Evolution of Business: From Company to Communities

Hello and welcome Work3 community! 👋🏻

This week, we’re going to cover a severely underrated topic: Companies = Communities.

My argument (actually, not just mine..) is that we’re seeing a deep redefinition of what a company is, and that many are going to be community native, meaning that they will be born out of communities.

What to expect:

• ⭐ Value of Social Capital: Focus on Alumni (Universities, companies) - huge value is being left on the table

• 🧊 Hidden Job Market and Networking: 60-80% of jobs are filled this way

• 👥 Communities: what they are and how companies will become Community Native

How many companies keep track of their alumni?

This is a must-have strategy to future-proof feedback loops (who better than someone who knows you, can give feedback with an outsider's perspective), talent referrals, mentoring, and much more. After all, the biggest problem in customer acquisition and talent acquisition (purposeful analogy here, as I always do between marketing and HR) is the cost per acquisition (CPA) and churn; both are going in the wrong direction: upwards. This means that the cost to acquire talent is increasing and that average tenure decreases, meaning you will lose that value sooner. This hasn't been such a big problem until now, but it needs to become a priority and the only way to do that is through measurement, and strategies to find 'value extraction' or maintaining connections at least, after an employee has left the company.

Think of Universities, for example. These historically have alumni communities, but the only ones that do real work are the most exclusive (think of MBAs) where the value of networking is probably even more important than the course material itself. The vast majority though, even with these programs in place, do little to keep in touch and even worse to nurture their connection with their alumni. This doesn't make sense for two reasons:

1. Universities are doomed to change their operational and business model, needing to break up monolithic courses and cater to educational needs for lifelong learning, even after graduation

2. Alumni themselves have spent so much time with their peers that this is a source of invaluable information for hiring: no acute machine-learning system will substitute having known someone for so long, in what is possibly the first 'test' work environment (working groups, etc)

Let's double-click for a moment on hiring. I always have to remind myself, and others, of the Hidden Job Market:

More than 75% of the job market, is beneath the surface, and you can get to it only if you build relationships. The real question, should be ‘how many people did you talk to, and tell your story?” versus ‘How many applications did you send?’. This way you can aim to get referrals, advice, and so on.

Now, of course, this can't be true for all jobs, it's an average. But imagine for a moment:

15% Internal - these are positions you can't reach, tough luck. 45% Networking + 15% Headhunters - I would argue that the two things are closely related, headhunters will know you if you are in a good network. That makes a whopping 60% of job positions being filled if you have a good network, versus 25% if you apply. LinkedIn, in one of the latest research studies, went as far as to say 85% of job positions are filled this way.

Take it a step forward, think in probabilistic terms:

When doing a classic application through Linkedin (or other job boards) you usually have an average probability of getting selected for the hiring process that ranges from 0.4% to 1%.

Now, the concept of the hidden job market, is that the submerged part could be jobs that are not even advertised, which means your probability to get them is 0%.

Unfortunately, there is no hard data on the probability of being selected for a candidature if you've come through networking. Your CV is still being checked and marked (many times through machines) but if the result is the numbers we've seen above, I would be safe to assume we're talking about completely different numbers.

Why is this relevant to talent referrals?

A good part of networking must come from existing relationships. University and company alumni networks are easily the best places to start.

Now, I haven't discovered fire - many companies do have a talent referral program, with interesting monetary incentives. But again, we're seeing just a piece of the puzzle. Much like in the hidden job market, there's a hidden social capital that comes from people who've worked and interacted at the company but now left.

Also, I would argue that having someone who's previously worked at the company referring you, is not just a way to get past the competition. Even more importantly, it can be a source of truth on what it's really like to work at the company.

There is a caveat, as there always is with human beings: subjectivity. This could mean that you could find completely different opinions about the same company, based on their particular character and experience.

Still, in today's world, I would argue that having this information is better than not having it, and of course, the moment you can have it from a trusted/known person in your network who also happens to know you, it's going to be even more relevant.

How well could I mentor someone who's taking up the role I had at my previous employer? Or a newbie, just starting at the company I've worked on for years? Before getting someone external, the first choice is usually (if there is such a program in place) to get people internally, of course. More senior managers who can give advice, and so on.

But think about it: it's missing the external, unbiased perspective.

Someone who has left the company could still help navigate it and could also add perspective from the new role (obviously, all of these considerations need to exclude competing companies).

Mentoring is extremely underrated.

As Robert Greene, in Mastery puts it:

When you admire people, you become more susceptible to absorbing and imitating everything they do. You pay deeper attention. Your mirror neurons are more engaged, allowing for learning that involves more than the superficial transmission of knowledge, but also includes a style and way of thinking that is often powerful. This means the company you work for doesn't need to provide your mentor, you need to choose it for yourself.

The biggest threat to businesses in 2024 onwards? Eco-chambers. 

Eco-chambers are "environments in which a person encounters only beliefs or opinions that coincide with their own so that their existing views are reinforced and alternative ideas are not considered".

Eco-chambers happen in any social network. They happen on Facebook and Instagram, but also in real life, including in companies. Why?

Because of confirmation bias. This is the natural human tendency to seek, interpret, and remember new information by preexisting beliefs. Consider it our brains’ default setting. Just by going through life, humans discover all sorts of information through focused research, general experience, and wild hunches—and it feels especially good to our brains when what we learn matches what we already expected.

What's my point here?

Unless you specifically do something to prevent it, this is a natural tendency, and it will be the biggest killer of innovation. Innovation has always been necessary, but in an increasingly competitive world, where technology is soon becoming commoditized, it's not an option to innovate more, and more often.

Inside a company, you will see the CEO setting the vision and goals, many times based on her own beliefs, or the beliefs of peer CEOs. They rarely seek out controversial, disruptive opinions and ideas. They are often dismissed. Even if they do seek them, what's one of the best places to get them?

From company alumni, who've jumped ship to other companies and can not only bring fresh perspectives and ideas - but also benchmark them directly to their experience. I think this point in particular is key.

Alright, I've got you convinced.

But how do you make this happen? And what's a community after all?

Let's start with the basics.

A community is a condition of sharing or having certain attitudes and interests in common.

You learn a ton about a community’s social capital with two simple questions.

First: “Can people usually be trusted?” A community in which most people answer yes is one with fewer locks, with people watching out for one another and intervening in situations where one could easily look away. The second question is ''What is the level of participation"? A community with high levels of such participation is one where people feel efficacious, and where institutions work transparently enough that people believe they can effect change. People who feel helpless don’t join organizations.

But consider this: cultures with more income inequality have less social capital. Trust requires reciprocity, and reciprocity requires equality, whereas hierarchy is about domination and asymmetry.

This is why a community cannot be a hierarchy (I've written extensively about alternative models like Holacracy in my article Reinventing Organizations Hierarchy vs Holacracy.

What’s powerful about decentralization is that it is carried out through the power of persuasion (instead of coercion). When you can incentivize millions of people all at once to change their patterns of behavior—and reward them for doing so—incentives align. It’s in this mass alignment of incentives that big things get done.

Think of DAOs (Decentralized Autonomous Organizations, on which I’ve written a good piece here “Delete your CV and join a DAO instead”). The currency becomes part of the product design or service offered. Because governance is distributed among token holders in a DAO, the enterprise forms a community based on the growing value ecosystem. Everyone can contribute.

The DAO environment, in contrast to most legacy companies, is more transparent, accountable, and trustworthy by nature. Everyone knows the rules, so greater predictability follows. The incentive alignment that comes about in the absence of central authority amounts to decentralized decision-making, as well as real options for detractors with a different vision. Token holders have skin in the game.

Tokenization (the process of issuing a digital representation of an asset on a blockchain) allows an enterprise—in part or whole—to embrace change because the enterprise has become a community and the community has become the enterprise.

Now, my prediction is that much like there will be AI-native companies being born in the coming decade, they will also be Community-native. It's already happening in Web3 of course, but it's going to be adopted also without the use of Blockchain technology to begin with.

One of the best thinkers in this sense is Greg Isenberg, whose thesis is that strong communities directly enhance products and experiences, and therefore that community-based businesses outperform those that don't have one.

He's drawn a neat-looking graph, that shows a new paradigm: products are built at the end of the process, not at the beginning. He argues that it all starts with short-form video (a hot and algorithm-preferred medium) to start building trust and providing value - something that can also happen in a much faster way than if you were to build a product.

Then, build on top with more forms of content (i.e. newsletter) before setting up a community, a paid community, and finally one or more products.

This approach solves product-market fit because it comes directly from the community, provides ambassador-like customers from the get-go (so free marketing), and potentially even a more scalable/profitable business model with less capital from the get-go.

The hardest job will be for traditional, and established companies, to turn into communities. You can't reverse this process, but here's what you can do instead:

• Change the organizational model to make it more 'flat' and allow more degree of freedom and responsibility

• Incentivize everyone - usually, big bonuses are handed off to CEOs; this needs to be a thing of the past; we need to distribute that (in the forms of equity, tokens, whatever) so that everyone has real skin in the game

• Build the mission together with the employees, so that it's not coming top-down or from eco-chamber-thinking

• Establish rituals to provide reasons for recurring involvement and belonging; you can borrow from Project Management, but also from Gamification (on which I've written here: Gamification of Work and Reality How Gaming Has Moved Beyond Leisure)