The shift to more distributed organizational forms is going to be bigger for business than the shift to the Cloud.
Let’s start with a simple analogy: What the Cloud was to 2008, the Distributed Organization is to 2020.
What do I mean by that? Think organizational disruption on a global scale. Think new ways of working, new ways of interacting. Think new organizational structures and forms. Think about the dissolution of numerous formidable barriers—literally physical barriers—that have long prevented organizations from operating more efficiently and effectively. Think new kinds of competition in the marketplace, competition driven by those organizations that have embraced the distributed paradigm and can draw on the expertise of the best and brightest from around the globe to deliver solutions at a far lower cost, far more quickly than an office-centric organization could possibly achieve.
Hopefully it is clear to you that what I’m talking about when I talk about “distributed organizations” — this is not simply a model in which an office-centric organization occasionally allows its employees to work from home. Think bigger. A distributed organization is one that can engage talent wherever that talent resides—the world is their oyster—and empowers its employees to work from wherever they want to work. A distributed organization does not need to bring employees into a shared office space because it is understood that today’s shared office space contributes far less to the productivity and effectiveness of employees it might have at an earlier point in history when many office resources needed to be shared. In fact, shared office space often accomplishes quite the opposite. Rather than increasing individual productivity and effectiveness, it creates distractions and resentments.
For many, the notion that distributed operations might actually be a viable alternative to office-centric operations is an idea that has flickered into life only recently. The arrival of the novel Coronavirus in 2020 has forced a sudden and unprecedented upheaval in the way most organizations have traditionally operated. Stay-at-home orders suddenly went into effect in a world where 44% of companies did not allow remote work at all. Indeed, going to an office was an option open only to those whose work was deemed essential. For the rest of us, if we were going to work we were going to have to do it from somewhere other than the office.
What’s surprising to many employers and employees alike is that working remotely is working out pretty well.
As of April 2, 2020, barely a month into the imposition of stay-at-home orders across the US, Gallup reported that 62% of employed Americans were working remotely. Compare that to figures collected before the outbreak of the pandemic, when a mere 3.6% of the entire US workforce worked remotely more than 50% of the time. The Gallup survey also found that 59% of workers would prefer to continue to work remotely, even after the stay-at-home orders are lifted.
This is the dawn of the Distributed Age. Going forward, regardless of when the world is “allowed” to go back into the office, more and more companies will embrace remote workers. More and more startups will appear that will embrace a fully-distributed model from inception. And while all of this sounds like a subtle shift in a work-at-home policy, it’s really much more than that. We’re about to see a massive transformation in business, the impact and effects of which will eclipse the shift to the Cloud in 2008.
Separation of winners from losers
Businesses that embraced the cloud in the early days gained advantages over competitors who did not, and so it will be now for organizations that embrace a distributed model. Distributed organizations will empower people to maximize their individual strengths—working late if they are night owls by nature, working without the distraction of long (and usually unnecessary meetings), working in the physical setting that they find most conducive to their productivity, and more. Distributed organizations will also focus on building global teams based upon complementarity of talent and diversity of perspective, rather than what’s available near a physical location. Drawing on like-minded talent from all over the world, the most attractive and inspirational companies will be able to assemble extraordinary teams that will do extraordinary things.
This is a “super-power” of distributed organizations, says Chris Herd, CEO of Firstbase, a firm that outfits the employees of distributed organizations with office tools and equipment. Distributed organizations, or remote-first organizations as he refers to them, can grow “the size of the pond that they can hire from, while at the same time increasing the bait that they have to get people to bite and join the company.”
While any organization can evolve into a distributed organization, those that move sooner will be more likely to thrive than those that move later—because the companies starting life today as distributed organizations have less legacy infrastructure, investments, and traditions to weigh down their balance sheet. Companies forming today as distributed entities have no physical real estate; they have no conference rooms, cafeterias, or custodians. That dramatically reduces their cost of operations. Combine those lower structural costs with a team of experts plucked from around the globe—rather than a 30 mile circle around a given office—and it becomes clear why an organization that embraces distributed can compete more effectively and win more frequently.
Shifting VC investment
How does one kick a virtual tire? Once, in a pre-COVID-19 world, that question might have held sway among venture capitalists. They often really did want to visit the physical offices and see the plants before making an investment. But in the world of COVID-19, even the VCs are phoning it in, and they have begun to realize that there are in fact a number of ways to kick a virtual tire.
Access to cloud services has made it easy for distributed organizations to start up anywhere in the world. They can show investors that they’re attracting top talent from all over the world and delivering that MVP sooner and with far less capital. VCs can see the logic of the distributed opportunity, and their own experiences with remote operations during the pandemic provide more than reasonable reassurance that investing in distributed startups is a smart move. Conversely, as the successes and competitive advantages of distributed companies become more evident, it is possible that an office-centric approach will be seen as a negative and investments in such start-ups may diminish. The weight that an office-centric organization must drag along with it will hinder its ability to compete in a market where distributed organizations are crushing it.
Moreover, as the number of distributed companies multiplies, so will an ecosystem of supporting services and enablements focused on distributed teams and orgs. Companies like Loom and Notion, that were already building solutions designed for distributed teams are going to experience growth. And, much as we saw a decade ago with the Cloud, many new businesses are now going to get created in response to the needs of distributed organizations. Distributed is a large space in which to create new companies, and investors can see that. Oyster itself is a fully-distributed company, purpose-built to help other distributed organizations extend their reach and hire the talent that can transform their business, no matter where they happen to live.
The unsustainability of the Status Quo
The lived experience of distributed work during the pandemic is the horse escaping the proverbial barn. Most workers don’t want to go back to the office and work the same way they had before. Force that on them and many will eventually bolt, quickly seizing offers from companies that will support their desire to work remotely. The power has shifted. There will be an inevitable decline in the quality of talent employed by firms that insist on an office-centric model, just as there will be an inevitable rise in the level of talent opting to work for firms that embrace the distributed model. Where, in that dynamic, would you rather work?
These dynamics will have ramifications in many different dimensions – in commercial and residential real estate, in the rollout of broadband and wireless telecommunications services, in consumer demands for public transportation and automobiles. Demands will change and this will ripple through communities far and wide. For distributed companies, the absence of a need to invest in physical facilities may enable a greater amount of investment to be directed at product and service development and distribution; it may facilitate the hiring of more staff in more locations. And, again, all this will stimulate a level of competitive advantage that an office-centric company, intractably bound to a costly physical infrastructure, will ultimately find impossible to challenge.
The HR business function fully transformed
The Cloud age sparked the transformation of IT and turned data into business gold. Similarly, the Distributed age is going to spark the transformation of HR and People Ops. The distributed company is going to redefine the basic relationship between its talent and how work gets done by embracing technology in new ways and by embracing new rhythms, like asynchronous communication.
Individuals with innovative titles like “Head of Remote” are going to be among the most influential leaders in this new age, as they are going to help their organizations turn their human talent into gold. For the HR function, it’s going to mean a change to everything from sourcing, to hiring, to onboarding, and the myriad ways the people organization supports its workforce. We’re going to continue to see innovation in the operational enablement of distributed teams (by which I mean all the tools and processes that make it possible for a distributed team to function). The digital experience for distributed teams of the future is going to be amazing. Facebook is probably working on VR for work as we speak. We’re also going to see the emergence of new kinds of physical experiences, and uses of “office space” that will cater more directly to the social and human side of work.
The next time you return to the office it may be for a yoga lesson with your boss, rather than a meeting.