In 2019, only six percent of workers in the U.S. worked from home, and 75 percent had never done so. By fall 2020, around 54 percent of employed Americans were remote at least some of the time. Although this number has since fallen, it’s settled at a remarkably high rate: since January 2021, the share of workdays completed from home in the U.S. has hovered just above 30 percent. Early signs indicate that while fully remote work continues to subside, hybrid work — a mix of days in and out of the office — continues to rise. In our emerging paradigm, the office is simply one among multiple dispersed sites of labor.
Many adjectives orbit this new norm for work. “Remote” and “hybrid” are primarily concerned with the site of work: the GPS coordinates where the day-to-day tasks of one’s job are accomplished. Distributed is a radical shift — it reconceptualizes the company as a decentralized network of employees, each located in the physical place of their choosing. While its details are case-specific and yet to be fully defined, they’re forming around a basic fact: the default headquarters of the distributed company is cyberspace — what we call “Internet HQ.”
The implications of Internet HQ are momentous, and they’re only just beginning to take shape. The knock-on effects for the structure of our cities and our lives, both professional and personal, remain unknown. But for businesses, Internet HQ decouples economic opportunity from physical location. When teams can be assembled without regard for time zone, geography ceases to be a barrier to entrepreneurship. By enabling companies to grow and thrive in places previously considered to be on the margins, Internet HQ promises to be a massive stimulus for innovation.
But uploading companies to the internet creates a host of related challenges, many of which remain unsolved. The majority of our present-day tools for distributed work — Zoom, Slack, Notion, Teams, etc. — were built prior to its adoption at scale. While it may seem like the digital rails for the distributed workforce have been laid, much of the necessary software is still to be coded. We may have been shunted into the future, but without the requisite hoverboards and self-lacing Nikes.
Equipped with nearly three years of pandemic learning, we’re now able to ask: What would a business look like if built for distributed work from the ground up? The aim is not to replicate the physical office in online form but to create net new ways of working that take the unique properties of the internet as their starting point. In what follows, we analyze the underlying objectives of work and explore what startup founders can build to help them succeed in a decentralized paradigm.
Designing for distributed work
While the pandemic prompted widespread adoption of distributed work, the technologies that enable it are, by and large, not new. The early 1970s saw the rise of “telework”: a term coined by NASA engineer Jack Nilles, who foresaw a “telecommunications-augmented decentralization” of the steel-and-glass office. Since the mid-2000s, high-speed internet, cloud computing, and virtual communication tools have combined to further loosen work from place. This is especially true for workers whose tasks are conducted, either in whole or in part, via screens and servers.
Despite having this fundamental technology in place, distributed work’s adoption stalled, in large part, due to concerns about its overall feasibility. In-person work enabled ease of collaboration, social bonding, impromptu exchanges, and managerial control over working hours, all of which ensured a baseline level of cohesion and productivity. Separating work from a shared, centralized site seemed to put this all at risk. For all its stress and strain on focus, the COVID-19 crisis debunked these beliefs, demonstrating that workers can be just as, if not more, productive when remote. Moreover, now that flexibility has become critical for knowledge workers, its greatest benefit for companies may be retention: studies have repeatedly found that quit rates drop and employee satisfaction rises when work-from-home policies are in place.
Phase One of our collective experiment with distributed work was to port old ways of doing things onto the internet. Businesses designed for colocation retrofitted their workflows with a patchwork of technologies, including team chat, internal wikis, and video calls. Their goal was to reconstruct in-person work online. In doing so, the mismatches between the physical and virtual world became major sources of friction.
Large teams in particular struggled, since coordination costs and organizational complexity scale exponentially as a team grows. By contrast, startups were among the earliest and most successful adopters of remote work due to their small size and lack of legacy infrastructure. Often grounded in the habits of software developers who have long worked in distributed teams, these organizations viewed location-indifferent work not as an add-on, but as a fundamental design principle.
Phase Two of this experiment, building an Internet HQ, requires leaders to think deeply about both the advantages (global teams, machine-readable workflows) and disadvantages (context collapse, loss of spontaneous interaction) of the internet, and then deliberately design for them. Software can play a critical role in this process, introducing novel ways to connect, coordinate, and simplify.
We’ve known for more than a decade that every company is becoming a software company. Looking forward, we believe that the company itself is becoming a form of software, with each of its functions available for hire as a digital service: what we call the “distributed work stack.” With these functions automated as software, companies will be able to focus on their long-term, sustainable source of differentiation: creating products and experiences that delight their users.
The distributed work stack
Through countless conversations with entrepreneurs and close analysis of the existing software landscape, we’ve developed a three-layer framework for the distributed work stack. Here, we deconstruct these layers and offer insight into where and how B2B startups can plug in.
Hire:
Distributed companies can assemble higher-quality teams at lower costs than their office-first peers: a decisive advantage in knowledge-powered economies. Yet, when geography recedes as a constraint to hiring, a bevy of new challenges arise. How can companies create talent pipelines in new and unfamiliar markets, especially when educational credentials, work history, and references are context-specific? How can they assess both hard and soft skills with high fidelity at scale? How can they manage the complex logistics of hiring, from the first screening to the final offer letter? How can they establish standardized, structured processes that allow comparisons across broad applicant pools while avoiding bias?
Enter AI startups like Turing, which helps companies build teams or get technology services solutions on-demand in this Internet HQ, and Eightfold, a comprehensive platform for managing that talent. Once a company specifies its requirements, their AI models do the heavy lifting, searching across their large database of rigorously vetted candidates and ensuring that their skills and seniority match the needs of the role. AI ensures that the evaluation of all prospects is objective and standardized. Better still, the data gained during each step of the hiring process becomes inputs to improve the model’s sourcing, scoring, and matching algorithms. Such continuous, data-driven improvement is impossible for legacy applicant-tracking systems, which rely on clunky, resume-based keyword searches.
Most startups in this area currently focus on data, engineering, and tech roles. Opportunities exist for new entrants to develop AI-powered marketplaces and tools to serve other verticals, from management to marketing. In addition to being industry specific, many popular professional networking sites were created when geographic proximity was a dominant selection criterion. Skill-based, AI-powered platforms that are tailor-made for the globalized workforce could prove especially powerful.
Enable:
“Enable” encompasses the nuts and bolts of working life: communicating, connecting, and collaborating with colleagues; championing growth and recognizing employee successes; providing L&D opportunities; improving productivity and efficiency, and so on. Recent years have seen an explosion of software-based tools that bundle these tasks for the digital workforce. Yet these tools struggle on multiple fronts.
Chat applications are notorious for consuming too many mental calories, making it hard for employees to prioritize, focus, and organize information. Text is often a thin substitute for in-person conversation, which includes the added signals of tone, body language, and eye contact. As context (emotional, social, or otherwise) falls away, our ability to convey and converge on meaning erodes. Lengthy back-and-forths replace the ability to stop by a colleague’s desk, causing light-bulb moments to dim and information flows to dwindle.
When our working days are spent typing and clicking in empty rooms, it’s hard not to feel lonely. Our senses of belonging and happiness correlate strongly with the number of daily social interactions that we have. These small, unplanned exchanges spur creativity, yet they are among the first things to disappear in a virtual environment, where all synchronous meetings must be scheduled. Isolation from colleagues can trigger depression, anxiety, and detachment — which among other, more urgent consequences, can dampen a team’s morale and productivity.
This is where companies like Kudos and Donut enter, giving teams a handy forum for celebrating wins and an avenue for sharing serendipitous moments on Slack. Virtual event coordinators like Hopin encourage engagement with professional-grade online events, along with the option for in-person and hybrid attendance when the occasion calls for it.
Other startups are addressing the challenges of distributed work for specific professions. For example, DevZero provides cloud-based software development environments that solve for the inefficiencies, overheads, and security risks introduced when developers write code on local devices. Future startups can look to build remote collaboration tools with bespoke requirements and workflows for other job roles, such as finance, medicine, and law.
Manage:
When work transpires in a web of digital documents, untangling who’s doing what and what’s getting done becomes difficult, especially financially and legally. And though Internet HQ may be borderless, those existing infrastructures are decidedly local. When employees reside in different locations, each with its own currency, compensation norms, and labor regulations (which are themselves constantly changing), the complexity quickly becomes exponential. There are growing opportunities for software solutions that can smooth over this complexity by providing convenient, compliant HR, payroll, accounting, and tax operations for distributed companies. A few examples, like Deel and Remote, give a flavor of what the future promises in this space.
Further challenges arise in the context of managing logistics more broadly, whether that be sending swag or equipment to an international team or arranging for team get-togethers in a physical workspace. That’s where startups like Gable come in. Their software helps HR and people ops teams source, budget, and administer a network of flexible, on-demand workspaces. Data on usage and employee satisfaction feed back into the system, allowing businesses to identify what works and what doesn’t. By similarly exploring the seams between the physical and virtual worlds, entrepreneurs can pioneer new ways to humanize distributed work and promote cohesion among far-flung teams.
Beyond that, complex workflows and organizational hierarchies don’t simply copy-paste into digital forms. The result? Duplicated efforts, siloed information, and weakened cross-functional bridges. Powered by the data contained in digitized workflows, software can help companies track productivity, identify bottlenecks, and pinpoint areas for improvement. With AI models as their guides, teams can make sense of their data exhaust and distinguish actionable signals from noise. Digital tools can also support managers in the training, teaching, and developing of their reports by delivering targeted information that supplements subjective cues.
The work of the future
For millions, pandemic-era work has been organized by a patchwork of software, from video calls to chat apps. Through our time spent with both entrepreneurs and executives, we’ve come to believe that this status quo is simply a prelude to the full promise of Internet HQ. From established enterprises to DeFi-powered DAOs, the firm is recalibrating. Indeed, over 50 years into the Information Age, workplaces are just beginning to redesign themselves for this century’s underlying properties and enabling technologies. This presents a unique opportunity for tech startups.
How do companies find and recruit the best talent? How do they equip employees to do their best work? How do they keep workers accountable and empower managers to be effective stewards? How do enterprises provide for human essentials like mentorship, emotional well-being, and a sense of belonging to a collective endeavor? How do they handle the nuts and bolts of running a business that exists nowhere and everywhere? These are all enormous problems in search of innovative solutions.
Stewart Brand observed that “this present moment used to be the unimaginable future.” No one, even just three years ago, could have imagined the current moment. We were thrust so suddenly into this “future of work” that enterprises are still struggling to catch up to the new paradigm, not yet able to plan for what comes after. But with the help of entrepreneurs, the frictions of the distributed company are poised to go to zero. For founders who are up to the challenge, the infrastructure and components of how people work are waiting to be assembled. The future needs to be more than imagined — it has to be built.
Published on 03.09.2023
Written by Ashu Garg and Lauri Moore
