Remote Economy: Is it the next disruptive business innovation?

• Remote working is an unconventional business practice that has never been more relevant than it is today.
• Advocates argue that remote working increases personnel productivity and makes it possible for the company to have a diverse and highly skilled workforce.
• However, there are inescapable downsides as well. Collaboration, team-building and employee engagement could all take a blow.
• Intuitively, remote working culture may not cut the ice with all type of jobs or companies. It works best for nature of jobs that does not necessitate close collaboration among co-workers, does not call for heavy dependence on machinery, or doesn’t have workflows in which tasks move quickly from one phase to another.

I. Work-from-Home

Much in line with disruptive trends across domains and industries, human resources management is also witnessing a paradigmatic shift in its tenets and practices. Engagement, inclusivity, people analytics, freelancing and gig economy are the buzzwords in HR practice today. While this is intriguing, yet they have significant economic implications! One such unconventional business practice that has never been more relevant than it is today is, remote working.

Unlike the traditional economy, the remote economy, as is referred, is an ecosystem or setting that relieves the mandate of requirement of physical presence of human resource on the site of the job, be it a corporate office, educational institute or bank. Based on a simple idea that a ‘job’ essentially need not be performed from particular location or place to be able to produce the same value, the remote economy champions a working style that allows working professionals to work from outside the conventional office environment. Of late, this practice is increasingly symbolized in popular parlance as work-from-home (WFH).

II. Genesis and the Benefits

From a historical perspective, the implementation of remote working or telecommuting can be traced back to the 1970’s when it was made possible to link satellite offices to downtown mainframes using telephone lines. Eventually home workers could connect their personal computers to the organizational mainframes and thus remote working was made possible. Since then remote working is almost ubiquitous today.

The advocates argue that remote working shuns out distractions often witnessed in the traditional workplace; thus increasing personnel productivity. Employees gain flexibility and autonomy, which psychologists say could increase their sense of responsibility towards their work and firm. Remote economy also makes it possible for the company to have a diverse and highly skilled workforce that it can onboard from across the globe with the geographical constraints removed. Particularly, firms positioned in industrial clusters reap the benefits of external economies of scale of having the flexibility of picking up skilled-manpower endowed with idiosyncratic skills required for specific projects. It is cost effective for both employers and employees in more ways than one. Not surprisingly, it has quickly gained so much momentum. Further, it also has a positive effect on the environment. For instance, currently due to the ongoing Covid-19 pandemic and lockdown, already there are clear signs of reduced air and water pollution with the stress on natural resources having eased out, as work is being carried out majorly from home all around the world.

III. Adeptness

However, there are inescapable downsides as well. Collaboration, team-building and employee engagement could all take a blow. Possibly sense of ownership could deteriorate with infrequent or absence of interaction with mentors and peers. It is also believed that working in siloes can hinder creativity. Steve Jobs was an outright critic as he believed that employees at Apple innovate and produce their best pieces of work by interacting with co-workers and broadening their horizons through exchange of ideas.

It can thus be inferred that remote working can be made seamless if companies and the workforce should be both psychologically and technologically equipped to easily adopt and adapt to this emerging phenomenon.

As to the infrastructural adeptness, few of the backbone technologies include VPN, VoIP, network protection, malware immunity, collaborative tech tools like Salesforce, SharePoint, Skype, etc. Physical infrastructure like personal computers or laptops complemented with high speed broadband or Wi-Fi capabilities is a bare minimum. Taking it a step further, companies that have moved to cloud-based software and productivity tools stand a better opportunity to resort to remote working during times of unforeseen crisis like the Covid-19 outbreak. Employing more advanced technologies like Blockchain, with its decentralized ledger mechanism, would further ensure a secure and responsible remote working ecosystem.

IV. Behavioural Shift and ‘Embedded’ Trust

The need for a behavioral shift and broadening of ‘mindsets’ of companies and their management is equally important. Now, it calls for overhauling of workforce and their work ethic. Traditionally, meeting with people and interacting with peers and counterparts has become an essential part of the work culture especially in corporates. Face-to-face interactions make a difference in building working relationships and networks; all of which would be bygone in remote working. Employees will feel rather uncomfortable to work in isolation at home, which comes with its own kind of distractions.

A survey conducted by job portal, Shine.com reveals that 52% of workforce in India feel their organizations lacks the culture required to make remote working a success and 20% of them face perception issues from their bosses and peers due to lack of trust. Hence, ‘embedded’ trust and seamless communication will lay the foundation for a remote working culture and economy. Further, firms must iron out host of nuanced implications on compensation, performance appraisal, training and development policies and practices.

V. Readiness & Disruptive Business Innovation

Intuitively, remote working culture may not cut the ice with all type of jobs or companies. It works best for nature of jobs that does not necessitate close collaboration among co-workers, does not call for heavy dependence on machinery, or doesn’t have workflows in which tasks move quickly from one phase to another.

It is not difficult now to guess that a remote economy thrives predominantly in the tertiary sector. In India, like many emerging economies, GDP growth is driven by services, and therefore, had more the reason and rationale to divert resources to ensure technological and infrastructural readiness to comfortably transition into a remote economy. However, it had remained a significantly untested endeavor in India until a few weeks back! It took a pandemic for India Inc to make a leap and accept remote working at such a large scale.

When the 21-day national lockdown was announced, according to the survey conducted by CIO, 96% Indian organizations took to working from home, as against the former 19% a couple of weeks ago. Companies were left with no choice but to opt for remote working irrespective of their readiness and bandwidth to support this tectonic shift. It cannot be achieved overnight and demands a change in the firm’s culture and managerial mindset. Regulation too, plays a key role. In order to have almost entire workforce work remotely, companies should garner an OSP (Other Service Providers) license from the DoT which costs around Rs 1 crore per office. Hence, the remote economy in India is still in its nascent stages and is undoubtedly daunting for companies to warm up to it.

Besides the buzz and the pandemic usurping remote working in India, yet the jury is still out on its socio-economic implications. From a fire-fighting exercise, remote working finds its rationale of businesses floating above the water primarily to maintain business continuity and bailing out of a crisis at hand. However, it is intriguing in its long-term implications. This temporary readiness has the potential to make lasting contributions to the advancement of the economy.

If remote working becomes a norm, it could upset conventional business practices based on traditional resource based economic models built on Marshallian fixed costs and diminishing returns to scale. Ideally, companies would like to cut down on their fixed costs in terms of office spaces, physical infrastructure and other assets, as much as they can. In a way, this is intricately related to the concept of shared economy business model. The likes of AirBnB, Uber, OYO, etc., are making use of idle assets to reach out to the target audiences along with assured quality of services.

Similarly, the remote working culture has given birth and is nurturing the co-working spaces sector, for instance, WeWork. There are around 100 major players in this space today. It won’t be an exaggeration to say that this crisis could prove to be the force multiplier. Like during and post-demonetization, fintech companies such as, Paytm benefitted hugely. Covid-19 and subsequent lockdown could be the drumroll that remote working support applications like Zoom VC have been waiting for.

Is this trend here to stay or would it mend ways permanently for India INC or in nutshell is it the next disruptive business innovation around the corner? The answers to these questions can be ascertained only in due course!!


Prof. D Tripati Rao is currently Professor of Economics, Business Environment Area, Indian Institute of Management Lucknow and Ms. Vanga Deeksha Reddy is TAS Intern (and former HR Analyst at Deloitte India), IIM Lucknow. We gratefully acknowledge other available published source content on Remote Economy. Usual disclaimer applies.

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