For many years in business management theory, the concept of ‘footloose’ companies has been an exciting talking point. On one side of the spectrum, you have non-footloose organizations that need specific elements in their physical surroundings to be able to operate.
This can be anything from resources or suppliers, such as raw materials, half products, or a (skilled) labor force.
Non-footloose companies usually find themselves in a tension field of all those factors when it comes down to where they can set up shop. On the other side of the spectrum, you have footloose companies that are free from that tension field. Non-footloose businesses have dominated our perception of what companies look like for all of the 20th century and at least the first decade of the 21st.
But as we enter the next decade and we look back at the one just gone, we can see a strong undercurrent that tells us its footloose companies making the change.
Stuck Paying a High Price
The location game for traditional businesses requires careful planning. Non-footloose companies would find a sweet spot between their dependencies, locking in the companies’ HQ or factories on specific sites.
Also, what works for one company might often be the exact same list of requirements for another, leading to a concentration of businesses of similar nature being concentrated together. For example, the heavy industry usually relies on being accessible by roads or significant waterways.
It’s not uncommon for heavy industry to be close to significant waterways or being along larger motorways. In most cases, these are quite far from urban areas. This sometimes leads to a bit of a struggle in finding a strong labor force.
In most cases, the price for getting closer to your labor force and being accessible comes at a steeply increasing price of your location.
The Service Industry
Other businesses, mainly those in the service industry, have a good labor force as their main requirement. This usually means they would opt for central (usually urban) points out that people can easily travel to. This would be major cities with good accessibility by car or public transportation, such as trains.
Especially in the service industry (as heavy industry is moving more and more to developing or low labor cost countries), the concentration of businesses in certain spots meant rising office space prices. As with heavy industry, this game of business requirements versus location requirements leads to increasing price tags for locations.
Even worse, with higher prices, this leaves a lot of would-be businesses priced out at doing business. Office space is one of the biggest costs for companies, and a high price basically eliminates smaller companies and start-ups from competing in the market.
Footloose companies breakthrough this dependency by being able to go anywhere they want. This very factor means that they no longer need to aim to be in the same location as everyone else, and therefore, the location cost barrier is no longer an issue.
Technology Leading the Way
A big driver for this change is obviously technology. With the internet being widely available at a very reasonable cost, people can work pretty much anywhere. If you wanted to, you can build a website, do cold calling and take electronic payments, for example, using the Payanywhere phone card swiper, from your car.
As long as you have electricity and an internet connection you can go extremely far. This has led to an entire breed of new professionals, for example, in the digital marketing industry. So-called ‘digital nomads’ set up shop in an exotic warm location, where ‘normal’ people only spend their holidays, and work remotely as freelancers to earn money and in between working enjoy the beach and leisurely life.
And as individuals are discovering the benefits of being footloose, so are companies.
Footloose for the Future
Having a choice of being closer to your customers or being closer to a key source of a differentiator, such as a steady stream of talented workers, has now become the core operating model.
Removing high lock-in location costs frees up funds to focus on added value for the end-user. It creates agility and avoids sunk cost traps. New interpretation footloose companies are everywhere. Take Uber for example, by not owning their own call cabs, they are completely footloose.
They could decide on running their business from the North Pole if there was a decent internet connection. Or take Amazon, for example, the selling platform itself can be run from anywhere. Granted, Amazon took a large part of the fulfillment business, as this meant very healthy margins for them.
Being footloose is no longer an oddity, it’s the main road to success and the only way to survive in the decades to come.