Will superfluid markets change companies as we know them?

Staircase, Vatican Museums, Vatican City, Rome, Latium, ItalyIs frictionless commerce an opportunity to deploy time and capital in more constructive ways?

We have now entered the age of superfluid markets. New technologies are converging to eliminate even more inefficiencies and frictions from markets. While we can’t predict exactly what the future will look like, superfluidity will have a profound impact on both markets and companies as we know them today. Here are a few of the ways in which markets and companies could change.

Up until the arrival of the internet, most markets were viscous. Executing buyer-seller transactions was an expensive, slow and opaque process. These frictions were largely related to the lack of information on the part of market actors, as well as information asymmetry that tended to benefit sellers at the expense of buyers. The need to navigate market access spawned multidisciplinary companies with large workforces.

The arrival of the internet and digital commerce introduced a level of fluidity. The internet democratized access to information, reducing information asymmetry. New virtual markets arose, matching buyers and sellers in a more frictionless way. Entire industries were disrupted. For companies, the digitization of business processes from hiring to procurement to sales and marketing greatly reduced the internal coordination costs of participating in markets. As a result, companies began to unbundle, pursuing alternate ways to get work done like outsourcing and co-creating with customers.

How will superfluidity impact markets?

New markets will form, and superfluidity will reinvent existing markets. The collision of real-time communications and IoT will give rise to “stock exchanges” for all kinds of goods, not just commodities. New markets for raising capital (e.g. initial coin offerings) will emerge. The increasing recognition of personal data as a valuable asset will likely lead to new personal data exchanges.

Excess or idle capacity will fade away. Digital intermediaries have already aggregated idle consumer assets such as cars and apartments. This sharing economy model will spread to expensive but underutilized capital equipment — from tractors to MRI machines — owned by businesses.

Markets will become more autonomous. Digitized assets linked to intelligent systems with blockchain as the underlying trust engine could eventually enable fully autonomous markets to flourish. Machines will begin to transact autonomously with other machines as well as directly with people — automatically requesting service, triggering inventory replenishment and bidding for power, among other activities.

Technology leapfrogging will supply “missing markets” in low income, rapid growth economies. Mobile money transfer and payment systems will create new financial markets. The Internet of Things will enable rural electricity markets through the installation of smart solar units managed centrally in off-grid areas and paid for using mobile phones. Blockchain-enabled land registries will enable real estate markets free of corruption and ownership disputes.

How will superfluidity change companies?

With fewer market frictions to manage, companies of the future will be extremely lean. They will be built around teams. These teams will assemble around tasks; employees will no longer be organized by role. Teams will be autonomous, self-driving and supported by intelligent machines.

The percentage of freelance labor will grow as the lifetime employment model fades. Organizations may arise that have no permanent employees. The platform economy and the “as-a-service” revolution will continue to make it easier and less costly to start up a new business. Entrepreneurs will increasingly be able to leverage a variety of modular, scalable services that give them immediate market access, distribution channels and more.

New technologies will continue to spur new operational efficiencies and increases in productivity. As company activity becomes less and less about managing transactional and other kinds of frictions, the opportunity for a company to compete on efficiency will fade. Instead, a company’s ability to drive innovation that results in new value creation will be the most important determinant of its competitive positioning — and its long-term survival.‍

Read the full feature here.

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Paula Hogéus – Global Labor & Employment Law Leader

 

Stephen DErrico

 

Stephen d’Errico – Global Corporate Law Leader

 

 

Jean-Christophe Sabourin

 

Jean-Christophe Sabourin – Global Transaction Law Leader

 

 

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Peter Katko – Global Digital Law Leader