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Sunday, May 9, 2021

What business models are actually about?

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Traditionally, companies have looked to acquisitions to make them successful. But there are ways to create extraordinary value organically, and one of them is through business-model innovation.

The outfit called WeWork is well known as an innovation factory. It started with one small, bespoke building in New York’s Meatpacking District, then branched out to scattered office spaces and now operates on a global scale.

Over time, the company’s transformation to a mass-production line of shared workspace has lead to criticism — most notably from Harvard Business School professors Clayton Christensen and Frances Frei, who say WeWork is more about developing a network of favored or selected customers than a great work environment.

Those same experts say If WeWork had stayed focused on building high-quality locations, its service to customers would have been more generous.

Look closer, however, and it doesn’t look so bad.

Plenty of employers insist on high standards of customer service, design and design experimentation. Even in the crowded New York real estate market, we find tenants joining WeWork units who choose the venture as an alternative to other office suites because the company pays attention to how it treats its tenants.

From its headquarters in New York, WeWork has devised ways to win the loyalty of its hosts, who are now bound together as members rather than tenants. I’ve asked several member agencies how WeWork looks for evidence of whether its coworkers are productive.

An amazing number of hosts, especially in small offices, were members long before they hired WeWork. And the company takes the practice of holding regular “gala” gatherings to show off its facilities and transform its office spaces into a social event.

WeWork also has developed use-case theory. Its owners study large companies in the health-care and technology industries, as well as startups, to glean what drives their customers. From that, it has devised ways to attract, develop and retain its customers.

WeWork’s major strength is that it shares all its best-performing spaces with its member agencies. The owner companies then hire WeWork hosts to handle at least half of their business. Many say that means WeWork is a one-stop shop for the enterprise. Others say it relieves them of the burden of hiring and hiring and hiring again to create a stream of productive employees.

In fact, WeWork’s people at the top know what they’re doing. Back in 2012, before co-founder Adam Neumann left hedge fund Fortress Investment Group to start WeWork, one of his co-workers asked him to do a simple arithmetic problem: what if some of his colleagues at a large company talked to each other and there were no mutual conversations?

“You know why we can’t? Because it’s the law of large numbers,” he said. He explained: even if there were a room full of people talking, and each person communicated with two others, there would be at least 50 people listening.

“If the whole thing was live, would they be having any thoughts that were useful?”

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