The Changing Way People Work Creates Big Winners And Losers
The way people work is changing, driven by technology, a changing economy, and a rising generation. This creates big opportunity for those who master the new game and build the tools and platforms, and peril for those who don’t.
Ben Lilienthal, the CEO of one of our portfolio companies, and I dug into this change, what it means for business tools, and how it enables companies like Slack to soar. Observations from our conversation are summarized below. Many are individually familiar, but together they amount to brave new world at work.
• The fraction of the workforce made up of Millennials is rising and will soon approach 50%. Millennials are team-oriented and grew up in the era of social networks. They bring this style to the workplace.
• Social networks create a means for and expectation of frequent, low-friction connectivity with the people we know.
• Today most people in the U.S. and comparable strata of other countries have a smart mobile device and constant connection to a strong network. This has arrived only in the last 3 or 4 years, coincident with the arrival of a series of powerful mobile-based messaging platforms: Twitter, Facebook Messenger (700M users), WhatsApp, Instagram, SnapChat, etc. Twitter aside, they are focused on facilitating constant and easy text, picture, and video communication with a limited set of people you know.
• Work is moving towards a start-up paradigm. GE’s announcement last week that it is moving to Boston to enhance its innovation culture is an icon of this trend. Start-up work is ad-hoc and collaborative: teams work together for finite intervals; team members come and go. San Francisco is the Mecca of the start-up culture, with its legion of talented cool-kid coders hopping from one hot company to the next.
• Your mobile device is the control panel for your life and a key tool for work. Data is in the cloud, so we no longer need a physical office to collect our work resources. We expect all kinds of resources, both virtual and physical, to be available on demand everywhere.
• We expect presence with colleagues and friends on demand, too: text chat, video conference, shared screens. Oddly, the one thing many young people dislike is talking on the phone, perhaps because it has neither the convenience of shooting off a text nor the richness of Facetime or a Hangout.
• Tech people flock together in cities like San Francisco, neighborhoods like Kendall Square in Cambridge, Massachusetts, workplaces like Cambridge Innovation Center, and ways of working like Ruby on Rails and Slack. Venture capitalists likewise want to have the same address. The rate and complexity of innovation in the tech world today (i.e., software is eating much of the economy) gives value to communication platforms and co-location that enable companies to connect and configure teams and technology modules rapidly and flexibly.
The change in the way people work has two big business consequences. First, businesses that fail to adapt will lose out, faster or slower depending on their sector. GE’s move is evidence that its leaders appreciate this. And, the new way of working creates demand for a new set of tools and platforms that are business opportunities for entrepreneurs.
Slack is a poster-child for this phenomenon. Founded three years ago (January 2013), Slack has grown to $30M of revenue and over 1M daily users, and continues to grow 15% per month (ab0ut 5x per year). The A16z podcast recently posted a long interview with Slack founder Stewart Butterfield. It’s a great example of how the new way of working creates product opportunities.
Slack started out as a game development company. 45 people worked for 3 1/2 years to develop a game that never launched. Instead they launched the communication platform they used to enable game development: a great system for modern team problem solving that they had developed, tested, and proven. That is Slack.
Stewart argues that productivity software is much like a game. People need to love using it. You have to capture the attention of new users fast, or they are lost.
Slack aims to replace email within the company. Users find it much more efficient and productive: communication is structured around teams and topics (versus email addresses); friction to launch a message is very low; common tasks like sending a link to a DropBox file are supported elegantly; and the whole history is there for everyone to read. Slack enhances lateral communication (e.g., between engineering and sales) because each can be invited to view the other’s conversation and see what is important and happening. Stewart says users report in surveys that they experience a 32% productivity increase. Slack fees amount to 0.05% of employment cost for a knowledge worker.
Stewart argues that the software tools companies use are now so numerous, diverse, and fast-chainging that sourcing most of them from one vendor in an integrated suite is not practical. Companies need an integrating platform for their different apps. Slack does that.
Adoption is a big challenge for a team productivity product: unless everyone adopts, it’s a failure. But the “flocking” culture of the tech world accelerated Slack adoption. Slack began with a few San Francisco start-ups and became part of the San Francisco work culture, spreading by word of mouth among the cool tekkies and cool companies. Then the tech and business press adopted it and began to report on it. Big companies became infected when they bought start-ups: Slack came to Nordstrom’s via its TrunkClub acquisition. New hires brough Slack to other companies. Now it is global, even big in Japan.
And this story is not unique. RelateIQ redesigned CRM* for the new way of working, and from a salesperson perspective versus a sales manager perspective. Salesforce.com acquired RelateIQ for $390M in 2014. Salesforce.com, in turn, rose the prominence in the last decade by redesigning earlier generation CRM systems for the cloud.
My company adopted Slack at the beginning of 2016 and I’m on the learning curve. I can already see how it helps us, and, hey, resistance is futile.
* Customer Relationship Management
Originally published at www.forbes.com on January 26, 2016.