Ahead of speaking at GCUC UK, John Williams, from The Instant Group, gives his views on satisfying customer demand by drawing parallels with successful international consumer brands.
What do Netflix, Spotify, Tesla and Zara all have in common? They are all absolutely nailing it in terms of satisfying client demand in an agile way. They are masters at moving with their customers – and outpacing all the rivals in their sector to generate either significant value, revenue or both.
I presented on the models of all these companies at big corporate workspace event in lovely Amsterdam last month. I was trying to explain the drivers behind coworking to an audience of large clients who have always traditionally used leased space. And lots of it.
I was trying to explain that we are heading for a future where no one “owns” anything anymore….
In the entertainment industry, subscription services allow an individual to have far greater flexibility and variety in what they consume and are willing to pay a premium for the service. The success of this model now also sees the companies providing the digital streaming services becoming the content providers too, with both Netflix and Amazon Prime’s programming budget now dwarfing those of long-established film studios and TV channels.
They have innovated far beyond their initial iteration to become both content enabler and provider, in both cases fuelled by limitless ambition and an agile approach to their business model.
The Automotive industry is undergoing similar change with the global car rental market expected to double in value between 2015 and 2022 as consumers change their outlook on owning a vehical. The requirement to “own” a physical asset is now viewed as an inefficient use of capital particularly with limited re-sale value and inherent risk attached to the ownership and liability for repairs.
As well as the dynamic growth in the car leasing market, car sharing platforms are also among the fast growing tech start-ups in the world. On demand access to vehicles is increasingly viewed as a service – as much as, say, video streaming – and with the potential of driverless technology may render the physical possession of cars totally redundant. How long will it be before car manufacturers have to move to this model to remain competitive?
And this is where real estate is headed with the coworking operators leading the way. Conventional CRE guys do not understand the “service” element of coworking. Where is the value in it? It seems like really hard work? Is it not really risky?
But that corporate workspace world can learn a lot from being fast, agile, and engaging with your customer base.
The corporate carcasses of once global giants such as Kodak are fading from memory as failure to move with market dynamics left them with nowhere to go but irrelevancy. Contrastingly, IBM, the world’s oldest “tech” brand in many ways, continues to innovate having been an early adopter of a service-based platform.
There are telling examples of “innovate or die” across the technology sector. Cloud based services have grown over the last decade spawning global tech giants such as Salesforce, Oracle and SAP in a relatively compressed timeframe
This new service-based model has been both a cause and effect of other changes that are profoundly impacting business models across multiple sectors. The availability of transparent pricing and the competition this encourages is enabling companies to become more agile, to focus on their core business functions; for example services such as IT now operated by a third party and even stored off-site via the cloud. In a compressed time frame, the concept of the server cupboard, and large in-house IT team has become a throwback to the early days of technology.
B2B firms are mimicking the evolution of the B2C marketplace as customers place more value on immediacy of delivery and easy to digest service rather than a bespoke end product. This is where coworking sits so impressively. It is dominating the market conversation because it is so at odds with the rest of CRE. Community, happiness, customer, service – these are not words that sit easily with corporates providers and facilitators of real estate.
The shift towards service-led solutions continues to transform industries at a global level and commercial real estate seems very likely to be the latest industry to be the next cab off the rank. It is our view that there is unlikely to be a wholesale shift towards serviced based solutions in commercial real estate.
Our current forecast is that by 2028, 20 years on from the global financial crisis we could see as many as 140,000 flex office locations globally up from just 13,500 in 2008. Of which a sizeable chunk will be coworking. This increase in demand will be driven by requirements from larger companies alongside the already buoyant activity seen within the SME market.
Make no mistake these are exciting times, and all our data would suggest that we can anticipate 15 years of dynamic market expansion, right across the global flex market.
What we will see is the proliferation of choice, of client demand forcing operators and landlords to aggressively evolve their models to differentiate and specialise. Now that commercial real estate has started to wake up to the needs of the end user, the sector will have to become smarter at finding where this demand is coming from and how it is going to change over time. But they are also in a battle to win hearts and minds of clients of all sizes, and many of the coworking operators already have a head start in that race!
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