The real value of a company lies in its people
Why investing in people determines your company's trajectory
The first 10 people in a startup are the ones who determine whether or not it will make it. These people are the ones who lay the foundation of the corporate culture, which is why they are also incredibly difficult to find and hire.
"A company becomes the people that hires, not the plan it makes"
Vinod Khosla
Some time ago I wrote about moats and startups. Having a moat is different from a competitive advantage. The second one doesn’t last longer and can be copied by your competitors over time. A moat is something unique and difficult to copy. Something that makes you irreplaceable in the long run.
In that piece, I dedicated a section about people as moats. I believe that this concept deserves more attention than a couple of paragraphs.
People are the ultimate moat
Companies are about people. Products and services are intended to solve other people's needs and problems. So the desires of the market are nothing more than the desires of people.
Technology alone is not enough. It can’t be a moat, that is just an illusion. It will soon be a commodity. Going all in on the latest technology is not synonymous with innovation and doesn’t increase value. It’s often the case that the company doesn’t adequately communicate the technology or that people don’t embrace it for its potential.
The human component remains a value, critical within increasingly automated companies. When the company brings a new product to market, the experience behind it is designed, developed and tested for other people (the customers).
Individuals work together to produce innovations
Collaboration is why some companies produce innovations over others. The better the interactions, the better the innovations. In a world where we all have the same inputs, innovation happens when there is a contamination of people doing different things.
After all, innovation is a team sport. A social process in which everyone is part of the same team and there is no status, power or hierarchy to create friction. A human cooperation that eliminates individuality. Hierarchy gets in the way of innovation. Because of authority bias, we tend to value the ideas and opinions of leaders more. So the source becomes more important than the substance.
Individuals build ideas.
Teams build dreams.
Removing people from a company can cause failure
Removing or changing people can be something significant that drives culture change and sometimes even failure. Just think of OpenAI, when its founder and CEO Sam Altman was removed. Suddenly a promising startup was in danger of failing overnight, and employees threatened to leave by signing a petition. In those days, I realized that the real value was not in the technology but in the people. If 2 of the 4 members of the founding team had left Satya Nadella, the focus would have shifted to Microsoft and the same vision of OpenAI would not remain.
Human capital is the element to be leveraged
So people are the ones who determine the value of a company, not technology that can be copied by competitors. This is why big tech competes to grab employees and spends so much to recruit them. This concept of investing in one's employees as the center of value reminds me of Olivetti, the company that could have been the Italian Apple. Olivetti created a real community within their company. A safe space where people with the same interests could confront each other. Adriano Olivetti treated his employees so well that he knew their families, children and provided them with homes, schools, spaces where they could learn and engage in culture. These are all things that have been taken up by contemporary big tech and companies within employee benefits.
Building a people-centric organisation
It is not only the people who work for the company who generate value but also those outside the company. Serving your users and their interests can be a real benefit, starting with building solutions that solve their problems.
The first level is build in public, frequently publishing updates with new features and openly receiving feedback as The Browser Company does with Arc.
The second level is to co-design directly with the community, and Nothing comes to mind, which is launching this co-creation initiative. This does not mean that the design is decentralized and everything that is proposed then has to be implemented. On the contrary, it is demonstrating broad-mindedness by welcoming all proposals and curating with a design vision on the part of the company. This could be the ultimate moat that leads a growing startup to become an established company.
People play a key role in the functioning of the organizational machine. Investing in them and actively involving them can ignite the spark needed to innovate and thus bring new value with long-term competitive advantage.
For those who are curious
Community Edition Project from Nothing
“A company is the people that hires…” by Vinod Khosla