For brick-and-mortar companies in the retail sector, 2017 hasn’t been filled with good news. Yet the culprit isn’t necessarily mismanagement or lack of consumer interest in the products they sell -- it’s evolution. Iconic organizations like Blockbuster Video simply get buried in the fallout of rapid progress. And this week, Toys “R” Us provided us with another object lesson as it filed for bankruptcy in a Virginia federal court on Monday. Analysts will cite a variety of reasons: competition, overhead operating costs, not enough focus on the modern customer experience, lackluster marketing, and more. While all these elements factor in, I believe the root cause is an inability to foster a digital ecosystem that complements the on-demand economy. Companies that continue to stand on tradition and ceremony can’t last. And staffing agencies, despite the demand for talent, are not immune.

Exponential Change Isn’t Toying Around with Traditional Business

In his recent article for Forbes, George Schultze astutely summed up the catalysts that have visited hard times upon old-fashioned retailers.

Retailers have been negatively-impacted by a number of major disruptive changes. Initially, big box retailers, like Walmart, Home Depot and Target, were able to take advantage of huge economies-of-scale in purchasing inventory and heavy investments in managing real-time inventory delivery logistics to pass through much lower costs to customers. Next came the proliferation of online shopping and the digitization of sales where new-economy companies, like Amazon and eBay, further lowered the cost to the end customer by altogether disintermediating the need to rely on bricks and mortar for retail purchases. Add excessive leverage at the company level to this mix of major disruptive trends and distress and/or bankruptcy seems inevitable.

Toys “R” Us managed to rack up nearly $5 billion in debt, making it the third-largest industry bankruptcy in history. What about Walmart, though? It’s one of the oldest retail chains in the country. How is that organization staying relevant and profitable in an era of accelerating change? It has made significant efforts to adapt. Walmart launched an e-commerce division to bolster its digital presence and create online shopping options. Since its marketplace overhaul, Walmart eCommerce has seen a 63-percent rise in sales. Beyond that, Walmart forged a strategic partnership with Google to compete more aggressively with Amazon. As the New York Times reported in August:

The two companies said Google would start offering Walmart products to people who shop on Google Express, the company’s online shopping mall. It’s the first time the world’s biggest retailer has made its products available online in the United States outside of its own website.

The partnership, announced on Wednesday, is a testament to the mutual threat facing both companies from Amazon.com. Amazon’s dominance in online shopping is challenging brick-and-mortar retailers like Walmart, while more people are starting web searches for products they might buy on Amazon instead of Google.

This is where things get interesting to me. If any finger pointing is going on, it’s usually directed toward organizations like Amazon. And discussions, for the most part, involve the online model: the big data, the digital approach, the agility, the flexibility, the cost savings, and the immediacy. All of it’s true; these are tremendous competitive advantages. Yet there’s something more vital at the core. Companies like Amazon aren’t just businesses -- they’re business ecosystems. The alliance between Walmart and Google proves that savvy enterprises have become serious about forming the rudiments of similar ecosystems.

Understanding Digital Ecosystems

Boston Consulting Group defines a digital business ecosystem as “a network of companies, individual contributors, institutions and customers that interact to create mutual value.” The ecosystems are enabled and empowered by a focal technology platform that connects all user groups.

As Nick Heinzman explained in a recent issue of Spend Matters: “While these platform owners provide the technical infrastructure — whether operating systems, devices or digital exchanges — they also form mutually beneficial economic relationships with their complementors in the broader ecosystem that add to the value impact, thereby increasing user relationship value.”

So let’s revisit the Amazon paradigm. Amazon is the platform owner. Its primary role is to maintain, enhance, and evolve the technology. Very few of the products, however, come from Amazon. They are provided by independent vendors and companies. By uniting distributors, businesses, and consumers through a digital interface, Amazon facilitates this mutually beneficial economic ecosystem. More importantly, it addresses the essence of innovation: it’s actively solving problems, across multiple layers. This is where companies like Toys “R” Us suffered. They didn’t innovate. They didn’t overcome the barriers complicating commerce for today’s customers, who no longer have the time or patience to plan a trip to the store. The want expedience, immediacy, and simplicity.

Digital Talent Acquisition Ecosystems

The same troubles facing companies like Toys “R” Us loom on the horizon for traditional staffing firms that continue to rely on the limitations of the agency model. Think about it.

• They have narrowing and finite talent pools.
• Their talent acquisition reach is determined by their internal recruiters; and increasing that staff puts larger burdens on operating costs.
• The data they can access generally comes only from the clients and workers they’ve supported in past engagements.
• Too many processes remain manual or outdated, which introduces friction. Today’s candidates, having grown up in the digital world, expect a seamless experience. They won’t spend time on older job boards, filling out sprawling applications or meandering web forms. They respond to mobile apps and simplified functionality. They want Tinder, not Monster.

For these reasons, Spend Matters called attention to the imperative need for the staffing industry to evolve.

Now consider the parallels in a contingent workforce ecosystem. Here, the available channels for talent — the supporting subsystems — have changed significantly in recent years. The rising prevalence of statement of work (SOW) engagements and the explosive growth of the gig economy, for example, are creating new talent sourcing challenges for contingent workforce managers — and offering innovation opportunities. Finding effective ways to use this complex and growing contingent workforce supply chain requires contingent workforce managers to engage talent through multiple channels.

These are the trends I observed when I began innovating Crowdstaffing. By turning to a crowd-based recruitment model, we can engage hard-to-find talent, contain overhead costs, cover a broader spectrum of sourcing channels, and reinvest in enhancing our business innovations -- without losing sight of our mission. Most importantly, we have developed a talent acquisition ecosystem. We are not a staffing agency. We are, like Amazon, the platform provider for every beneficiary of the ecosystem:

• In the platform, independent recruiters or recruitment companies access open requisitions across clients. Instead of working with one to four recruiters at a staffing agency, clients have hundreds of recruiters paralleling sourcing to find the best-matched local talent.
• Clients receive a virtually limitless pool of candidates from the expanding network of global recruiters.
• Candidates gain greater exposure to opportunities. They also increase their chances of being redeployed into new assignments on a more consistent basis.
• In an MSP engagement, the crowd-based ecosystem provides sweeping coverage that allows the existing supply base to be rationalized to a small, strategic handful of top-performing staffing partners. For the client, this yields unparalleled efficiencies, cost containment, visibility, and process optimization.
• MSPs and hiring managers tap into a wealth of data in the platform, which spans all recruitment teams and candidates.
• Traditional staffing agencies have begun outsourcing hard-to-fill requisitions to our ecosystem for additional hiring support. With access to the platform, they also receive new sources of business intelligence. Meanwhile, recruiters and candidates benefit from the presence of new client positions.

As I’ve outlined in previous posts, the first step in becoming a digital organization is to rethink the existing business model -- conceiving a strategy for the entire ecosystem, not just the organization. There are many “customers” active in the talent business. They include internal customers (such as stakeholders), external customers (such as candidates), and direct clients (those people purchasing your solutions). And each of these groups represents an end user. And each user can be united by a centralized platform.

We talk a lot about the economic changes spurred by the advent of the sharing economy. However, a more seismic shift is taking place with the digital economy. Digital no longer represents a slick new toy or lifehack. It’s interwoven into every aspect of our professional and personal lives. The world of staffing is no different.