Bill Kerr: This episode of the Managing the Future of Work podcast was recorded before the coronavirus was widely understood to constitute a public health emergency. As the crisis has unfolded, Catalant has teamed up with MBA students to work with businesses in need. More information is available at the web page www.mbasfightcovid19.com.

While students at Harvard business school, Rob Biederman and Pat Petitti saw an opportunity. Many HBS classmates wanted to use their skills to earn extra money and many companies wanted to hire more high-end talent than they could find. To bridge this divide, they founded Catalant Technologies then, called HourlyNerd, to match MBA graduate students with freelance consulting projects. Playfully, they sometimes said you could get 80 percent of McKinsey's value for 20 percent of its costs. Welcome to the Managing the Future of Work podcast from Harvard Business School. I'm your host Bill Kerr. Since those early days, Catalant has expanded to provide software that helps firms perform critical work both using internal and external talent. They have about 75,000 freelancers for their external marketplace. The market opportunity Pat and Rob pursued illustrates key challenges posed by the future of work and also how firms are reorganizing to address them. Welcome to you both, thanks for joining us.

Pat Petitti: Yeah, thanks for having us, future of work, let's do it.

Kerr: All right.

Rob Biederman: Great to be here.

Kerr: For the record, that was Pat that was quite excited and Rob who was a bit more reserved. So, Rob, I want to go back to you then. Rob, there's many parts of Catalant to unpack, so let's just start with the core initial talent marketplace. How did it begin and what was the subsequent evolution of it?

Biederman: Yes. If you think back to 2013 when we started the company, you started to see a pretty broad-based shift in how folks conceptualize labor and work and jobs, and the biggest dislocation then was the beginning of a trend. That's obviously continued strongly since, which has been the disaggregation of the concept of work versus the concept of a job. What Pat and I saw along with our teammates was, nobody had helped enterprises with that and nobody was really operating at the very high levels of, kind of business intelligence that a lot of the work that was happening in the gig economy, and the freelance economy was very fairly basic and fairly commoditized. And we saw a chance, given the structural barriers to consuming the consulting industry, to be able to really bring a new class of labor into the gig economy and for those folks give them significantly more freedom and flexibility than they could have with a full-time job.

Kerr: Okay. So Pat, maybe you can give us a few examples of the types of projects that you were filling in the early years and also, who were the consultants or freelancers that were coming on the platform?

Petitti: Yeah, in the early years when we were initially focused on small and medium sized businesses and the projects were things like, "I need help building a marketing plan," or "I have a new point of sale system and I want to be able to get the data out of that system and do something with it." The types of skills and capabilities that would be too expensive for people to hire full time in-house, they just didn't have the ability to go and work with consulting firms. So those were really the types of projects and the people who would do it, initially when we were students in business school, we weren't allowed to use Harvard Business School students. So, we would have to go and find a way to get other business schools to get their students onto our platform. So, we'd go and walk around to Sloan. We'd email our friends who were at Wharton, and then eventually it just started to kind of catch on its own.

Kerr: So, it kind of had a snowball effect across the various business schools and then, certainly, a lot of HBS students ultimately did go on the platform. You start to make this transition from small and medium to enterprise. Tell us a little bit about what opportunities you saw? It's about two years into the company's life and what changed about the organization when you made that transition?

Petitti: I remember we had like something like 40 people from GE sign up in a two-week period. Then a bunch of people from J&J [Johnson & Johnson] from Pfizer, from all these huge companies, they would sign up for the marketplace. They would create an account, but they would never actually post projects. So, we went, and we just started to talk to all those large companies. And what we heard again and again was that they really wanted to be able to leverage the high end of the freelance economy, but they couldn't do it through something that was just kind of like felt like a consumer marketplace. They needed something much more controlled, curated. They needed something where they wouldn't get slapped on the wrist by procurement or by their boss. You know they couldn't use something where they were describing a proprietary project launching into the ether paying in a credit card. We spent a lot of time just trying to understand what was the real market size and market opportunity in the small business market, and how could we go and actually acquire those customers. And it's like notoriously difficult to acquire small business customers, and it felt like a lot of the value to be had here was really at large enterprises, it's much easier to get to them. You know, GE has 20,000 buyers, whereas the average small business owner, maybe there's like a half a buyer and so just felt pretty logical.

Kerr: Yeah, they'd require a lot to change in the IT architecture, your sales force has to change. It’s a pretty big, evolution of the company.

Petitti: For sure, internally, yeah, big changes. So, we had to basically totally change the product. Like the product had to be able to fit inside these large enterprises in a way where it could be configured for them. Where they could see their colleagues, it would have their colors. Only people who worked at their company would be able to see the projects. Huge changes, big changes to the sales force too.

Kerr: Okay. And it sounds like you're getting like a project management. You're also getting insights that you're adding into the organization, rather than just access to talent. Rob?

Biederman: And we saw something else interesting developing, which was that where small businesses were using us because we potentially were the only way they could access this kind of talent and so it was almost more of a bandwidth filler. For enterprises, this was a group of people that were strategically relevant to them in a pretty special way. So, they were talent populations that for whatever reason, Fortune 500 company X was not only needing in large quantity but also needing for a transformational reason because of some core disruption relating to their business model. And that felt more seminal to us as a use case.

Kerr: Sure, you're targeting important tasks, but Rob, I think you've probably heard this before where someone says, "Oh, but we would never contract out high valued critical work to somebody else." Over the last seven years, how have you guys responded to that question?

Biederman: We do really enjoy getting that question because of the obvious response is well, “It's highly likely that Bain, BCG or McKinsey is actually running your strategy process.” So, think you'd be pretty hard pressed to find a Fortune 500 board that is truly independently setting it strategy without the help of a global consulting firm. And so that argument doesn't really hold water as a reason not to use us.

Kerr: And this is also about the time that you started to recognize Pat, that you weren't just substituting for a consulting company. You were actually substituting potentially for a full-time hire. So how did that kind of insight emerge and then what did that lead you to think about, as to the future of Catalant?

Petitti: More and more that we started to work with large companies, the more that we would get to senior executives inside those companies. And the more they would then look at our platform and they would ask our teams if they could license our technology, in their words. And what they would say they wanted to do was actually put their employees on the platform, because they felt like they didn't know enough about the skills and capabilities that existed inside of the company. And, so with these increasingly complicated cross-functional work streams that they had to execute—they had no idea how to go and staff them up dynamically. So, we surveyed all of our customers and we just asked them one question. We said, "When you use Catalant, what are you using it, instead of," assuming they would say consulting firms and we get back the data and like 80 percent of the time when they were using our marketplace it was instead of a full time employee. So, we were like, "Oh my goodness, we've been solving like the symptom, misuse of the consulting industry, when the core problem is that companies can't get their work done, particularly the most strategic work, the most transformative work they have to do—they can't get it done because they have no idea where the people are to do it, whether they're inside or outside of the company."

Kerr: This is obviously a very big transformation for your company. I think it's also one that we need to sort of rewind the table a bit and maybe unpack in a bit more context, because what you're saying is that inside the organization they are finding your marketplace better than what they have, and so, as you come in and think about your solution, is it about like better data? Is it about algorithms? Is it about, like, the definitions that you put around staff? What is the piece that you can add because the company has obviously already worked—it's been in existence for maybe a hundred years. It's not a small entity. So, what do you add in that situation?

Petitti: Visibility. It is visibility into the work that has to happen. It's visibility into the people inside of the company who are available to do that work. It's visibility into the people outside of the company that they either have leveraged in the past or will need to leverage in the future to do that work. It's all about visibility and if you can create that visibility, you can create better connections. You can create a better understanding of what the company's capable of doing. You can create a better understanding of how the company's progressing and you can start to capture better data.

Kerr: Rob, if you thought about this from like at the CEO level, then you have, like, beneath that, the executive vice president level, into HR management and like, where is the visibility most valuable? What's the thesis there?

Biederman: The person to whom it's most valuable is the CEO and the CFO. Because their job, more than else, is to take a set of resources and turn that into a strategic execution plan. And the reality is, as Pat said, they do not know the most important things that need to get done. They don't know how to atomize those into specific projects and then they don't know who's a good fit against those. And that is probably the biggest reason why companies fail to execute on their strategy. It's not a lack of capital. It's not a lack of commercial momentum. It's actually because they are inefficiently using their resources against the things they need to do.

Kerr: Okay. And as you're creating this visibility for them, is it something that you also help them with the prioritization or is that something that sits with the senior leadership? That's their job. How can you help a client on that front?

Petitti: We have a big work stream inside the company around data and one of the big things we're working on is making it easier for companies to know, if you need to run a digital transformation, what are all of the things that have to happen to enable that? Because we are working across 30 percent of the Fortune 1000. We're seeing a lot of the same things in terms of what they're trying to accomplish, and so from a data perspective, we actually think we can be even more useful to a lot of our clients.

Kerr: Yeah, Rob?

Biederman: One of the most important disciplines there is actually taking the outcomes of projects, intra-period, and using them to feed what is actually being worked on. Because, across 365 days in almost any industry there are going to be changing commercial conditions, changing competitive actions, and if your execution plan is not updated about once a year, it's pretty hard to believe that you're going to be making optimal use of the resources.

Kerr: As you think about also going from the CEO level down into the most senior leadership, do you guys help with the resolution of priorities at that level? You can imagine CEOs seeing it one way, but if there's lack of transparency, the lack of the information that you need is happening at multiple levels, do you find differing objectives, and do you have to arbitrate which objective takes precedent?

Petitti: Yes, so usually, the place that would happen is at a level that's like pretty deep, further down inside the organization. Yeah, we make it possible for you to know what teams are working on and whether they do or don't align to the overall objectives. That's one of the biggest things that executives will tell us, is they hear about all of these like little innovation projects going on, or people who have come up with their own little idea to work on and they have no idea if it's actually connected to the actual goals and objectives of the company.

Biederman: What we've seen at a couple of our software customers is they're incredibly thoughtful about tying innovation projects into core business needs. So, innovation stops being thought of as a laboratory or a science experiment but is instead, "Hey, we have this really annoying macro trend in our industry and we're going to combat it through purposeful business-centric innovation."

Kerr: Is it very important for the organization to be set up in a project-based format for Catalant to sit on top of that. And second, are, if you were going to have some agile transformation, does that have to precede Catalant coming in there? Is that, is Catalant a means to an end?

Petitti: Yeah, great question. The places that we focus are places where companies have already decided to work in a project-based way, which tends to be the work streams that have the biggest visibility inside the company. They're major transformation work streams. They are centers of excellence where they're trying to build up core capabilities that can be deployed more dynamically in a project-based way across the company. There are always going to be places inside of a company where people don't work in a project-based way, and that's totally fine. We're rolling it out at our company and there's a bunch of people who the jobs that they do day to day don't necessarily need to be in the platform. But the types of things that we really want to focus on are those major initiatives, those major work streams where they are done in a project-based way.

Kerr: It's the non-routine work that we haven't already built a process around, a function around the things that are humming in the background. So, the CEO's mind is on what happens next, and so that's where you're focusing this product.

Petitti: Exactly.

Biederman: Projects are easier to manage, they're much easier to tie out to an overall strategic plan. And then, a lot of the lack of measurement or waste in big companies is, typically, tied to vague job descriptions that are typically obsolete a quarter after they've been searched for, tied to, as Pat said, really hard to measure outcomes in specific roles.

Kerr: Sure. Do you have a measurement or a rule of thumb about the under-utilization of the workforce that's in these Fortune 500 companies you're dealing with?

Petitti: We hear all the time when we ask executives, “how productive do you think your workforce is,” anywhere from 65 to 75 percent, which is unbelievable. We increasingly are partnering with our customers to actually measure that. If 70 percent of your resources are in labor, and you believe that those resources are 65 to 75 percent productive, like my goodness, what are you doing?

Kerr: With 20 percent of your cost structure is not going to the ends that you're desiring. Rob?

Biederman: What's interesting about that is if you think about other spaces, you would cut those off. And yet for some reason with the use of human capital, people that have been willing to accept this, candidly very mediocre, norm for a long time.

Kerr: Pat, give us a sense of how much this enables an organization. How much does it increase their productivity? How long does it take them to go from A to B with the platform? Is it an ongoing evolution?

Petitti: The way that we tend to measure value is alignment of—in some cases at least, alignment of work objectives to work—to the resources who are doing the work. Where the gap usually exists is aligning the workforce to the actual work that has to happen. That's where the 65- to 75 percent productivity issue comes in. We've been working in this case from four weeks ago, we were working with a client where they have about 2,200 employees who are in our platform. We started with a V1 of using our platform, which was over six months we wanted to be able to take on a percentage of their strategy plan and create profiles of at least half of the 2,200 people that are working in the platform to execute the work.

Kerr: So, Pat, V1 being version one?

Petitti: Yeah, sorry about that. What we are really trying to measure was can we prove that the workforce will be more productive? It's much more about talking about the business case for, "Okay, how much value can we create as we start to scale this across those 2,200 people and take on the entire strat plan?" The way that we think about that is, what's the amount that each of the average salary that each of those employees gets? How productive do you think those employees are today? We'll actually work with companies to understand how productive they are. Usually, we land in like the 25 percent range. Then we start to talk about over the course of three years, how much do we think we can increasingly align the workforce to the work to be done to drive value out of it? The numbers that we end up coming up with there in terms of value created are on the order of tens of millions of dollars, because you’re talking about a huge, huge asset that company leverages in a really inefficient way.

Kerr: Rob?

Biederman: I think there's a deeper insight in there, which is that, at least to us, the future of work is not about cost. It's not even necessarily about enabling a happier, better work life, although, I think that's a really, really nice outcome of the future work. I think it's really about enabling companies, big, small, otherwise, to be able to get far more out of human capital and to be able to better align that to what they're doing. And to go from thinking about the benefits of a system—originally a cost as they're rolling out—and then eventually thinking about it as a revenue and even a company value upside.

Kerr: Well, something else that you guys had mentioned before is reduced downtime. If someone that's in a critical role and the plant's going to be shut down, your system can help in that.

Petitti: For sure.

Kerr: If you think about someone comes to you and they say, "We want to do this as an optional platform, we want to create a place for people to spend their 20 percent time or something like that." Is that something that you support? Is it something you advise? How do you think about that entry strategy from more of an optional…?

Petitti: Certainly, we have clients where their instinct is to start with something where people can spend 20 percent of their time and have a say over the things that they work on. We actually think that that's a great way to drive more productivity out of the workforce and to align your workforce to things that they actually care about. People want to work on things that matter. They want to know how the things they're doing every day actually are advancing the company they work at.

Kerr: It's an interesting sort of point, because it highlights that it's not only the visibility from the senior leadership down, you're highlighting important visibility from the employees upwards into how they're contributing to how this company's performing overall.

Petitti: Yeah. Another stat for you. Seven percent of people who work at large enterprises understand how the work that they do every day supports the company's strategy. Seven percent—think about that. Simply fixing that, creating visibility, from the bottoms up, is enough to totally move the needle.

Kerr: I'm curious on the external side, external contractors, do you find the similar, "I want to have visibility into how my work is going to shift this company even if I'm only going to be with it for a short period of time"?

Biederman: Incredible. One of the biggest surprises I think we've seen in the platform is we'd assume that folks were going to take a fairly mercenary attitude. It's incredible, two things—one, how much they really care about what the company they're working for on this project and whether they believe in it and whether it's something that they are personally passionate about. The other thing we've seen is we have companies that do literally a 100 billion dollars of top line. We have significantly smaller companies that can pay less, and freelancers on the platform will really actually change their bidding strategy and approach to be able to kind of right size the cost to fit into the economic model who they're working for. And we presume that they're willing to do that because in certain cases, getting a startup off the ground or doing a project for a not for profit is just as emotionally fulfilling to them as helping a global corporation roll out a new product.

Kerr: So, Rob, as you look at the external talent marketplace, what's kind of the geographic locations of workers and also the firms that most utilize this platform?

Biederman: You know, I think increasingly on the talent side of the marketplace we're seeing folks want to live in a core set of cities that tend to correlate a lot with where millennials are looking to live, and that can be all manner of places but, tends not to be very correlated with where a lot of legacy Fortune 100, Fortune 500 companies are. I think that the talent matching system can be a really attractive way to bring sort of asynchronous geographic supply together.

Kerr: So, Rob, if you think about going back to your enterprise SaaS model, how common are the feature sets that people in the Fortune 1000 companies, you're in about a third of those companies now, how common are the feature sets? Is everything bespoke or is there a core that you see over and over again?

Biederman: What it really comes down to in most cases is they are trying to drive to visibility and transparency in what is being worked on and who's available to work on it. And “how is that being executed, what were the outcomes of the projects and how can we do that better next time?” And regardless of whether it's an oil and gas company or a CPG company or financial services, everybody's trying to solve for those common challenges—to really go from strategy to execution quicker and more efficiently.

Kerr: You have both this external marketplace, you also have the internal matching of people. And you're trying to integrate all that into one environment for this strategy, execution management. What share of a Fortune 500 companies’ business do you expect will need to be conducted in this platform? We know it's very high-value, but you think about how far down in the stack of stuff will this be effective or be important to utilize?

Biederman: I'd say somewhere between five to ten, to maybe even 15 percent at companies, and particularly transformative moments will ultimately go through our platform. Obviously, I think we'll see over the next five to ten years a pretty broad based shift in the underlying suppliers for "work in companies" so that as that moves towards a mix of external and nonhuman, there is always going to be a top 10 percent of work that requires judgment and creativity, synthesis across a bunch of inputs being able to analogize from situation to situation. And I think that'll always be pretty secure in the Catalant platform.

Petitti: A lot of that work will be forward looking things where it requires you to be able to plug into skills and capabilities that you just don't have or have never needed before. Industry knowledge you've never needed before and that's where the marketplace is really, really important. I could see it being a pretty significant 20 percent, 30 percent, over time.

Biederman: There's also an underlying shift in what companies are actually doing. They're focusing, I think if you look at a company like Casper, Casper sells millions of mattresses. They’ve never created a mattress before. And, so it's companies, a mix of jobs to be done, moves towards more strategic and creative work and a lot of the core functions of providing and manufacturing tend to get concentrated in a handful of companies and geographies. I think the companies we work with in the United States will become even more relatively attractive to us because the questions that they need to solve will become more sophisticated.

Kerr: Pat, as you think about the competition that's out there, there's clearly a number of vendors that provide sort of point-based solutions that are within the realm of things that Catalant’s working on. You probably have some competition from some consulting companies. They're doing sort of transformation work. Who is disrupted here? Who do you see as being your main competitor?

Petitti: The pockets that we sell into are generally big transformation work streams or strategy plan work streams that are cutting across the business. And most companies are building out what they would call an enterprise PMO to be able to help coordinate and execute that-

Kerr: Can you define PMO for us?

Petitti: Portfolio and project management office. PMOs traditionally sat within a function and so, they'd often use their tooling for allocating costs to work that happens, but very, very specific to a given function that they sit in. Today, these enterprise PMOs are charged with a much larger task, because they're having to pull across the entire company across a whole bunch of function to coordinate a ton of work that looks really different depending on who's doing it, but it’s largely project based. And, so the way that they do that is with like tons of meetings, tons of PowerPoint presentations, Excel files, and then like, God forbid they're trying to log it into SharePoint so that people can like look into it real-time. And what we're really helping solve is the fact that if you talk to any of these leaders of these PMOs, any transformation leaders head of PMI at an organization, they'll say that the amount of time that the most senior people on these initiatives spend in meetings, just like creating updates or trying to get updated on what the hell is actually going on or a meeting to like report it back up to the exec team, when by the time you report it, it's like six weeks old. The amount of time they spend on that is about half their time, which is unbelievable. We can integrate with your project management tool to help make sure that we understand how the work is progressing. We can certainly work with whatever other tools you're using for like setting goals and tracking goals and progress. But, really, I don't think anyone's solving this problem with real technology today.

Kerr: It sounds like that 20 percent of employee under-productivity that we talked about earlier is now being compounded with 50 percent of the senior leadership time is spent trying to figure out how to manage or overcome some of those organizational barriers, some of the lack of visibility that was described earlier.

Petitti: And then you're like an executive and you get an update and you're like, "Okay, when was this last updated?" Or you're like, "Can I double click on that and understand why that one's red?" And the answer is “no,” because now they have to go back and go through their whole cycle of getting updates again.

Biederman: The reality of a lot of strategic planning software today is that it's not really driving the process. It's used more as a way to collate what is going on and read out to an executive team. And, so the last-minute PowerPoint scramble is a very real thing. And even the largest and most sophisticated companies where there's a steering committee meeting coming up or a board meeting coming up folks will only at that point, because of the presence of a meeting, go and update all of the inputs and the tracker, but not in any way to steer or manipulate the process.

Kerr: So, it sounds like your main competitor is the last-minute executive dash with the Microsoft Office suite.

Petitti: Honestly, yeah.

Kerr: You guys just raised or actually just announced a $35 million series E. So your fifth venture investment and I'm sure that you've gotten an offer to along the way to sell Catalant or somehow exit from it. So, I guess my broad question is where do you see this going? What's the long-term passion seven years into this for both of you?

Biederman: I think there's a lot of room to run here, both on the marketplace side and the software side. So ideally, we'll both be running this company with the same leadership structure in five years, but we're working with 80 or 90 percent of the Fortune 1000. And I think over that period, gone from being something that is definitely still seen as innovative and disruptive to something that's as obvious to a big company to use as Workday as Salesforce.

Kerr: Yeah, you want to pitch this as an operating system for the future.

Petitti: Exactly.

Biederman: Precisely.

Petitti: We hear from folks who are in all different types of industries or different types of software firms. And they'll say that all of their customers are asking them for internal mobility because they don't know how they can reallocate their people unto the work that matters. Every large scale marketplace that we talk to, or even think about, like vendor management systems or even some MSP's, talk about the fact that they need to do a better job of plugging into the work that a company is getting done so that they can deploy their marketplace or their vendors in a more dynamic way. So, we happen to be in this really unique position where, the answer is not one of any of those, the spaces. The answer is a totally different approach to helping companies execute work. We don't really get intimidated by whatever company shows up and raises a ton of money or has a market cap in the tens of billions. We have an advantage, and I think we have an opportunity right now, particularly with some of the clients where we're already delivering value to really scale this thing for a while.

Kerr: Great. I want to end with maybe a couple of pieces of advice you would give. So, my first is going to be a senior executive that wants to open up more talent channels, internal and external. I'm sure you have interacted with a number of these individuals if they start the journey, so, what do you tell them is step number one?

Biederman: The first question I'd ask them is why? What is your motivation in wanting to do that? Is it because of a talent centric goal? Is it because you have some sort of KPI [key performance indicator] or metric around talent? Or is it because of some sort of business outcome you're trying to achieve? I'd say, if it's the latter case, the first question to ask is, "Well, how well prepared is my workforce today and how much do they understand about what we need to get done as a company?" And, closing those gaps is absolutely a critical first step to being able to access a broader range of talent.

Kerr: Okay.

Petitti: Yeah. The only thing I'd say is, don't wait. At the end of the day, you're already doing this. You're already taking your most important work and using your network to go and find the 20 people who you know to help you get it done. Find an important work stream, find important things you got to get done. Don't worry about having the answers to everything. You just got to get going. I think inside a lot of these large organizations it's always easy to say no. It's really hard to say yes but, the companies who make a difference, the people inside companies who change the way those companies operate and actually have a fundamental impact on them, are the ones who say yes without knowing what all the answers are.

Kerr: Rob and Pat, thanks so much for coming in today to talk to us about where Catalant is, the functionality that you provide to many large organizations towards the future of work, and a little bit of a glimpse as to where this gig—both inside and outside of companies—may go. Thanks.

Petitti: Thanks.

Biederman: Great to be on.

Kerr: Thank you for listening to this episode of the Managing the Future of Work podcast. To find out more about our project on the future of work, visit our website at hbs.edu/managing-the-future-of-work.