How will co-working need to evolve to continue to grow in the future?
There is a contemporary school of thought, which indicates that co-working spaces are leading the way in workplace design. This may be partly true, especially when it concerns co-working spaces that are start-up friendly in approach. However, when it comes to a business proposition, I am beginning to feel that co-working spaces, in their current form, is not the way forward in the way work will happen in the future. They will need to change, and rapidly. Let me explain. This is my opinion, and there may be some who may disagree and some who may agree. I would love to hear those thoughts in the comments!
As a consultant on workplace strategy and change management, I travel a bit for work and to talk about the subject of my recent book ‘The radically changing nature of Work, Workers & Workplaces’. In these travels across Asia, Europe and the USA, I have seen the growth of two broad types of co-working spaces; a) the enterprise focused type and b) the startup focused type.
The Enterprise Focused Co-Working Space
These are large format co-working spaces, where client organizations house hundreds of people. Such centers have a multitude of such clients and collectively accommodate thousands of workers. Grouped by organizations, workers are segregated by partitions. Inside these partitions, workers of one organization interact and behave with their colleagues in the same way that they would, if they were operating from their own workplace. It is only during breaks in the common cafeteria or breakout areas, that an opportunity for workers of one organization to interact with workers of a neighboring organization, may present itself. In that sense, these centers are no different from a multistoried office complex housing different organizations on different floors, with some common breakout areas. Contracts are often signed for a year, and sometimes even for longer terms like three or five years. From a client organizational point of view, their advantage is that they do not need to spend capex for the fit-out, and that they do not need to manage the facility. But then, this is something that can be offered by any willing property developer.
I spoke with a few senior representatives of such co-working centers. On condition of anonymity, one senior professional said “The biggest challenge we face today is to bring about a common sense of purpose amongst the various organizations housed in our centers.” Each organization is dedicated to their own mission and find it difficult to relate to any other common mission of the center; which anyway is not obvious. In absence of this, the question arises as to how is this model any different from a ‘real estate rental’ model, with a mild sprinkling of ‘real estate as a service’ model. A rental model, based on well furnished and managed spaces, is not really anything different from models, which have existed in smaller formats, since the 1990s. By harping on the service offerings, large format co-working businesses have managed to quickly ramp up millions of sq. ft. of real estate, raised big-ticket funds and attracted large enterprises as clients. The verdict is not yet out on whether this is a financially sustainable model, but as things stand today, this appears to be more of a financial valuation game then anything else.
When it comes to the design of such spaces, such large format co-working operators are increasingly facing the challenge of custom designing as per the wishes of their clients. Such requests are however limited by price and time sensitive contractual agreements and this does not allow design to do justice to fulfilling the unique needs of an organization’s workers, and still align it with corporate goals. I have seen quite a few ‘nice looking’ centers, which are not very different from the cubicle farms of the last century, and built as rows of open desks in the name of collaborative spaces. A workplace, when designed thoughtfully, has the power to make people feel good about themselves and this aids productivity. However, to achieve this, one needs to approach workers as internal customers and design experiences that allow them to bring out the best in themselves; in the same way that one looks at customers of products. The nature of the contract in these centers forbids this from happening. A sense of ownership is often missing.
My doubt about the viability arises from the fact that such centers may not allow design to be used as a powerful tool for business transformation. It may make a lot of financial sense for management on both sides, but in an age, where ‘feeling good’ at work is the new manna, the current format of these centers will fall short.
The Startup-Focused Co-Working Space
Then there is the other type of co-working space, which focuses on startups. Occupiers on an average would sign up for 1-10 seats with short-term contracts. Once the size of a startup crosses a certain optimum number and they are on a growth trajectory, a startup may choose to move to their own dedicated space outside or to an enterprise focused co-working space. As far as design goes, I have more hope in this category of co-working spaces as a way forward in workplace design.
We live in a collaboration economy today and contemporary workplace design is reflective of this. The type of workplace that seems to be working is one, which is a blend of different types of spaces. An organization has different types of people, and with different types of tasks to perform. Workplaces for multi-generational organizations tend to be like college campuses, which offers opportunities for a wide variety of functions to be performed. Ideation happens in the middle of this, often through chance encounters. Large global organizations have adopted a startup mode with a focus on innovation. Such organizations have become more playful and are open to newer, radical product ideas. This has required workplaces to reflect this reality.
The startup focused co-working spaces are designed with this openness in mind. Startups in such centers often sit next to each other, in open, collaborative spaces. Such centers usually do not have partitions separating one startup from the other. Customized fit-outs are a no-no. However, occupiers are allowed the freedom to work from common spaces, outside of their signed-up spaces as well. There is playfulness and freedom all around. There is much talk in between startups and ideas often bounce against each other. This setting is similar to the one that larger, well-established organizations are trying to adopt in their hunt for innovation, within their workplaces. So, the design of such co-working spaces is reflective of the contemporary business need to be constantly innovating.
I have seen much more vibrancy in these type of co-working centers than in larger format ones, and it is this vibrancy in a smaller setting that brings in a sense of belonging to a community. Although occupiers may be from vastly different business domains, a majority of the occupiers of such centers are likely to bootstrapping and at the threshold of breakthroughs. This brings in some sense of a common purpose within the community, and I see a big opportunity there.
The Missing Link
From a startup’s point of view, they would set up shop in a co-working center, which is geographically most convenient for them. The center could be close to founder’s home or it could be close to one’s clients. However good the design may be, such co-working centers rarely have any major ‘pull effect’ of their own and occupier decisions are largely made on the basis of location. In this, there is one major advantage that the startup focused co-working centers have, that they seem to be turning a blind eye to. It is knowledge collective. Such co-working spaces attract some of the brightest, creative and bravest entrepreneurs to work under one roof. Instead of simply co-working, imagine the power of the collective knowledge if it could be harnessed by adopting a co-creation approach.
Most startup focused co-working centers are designed to fuel collaboration. It is not difficult for collaboration to turn to co-creation if the right ingredients are present. Co-creation in such surroundings can lead to the creation of radical new products and solutions. Co-working centers can easily become the nerve centers of innovation.
The Shift From Co-working to Co-Creation
Co-working spaces that focus on startups can become ideation hubs. What are the main factors required for this?
- A common sense of purpose
- Infrastructure that supports innovation
- A variety of talents
Startup focused co-working centers will need to adopt a ‘center of excellence’ mode, centered around one business domain. Say, there is a center focused on healthcare. While designing such a center, besides the co-working spaces, the center will also need to accommodate domain specific infrastructure, like a lab. So, when healthcare startups know that they will get other talent as well as infrastructure related to prototyping of their ideas, they will choose this center over others, and will go outside their of their geographical comfort to be in this center. When such a center houses startups, researchers and other talent from the healthcare domain, multiple revenue streams will open up for the community as well as for the center owners. Mentoring, incubation, investment models will open up and so will events and activities around these. The model will no more be based on real estate rentals or real estate based services, but rather based on ideation and innovation. Out of this will emerge new products and services, and new intellectual property will be generated.
In terms of workplace design, the future is in a co-creation model where the startup focused co-working center begins to adopt best practices from collaborative working and from incubation centers. With the operational know-how and the business acumen of running co-working centers, operators of such centers can lead the way in sprouting global innovation hubs, solving big and small world problems.
Insightful. It feels as though the start-up focused co-working spaces are already beginning to move in this direction: a cross between a co-working space, incubator, and accelerator. Co-working spaces are also establishing themselves as lifestyle brands to attract like-minded entrepreneurs and businesses. I’m part of a co-working space that offers flexible, robust entrepreneur coaching which is basically like having a part-time, financials-focused CEO on call. One question that came up for me is in reading your article is how to address the lack of business diversity within an industry-focused co-creation space? After all, healthcare start-ups usually need outside vendors to function, and currently and co-working spaces house a wide range of services due to the diverse professionals that work there. All healthcare start-ups likely don’t want vendors and contractors that only specialize in healthcare (although I’m sure some do). I think one of the strengths of co-working spaces currently is the ability for start-ups and small businesses to find help and referrals outside their current networks (for example, photographers, illustrators, coders, graphic designers, coaching, social media and digital marketing experts, writers, event planners, etc.). Besides referrals to vendors/freelancers, the diverse industries within a co-working space often result in professionals that are surrounded by dynamic creativity, shared through casual conversation and events. Just a few thoughts…..thank you, Parthajeet.
I think this current, expensive labor market will force some companies to actively seek out neighbors in their coworking spaces with whom to collaborate, or hire-on-demand. Because, otherwise, that talent is simply not available.
I am doubtful, however, that this co-creation will occur very naturally, let alone quickly. Too many labor issues prevent it, such as 1099 vs W2 status. If you hire another company, maybe. But as you can imagine, just because someone’s your neighbor, doesn’t mean they’re the right hire.
Therefore, you’re advocating for smaller format, niche/vertical industry coworking spaces. These become agencies, or hubs. And while you could focus on a vertical, as you said, most will focus on geography. The stars would have to align just so perfectly, and maybe in a few cases in gateway cities, they may.
From a longtime operator, getting people to share spaces or share anything, is such a monumental shift, we will be gnawing at this for quite some time.
Placing workers in co-working spaces, hoping for “innovation” that comes from serendipitous encounters is no substitute for leadership that is schooled in innovation coupled with sound innovation processes. You have to make innovation happen from within to ensure it is persistent and sustainable.
I like Lindsay’s thoughts on start up co-working spaces that make innovation, design and business coaches available along with contractor resources that are housed in the space or are in the area. Regarding sub-spaces, maybe include 3D printing, model making, graphics production, shipping, etc on a small scale.
Maybe afternoon classes are held for all tenants on various subjects relevant to all. Another idea is to pull some members of tenant startups together to brainstorm on a particular tenants business problem.
All this would be predicated on a co-working space owner being able and knowledgeable to pull such a service package together in their area.