📇 Eurazeo's Deep Dive on Future of Work

Overlooked #91

Hi, it’s Alexandre from Eurazeo (ex. Idinvest). I’m investing in seed & series A consumer and consumer enablers startups all over Europe. Overlooked is a weekly newsletter about venture capital and underrated consumer trends. Today, I’m sharing a guest post written by Elise who has recently joined our team and who has led a deep-dive (with Clément and Pauline) on startups reinventing the future of work.


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Introduction

According to a June 2021 study conducted by Future Forum, 93% of knowledge workers want a flexible schedule, 76% want flexibility in where they work, and, 56% are open to a job change.

Two years into Covid, as restrictive measures tend to ease and as competition for talent is in full swing, it’s now almost certain that things won’t go back to office normal.

At Eurazeo, trends regarding the future of work have always been a core area of focus of our team and we’ve been lucky enough to track major evolutions in the space from a front row seat thanks to our portfolio companies: Peakon, Malt, Livestorm, Colonies, MessageBird, Andjaro, Hera, Comet, Lumapps, Klaxoon, Kaia, …

Yet, the multiple-year leap forward in digitization and brutal cultural shifts that the Covid crisis induced have forced us to update our thesis on the sector. Thanks to the heavy lifting by Clément and Pauline, we’ve spoken with several entrepreneurs in the space and we’ve compiled our thoughts in this article (+ in a few slides & videos below).

👉 Slide deck available here

Extensive quality research and mappings have already been conducted on the topic, so the endeavor here is not to provide a comprehensive framework. It’s only to share key insights on what we believe are the most interesting opportunities to come.

If you’re working on something in the space and you’d like to chat or be included in this study please do send me an email at estern@eurazeo.com!

We divided this paper into two main sections:

  • Megatrends: consumerization of enterprises, enterprization of consumers, workplace going hybrid

  • Categories to keep on the radar: human resources, communication & collaboration, independent work and self-employment facilitators and physical infrastructure

MegaTrends

Trend #1: Consumerization of enterprises

In its 2012 shareholder letter, former Microsoft CEO Steve Ballmer anticipated the following:

Fantastic devices and services for end users will drive our enterprise businesses forward given the increasing influence employees have in the technology they use at work — a trend commonly referred to as the Consumerization of IT.

Recent developments have proved him right.

In the early 2000s, software was expensive and largely limited to businesses that could afford it: computers and other digital systems were common at work, rare in homes. Providers sold to C-level decision makers and department heads and software design reflected that reality: the focus was on solving managers’ productivity challenges, not on how employees would interact with these applications.

Today the situation has changed dramatically. Consumers overtook enterprises in becoming the largest buyers of technology and the technology they use in their daily life intrinsically puts a strong emphasis on user experience to maintain engagement and retention. As a consequence, today’s employees expect the technology they use at work to match the one they use as consumers in their everyday life. Otherwise, they simply don’t use it.

This observation entails two consequences for B2B SaaS providers:

  1. The product provided needs to match consumer-like experiences

  2. Bottom-up distribution approaches are increasingly strategic as employees are becoming an important driving force in the buying process of enterprises. Indeed, they will tend to start using applications at an individual level without waiting for IT approval and once they have proven the success of the system, they call higher in the organization to expand the usage of the application.

Our take is that the Covid crisis by inducing accelerated digitization and by blurring the line between work and home will reinforce this phenomenon.

Trend #2: Enterprization of consumers

On the other side of the spectrum, individuals are increasingly becoming enterprises at their own level.

This phenomenon is structurally driven by a long-term shift towards independent work and can be understood through 3 waves:

  1. Gig economy. Also known as the “Uber for X” trend of the past decade, it encompasses a large range of on-demand platforms that allowed workers to easily monetize their time in straightforward short-term gigs such as taxi or food delivery. Although they’ve acted as massive enablers of job creation by automating matching, they’ve also participated to homogenize workers, increase competition, lower prices and thus, as stated by Ji Lin, defeat the initial promise of “Be your own boss”. Consequently, these platforms are now under constant scrutiny from regulators which action could entail existential risk to their models.

  2. Knowledge-based economy. Another wave of independent workers has emerged with a very different profile. They are still working for third-party companies but they are highly educated individuals, with a tech skillset (data, programming, design, etc.) who switched from employee to freelance status deliberately and have no desire to work in a permanent employment. Solutions targeted at this segment have focused on matching platforms, be they between freelancers and employers or among freelancers themselves.

  3. Creator economy. In a more recent paradigm, a new generation of digital platforms are allowing consumers to leverage their own individual skills and talents into creating a business of their own. This trend, well-known as “Creator Economy” or “Passion Economy”, has been enabled by the emergence of various categories of solutions that cover the full “enterprization” cycle:

    • Creating content

    • Growing an audience and owning a community

    • Monetizing an audience online and offline

    • Managing the back-office

We believe that knowledge-based models and creator economy are still on the set of disrupting the entire concept of work as we know it and we’ll spend time digging into them in the coming months.

Trend #3: Workplace going hybrid

Pre-Covid, we used to work almost exclusively at the office. Then, Covid lockdowns’ pushed us into a home-only world overnight. The logical question that has since arised with the coming back to normal is what would actually be the new normal.

Our conviction is that the future of work will definitely be hybrid in knowledge-based companies.

As several surveys show, hybrid is what employees want ubiquitously. And in a world of talent hunt, companies cannot afford to be the last ones offering the benefit of flexibility.

Employers seem to have understood this imperative quite well as pointed out by several low signals :

  • 84% of employers intend to rapidly digitalize working processes in order to support an expansion of remote work to potentially move 44% of their workforce to operate remotely (World Economic Forum)

  • 1/3 of all employers intend to take steps to create a sense of community, connection and belonging among employees through digital tools, and to tackle the well-being challenges brought up by the shift to remote work (World Economic Forum)

Categories to keep on the radar

Category #1: Human Resources

When it comes to handling a hybrid workplace, companies are torn between two conflicting injunctions:

  • Offering a customized and smooth experience to each employee in order to attract talent and foster retention

  • And at the same time, maintaining seamless workflows and a shared culture within the organization.

At the very center of this paradox lies an overwhelmed human resources division which is increasingly open to solutions helping it address these challenges.

Among them, innovations helping to tackle 1) global hiring, 2)employee onboarding, 3) employee engagement and 4) well-being seem particularily promising.

Category #2: Communication & Collaboration

One obvious challenge stemming from hybrid work environments is the ability to actually work together. To put it simply, even if “zoom” has definitely entered the everyday language, it is still not straightforward to work together if you don’t sit next to each other, let alone if you don’t work on the same time zone.

In that sense, we monitor the emergence of 6) “context rich” asynchronous communication tools quite closely.

Another thing that the Covid crisis has unequivocally revealed is that we don’t just work when we’re at work. Informal talks at the coffee station, unexpected meetings in the corridor, chit-chat with your tablemate, none can be replaced by a videoconference and yet all participate to building corporate culture, enabling serendipity and eventually smoothening work collaboration.

That’s why trends towards 7) “metaverse-like” virtual offices and 8) natively hybrid B2B events are gaining traction.

Finally, it’s easy to see what we missed in terms of collaboration when deprived of physical interactions, but it shall not blindfold us from also realizing the realm of unthinkable opportunities that hybrid work and systematic video-conferencing have brought along. Starting with the ability to record and thus leverage any meeting or work-related interaction.

This new paradigm has paved the way for 5) automated data leveraging and verticalization of real time videoconferencing.

Category #3: Independent work & Self-employment facilitators

The shift towards independent work is not new. Yet, what the pandemic has brought of fundamentally new is two-fold:

  1. companies have come to realize, in an accelerated way, that allowing employees to work remotely and allowing for more flexible and less controlled workflows does not necessarily lead to decreased productivity. Some might actually argue the contrary.

  2. as hybrid work becomes the new standard, the traditional insider / outsider rift that could previously arise between full-time employees and freelancers does not stand anymore.

    • First, it evens out the cultural gap: If everyone’s behind its own camera, everyone can take part in the discussion or in private jokes, regardless of whether they are sitting next to each other or several kimometers away. There are no sub-cultures.

    • Also, it balances out the organizational divide: if hybrid is the norm, workflows, IT, compliance, and other streams of the entire organization will be adjusted to its needs. Hiring and onboading a freelancer thus becomes just as, or almost as, simple as hiring an employee, hence opening up the company to a wider pool of talents.

These recent dynamics should increase the cohort of independent workers and specifically knowledge-based gig workers who have high-in-demand skills (developers, data scientists, designers).

  1. As the number of knowledge-based gig workers increases, so does the level of heteregoneity within the cohort and this will require different platforms catering to verticalized needs.

Hence, we’re following actively 9) the verticalization of freelance marketplaces.

2. Even if many skilled workers are attracted to the benefits of being their own bosses, the prospect of losing financial benefits and working alone can be daunting.

In that sense, 10) the reinvention of unions through freelance collectives and 11) services taking on the role of employers to provide benefits and financial services to independents should benefit from important tailwinds.

Category #4: Physical infrastructure

Traditional distinction between office life and home life relied on a basic assumption: you work at the office and you socialize at home (or at the bar, but you get the picture). Now that home is also a place to work, the office, on the otherhand, has gained a renewed importance in fostering social interactions and company culture.

This shift explains the 12) emergence of numerous solutions aimed at making the office more attractive and enjoyable.

Our guess is that these solutions will move from “nice-to-have” to “absolutely necessary” to lure employees back to the office. They will also need to be integrated in a comprehensive framework of complementary solutions that match a well-defined company culture. Adding Google-inspired table soccer won’t do.

Another obvious consequence of people increasingly working from home is that they don’t work at the office as much as they used to. This trend questions the very meaning of buying or renting large office spaces in expensive cities and explains why companies have already started to reduce their permanent real estate. In our opinion, a side effect will be the need to host occasional real-life meetings, seminars, training or events, especially with the rising number of remote-first employees and freelancers.

That’s why 13) new forms of flexible workspaces are on the rise.

Finally, if we take a step back, the very concept of sedentary life stems from the obligation for individuals to remain physically close to their work: initially the work of the land. And despite the many technological revolutions over the last thousands of years, this principle has not changed because the nature of work has not changed: it has remained eminently physical. But with the emergence of digital technology and now the generalized acceptance of a hybrid form of work, nothing, in theory, forces people to a sedentary lifestyle. We actually had a taste of this with the emergence of the concept of “digital nomads” during lockdown. Our take is that this trend is not a niche and will dramatically affect the way we live.

That’s why we believe the future of work will actually trigger 14) future ways of living and we’ll be very interested to follow innovations in that field.

If you’re working on something in the space and you’d like to chat or be included in this study please do send me an email at estern@eurazeo.com!


Thanks to Clément, Elise, Pauline and Julia (🦒) for the feedback! Thanks for reading! See you next week for another issue! 👋