Major changes to the labor market that had been brewing for decades have erupted to the surface in the last several years. As a result, the 20th-century workforce paradigm has in many ways collapsed under the weight of explosive technological developments, sociopolitical trends and a host of other meta-economic factors. The dream of building a long-term career at one location with a single company has almost entirely disappeared. The dot-com collapse and subsequent pandemic—when millions of people found themselves without jobs—dealt that sense of loyalty a lethal one-two blow.

The Shift To Fractional Work

In this challenging period, the concept of fractional work began to take shape—a new type of interaction between an employee and an employer. Less full-time, more long-term projects; not just one employer, but several; not an office and control, but rather focusing on results and compensation.

Labor itself has become an asset, requiring professionals to use flexibly to succeed. And just as smart investors diversify their assets to minimize risk, certain creative and white-collar professions have begun diversifying their approach to labor. The main question was whether this trend would sweep across other industries, as well. And sure enough, in the last decade, we've watched as unicorns emerged that transformed old, hidebound markets and conquered them in a matter of months with apps for rent, taxis and so on. The sharing economy was born.

The AI Catalyst

But what prevents the old labor market from fully transforming into one based on fractional employment? There are numerous contributing factors, and I believe one of the foremost is the limit of human capabilities. If you’ve ever done freelance work, you know exactly what burnout is. But freelancers typically perform an endless stream of one-off tasks; working with long-term projects can pose far greater challenges. They themselves actively gravitated toward alternative work models and fueled a market that was only growing.

Prior to 2023, plenty of apps helped with task management and customer relations, but we lacked a catalyst that could deal effectively with human resources. And then generative artificial intelligence (AI) models appeared, granting startups more opportunities to make fractional work a reality, scale it, optimize product development costs and attract top specialists.

Fractional work enhanced by AI can be a powerful boost for startups. In this reality, you can attract highly skilled specialists without the need for massive financial investments and still achieve excellent results. Professionals using these tools can focus on several large projects simultaneously without burning out from huge volumes of information. Fractional employees can contribute their expertise and easily handle routine tasks with the help of AI tools, which can enable faster product launches, reduce errors at the outset, increase efficiency and potentially decrease the cost of creating a minimum viable product (MVP).

I believe the main task for founders today is to break free from the old paradigm of launching a startup and clearly define where they can leverage strong professionals enhanced by AI. However, many people have gone too far in sanctifying this advancement. I believe it's important to remember that AI is just a tool for enhancing your business—not a business in itself.

Adapting Your Company For Fractional Employment

With the advent of fractional employment, businesses face numerous challenges that future superstar companies and unicorns are already starting to tackle. For those who want to be at the forefront of this trend rather than playing catch-up, I recommend thinking now about how to identify growth opportunities in the new world of fractional work. Instead of waiting for it to completely reshape the landscape, you can start adapting and repositioning yourself right now.

We cannot know exactly how this transformation will unfold and how to prepare for it. However, there are several practical pieces of advice for entrepreneurs that I recommend paying attention to:

1. Determine your core function. What is the core function of your business? Are you focused enough? It's important to have a very clear picture of your business processes and an understanding of which areas are critical to being in-house and which complement the core competency.

2. Reinforce a positive culture. Analyze your company's culture and its attitude toward existing freelancers and outsourcers. In a world dominated by fractional work, people who are not on staff should by no means feel less significant. Having a shared understanding throughout your organization that non-staff workers are part of the team is crucial.

3. Seek innovative AI applications. Pay attention to data, and consider how to use AI tools to improve processes that are not delivering results. The ability to use modern tools and AI tools should be encouraged; an employee who effectively uses them to enhance the team's results is not lazy but rather a superhero. Encouraging these approaches can quickly reveal areas of hidden growth potential in your business processes.

Many employees with strong expertise are already striving to apply it on a service-based or part-time model. And there's nothing wrong with that; it's a normal process of labor development. The key thing that I believe every founder should understand is that to achieve success, you must be focused. The primary strength of your company on the path to success is focused work on the project and a clear understanding of core competencies.