web analytics

Business

Coworking in a Holistic Perspective

As long-standing participants in the coworking industry, the partners at OpenWork Agency have seen the industry evolve since the beginning. What was once a social movement is now a sure enough industry. Depending on what your vantage point is, though, coworking is different things to different people. In this article I reflect on some of these different perspectives, and suggest that an exogenous and holistic perspective can help make better sense of what is happening than any of the endogenous perspectives that are out there.

The CRE Perspective

Currently the loudest voice in the industry is coming from corporate real estate professionals. CRE professionals around the world are tuning in to see how coworking (and the shared workspace industry generally) will impact their strategy and bottom line. Much of our business is working with real estate firms that are trying to figure out how and if they want incorporate coworking offerings in their portfolios. The starting questions are understandable, but often the questions indicate the limitations of an endogenous view of the scene.

The starting questions are understandable, but often the questions indicate the limitations of an endogenous view of the scene.

From the CRE perspective, the challenge is often framed this way: How can we leverage the “cool and young” vibrancy of coworking as an amenity in our buildings to drive up higher rent rates in the rest of the building or development?Implicit in this and related questions is the notion that coworking is an approach to working that is separate and discrete from the mainstream world of work inside large companies. A kind of Cartesian dualism prevails here, where “real work” (fixed work stations in large offices within long-term leases) takes place inside large firms, while fun and whimsical start ups and freelancers are busy working in the ‘funky’ environments that are associated with coworking. And never the two shall meet.

A kind of Cartesian dualism prevails here, where “real work” (fixed work stations in large offices within long-term leases) takes place inside large firms, while fun and whimsical start ups and freelancers are busy working in the ‘funky’ environments that are associated with coworking.

The CRE industry has been slow to come around to the reality (and it is a reality) that many large firms are now embracing coworking in various ways (on campus and off-campus). This is puzzling, since the large firms that are their tenants are in fact the drivers of this type of coworking adoption. We assume that this blind spot is due to the profound challenge that this represents to their business model. Large, highly credited tenants signing long term leases makes their work much easier. The idea that leasing will dissolve into tons of little micro leases is an absolute nightmare. We get that.

We assume that this blind spot is due to the profound challenge that this represents to their business model. Large, highly credited tenants signing long term leases makes their work much easier. The idea that leasing will dissolve into tons of little micro leases is an absolute nightmare.

The Enterprise Perspective

Meanwhile, facilities managers and HR managers in large firms are witnessing deals such as the IBM/WeWork deal, where WeWork will manage IBM’s entire new Manhattan campus. What to make of this? We know that dozens of large companies are already sponsoring employees to be members at places like WeWork and Industrious, but that is largely an outsourcing process. What will the long-term effect of this be when more and more company employees don’t actually work at the company? This is the kind of question that we ask at OpenWork.

Oddly, it seems that this enterprise embrace of outsourced coworking is being somewhat lost on their CRE partners. As large firms rethink their real estate strategies, they are seeing massive advantages in coworking. It would seem that as some of these companies approach the end of their leases, they will begin to rethink how much real estate they need under their own management. When firms make the decision to shrink their footprint, the real losers will be their CRE clients who are witnessing the shrinking demand for their traditional products. We see this as the elephant standing in the middle of the room!

When firms make the decision to shrink their footprint, the real losers will be their CRE clients who are witnessing the shrinking demand for their traditional products. We see this as the elephant standing in the middle of the room!

We have recently launched a new service that helps firms rethink their long-term relationship with coworking, both on and off campus. But this article is not so much about that. Here I am interested in the intersection between CRE and Enterprise.

A Single Perspective

Of course, all of these changes in workplace are interrelated. Coworking is not just for kids anymore, as the recent corporate adoption of coworking demonstrates. Large firms, as we see it, will continue to open up their work environments, sending some people off campus to cowork while designing their own campuses to be more open and fluid to keep up with the changing generational demands for choice, flexibility, and mobility. In our estimation, this is the single largest driver of change in the whole world of work. Many of us like to cite the figure stating that 40% of the workforce will be freelancers by 2020, and this is indeed a staggering statistic. However, this is a drop in the bucket compared with the massive shift towards new ways of working that will be driven by large firms. This IS the world of work, not some adjunct to it.

For CRE, this is the lesson that needs to be learned. That is, coworking is no longer just an adjunct, or an amenity; rather, it is an early warning signal of what WORK will be in the near future. Yes, this challenges existing leasing practices, as well as the level of TI allowances that they will need to contribute at the beginning of a lease cycle. However, the idea that they will be able to hold on to their conventional leasing process with large firms forever, while playing around the edges of their business model with coworking, is a bit risky.

An Example

We recently toured a forward-thinking Brookfield design experiment in Houston, called DesignHive. Design hive invites local architects to design ‘spaces of the future’ with the idea being that the buildings will come pre-designed and furnished, and that corporate tenants can then say, “I’d like option B.” These spaces were all very much like coworking spaces designed for companies. Now, of course, the question is: Who pays for these up-front build outs? This is no small question, but the small scale and modularity of these spaces feel like the future of corporate offices to us. That is, they feel like coworking spaces. One company might lease one of the spaces, while another will lease a space down the hall, both sharing the same floor. Quite interesting.

Operators

Of course the other node in this process are the operators. As has been the case since the beginning of the industry, these folks have proven to be nimble and adaptive. Many operators have already seen this intersection of CRE and Enterprise and are offering their services directly to enterprise. This is additional pressure on CRE. In this respect, we feel quite confident that the innovative operators will jump on the moment and continue to grow their businesses and thus the industry as a whole.

As relative upstarts and champions of disruption, coworking operators have had a holistic perspective from the beginning. Unlike their CRE and Enterprise counterparts, who are often limited by endogenous worldviews, coworking operators are doing important work in pushing the world of work into the future. As Will Ferrell might put it, “coworking is kind of a big deal.”

OpenWork Agency is a workplace and culture consultancy that helps companies and real estate developers leverage coworking solutions within their offerings.

Coworking and Company Culture

Marc Andreessen once famously said that ‘software is eating the world,’ and that if your business can’t be boiled down to a simple (software) solution it probably doesn’t have much of a chance. Or at least, in his world of venture investing, if your startup isn’t predicated on an elegant piece of software, then your business will be challenged. While some people took offense to Andreessen’s sweeping comment, I think it is even more profound than people might think.

Take, for example, the corporate culture consulting industry. Since the early 1980’s management consultants have made small fortunes helping large firms ‘engineer’ their cultures to be “stronger.” By stronger, we all understand that what is actually meant here is greater profitability and higher share prices. Enron had a strong culture, but that didn’t turn out so well. However, in light of the fact that some 70% of all corporate change programs actually fail, it is worth questioning what the actual value of culture consulting is and why so many existing efforts fail? And, to what extent will culture itself be boiled down to a piece of software?

However, in light of the fact that some 70% of all corporate change programs actually fail, it is worth questioning what the actual value of culture consulting is and why so many existing efforts fail?

For us at OpenWork Agency, this is where design and design thinking are so important. Typically, culture consultancies use typologies to classify companies within one type of company or another, and then help them transition to a new ‘type’ of culture. The whole process remains in the realm of values, beliefs, and behaviors, which tend not to ever change because very little else in the company changes. That is, words are cheap and easy.

Coworking as Design Intervention

In our estimation, what is needed are tangible, material interventions in the flow of peoples’s day-to-day work. By shifting people to the open and fluid mode of work that is coworking, the day to day interactions of employees themselves are changed. Without talking about culture, per se, the elements of coworking- communication, learning, etc- and thus culture itself is changed over time. But only slowly and organically. This is a critical difference.

By shifting people to the open and fluid mode of work that is coworking, the day to day interactions of employees themselves are changed. Without talking about culture, per se, the elements of coworking- communication, learning, etc- and thus culture itself is changed over time.

Thus, we have recently launched a new culture change initiative premised on coworking. We might be fifteen minutes early, but we know what impact coworking has on people, how they work, and on the social interactions between people who cowork together. Of course the proof will be in the pudding, but we are quite confident that as more companies embrace coworking (as many, such as Microsoft, IBM, HSBC, Dell, Samsung, Amazon, Merck, GE, just to name a few, have already done), those companies will in fact change, culturally, over time.

There are no magic bullets, we understand that. Company policies will have to shift accordingly, and will have to allow for the choice and flexibility that is at the heart of coworking. Without this accompanying level of change, coworking will be as ineffective an approach as previous generations of change programs. And finally, to return to Andreessen’s earlier point, the coworking-as-change-management-platform is grounded in a technology platform that allows employees to collaborate effectively and managers to monitor and understand what is going on in real time.

However, software won’t ever replace the value of human interaction and the importance of that for building community and culture. Thus, in the end, with respect to the workplace, Andreessen’s maxim was only partially true.

However, software won’t ever replace the value of human interaction and the importance of that for building community and culture.

Enterprise Coworking

WeWork + IBM

It was recently announced that WeWork, the global coworking chain, has signed a deal to manage an entire office building for IBM in Manhattan. Up to 800 employees will work in the building, which WeWork will manage as a single shared office environment.  At first glance this looks like it is just an extension of its recent strategy of providing work spaces for employees of large firms, but it might also signal something much bigger.

Concurrent with this news was the announcement of a new Enterprise division within WeWork.  While it is unclear what the specific terms of the IBM deal will be, it seems that these enterprise deals might signal the beginning of a lease-free model, wherein the value-add of the company is in the management of the space.  We are seeing lots of ‘management fee’ arrangements in lieu of straight leases, and it would make sense that this is what the company is aiming for.  It seems like only a matter of time before the weight of SO many leases becomes a heavy burden.

But that isn’t the main point here.  Rather, what is interesting (and important) about the WeWork announcement is the shift towards enterprise.  Retail coworking, which is for the most part what the world has seen thus far, is just the first iteration of a much large shift from old ways of working to ‘new ways of working.’   All of those brave pioneers who made coworking what it is today, such as Alex Hillman and Tony Bacigalupo, have opened up the floodgates for a new wave of adoption to follow the retail coworking phenomenon.

Three years ago, before we began working primarily with real estate developers seeking retail coworking solutions, we set out to do enterprise coworking. For us, the big opportunity has always been the potential to ‘convert’ large firms to the culture and flow of coworking.  Not only is this a big business opportunity, it would seem, but it also potentially can serve to liberate corporate employees from uninspiring spaces and rigid workplace policies.   

 

coworking together: employees and independents

Workplace Strategy: Coworking for company employees: What/Why/How

Workplace Strategy Insight: In these times of innovation, coworking is emerging as the new office.

Coworking has been the preferred office of choice for the independent worker since the community office trend began to emerge in 2006, catalyzing the disruption of the traditional workplace strategy model.  Since then, the coworking phenomenon has grown at an accelerated rate in parallel with rise of the independent workforce. Today there are 50 million+ people in the USA working independently who office from home, a coffee shop, or a coworking space. Work has truly become an anytime/anywhere affair. As the coworking industry continues to mature and the corporate environment innovates, the two worlds are forming a symbiotic, albeit experimental relationship. Companies and employees have both begun to hear the buzz around coworking and have been curious how they may ‘do coworking.’

coworking-stat2Even so, most company employers don’t know how to integrate coworking into their workplace strategy and most company employees are not aware that HR department rules on workplace flexibility are quickly evolving, making it common practice for companies to encourage mobile working.

As more companies test out coworking it’s causing the industry to evolve to support them.   In fact, as reported in the latest 2016 research by Deskmag, this is the first year on record where company employee members (51%) outnumbered independent worker members (49%) at American coworking spaces.

How companies can test out coworking as part of their workplace strategy

corporate-coworking-strategyOption One: External Coworking Strategy

Sponsor company employees to work in existing coworking spaces. Companies that have embraced ‘external coworking’ include: G.E., PwC, The Guardian, AirBnb, Pinterest, Red Hat, Automattic, PepsiCo, Microsoft, Merck, Heineken, KPMG, among others.

Picking the Right Coworking Spaces

Picking the right coworking space to match the specific needs of your mobile employees can be a challenge. Different spaces are tailored to different uses. As many cities have numerous coworking options, picking the right one can be a project in and of itself. As the awareness (and demand) for coworking has increased among large firms, it has become common for some spaces to create membership models specific to company needs. Some companies choose to send all their mobile employees to one coworking space in private offices. And some companies allow each employee to choose where they want to work.

Embracing a Culture of Experimentation

Coworking for companies should be looked at as an experiment  One of the things that makes coworking spaces so appealing is their no risk, short term obligations. All coworking spaces offer month-to-month memberships. Ask your employees if they would like to have coworking as an option and if they say yes, offer to buy them a short term membership to test it out.

Option Two: Internal Coworking Strategy

Instead of sending your employees out to external coworking spaces, some companies opt to build their own internal coworking solution. Companies that have embraced an ‘internal coworking’ strategy include: Macquarie Bank, BankWest, Rabobank, Microsoft, ERA Contour, Achme Insurance, KPMG, GLG

Start with a Pilot Coworking Space

Take between 5,000-15,000 sq ft of space and repurpose it into a coworking space.

Empower it with data-driven Key Performance Indicators (KPI)

While testing out your pilot coworking space, you must find a way to measure the impact. How do you measure an increase in employee productivity, creativity, innovation, engagement, among other things? These are the KPI’s that will dictate whether or not you should expand the pilot to an entire floor, your building, or company campus.

Why/how does coworking work?

Data demonstrate that engaged employees are more productive employees than their disengaged counterparts, and the data on employee engagement is abysmal.  According to a 2014 Gallup poll, less than one-third (31.5%) of U.S. workers were actively engaged in their work, meaning well over half of American employees were not 3ps-openworkpsychologically committed to making positive contributions to their organizations.  These figures, according to Gallup, have only declined recently.

To the contrary, data from coworking spaces underscore that engagement, productivity, and energy are ‘through the roof.’  Two recent Harvard Business Review articles speak directly to this.  Coworking spaces bring together the 3 P’s of the ‘Open Organization’- people, place, and purpose– where employees work according to their own rhythms on work that is meaningful to them.

It’s all about culture.

coworking-stat1

The coworking ethos has become the workplace culture of choice in the sharing economy. Yet, the culture of most large firms does not reflect the culture that Millennials are co-creating and want to be part of. Workplace strategies and HR policies are evolving, though, as innovative company leaders embrace the modern workforce and the future ahead.

Interested in digging in further?
Read our white paper, Why Companies Need Coworking.

Ready to get started?
Get in Touch to learn how the transition can work for your company.