_Innovate or die: Can Coworking be a catalyst for innovation?

Such statements are typically backed up with reference to the high profile demises of Polaroid, Kodak, Blockbuster etc...

But why are corporates still finding it tough to bring their innovation initiatives to fruition?

Historically, corporates have fostered success by leveraging economies of scale and maximising the quality and efficiency of delivery of their product or service.

With a proven product or service being steadily improved over time, covering the key markets, and leveraging economies of scale, corporates could be confident that they could make long term investments with little threat of disruption.

As such they would accept long leases (10+ years) and invest heavily in people and premises. They knew most challengers would struggle to compete – the barriers to entry and the strength of incumbents was too tough competition.

Most challengers would offer little threat and on the odd occasion that a genuine challenger appeared, there would be ample time to consider the appropriate strategic response.

But, technology has changed everything…

Rapid advancement of technology has radically altered the business environment

Fast-paced advances in technology create endless new opportunities for corporates and for entrepreneurs. But those opportunities are also short-lived – change is constant and opportunities come and pass.

Agility is key to recognising, capitalising on and maintaining competitive advantage. 

Challengers to incumbent corporates are now many. They are often using technology to ‘change the playing field’ rather than compete directly with larger, more established (and less agile) companies. 

Challengers can also scale quickly themselves leveraging online and digital platforms to establish global reach much more quickly.  In summary, the threat of disruption is very real and scale is not the defence that it once was for corporates. 

Go digital or die: Polaroid went bankrupt in 2005 as digital cameras and later camera phones enjoyed mass take up 

Today’s world is one that favours the disruptors, the innovators, the entrepreneurial and the agile. Corporates must respond to the challengers by becoming more innovative themselves.

Innovation is a core requirement for most businesses. 

How has this affected real estate strategies? 

Modern real estate strategies will still look to new markets and opportunities for cost mitigation, but these are supplemented with these ever more prevalent real estate considerations:

• Workplace as a tool to attract and retain the best talent – locate where the talent is and use the workplace as a key tool to attract and retain your talent in these locations. Adopt a sharp focus on creating amazing user experience for your people.

• Make workspace an accelerator of innovation – shun the one size fits nobody, open plan battery farm approach to workplace. Instead, strive to create ‘ideas factories’ where people can collaborate and share ideas, then work these up into viable products and services. Ask your clients to hang out with you (at no cost) and to participate in the development of the products that you are going to create (that will help to transform their business).

• Match agility with flexibility – in an environment of short-lived competitive advantage, find flexible solutions in terms of building design, lease terms and tenure.

The challenge then becomes how to create a workplace that attracts and retains talent and inspires collaboration and innovation, without the burden of investing long term? 

Coworking operators - read ‘space-as-a-service solutions’ - have expanded rapidly across the globe in recent years.

The modern coworking offer is: 

• Flexible – contracts very from one month to a few years, which better suits the time horizons of the modern business, enabling rapid growth (or contraction) as and when required. For corporates these spaces can work really well for project teams, or elements of the business that want to work autonomously, away from the shackles of 'the mothership'.

• Design led – the lead providers offer attractive workplaces in which your staff would actually choose to come together. Technology has created a much more mobile workforce with choices as to when and where to work. The benefits of getting a team together face-to-face still remain, but the challenge of doing so has become greater. For corporates, coworking spaces offer a modern working environment which they might like to create themselves, but can’t justify until the next opportunity arises – this is often centred around the next office move, which could be years away.

• Hospitality focussed – leading providers employ a customer-centric approach which breeds loyalty from member companies and makes members’ staff feel great about their workplace. A win win for the providers and their members’ workforce. For any company, creating a better workplace experience for their talent is key to employee attraction and retention. Younger talent is often cited as not wanting to work in a ‘traditional office’.

• Collaborative & entrepreneurial in culture – coworking operators create a strong sense of community among likeminded people. It’s infectious. The sharing of communal facilities and amenities and the movement of people around the shared spaces facilitates serendipitous interactions. This is particularly valuable for startups looking for useful connections, but also corporates looking to embrace a more innovative culture and/or those who are specifically looking to work more closely alongside startups.

• Supplemented by events and learning opportunities – most providers will lay on a programme of events that further promote interaction among the members and often provide a source of ‘extra-curricular’ learning. This serves to satisfy a natural curiosity, desire to learn and investment in self-improvement. For corporates it serves to remove the ‘blinkers’ and encourage a broader perspective which is critical to fostering innovation.

Once the domain of start-ups and SMEs, coworking providers are seeing an increasing number of corporates taking spaces in co-working environments. 

And the coworking providers are responding by creating more bespoke solutions to adapt to the needs of corporates e.g. creating spaces that are aimed at ‘enterprise members’ - offering more opportunities to influence design of the space, offering a greater degree of privacy, incorporating dedicated meeting rooms and kitchen facilities, and allowing corporates to brand their spaces. 

These enterprise solutions provide the corporate with the ability to act and behave as if they were not constrained by their corporate processes and culture, benefit from the collaboration and community proposition that these places provide and effectively outsource the management and admin burden of operating their real estate. 

Strive to create ‘ideas factories’ where people can collaborate and share ideas, then work these up into viable products and services.

This frees the teams to focus on and accelerate their innovation initiatives so they can then start to inject new thinking back into 'the mothership' and they can become a key part of the solution to solve the innovation challenge for corporates.

WeWork, the largest global operator of coworking space, has secured major enterprise clients including tech companies like Microsoft and Salesforce, but also more traditional blue chips like Bank of America and HSBC.

According to WeWork, the number of enterprise companies taking space grew by 90% in July of this year compared with the same month last year. And the number of workers enterprise companies had working at WeWork grew nearly five times.

Despite their rising prominence, it’s important to recognise that WeWork is not the only option - there are a number of excellent coworking providers, providing choice in most major cities across EMEA.

There is a need to consider how coworking (flexible office solutions) will play a key part in your corporate real estate strategy and to pick the provider that offers the best match for the specific objectives of your flexible office strategy.

Please email me with any comments, or if you would like help defining a your real estate strategy in order to drive innovation in your business.

James is a Partner in the EMEA Strategic Consulting team and specialises in helping companies create real estate strategies that contribute positively to achieving key strategic business objectives. This includes rethinking portfolios and the workplace to help drive innovation, better respond to uncertainty, attract and retain talent and/or make cost savings. 

James is also a member of Knight Frank's Technology Board, which is responsible for sourcing new technologies that may be of benefit to Knight Frank and its clients.