, then the shares are diluted. Dilution is a term often with a negative connotation, because the shares in terms of equity will reduce if no further funding is provided. Additional fundraising typically indicates that the business is doing well, because funding rounds increase the value of the business. Provided that a company is raising more money at the same or higher valuation, an investor having a smaller share of the business will have a higher value of shares. In other words and investor will be holding a smaller piece of the pie when his shares dilute, but the pie is getting larger. (“Dilution isn’t always a bad thing | Crowdfunding,” 2013) A further important aspect is that pre-emption rights are also seen as one of the most crucial protection for minority investors. Pre-emption rights hinder majority shareholders from issuing new shares to themselves at a low valuation (“How do pre-emption rights affect investor dilution?,” 2017) These pre-emption rights are an important legal framework to be included in enterprise crowdfunding as well as information regarding a potential dilution of shares from investors. Investors might consider diluting their shares and using the capital to diversify into different investment opportunities instead.

3.3.3 How to deal with delayed milestones and objectives not achieved?

Research into Amabile study on extrinsic and intrinsic motivation among entrepreneurs has indicated three significant points that should be considered in enterprise crowdfunding. The weakening of entrepreneurial creativity through strong control measures and loss of autonomy. Extrinsic motivators such as the achievement of additional funding can lead the entrepreneur to continue seeking funding instead of achieving the business objective. (Amabile, 1997) In contrast, financing rounds if combined with clear milestones, activities and deliverables can increase creativity and intrinsic motivation. With the absence of stringent control mechanism, an entrepreneur is held liable to achieve the milestones set. If milestones are not achieved, a “three strikes and you are out” policy could be introduced. Such a policy can be introduced with an assessment if a deadline was missed. In an enterprise crowdfunding system it would be possible for the crowd to nominate a new entrepreneur to pursue the interest of the crowd and its innovation. Internal factors and external factors such as market and customer requirements need to be reassessed which will lead to new milestones and business plans. Such a reassessment and proposal of a newer and realistic plan will reduce the pressure on entrepreneurs and thus work in favor of increasing motivation and protecting the crowd’s interests.

3.3.4 How to protect financial interests of investors and company?

A company that is implementing an enterprise crowdfunding model not only will want to protect its interests with innovations to be launched but employees will want to protect their investments. There are two topics to be considered, which are majority voting rights and investment guarantee for employees. Firstly, the majority share as well as voting rights of the company can be protected by providing a double up equity program towards an employee’s investment. In a double equity program, each invested amount is matched by the company with an equivalent amount. By this the company can be sure to remain in a dominant position and majority shareholder of any project. Secondly, providing double up equity towards employee’s personal investment could have positive effect on encouragement to undergo an investment. Further research into this will have to provide justification for this argument. But generally, we can understand that any form of guarantee and incentive might have an impact on system 1 and system 2 type of thinking and decision-making which was addressed earlier in this paper.

3.3.5 How to value work and funding using a crypto currency?

In an enterprise crowdfunding system employee would invest their private funds towards innovations. These funds could be provided in form of a currency as part of their salary, as part of work provided or in form of a crypto currency. The advantage of a crypto currency would be that it would open up a trading platform for employees to invest into multiple innovations and trade among each other. A crypto currency could not only provide as a valuation of financial funds but also provide as a valuation for time and work provided towards an innovation. Thus, employees providing support towards the launch of innovation will receive cryptocurrencies in return. The overall value of the innovation could be then also measured by the amount of crypto currencies raised in form of financial support as well as work performed. As highlighted by Thomas in his article about crypto currencies and the evolved process around ICO 2.0 there are examples of regulatory and compliant turnkey solution that provide founders with an option to offer a non-convertible preferred share class that pays a dividend and does not cause dilution on an equity level and instead of equity, investors would receive a revenue share. (Thomas, 2018) If the crypto currency is linked to the company’s valuation or stock market price, then the crypto currency would be protected against volatility. It would also be possible for each innovation to launch its own crypto currency; however, more insights needs to be gained in order to understand if multiple crypto currencies in an enterprise crowdfunding model would create for more transparency towards the progress and the performance of each innovation and be feasible in terms of cost and resources.

3.3.6 How to manage intellectual property rights (IP/R) in an enterprise crowdfunding?

Any IP/R is clearly regulated in an employment contract. Hence any intellectual property is in the ownership of the company. An invention is bound to a person or a group of people, but the rights to use an invention and an intellectual property are with the employer and company. An enterprise crowdfunding system supports employees with a platform to try and launch an idea as well as provides with a protected environment in which to launch the idea. These benefits could play in favor of more conservative entrepreneurs and innovations might form that would have otherwise stayed absent. In addition, a crowdfunding system provides transparency and will allow the innovator to reap the benefits of a successful innovation in form of extrinsic rewards which is not certain in a typical hierarchical organization.

3.3.7 How can employees that are invested in projects leave the company?

The standard among investments is the right to liquidity which as investors with rights to receive certain amount of money back from their investment. In enterprise crowdfunding most of these rights would not be necessary except for the “put option”. The put option allows investors to force the company to buy back the shares at a previously agreed price. (“Put option,” 2019). In the context of enterprise crowdfunding these rights should allow employees to force the company or innovators to buy back the shares from employees based on its previous value. If the current value is less than the market price the employee still has the option to trade his shares for the current market value which is referred to as a right to convert. If the value of the innovation increases, the employees have the right to convert their investment to a regular common stock, other company related assets or even vacation days. Although the right to convert is generally considered fair for crowdfunding investors the right for liquidity is still being debated. Important is understand the difference between equity and lending, where the rights to liquidity as well as the rights to conversion are tools for equity financing and should not be available for loans. (crowdfundattny, n.d.) Funds that are provided for a previously determined timeframe and which provide with a regular interest to employees will be lost or could be transferred to an employee in case of an employee wishing to leave the company.

3.3.8 How can employees take time off or spend time to work on project?

Companies such as Google have introduced workdays where employees can work on their own projects and are not bound to their daily tasks. There are numerous ideas how employees can allocate time to work on their innovations. Clear is that a company that has introduced a crowdfunding system will have enabled a methodology to allow employees to develop their innovation. As outlined in the earlier if extrinsic rewards are available in form of dividends, interests or equity shares then an intrinsic motivation can be increased. It would be interesting to conduct research and understand the correlation of rewards with time spent. Ultimately any work performed towards an innovation project needs to be valued towards the project. Thus, if an employee provides any form of support this should be tracked as a value add and increase the overall value of the innovation. If an hour was added to a project, then this hour cannot be allocated to any other project and also cannot be considered as regular work time. Any work provided towards the project will be compensated via dividends from equity or interest from lending. This will provide a certain guarantee, that hours spent will not be accounted for and remunerated twice.

4 Summary and conclusion

In conclusion the interviews have showed interest of employees in a new type of renumeration as well as being able to receive time off from work in return for work provided. The interest in investing private money towards projects is positive, but it is yet to be seen how much money employees are willing to invest and how much will be allowed for. The participation rate will not necessarily increase because successful crowdsourcing platforms such as the one from TÜV Austria already have a 70% sign-up rate. More interesting is to understand how an equity and lending type of enterprise crowdfunding system could influence the engagement rate of employees. And based on research we can anticipate that private money will have a conductive influence on decision-making as well as on the quality of ideas generated, selected and funded. Furthermore, a stronger form of enterprise crowdfunding can empower employees in a hierarchical organization and thus support organizations in retaining their talents. And equity and lending crowd funding system potentially can help organizations with a new form of renumeration that can co-exist with crowd work and the trend towards a new world of work.

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6 List of tables and figures

Figure 1 Proposal for enterprise crowdfunding methodology

New World of Work concepts in today’s gig-economy

Table of Contents

1 Introduction to a life in a New World of Work
1.1 The megatrend of New World of Work
1.2 Example of New World of Work – more voice leads to higher satisfaction
1.3 Uber as an example for gig-workers in the New World of Work
1.4 What is the New World of Work and why does it receive so much attention?
1.5 The reasons for a New World of Work based on disengagement
2 The types of New World of Work in a gig-economy
2.1 New world of work and the four future worlds by PWC
2.2 The Gig-economy as a new form of adopting the New World of Work
2.3 The differences of Microwork and Online Freelancing
2.4 Common characteristics of crowd work
2.5 Typologies of crowd work
3 Considerations for implementing a gig-type of New World of Work
3.1 The importance of OID on gig-economy
3.2 The need for traits rather than specific technical skills
3.3 The time-spacial flexibility in creating new types of employment frameworks
3.4 Setting a starting point for a New World of Work organization
3.5 Simplification, collaboration and remuneration in the New World of Work
4 Concluding Statement
5 Bibliography
6 List of tables and figures

1. Introduction to a life in a New World of Work

Life as we know it and have lived with it over the past hundred years is changing. The authors of the book “The 100-year Life” suggest that the new generation entering the workforce will be working for a much longer period then generations before. This means retirement will require a completely different set up and so will training and learning. Up to now life was separated into three phases. The first phase being the educational face the second phase was the working phase and the third phase was the retirement phase. The scholars Graton and Scott argue that people will be moving in and out of these phases over the course of their life rather having these phases consecutively. This means that people will be also changing their work relationship from a self-employment type to an employee type as well as a student or learning type. (Gratton & Scott, 2016). There is a substantial philosophical debate about the New World of Work and much of it is polarizing towards either extremes of positives or negative’s resulting from this new emerging concept. Interestingly enough there is little research found that can assist in how a New World of Work can be implemented into an organization.

1.1 The megatrend of New World of Work

Research predominantly focuses on observing trends within the work environment indicating a paradigm shift towards a New World of Work. According to the Zukunftsinstitut that has published one of its megatrends to be the New World of Work, some findings from their surveys can lead to a better understanding. Based on feedback from opinion leaders of the Zukunftsinstitut the following top four trends in relation to work are: 

  1. growing complexity of work performed,
  2. increasing speed of processes, 
  3. growing customer demands,
  4. an increase of importance in knowhow and competency. 

The Zukunftsinstitut envisions that people in future will not follow jobs, but jobs will follow people. With this the Zukunftsinstitut means that individuals will be shaping through their contribution at work value towards an organization, rather than an individual adapting his skills and capabilities towards a job description and tasks defined by the organization. Thus, organizations will be looking for like-minded people and talents that represent their interests as well as represent their cultural traits towards customers and clients. And as work will become more creative, an individual’s output and result will become more important to an organization. Therefore exchanging one person for another will ultimately have a significant impact on the outcome of work, not necessarily worse but different. (zukunftsinstitut.de, 2018) In summary the research shows that the New World of Work consent taps into many different disciplines and many scholars look at the New World of Work from different point of views. Maybe because of the broad and vast implications that a New World of Work has on our whole society, there is no simple and clearly described cause and effect, and thus remains a complex system. 

In the following two examples from research will provide an insight into what New World of Work and how differently a form of New World of Work can be introduced into organizations.

1.2 Example of New World of Work – more voice leads to higher satisfaction

Comparison of Tele Haase and Uber show that more voice of workers lead to more satisfaction. Tele Haase is a hardware IT component and production company in Austria. With the recent change in chief executive officer the company went through a pivotal change in how organization is organized. Today employees at Tele Haase are grouped in clusters that define processes, manage their own processes and decide on individual remunerations among team members. Decisions are made inside the team and the cluster, and the cluster management is appointed on a regular basis. At the core of this concept lies that each individual has competencies that are not necessarily utilized to the full extent in their daily work. Tele Haase makes an effort to utilize the competencies of each individuals by identifying these through the clusters that have formed. Basically, there are three clusters that are the main processes for running the business which are sales. innovation and production. There are numerous sub customers that are in the supporting function towards the main clusters. Tele Haase has understood how to transfer the full ownership and responsibility towards the workings staff that actually have the capabilities to influence and impact change. In the normal organizations management and leadership are responsible in promoting and driving change within their work staff, Tele Haase has placed this responsibility to their workers. Tele Haase has lost some of their workforce because of the new type of leadership style and job responsibility. But Tele Haase states that they are now carefully qualifying candidates to see if they can fit into this decentralized management and organization set-up. Employees state that not only working conditions have become fairer but transparency about each and everyone’s input has helped to simplify tasks and processes as well as focus on the essential organizations objective which is to generate profitable turnover. (Tele Haase, 2015) In strong contrast to Tele Haase stands Uber, a gig-organization. 

1.3 Uber as an example for gig-workers in the New World of Work

A company that has been criticized and accused of poorly treating its employees is Uber. In terms of the concept of a gig economy the organization has reduced its headcount and headquarter operations to a minimum and is utilizing a crowd to deliver a service to its customers. In the case of Uber, it becomes apparent, what importance the crowd as brand ambassadors has towards customers. Because organizations fail to influence organization identification, crowd workers are left to themselves when representing their employer and its values to its customers. An even bigger concern towards influencing crowd workers on organizational identification is the number of platforms and gig-organizations emerging. It becomes easy for crowd workers to switch from one contract to another, so too much control by organizations will quickly result in a migration to new employment opportunities. Thus as Mishel points out, it is more important for companies to focus on organizational identification among gig-workers than anything else (Lawrence Mishel, 2018). At some stage however we can assume that a gig economy will correct itself leading to organizations with mediocre reputation providing more benefits towards crowd workers than organizations with a high reputation and brand value.

1.4 What is the New World of Work and why does it receive so much attention?

Why is New World of Work interesting, why is it something that we need to pay attention to? According to the scholar Beck in the 1960s only 10% of the workforce where freelance or contractual workers and by the late 1990s this force grew to 30% (Beck, 2000). The scholar Resch states that the arrival of the gig-economy is a new shift towards self-employment with the help of information technologyResch, when describing a New World of Work, refers to Peter Drucker’s organizational vision will be fulfilled when each person takes on full responsibility for contributions towards an organization, acts as a manager to accept full burden for performance delivered and plays a significant role in social responsibility inside his or her  community. (Resch, 2015) Workers that take full responsibility for their contributions have similarities with self-employed or contract workers which are represented in the so-called gig-economy. In the past decade, the exponential rise of the gig-economy has led to much controversy about work arrangements that gig-workers were entering. Due to increase in acceptance of gig-workers and lack of policies, work agreements tend to lean towards exploitation according to the scholar Kaminska (Izabella Kaminska, 2016). The scholar Havard indicates that the gig-economy is bringing out two polarizations, where some see the threat of gig-workers facing wages that do not allow to provide for a living and others, that seek the new age of distributed work, supported by technology and free from policies. (Havard et al., 2009) Along this train of thought the Accenture Technology Vision Paper points out that online work platforms will have a tremendous impact on traditional organizational management forms and that these platforms will reshape further the development of the labor market (Unkefer, 2017). The number of platforms emerging bring further level of complexity towards the New World of Work concepts by introducing different types of tasks and various skill level thought after. Research performed by Huws and Joyce try to understand the level of importance on income of crowd work. They identified back in 2016 that the gig economy was still predominantly used for altruistic reasons and used more as an occasional and additional income to a steady position. Less than 2% in 2016 stated that their sole income was coming through gig-economy type of work. While 11% stated that it was close to half their income, two thirds or the majority of respondents stated that their income from gig-work was less than half of their current regular salary. Half of the crowd workers stated to earn less than 18k euros annually, while the remainder stated their income was up to 36k euros a year. (Huws & Joyce, 2016) One way of looking at the reason for companies or organizations to embrace a form of New World of Work is by analyzing the disengagement of workers in the current employment condition.

1.5 The reasons for a New World of Work based on disengagement

The most obvious cause for workers to quit a company in Austria is its organization’s management. Several other reasons include a lack of career opportunities and insufficiently positive experiences for workers. In terms of age, 25 to 34-year-olds are the most vulnerable group of employees with a 64% likelihood of leaving the company. As an example, the disengagement of organizations costs business in total € 80 to 105 billion Euro. Pfeifer indicates in his business case assumptions, that businesses with high engagement levels are 21% more profitable and 17% more successful than those with a low index. In this calculation of Figure 1, based on the age structure in Austria 88% of the workforce (no engagement + disengagement) are at risk of leaving their employer. (Pfeiler, 2020)

Figure 1: Business Case – Costs through disengagement

Source: (Pfeiler, 2020)

Especially 70% of the workforce have no engagement with their employer and work by the book. Most employers leaving companies do this with little prior notice and of which 11% of these workers are identified by companies as key talents causing disruption. Deloitte estimates the cost resulting from fluctuations of workers for companies to average at € 14,9k Euro per worker and larger companies above 1k workers have a higher cost resulting from fluctuation (Brence & Nowshad, 2019). Considering how the gig economy is shaping the workforce of the future, the importance of organizational identification to workers, as well as the risk of fluctuation through more opportunities poses and immense threat to the sustainability of an organization of the future. Essentially research shows that New World of Work is a concept that has still much room for implementation, leaning towards further research needed in studying the impact on work and our society. Therefore, looking into types of New World of Work could help in understanding how an implementation would be possible. 

2. The types of New World of Work in a gig-economy

Price Waterhouse Coopers (PWC) have undertaken the task to categorize the future of our world of work into four different types of worlds. This categorization helps to understand the implications on organizations and also what culture lies fundamentally in each of these worlds. The PWC study highlights the main focus of each world and what type of organizational culture is embraced by organizations. Although the PWC study does not imply it, but it can be assumed that any organization will have a variation of all worlds represented but lean towards or focus on one or the other type of New Worlds. 

2.1 New world of work and the four future worlds by PWC

PWC depicts in its study the competing forces that are shaping the future of our world of work. The study identifies key differentiators in organization and their orientation towards the workforce. According to PWC visual representation of the four different worlds, depicted in Figure 2, work in 2030 will be separated based on companies leaning towards collectivism and community thinking or towards embracing employee individualism and singularity. On the other axis PWC places companies that will either focus on leaner, faster operations that drive innovation or companies growing bigger and more powerful than some countries.

Figure 2: The competing forces shaping 2030

Source: (Workforce of the Future, 2030)

In the following subchapters these four worlds are summarized to deliver clearer differentiations among how New World of Work will form in the organizations of the future. The PWC study introduces these worlds with four colours starting with the yellow world that is a combination of collectivism and business fragmentation – on the axis of Figure 1 (the left top quadrant). The red world is positioned between fragmentation and individualism (top right quadrant), the blue world is placed between corporate integration and individualism (bottom right quadrant) and the green world lies between corporate integration and collectivism (bottom left quadrant). A summary of the worlds in colours is provided in the following subchapters. 

2.1.1 Communities and crowds focusing on business ethics will prosper

In the yellow world the responsibility for human capital rests on the business leaders who focuses on management and direction. Due to the availability of digital platforms that help to match skills and experience with demand from organizations and supply from workers, the human resource organization and function will be replaced by outsourced services. In a yellow world operation performance is measured about delivering towards an organizational goal and what impact employees have on their culture and social surrounding. Like-minded workers collaborate through digital platforms and work together on projects that are blending work and life concept, instead of working in a 9-to-5 and Monday to Friday working week. A strong sense of identity is key to a yellow world where individuality is important but a unity by individuality is essential. In such a setting non-financial rewards can be present and offer an alternative form of remuneration. The organizational challenges among a yellow world are that brands need to focus on a good ethical standing and organizations are measured on trust and fairness. The organizational objective is to have a clear purpose which must be clearly articulated and lived by. In a yellow world organization ethics in business are key for prosperous growth and followers. 

2.1.2 Individuals and niche players thrive through innovations and first to market

The red world is defined as a perfect incubator for innovation. Similar as in the yellow world, organisations rely on automated outsourcing to gather workers and skills. In contrast to the yellow world, performance is all about the result and not about the process of achieving the result. Thus, workers are highly specialised and well paid. Workers will be generally looking for the most rewarding remuneration, which is linked to the most demanded skill. Organisations are slim and rest on employees with outstanding management skills, that manage the work towards results and innovation. Projects are managed quickly, resulting in a high fluctuation of specialists providing their services. Organisations in the red world will have very low hierarchical structures, because speed to market is the most important attribute. In a red world organisation will follow trends and only survive by meeting the needs of their customers. Due to companies focusing so much on innovation, they tend to be ahead of policies and regulation posing them to a high-risk environment. Loyalty from employer and organisation towards its workers will be limited towards the skills that workers provide. 

2.1.3 Corporations provide stability through size and follow individual leaders 

The pressure to perform for workers in a blue world is uncompromising, therefore employees and contract workers are depending on their skills and require keeping these skills relevant. According to the survey leading to the four worlds defined by PWC on the general public in countries of China, Germany, India, the UK and the US if treatments to brain and body would improve employment prospects in the future, 70% would consider these treatments. In a blue world companies will monitor and measure their employee’s performance, lifestyle and well-being. In return organisations will provide for social support towards families and close relatives. Data collected by these organisations will be used to predict performance but also to anticipate any risk by workers. According to PWC a chief people officer will be a powerful position where the interconnection between people and performance is measured greatly. Because the performance of an organizations depends so much on individual performance, functions such as human resource management are internalized and essential to drive performance as well as avoid any risks resulting from human capital. Organisations start looking for exceptional talent early, by involving schools and universities. Workers actively drive their own career development and improve their skills continuously. Top talents would engage agents to negotiate and manage their careers. Organisations in a blue world face challenges due to their size and inefficiency to respond to changes quickly. 

2.1.4 A higher calling to social responsibility is cultivated and lived by a community 

In the green world corporate responsibility lies at the centre of the organisation mission. Therefore, businesses seek collaboration with employees and local communities to support the strong ethical and green business agenda. Because people management decisions are highly influenced by social responsibility, the impact of diversity and regulations can lead to difficulties in obtaining the best talent for work. Human resource management are focusing on developing non-hierarchical and social networks to improve collaboration and reduce the need for travel. The workforce, in a green world organisation, embrace the values of the organisation as their own. Although financial reward is important, it is far less than in a red or blue world. To a green world organization, the concept of belonging and following an ideology is far more important. Workers will seek a job for life to fulfil the desire to commit towards an organisational pledge. Organisational purpose and its impact on the society and culture is first and foremost the singular communication strategy. Workers receive a very high level of trust, leading to high levels of quality assurance and vigilance. The brand of an green organisation must be protected by all means, which implies that organisations will favour long-term society impact over short-term financial gains (Workforce of the Future, 2030).

With this study PWC provides a very through and holistic view of the future work environment and challenges that organizations and workers will face. Already today there are some resemblances with organisations leaning towards one of the other worlds. Interesting is that crowd work is essential to all worlds in some form or another. Crowd work will seemingly provide organisations of the future significant contribution for resources. Therefore, crowd work should be understood in more detail to differentiate their impact and significance towards value created for workers, customers and companies in a newly forming gig-economy and New World of Work. 

2.2 The Gig-economy as a new form of adopting the New World of Work

The definition of a gig economy by the Cambridge dictionary suggests that it is a way of working, where individuals have temporary jobs instead of working for one employer and are working on isolated tasks that are remunerated separately. According to the scholar Gillespie, the gig economy is a labor market that provides contracts for temporary positions to independent workers via a digital platform or marketplace. A gig-work therefore is considered to have less administration, is temporary and lacks physical connection. Brawley estimated in 2017 that the size of the gig economy would be 43% of the U.S. workforce. (Brawley, 2017) The scholar Thatcher indicates that there are two forms emerging from the current development of the gig economy. On demand work engagement where jobs are provided to anyone even outside an organization and the other being crowd work. But there are more granular differences which are seen more clearly in understanding the skills required. 

2.3 The differences of Microwork and Online Freelancing

The scholar Corporaal provides with a comparison of two extreme forms of crowd work being microwork and online freelancing. Microwork according to Corporaal are tasks that have been broken down from projects. These tasks are simple and take minutes to complete and require limited expertise, while task coordination can even be automated through the use of digital platforms. Examples for microwork tasks are work provided on platforms like Amazon’s Mechanical Turk or the CloudFactroy. A compensation for work is resulting on the rate by which tasks are completed. Platforms geared towards the gig-economy are typically for local and in some cases even physical interaction necessary. In contrast, online freelancing platforms differ from to microtasks or gig economy platforms by form of interaction and tasks or skill level required. In other words, online freelance work are tasks that pose a higher complexity towards workers. A completion of such tasks can take hours, days or even months. Workers typically require special skill and will be paid based on milestones completed and an hourly rate defined. Task that are provided to online freelancing workers are usually coordinated manually and examples for such platforms are online freelancing platforms such as PeoplePerHour or Upwork. In essence, digital platforms such as Upwork, Freelancer and PeoplePerHour are marketplaces that promote and offer services to clients. In most online platforms, workers can define their own price for service provided. Platforms also often provide the convenience through online tools to coordinate and control performance of work delivered. On freelancer platforms human resource divisions can quickly identify and tap on specific talents required at a given time. (Corporaal, G.F., & Lehdonvirta, V., 2017) Although Corporaal places microtasks as part of the gig-economy, the scholar Huws regards any form of crowd work to be part of the gig-economy. Because many new platforms are providing crowd work and a growing number of diverse areas, Huws offers a more diverse categorization of different types and forms of crowd work. Huws categorizes crowd work into four types of platforms where client requests are matched with paid labor from freelancers. The categorization rest on the skill level required to perform the work. Ranging from highly skilled, creative and IT related tasks and delivery towards projects, to lower skill work which would fall into the delivery or transportation industry. Huws though indicates that as industries are adopting the gig-economy concept many different shades of skill level are seen and services in the health, education and legal industries are driving the need for more platforms. (Huws et al., 2016)

2.3.1 The acceptance of the gig-economy and crowd work platforms

Although the amount of people employed on crowdsourcing sites is challenging to quantify, reports suggest rapid development. Studies reveal almost 5 million crowd staff in the United Kingdom, some 12% of Swedes work in the freelance economy and in Netherlands 18% have sought to find jobs across a web network (Huws et al., 2016). Crowdsourcing is very diverse and involves the development of ideas, (crowdsourcing and contests) and popular opinion polling (crowd voting). The areas of major interest commenced in the sharing economy and recently went to the gig-economy: conceptually distinct but overlapping constructs. The media have provided some transparency to the job standards and working conditions of gig-workers, especially in delivery or taxi employment, but these are only a fraction of all possible crowd work areas. Many literatures underline market advantages and the need to explore different forms of competition and productivity that continue to obscure the element of labor. The two major examples of labor exploitation, Amazon’s Mechanical Turcs (MTURK) and Uber, have growing critical literature. While critical analysis is welcome, it is necessary to understand crowd-work more extensively, what values it can offer. In contrast to microtasks platforms and according to the scholar Corporaal there have been a large increase in the acceptance of freelancing platforms, due to availability of various skills and talents. Corporaal’s research suggests that enterprises are using platforms not only to reap the benefits of financial flexibility but also to gain access to workers with different skill sets and expertise. In his research he points out that enterprises that have successfully adopted platforms in their operations have created an environment for experimentation and learning. Enterprises have opened up platforms to in-house teams so that workers can collaborate freely in finding the best possible uses cases. For instance, a board of experts formed of freelancers are readily available when needed by an inhouse team. In this context Corporaal indicates that enterprises successfully using these platforms utilize freelancers in addition to regular employees and not instead of. An important finding from organizations utilizing platforms was that regular employees were essential to convey and carry the organizational identity and culture towards freelancers. Regular employees were also essential to support the integration of freelancers and externals into project teams. To prevent resistance from employees for such a crowd platform an early integration is beneficial. (Corporaal, G.F., & Lehdonvirta, V., 2017).  

2.4 Common characteristics of crowd work

There are five common characteristics according to the scholar Howcraft. He pinpoints the evaluation of the platform to be the first characteristic, that enables the interaction between producers and consumers. In some cases, the platforms have emerged to cater to various needs that are part of the value chain of an organization such as investors and partners. According to Howcraft and more resent research, crowd work predominantly exists for microtasks which are low skill and high quantity but Howcraft implies that these tasks are not affected by geographic location, as opposed to other scholars. Howcraft points out about crowd work, that even with high quality workers, the remuneration is lower than with offline work arrangements. In terms of contracts, Howcraft suggests that the majority of contracts to be based on independent or freelance contracts with self-employed status providing tax benefits and circumvents minimum pay policies. Furthermore and because of a growing number of monopoly platforms providing crowd work, the possibility for micro-entrepreneurism is shrinking. The scholar therefore questions how crowd work is fostering entrepreneurism. From a technological standpoint Howcraft places software as a means to function as an intermediary between worker and employer. Technology is capable to handle transactions and evaluate performance with forms of quality assurance as well as software that is able to cater for social and economic well-being of workers. The platforms described can operate to provide rewards based on a reputation system by rewarding good workers and punishing poor ones. Finally, Howcraft reminds of the trust digital workers have towards an infrastructure and the fading or diminishing responsibility of platform owners seem to have towards workers (Howcroft & Bergvall-Kåreborn, 2019). There are clear differentiations in characteristics among crowd work ranging from low skill to high skill inputs, but further differentiation is required to understand the more complex nature of crowd work and how it is progressing towards a New World of Work. 

2.5 Typologies of crowd work

In a little over ten years since the term “crowd-sourcing” was first invented, growth and size have taken various observers to comment that the “crowd-based economy” has become a basic transformation for New World of Work. Questions around globalization, labor instability and career stability quickly add to wider questions in how the environment of transition in the workforce will evolve. The research paper by Howcroft points to the use of crowd work as both a primary and supplementary source of employment providing a growing number of people to pursue alternative forms of remuneration. Howcroft suggests as with the increase of outsourcing where businesses focus on cost savings and increasing profits, a similar behavioral pattern reinforces more conventional types of crowd work. This is apparent from the interference of crowdsourcing in the fields of specialized labor (such as computer engineering and legal counsel) as jobs are digitally broken down into smaller entities, these can be distributed easier. However, causing workers to struggle with minimal pay resulting from fragmented work. Howcroft suggests that crowd work in this regard is a major driver to growing types of non-standard work, which can better be explained within the wider sense of neoliberalism (Howcroft & Bergvall-Kåreborn, 2019). A summary on the four typologies depicted in Figure 3 and according to Howcraft:

Figure 3: Typologies of crowd work platforms

Source: (Howcroft & Bergvall-Kåreborn, 2019)

Type A: Online task crowd work 

  • Tasks are modular, ranging from microtasks to more complex projects. 
  • Labour is broken down into little units, or modules, 
  • interaction between managers and workers is replaced with micro-level task control because low-cost human labour is cheaper than automation. 
  • Platforms with higher skill sets are UpWork, Fiverr and InCloudCounsel,
  • These platforms provide services at lower cost than their traditional offline counterparts. 
  • Predominantly though online tasks crowd work is categorized as microtasks

Type B: ‘Playbour’ crowd work

  • Crowd work is non-paid work and the initiative lies with the requester. 
  • This type of work is associated with pleasure, creativity and autonomy
  • Work is allied with fun; therefore, workers are more innovative and increase productivity
  • Crowd work will not replace traditional work as it does not cater towards financial stability
  • Attract participation of highly skilled individuals to receive creative output for company profits 
  • Provide monetary reward for the especially talented 
  • Examples are Threadless.com or InnoCentive.com publish scientific problems to an online community and in return participants can win cash prizes if problems are solved. TopCoder, a large platform for software developers that issues lottery-like payments

Type C: Asset-based services 

  • Services offer paid work for crowd work
  • Asset-based services are interconnected with the sharing economy 
  • Work is mainly conducted offline, is dependent on time and location 
  • Platform focus on orchestration of workers 
  • Examples of platforms are Airbnb, Uber and TaskRabbit. 

Type D: Profession-based freelance crowd work 

  • Platforms focus on specialists to provide offers to profession-based freelancers 
  • Platforms requires participants with high level of professional knowledge and competence 
  • Used to develop mobile apps for Apple and Google platforms or providing photographs to iStockphoto 
  • This type has closes resemblance with the traditional self-employed worker
  • Remuneration happens when products and services are sold to consumers 
  • Platforms transfer the risk for demand and uncertainty of sales to third-party contributors 

(Howcroft & Bergvall-Kåreborn, 2019)

The typologies of crowd-work demonstrate the various means to attract workers and provide with motivational incentives to perform work at low cost. The organizations reap the benefits of reduced fixed and variable costs and have great potentials in scalability of their workforce. These organizations, although facing reduced cost of work performed are facing new and different challenges as indicated by scholar Jabagi. 

  1. Crowd work and gig-organizations lack traditional tools of supervision 
  2. Organizations pose themselves vulnerable to commitment and availability of their crowd workforce
  3. Crowd workers in gig-economies are customer facing and act as brand ambassadors for the gig-organizations.

The scholar Jabagi points out in his research paper that the gig-organizations and their workers are facing a challenge to have a strong connection. This connection of workers and organizations is referred as an organizational identification (OID). Jabagi proposed in his research paper that OID can be enhanced among gig-workers through intrinsic motivation and organizational prestige by using social media as a form of communication. Jabagi rests his suggestions by combining the self-determination theory, identity theory and social media research (Jabagi et al., 2018). In summary, there seems to be a positive attribute to the notion of New World of Work but a lesser one towards crowd work. Although both rest on the same principles and place the worker at its center, in crowd work critical examples are provided of organizations misusing workers for profit maximization. And on the other hand, New World of Work is considered to bring freelancers and employees closer together to collaborate and jointly innovate through the use of platforms. A combination of the two forms needs to be considered. Simply put, crowd work is facing problems with remuneration and the New World of Work is challenging organizations in how to implement these principles into an existing organization. As indicated by scholars, crowd work provides with great new ways for workers to contribute and get satisfaction from work performed which lays the foundation for New World of Work concepts in organizations. A more concise understanding for what influences workers in crowd work will provide a better understanding for what factors to consider when adopting for a New World of Work organization. 

3. Considerations for implementing a gig-type of New World of Work

How can I get workers more engaged seems to rest at the core of a New World of Work organization? The need for more leaders and fewer managers becomes apparent. Where organizations seek support by independent workers on a short-term based contract and by the using a digital marketplace as a broker platform, Jabagi refers to this as a gig-economy. Uber, Deliveroo and Fiverr are according to Jabagi gig like organizations enjoying the benefits of an agile and flexible workforce as well as benefits of reduced operating cost and liability towards customers. For the gig organization the challenges are that workers are not bound, and don’t allow for traditional types of supervision. Therefore, gig-organizations are forced to rely on workers delivering work in accordance of organizational goals and quality while also providing for certain self-organization. Jabagi indicates that in most gig-organizations, workers tend to have a strong organization are therefore challenged to seek solutions how to empower and motivate their gig-workers. Due to their customer facing role gig-workers therefore can be seen and regarded as brand ambassadors (Jabagi et al., 2019). 

3.1 The importance of OID on gig-economy.

External workers that are brand ambassadors cannot be controlled or supervised as traditional employees. Organizations are therefore challenged to seek solutions how to empower and motivate their gig-workers. Failing to provide positive experience and connection between organizations and workers will have a negative impact on the customer experience. While there are certain techniques and tools to increase the organizational identification (OID) leading to positive connection and experience for good workers, the difficulty seems to be developing a strong OID through the use of online platforms. Jabagi suggests that the development of the OID is the key to have a positive connection between gig-organizations and gig-workers. There are however two aspects that impact the organizational identification among workers and organizations, which are a distance and time. Developing an organizational identification among workers proves to be difficult, because the gig-workers have a flexibility towards distance, and also in terms of contract length. Thus, Jabagi indicates that organizations are utilizing virtual solution such as enterprise social media platforms to address both aspects of distance and time. Jabagi rests his strategy for the use of enterprise social media on the theories of self-determination by Deci and Ryan as well as on social identity theory of Ashforth and Mael. Jabagi claims that OID can be fostered in a gig economy by intrinsic motivation and organizational prestige. Jabagi provides with eight proposals to strengthen OID through the use of an enterprise social media system. (Jabagi et al., 2018)

Figure 4 is provided by Jabagi to show the relations of three factors impacting OID.

Figure 4: Proposed Conceptual Model

Source: (Jabagi et al., 2018)

Figure 4 explained in more detail shows, that workers managing their status is regarded to have an impact on the perceived prestige (P7) of working for an organization. Providing feedback (P6) has an impact on the perceived competence of a gig-worker. Developing relationships (P5) has an impact on the perceived relatedness of work performed by a gig-worker. Both relationship developing and feedback have an impact on the intrinsic motivation of the gig-worker. Therefore, with intrinsic motivation and prestige perceived Jabagi suggests therefore OID can be positively influenced. With increase in commitment and autonomy as well as feedback from social interaction an increase in OID can be anticipated. (Jabagi et al., 2019)

3.2 The need for traits rather than specific technical skills.

In a recently published book, Cribb indicates that over the course of the next 10 years there will be a reduction for routine and manual labour tasks and an increase in creative, problem-solving and relationship tasks. Cribb indicates that problem solving will be the majority of people’s skills sought after with dominant skills required in scientific work and minor skills in critical thinking and judgment. Thus, employers will be seeking traits rather than specific technical skills. Another interesting aspect Cribb points out are security or flexibility received from a form of work performed. Where in employee receives a form of security and financial stability through a perceived permanent job, a self-employed trade these advantages for flexibility and lifestyle. According to Cribb some employers are already trying to merge the advantages of a flexible work style of a self-employment with the security of an employment contract through introducing zero-hour contracts or outsourced  contracts. Uber is provided by Cribb as an example where the assets and skills remain on contractor side leaving the company with few actual employees and assets but providing customers with a universal and global image and experience (Cribb, 2019). An interesting new form of flexible work style similar to a self-employment role is introduced by the scholar Wessels as the time-spacial concept. This concept introduced in organizations provides for more autonomy towards workers leading to better work output.   

3.3 The time-spacial flexibility in creating new types of employment frameworks

The concept of time-spacial flexibility is a new approach in creating new types of employment frameworks for workers. The time-spacial flexibility as suggested by Wessels is a strategy for employees to be productive and staying healthy. However, research on the impact of time-spacial flexibility has been not conclusive to have only positive or negative impact outcomes on well-being, performance or managing a work-life balance. Wessels argues that current time-spacial flexibility and job crafting has been a task performed top-down, reducing the autonomy of employees and the workforce. Does time-spacial flexibility in job crafting should be a bottom up task, that not only provides the workforce on a daily level to adapt to current situations but also to provide the feeling of autonomy in making informed decisions about work performance and tasks. Wessels concludes that the formal time-spacial flexibility that employers provide should be completely separated by the time-spacial flexibility lived by employees on a daily basis. Thus, an organization should provide for the framework of a time-spatial flexibility to exist and draw up on the employees and workers to design and create their work contribution in accordance to the understanding of a time-spatial flexibility of the organization. Wessels concludes that the time-spacial flexibility depends largely on how each individual uses the concept and which extent and individual can use and manage to optimize output and deliverables. Wessels indicates that employees seeking social job resources such as seeking feedback and developing skills has led to a positive impact on an individual’s well-being. 

But because there has been no conclusive evidence or research stating that time space or flexibility provides for better work life balance, time and space flexibility should be regarded as a tool for which individuals need to build up abilities in order to effectively use this tool. Wessels highlights three dependencies for time-spacial job crafting to work. Firstly, the organizational culture needs to embrace time-spacial job crafting as a foundation for employment. Secondly, leaders and co-workers need to provide instant feedback openly and freely to allow individuals to adopt and alter. Thirdly autonomy, competence and social feedback are the needs that individuals seek, which in turn are the essential needs for time-spacial job crafting framework. Wessels indicates that time-spacial job crafting is a long-term undertaking and rests on the individual to become more proactive. Wessels argues that if used well the time-spacial job crafting will lead to higher levels of organizational commitment (Wessels et al., 2019). The time-spacial job crafting concept lies closely with the concepts of a New World of Work and it provides for a reasonable framework for how employees and workers are placed at the center of an organization. The difficult aspect though is that a fundamental shift in work ethics or organizations culture towards trust and autonomy is required. A daunting task for organizations to consider when considering shifting their culture towards a New World of Work. Key for such a transition is to understand if the benefits outweigh and potentially how to implement a New World of Work into an organization.

3.4 Setting a starting point for a New World of Work organization

Defining a future vision and identifying the starting point. In order to achieve the surroundings that are fruitful towards an employee centric organization supporting the New World of Work concept there are numerous criteria to fulfil. To a certain extent scholar have not been able to list and summarize the criteria that are required to implement a New World of Work. The New World of Work still seems to be a conceptual topic that is well understood in its singularity but not well documented in its implementation. Basically, there is a trend towards a paradigm shift in how we work, but there are no clear signs of what this actually means. A few sources provide cookbooks for New World of Work but it all comes down to an individual approach for each organization or company. Aspects drawn from literature by Covey can be summarized into: 

  1. Reshape leadership skills to support a genuine human intrinsic motivation approach
  2. Build on and invite new talents while utilizing individual competencies
  3. Live by the philosophy of circle of influence and circle of competence 

(Covey, 2004)

To implement a New World of Work will result organizations to embark on a journey, a lengthy process due to a need for cultural adaptation and change that is lived by all members of a company. Thus, organizations will need to reshape work entities and collaboration in order to provide more flexibility to workers and reap the benefits of more workers contributing. Simplifying work can thus lead to higher collaboration in a New World of Work.

3.5 Simplification, collaboration and remuneration in the New World of Work

Simplification and collaboration can be divided into two dimensions of personnel and organization, and automation and digitalization. On the one side work performed should become simplified in order to attract more contribution. Thus, companies are working to implement design thinking, change the work environment, and assist workers to focus on their deliverables and provide a setting that is conductive to rest and pleasure. As pointed out by scholar Bersin, the New World of Work leads to an era of doing less but doing it better, rather than doing more with less resources. This implies that machines will support people in tasks and thus people and machines need to collaborate instead of competing for work. Machines are becoming better at reading, analyzing and making decisions that impact work. Human resource responsibility rests in how to revise jobs so that a collaboration with machines is possible (Bersin et al., 2015). The combination of simplification and collaboration leads to platforms that provide this synergy. As the scholar Jabagi suggests, enterprise social media platform should provide three basic functions, which are developing relationships, providing feedback and managing status. The underlying reasons for organizations to adopt a New World of Work philosophy and implement sourcing platforms are comprised by the scholar Corporaal into the following three distinct reasons: 

  1. An easy and scalable solution to find talents, skills and expertise; 
  2. A non-bureaucratic process in terms of human resource management; 
  3. A reduction in costs for training, set up and overall transaction

(Corporaal, G.F., & Lehdonvirta, V., 2017). 

Although these benefits strongly suggest a reduction in cost and resources, adopting online freelancing platforms require new skills and bare new challenges. This can be the alignment of internal workers and external workers, learning new processes and procedures, increased cost with coordination of employees and external workers, increased resistance from internal staff, developing new platforms to work with legacy systems. His new challenges can result in a financial burden for an organization seeking to utilize the advantages of a crowd work environment. Thus, Corporaal provides with five recommendations towards enterprises seeking an enterprise social media platform to support crowd work: 

  1. Decide for what freelancing platforms will be needed, such as for specific tasks and divisions or for whole enterprise as a new solution to draw customers closer?
  2. Define the anticipated value received through flexible sourcing via freelancing platform 
  3. Develop a strategy for introducing a sourcing platform in divisions and the whole organization
  4. Provide for trainings to members 
  5. Creating an experimental space that allows managers and users to test and find new practices. 

As organizations improve their platforms, they face more freelancers available with skills and experience. Organizations then will need to cater for new forms of remuneration and benefits that are geared towards the types of work performed but also be able to distinguish which workers are suitable to perform work. Organizations need to curate a selection of freelancers in order to meet their expectations. When having freelancers on board, to create a community with these few talented freelancers and to complement employees in their internal positions  (Corporaal, G.F., & Lehdonvirta, V., 2017). In summary leaders need to prepare an organization to adopt a new platform that has its own management layer, a platform that enables space for experimentation and a platform that has enough financial resources allocated as well as endorsement of the entire leadership team. 

To analyze the balance between basic salaries, bonuses and benefits geared towards individual preferences. This means the workforce should also be able to readdress their salary and benefits and define new forms based on individual preferences and life stage. In the New World of Work and its followers, money is not the sole remuneration possibility. Modern workforce can provide benefits along the lines of sabbaticals, family care, housing support (Jones, 2019). Also, non-monetary benefits of autonomy, feedback and social recognition are key benefits desired by the New World of Workforce. 

4. Concluding Statement

Some corporations have implemented types of crowdsourcing work or crowd work, in order to stay flexible in their operations and for financial reasons. As research shows currently there is a polarization of the work environment. On the one side we have the traditional employer and employee relationship. This provides with security long-term planning and reliability; however, the downsides are inflexible organizational structures and high labor costs. On the other side we have the growing interest in a gig economy. This gig economy consists of part-time workers, temporary, independent and contract workers. The motivation for people to join the gig economy are basically summarized into three points which is autonomy, flexibility and purpose. Although these three points should be part of a regular employment relationship, the reality is very different. Management has evolved in the growth economy towards managing growth of an operation and not managing people or staff towards the growth of an organization. Thus, in recent years the focus has shifted from individual, people and human centric to objective, output and performance management. It is clear that under these circumstances a certain amount of people will not be interested in providing time and resources. This is why the gig economy is increasingly interesting towards a new labor force seeking autonomy, flexibility and purpose. Large enterprises have been slow to adopt a new type of labor work organization and there are numerous reasons why large enterprises find it difficult to implement a gig economy workforce. 

Useful to organizations would be to understand how large enterprises can implement a New World of Work environment in an existing enterprise organization, without major disruption in labor policies, contracts, physical or virtual necessities, additional financial or human resources. The scholar Thatcher identified that the negative implications of internal crowd work are that rewards no longer are honored as they would be in a traditional employment setting. The gig-economy lacks the processes and systems for more remuneration possibilities (Thatcher et al., 2019). Thus, it would be interesting to understand if there is a short-cut for organizations to tap into the world of New World of Work using a combination of internal crowd work and internal crowd sourcing and funding. More research would be helpful to understand how work for equity can be incorporated with forms of crowd work supporting the New World of Work concept.

5. Bibliography

Beck, U. (2000). The brave new world of work. Polity Press.

Bersin, Agarwal, Pelster, & Schwartz. (2015, February 27). Introduction: Leading in the new world of work | Deloitte Insights | Global Human Capital Trends 2015. https://www2.deloitte.com/us/en/insights/focus/human-capital-trends/2015/introduction-human-capital-trends-2015.html

Brawley, A. M. (2017). The Big, Gig Picture: We Can’t Assume the Same Constructs Matter. Industrial and Organizational Psychology10(4), 687–696. https://doi.org/10.1017/iop.2017.77

Brence, & Nowshad. (2019). Fluktuation und deren Auswirkung auf Unternehmen. 12.

Corporaal, G.F., & Lehdonvirta, V. (2017). Platform Sourcing: How Fortune 500 Firms are Adopting Online Freelancing Platforms. Oxford Internet Institute: Oxford.

Covey, S. R. (2004). The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change. Simon and Schuster.

Gratton, L., & Scott, A. J. (2016). The 100-Year Life: Living and Working in an Age of Longevity. Bloomsbury Publishing.

Havard, C., Rorive, B., & Sobczak, A. (2009). Client, Employer and Employee: Mapping a Complex Triangulation. European Journal of Industrial Relations15(3), 257–276. https://doi.org/10.1177/0959680109339406

Howcroft, D., & Bergvall-Kåreborn, B. (2019). A Typology of Crowdwork Platforms. Work, Employment and Society33(1), 21–38. https://doi.org/10.1177/0950017018760136

Huws, U., & Joyce, S. (2016). Character of Austria’s “Gig Economy” revealed for the first time. Hertfordshire: University of Hertfordshire.

Huws, U., Spencer, N., & Joyce, S. (2016). Crowd work in Europe: Preliminary results from a survey in the UK, Sweden, Germany, Austria and the Netherlands.

Izabella Kaminska. (2016, December 12). FT Alphaville exclusive: Inside the gig economy. https://ftalphaville.ft.com/2016/12/12/2181219/ft-alphaville-exclusive-inside-the-gig-economy/

Jabagi, N., Audebrand, L. K., Croteau, A.-M., Marsan, J., & ULaval, F. (2018). Connecting with gig-workers: An organizational identification perspective. 25.

Jabagi, N., Croteau, A.-M., Audebrand, L. K., & Marsan, J. (2019). Gig-workers’ motivation: Thinking beyond carrots and sticks. Journal of Managerial Psychology34(4), 192–213. https://doi.org/10.1108/JMP-06-2018-0255

Jones. (2019, March 26). How to adapt to the new world of work. https://www.theceomagazine.com/business/health-wellbeing/how-to-adapt-to-the-new-world-of-work/

Lawrence Mishel. (2018, May 15). Uber and the labor market: Uber drivers’ compensation, wages, and the scale of Uber and the gig economy | Economic Policy Institute. https://www.epi.org/publication/uber-and-the-labor-market-uber-drivers-compensation-wages-and-the-scale-of-uber-and-the-gig-economy/

Pfeiler. (2020). Leadership_Engagement_Fluktuation.pdf. https://www.corporate-culture-consulting.at/wp-content/uploads/2020/01/BC_Leadership_Engagement_Fluktuation.pdf

Resch, B. (2015). We have the gig economy all wrong: Here’s how we reinvent the organization man in the Uber-age. Salon. http://www.salon.com/2015/09/08/we_have_the_gig_economy_all_wrong_heres_how_we_reinvent_the_organization_man_in_the_uber_age/

Tele Haase: Hier darf jeder der Chef sein. (2015, September 4). trend.at. https://www.trend.at/wirtschaft/oesterreich/tele-haase-5843890

Thatcher, A., Zink, K. J., & Fischer, K. (2019). Human Factors for Sustainability: Theoretical Perspectives and Global Applications. CRC Press.

Unkefer. (2017). Accenture Technology Vision 2017 Forecasts a Future of Technology for People, by People. /news/accenture-technology-vision-2017-forecasts-a-future-of-technology-for-people-by-people.htm

Wessels, C., Schippers, M. C., Stegmann, S., Bakker, A. B., van Baalen, P. J., & Proper, K. I. (2019). Fostering Flexibility in the New World of Work: A Model of Time-Spatial Job Crafting. Frontiers in Psychology10. https://doi.org/10.3389/fpsyg.2019.00505

Workforce of the future. (2030). 42.

zukunftsinstitut.de. (2018). NewWork_Web.pdf. Zukunftsinstitut. www.zukunftsinstitut.de/dossier/megatrends

6. List of tables and figures

Figure 1: Business Case – Costs through disengagement

Figure 2: The competing forces shaping 2030

Figure 3: Typologies of crowd work platforms

Figure 4: Proposed Conceptual Model

How to help investors with „Zombie“ start-ups?

Table of contents

  • Definition of a zombie start-up
  • Problem statement of investors
  • Solution for getting investors better insights
  • Methodology to obtain true insights
    • First meta level analysis
    • Secondary deep dive analysis
    • Tertiary conjoint analysis
  • Financing of a true insights service

Definition of a zombie start-up

Even the best investors in the world aren’t right all the time. Investors typically apply a portfolio approach to spread their risk and increase the chances for backing an opportunity. In any investor’s portfolio you have therefore what investors have come to call “zombie start-ups”. Zombies are start-ups that make revenue, perhaps enough to break even, but not enough to generate a valuable return for investors and as turnover is not enough, they are constantly raising capital. As a successful financing round always needs an attractive start-up, and zombies are by definition not attractive to investors, there is only one way to raise capital or secure an investment by covering up unwanted negative sides of the start-up. For clarification, this is mostly not about fraud, more about ignorance, omittance and/or deception:  

  1. ignorance: most often the start-ups themselves are not conscious about essential facts for the success of their business, be it out of misinterpretation or just not knowing.  
  2. omittance: cutting out the ugly non-obligatory information.
  3. deception: providing a positive interpretation to the ugly obligatory information 

Along this train of thought, both new as well as committed investors are provided with a “dressed-up” version of the start-up’s story which will make investors believe in the rightness of investment decision. Typically, new investors fall prey when they fail on performing a profound due diligence and rely solely on business analysts whose interest are in achieving a deal. There are numerous reasons for the due diligence process not being done in a comprehensive and profound way. However, after an investment an investor is defined by the legal binding of his investment which usually impedes a drawback of the commitment other than by buyout or exit. Moreover, there is sometimes also an emotional relation to the Start-up Team or the idea itself, so often an investor still will provide with follow-up investments in the course of future financing round in addition to increasing investments to avoid dilution of shares. Despite investment reasons, such a situation is best described as a stalemate, where the investor has seemingly no real option to change the situation substantially and to lose his investment, what most investors want to avoid. So, either investors just accept it and let their investment quietly fade away or investors struggle on, trying to help the team with whatever resources they think could help, be it money, market insight, own time and work to achieve a desired turnaround. 

Regardless the path an investor will seek, a true insight into the ordeal of the start-up is missing and thus a zombie start-up proceeds its way. 

Problem statement of investors

Investors that have invested in underperforming start-ups need a basis to decide future actions and support. Investors seek information they will not receive resulting from conflicting interests with the start-up’s management. To reiterate earlier interest of zombie start-ups is to achieve success in financing their operations by deferring and deflecting unwelcome parts of the start-up for  upcoming rounds of financing.  

So how can investors find true insights to a start-up’s health? Information sought after is how the start-up is really performing on the market as well as assumptions about future potentials and performance on the market, thus a realistic valuation.  There are two approaches to get information about a start-up’s performance. On the one hand, there is the obligatory public information, as the balance sheets and the profit & loss and other key performance indicators that are published for regulation reasons. This information is produced internally and depict how funds were used. This information can lead to deception, strongly pointing towards a solution in how to find the economically right interpretation. On the other hand, information about the performance of the start-up that is produced externally, by partners and customers and community that lead to answers in how the start-up is perceived in the market, its status quo and its future potential. This information is only used when there is an advantage for the start-up and thus can be ignored or omitted if found to harm the overall picture. 

Solution for getting investors better insights

A team can provide true insight to the status and the prospect of the investor’s investments. The team would scrutinize the investment opportunity without bias from close relation, conflict of interest or deal based performance pay. The team focusing on the market perception of the start-up’s performance taking into account all stakeholders and their feedback. True insights would be provided by a three-level analysis. The first analysis will be to compare the initial due diligence and start-ups vision with current reality. The second analysis will provide a deep insight into problem areas that were identified in the first analysis. The deep dive will provide with potential solutions to overcome the problems. The third analysis will provide an insight into which solutions have which impact for a potential turnaround. The third analysis can be conducted via a conjoint analysis.

Methodology to obtain true insights

First meta level analysis

The meta level analysis will look at external and internal factors involving the product service or solution of the start-up. Internal competencies and external influencing factors are analysed through a quantitative survey. This survey will be conducted in at 360° approach, so that start-up employees, investors, customers and clients are invited to participate. Quantitative feedback will provide with a score and provide insights to further qualitative deep dive analysis.

Vision and evaluating its “Back casting”
Best caserealistic caseworst case
Initial Vision   
Current State   
internal competencies:scoreexternal potential: Score

A further correlation matrix provides understanding about which problem areas have a correlation effect on other areas.

Secondary deep dive analysis

Problem finding with 360-degree interviews towards stakeholders. These interviews will be qualitative interviews and provide more profound insights into what problems exist. Qualitative interviews can also point towards potential solutions for problems. These solutions can then be compared with other interview feedback and ranked based on our previous correlation matrix and scores. An effective deep dive analysis and qualitative interviews will require a throw stakeholder mapping and access to clients and customers that are not biased by the start-up. 

Tertiary conjoint analysis

The final analysis would be to provide a weighting average on the proposed solutions from the deep dive analysis. It might be obvious to be able to rank the most important solutions to problems. In cases where it is not obvious, such as price or enhancements, a conjoint analysis can help to provide true insight on the impact and effect a proposed solution will have on the start-up’s turnaround. Thus, with the final analysis the investor can estimate the required recourses for a potential turnaround. 

Financing of a true insights service

In order to omit any performance related fees, a flat fee for each of the analysis stages is ideal. The variable costs are the amount of interview partners required to provide a true insight analysis. Thus, larger start-ups will require more interviews to be conducted and essentially cover the operational costs for interviews. Teaming up with market research companies and universities will also help to streamline and standardize the methodology so that future evaluations can be compared with previous analysis.   

How does flow, creativity and play, experience and memory influence the work environment?

Table of contents

  • Creativity and Play
  • Flow
  • Experience and Memory
  • Conclusion
  • Resources

Creativity and Play

Judgment is the killer for creativity. Embarrassment or fear of failure leads to conservative approaches and stops wild ideas. According to Brown our fear of judgment of peers leads us to be more conservative. Children on the process of becoming and adult become sensitive of the opinions of others. Children that feel in a trusted secure environment are freer to play, because they trust in kind judgment of their surroundings. In order to nurture creativity at a workplace, a trusted environment should be in place that creates a sense of security to allow people to take risks and have the security to play and experiment. Children are an example where they not only question what an object is but also what use it could make. The human brain has developed in such a way that we can anticipate certain situations. In a playful environment this skill allows us to use to imagine our self in a certain situation as well as observe our play and iterate in various forms. Roleplay is therefore very useful to test if our imagination is accurate and if the situation feels authentic. In order to embrace creativity and playfulness into everyday work, rules about how to play and when to play give a structure and improve the quality of outcome (Brown, n.d.).

As stated by Peter Kruse it is not possible to ask someone to be creative, creativity is a process to overcome a state of imbalance and return to a balanced state. The easiest way to create a creative environment is to create friction into an existing situation. This friction can also be understood to be a challenge to overcome (“Prof. Peter Kruse über Kreativität (plus Transcript)—YouTube,” n.d.).


A challenge is required for creativity to flourish and according to Csikszentmihaly this challenge can also help in achieving a state of flow. A state of flow is desirable because the mind will only focus on the task at hand without distraction. The mind is so consumed by the task that everything else is suspended. In order to achieve a flow state a situation needs to be challenging and at the same time the skill level needs to be adequate enough to create a perfect balance. By increasing the challenge while a skill is being improved, a state of flow can be extended. An interesting finding according to Csikszentmihaly is that in a flow state the self-perceived existence is temporarily suspended because the mind consumes full attention in the process of dealing with the situation. There is simply put not enough brain capacity available for our conscious self to actively influence our doing. There are two state of minds that are close to state of flow which are arousal and control. In a state of arousal most people have sharp learning curves as the challenges are higher than the skill level. A longer duration in such an arousal state can lead to a fear and burn-out. In a state of control where the skill level is higher than the perceived challenge people are in a state of control and if the challenges do not increase, then the mind can enter the state of boredom. The most distant state to a desirable state of flow is finally the state of apathy. The single largest contributor to this state is watching TV – only 6-7% of the time spent watching TV can deliver a flow state (Csikszentmihalyi, n.d.). If flow is such a desirable state, how can a business foster a flow favorable work environment? There have been attempts to increase challenges for employees such as “Job-rotation” and trainings to enhance a skill level. However, in a transactional business environment the task to make turnover outweighs whereas in a transformational business the focus lies on creating. That also means that transformational changes are more important than transaction leaders. Csikszentmihaly points out that in order to be creative in a flow state and develop something entirely new that is considered an improvement to the current system, requires at least 10 years of knowledge in this field. 

Experience and Memory

It might be that happiness is derived from a state of flow and fulfilment and that to experience happiness is more important and meaningful to employees than income. As Kahneman points out in his Ted talk, people with an anual income below 60k USD show signs of unhappiness. However, people who earn more than 60k USD a year show no signs of being happier. This underlines the understanding that income is a hygiene and not a motivational factor. Companies should pay more attention in making sure minimum basic needs are met and to focus on supporting happy memories at work. Kahneman suggests that in order to measure happiness, there needs to be a differentiation between the experience of happiness and the memory of a happy event. According to Kahneman experience and memory are very different and have a fundamental influence on how we perceive happiness. For instance, an experience creating happiness but ending with a negative experience will lead to a negative memory and possibly an unhappy memory. In contrast if we experience a bad situation that has a happy ending the memory formed will be subsequently happy. Kahneman also points out that not our experiencing self, but our memory of it will be the decisive factor for going through this experience again (Kahneman, n.d.). A positive memory can contribute to word of mouth and help companies to retain and attract more customers. Similar to movies or in evaluating service a lot of focus on making a happy and successful outcome lies in how the end was experienced as this will form a memory that people recollect and evaluate the experience.


In a study by Schroer & Hertel the readiness to participate was most closely associated with autonomy in choice for which project to work on, a projects and task significance, and the newness of the challenge or “skill variety” (Schroer & Hertel, 2009). Freedom of choice therefore has an impact on the number of hours spent on a project. These decisive factors have also an impact on reaching a state of flow. Focus should be led on the outcome of the experience and thus in forming a happy memory which will influence our future decisions. Because our brain cannot process our wellbeing or happiness during a state of flow it is even more important to focus on the outcome of the flow state and trigger a happy memory and feeling of achievement with it. Thus, in order to achieve a form of flow state in our working life we need to maintain a good mix of skill used and choice of challenges. Security and trust in a work environment will allow creativity to unfold and thus business should focus on providing basic needs for financial remuneration and work security. To drive creativity at workplace friction to a balanced system is required. However, in order to allow for creativity to unfold in a playful and constructive manner a sense of security and trust is needed to allow for creativity to be embraced. Setting goals that are purpose led and not transactional will help give people a sense of choice and decision to participate. In order to enhance creativity companies may wish to enable environments that are favorable for a state of flow. Immediate feedback but not judgmental is needed to maintain a positive flow state. In order to reiterate any creative processes business should focus on positive outcomes or achievements for participants to form happy memories and thus these memories will lead people to want to repeat such a creative process. 


Brown, T. (n.d.). Tales of creativity and play. Retrieved from https://www.ted.com/talks/tim_brown_tales_of_creativity_and_play

Csikszentmihalyi, M. (n.d.). Über “Flow.” Retrieved from https://www.ted.com/talks/mihaly_csikszentmihalyi_flow_the_secret_to_happiness?

Kahneman, D. (n.d.). The riddle of experience vs. Memory. Retrieved from https://www.ted.com/talks/daniel_kahneman_the_riddle_of_experience_vs_memory

Prof. Peter Kruse über Kreativität (plus Transcript)—YouTube. (n.d.). Retrieved December 5, 2019, from https://www.youtube.com/watch?v=oyo_oGUEH-I

Schroer, J., & Hertel, G. (2009). Voluntary engagement in an open web-based encyclopedia: Wikipedians and why they do it. Media Psychology12(1), 96–120.

Improvisation or Agile?

1 A reflection on improvisation within organizations

An overarching definition for Improvisation could be as described as “Improvisation thus involves dealing with the unforeseen without the benefit of preparation” (Hadida, Tarvainen, & Rose, 2015, p. 440). The article “A Consolidating Review and Framework” by Hadida provides an extensive list of definitions for improvisation in organizations. Time, deliberate action and information are the most commonly used elements for improvisation derived from a comprehensive list of publications ranging from 1990 to 2011. These three elements can be summarized with the following attributes: 

  • Time: immediate, unforeseen, real-time or as it unfolds. 
  • Action: a reaction to an action, intuition guiding action, invention and spontaneous creation or behaviour. 
  • Information: lack of prior knowledge, lack of insight or precognition, without planning, unanticipated factors or just simply doing something in a new way. 

Improvisation is difficult to be positioned into a single universal container as stated by Hadida because improvisation is seen differently in various contextual settings, which result in a lack of a universal consolidating framework for improvisation.

2 How can improvisation be fostered?

To help select the degree and level of improvisation most suitable to a specific situation, Hadida makes an effort to provide a degree/level framework as a dynamic analytical and diagnostic tool. Hadida’s framework measures the degree and level of organizational improvisation. On the one side, the degree of improvisation ranges from minor improvisation which is referred to as a spontaneous reaction to more structural improvisation or similar to changing the rules or framework for a situation. On the other side, Hadida differentiated an engagement in improvisation from individual improvisation to improvisation between two people or improvisation among a group of people. Hadida suggests that by understanding a situation the level and degree framework helps to understand how improvisation can be applied.

In addition to a framework, a culture for improvisation is essential. An article by MIT Sloan and a TED Talk of Morris (“The Way of Improvisation,” 2011) suggest that creating suitable conditions for improvisation by providing an organizational culture that accepts change positively and is empowered to make local decisions, an organization that has more frequent face-to-face meetings coupled with a sense of accountability and responsibility, and an organization with agile management approaches, techniques, and tools. Notable is that the level of accepting failure is less explicit with MIT Sloan. However, all three sources suggest that the fundamental for improvisation to foster in an organization is the readiness to accept failure, a willingness to learn from mistakes and openness towards change. Hadida refers to his framework and points out that in established organizations a structural and organizational improvisation may still be unlikely. Virtual or scrum-like teams, open innovation systems and existence for flexible working hours are providing a foundation for organizations to support improvisation. 

According to the MIT Sloan article a level of Improvisation can also be dependent on the background or experience of a team, interpersonal skills of team members and the motivation of a team. MIT Sloan focuses primarily on the positive outcomes of improvising teams. Although Hadida also refers to publications by Crossan, Sorrenti and Cunha implying that improvisation rests on the background and experience of a person. Hadida does highlight the possibility of an unsuccessful or negative outcome by improvisation and harm caused through unskilled improvisations. Hadida points to publications that even refer to potential psychological burnout resulting from over-improvisation, perfectionism and over expending resources, energy and time that cannot be maintained or sustained over time. It can be concluded that a new incident to be improvised upon should be difficult enough to pose a challenge and to create a state of mind favourable of creating a flow. However, Hadida continues referring to publications by Kamoche, Cunha and Weick which indicate that an overemphasis on improvisation can hinder the development of experience-based teams.

A preliminary neuroscientific research study by Limb focuses on trying to understand where inside a brain improvisation is triggered (“TEDxMidAtlantic 2010 – Charles Limb – 11/5/10,” 2010). According to Limb preliminary findings, improvisation triggers similar brain activity which is responsible for language and speech. Thus, improvisation is a skill that can be learned as pointed out by Giardella in an interview on improvisation (“Using Improvisation to Develop Leadership,” 2013). To do the thing one is most afraid of, high stake listening as if the life of a topic would depend on it, being in the moment and saying yes to the unexpected are core skills for improvisation mentioned by Giardella. Having a relationship to the other person and making them look good, knowing what the other person wants and at any moment to be able to say “yes and” are improvisation skills that can be trained. According to Giardella, mistakes should not matter and therefore more emphasis should be put on how to rebound from a mistake or to focus one’s attention to the upcoming task. 

3 Reflections for improvisation in a fast-paced business context

Improvisation needs frames and rules that are favourable to allow creativity to be funnelled and channelled. Such rules need to be challenging and allow for an outcome to be unpredictable. As with a good game, the best player cannot always win. Thus business improvisation can work and create something new if combined in a setting where the element of play exist (“Using Improvisation to Develop Leadership,” 2013) or aspects where gamification is present. Improvisation just as innovation is an organizational style that has to be lived and embraced. If an organizational culture does not accept mistakes, does not allow for ambiguity, is focused on micro-management or where management tries to keep control and takes credit for the success, then innovation or improvisation will not enfold. In many traditional companies, readiness for failure is against common management principles. Education and Training of staff are tools to limit improvisational responses. Additionally, processes in companies are in place to limit failure and to guide inexperienced staff to deliver towards an organization’s desired outcome. Legal or punitive implications for a company are also avoided if processes are followed, which ultimately limit improvisation.  

Structural improvisation could possibly be accepted in a business context if the consequence of failure is better for the company than no action or response at all. For example, in a crisis situation of a company, a bad press response is better than no response at all. Therefore, improvisation could be considered a last resort. Businesses have developed over time resting on experts and their knowledge on how to do things. The risk of failure resulting from an improvisation could be considered a too high of a price to pay. In highly technology-dependent environments such as the fintech industry, predictive and redundant systems are in place to eliminate the chance of the unforeseen events. The MIT Sloan article states “[…] teams […] be informed about and willing to take risks, and not overly fear potential failure.” Which leaves a lot of room for interpretation of the level of fear or failure accepted by management. In conclusion, though market dynamics are increasing the speed by which companies need to respond. Nowadays there is less time for planning less time for change management projects and thus decisions are made on the go. An agile business style is fundamentally an improvisational approach. Ranging from spontaneous improvisation in daily activities to structural improvisation when new business models are born.

References and Literature

Hadida, A. L., Tarvainen, W., & Rose, J. (2015). Organizational Improvisation: A Consolidating Review and Framework: Organizational Improvisation. International Journal of Management Reviews17(4), 437–459. https://doi.org/10.1111/ijmr.12047

TEDxMidAtlantic 2010 – Charles Limb – 11/5/10. (2010, October 12). In TEDx Talks. Retrieved from https://youtu.be/BomNG5N_E_0

The Way of Improvisation. (2011, November 19). In TEDxVictroia. Retrieved from https://youtu.be/MUO-pWJ0riQ

Using Improvisation to Develop Leadership. (2013, February 25). In MIT Sloan. Retrieved from https://www.youtube.com/watch?v=-KfuzO6t998&feature=youtu.be