COVID-19 is forcing companies to do remote work. The emerging virtual company will disrupt traditional rival businesses.
Strategic Exits has been saying for a while that virtual companies (those with no physical head office and everyone working remotely online) provide greater returns to their founders in a technology company exit than comparable bricks and mortar companies. COVID-19 may be the tipping point that accelerates the transition to this workstyle of the future.
COVID-19 wouldn’t be the first disease to change the course of history. The Black Death in the 14th century, for example, set in motion the disappearance of feudalism in favour of more dynamic and meritocratic societies. The Black Death claimed so many lives that surviving workers were in greater demand. Feudalism gradually crumbled as common people gained more power to negotiate working conditions and compensation.
COVID-19 is likely, and hopefully, not remotely in the same league as the Black Death. Nonetheless, in a few short weeks, the virus wreaked horrendous costs in human suffering and economic destruction worldwide. The recovery will be long and uneven, at best.
But COVID-19 is also bringing the future of work to the present day. When governments declared national emergencies, companies forced people to work from home. Suddenly, the streets and offices emptied. Cities became ghost towns. Every business that could transition to a virtual workstyle quickly did so.
Employees were at first bewildered by the sudden disruption to their lives and work. But they were quick to appreciate the advantages:
- gaining two extra hours every day from no commuting
- freedom to schedule work around family
- lower work expenses
Once the restrictions are lifted, many employees will prefer to retain these advantages by working from anywhere but the office. Say so-long to the horrendous commute and the rigid office protocols.
But conventional companies may resist this, as to go virtual will disrupt their deeply entrenched processes. Many are barely coping with the shift to remote work and can’t wait for sanity to return, (along with their employees), when the restrictions ease.
Tension will grow between traditional office-centric workstyles and the freedom of working remotely.
The COVID-19 crisis may be the tipping point to widespread adoption of remote work. Once offices re-open, will workers rush back to their repetitive 9-5 workday in a cramped office with an hour-long commute at either end?
Many won’t. If their company goes back to the office, workers might rebel and opt for an entirely different alternative.
This brings us to the acceleration of the virtual company.
Virtual Companies: the Future is Now
Virtual companies have several advantages. The first is talent. They hire the best people from around the world who are keen to work with like-minded others in cutting-edge companies.
In developing countries, top talent is available at a fraction the cost paid in developed countries. Virtual companies can save a significant portion of their biggest expense. Even in developed countries, employees will gladly accept less pay to “work from anywhere” while they balance their work and family time to their advantage.
Traditional bricks & mortar companies fear the virtual model because it is a bet-the-company move. Case studies suggest that there can’t be any half-measures. A company must fully commit to going virtual, which is a huge risk. Every employee must be online from day one. A half effort is destined for failure as it creates two classes of employees and a mix of virtual and conventional protocols. The hybrid company loses its agility sorting out the mess.
Unsurprisingly, start-ups in the technology industry has been the first to adopt the virtual model. The company is virtual from day one. Tech-savvy millennials who grew up in front of screens can easily master the technology of online collaboration. No surprise that in May, 2020, when the restrictions enforced to limit the spread of COVID-19 began to ease, Twitter, FaceBook, and Shopify were among the first companies to allow employees to work from anywhere.
With everyone continuously connected online, there is little need for bricks and mortar, so young tech entrepreneurs can start a web or software company with minimal investment. With the best worldwide talent and a lean structure, virtual companies are agile and can scale quickly to disrupt long-established industries or invent new ones. This is part of the reason that virtual companies are worth more than conventional ones.
COVID-19 has forced millions of people to work from home. They discovered that they like it. It may be a tipping point which launches us into the future of virtual work in the same way that the Black Death launched the medieval world into modernity.
If large companies can accommodate the radical restructuring of work patterns necessary for virtual work to succeed, they may reap extraordinary financial benefits – If not, then young upstarts might force the issue and beat the established players at their own game.
The virtual company will become the defining feature of the modern era, whether conservative rivals want it to or not. As virtual companies are worth more money in a technology exit transaction, this trend should put more money in the pockets of their founders.