Abstract
WeWork, a coworking company that specializes in providing office spaces for freelancers, has failed to maximize its potential, suffered severe revenue losses and reputation issues, and failed to fulfill investor expectations. This paper aims to determine why the organization has faced significant market challenges and recommend potential solutions that may have mitigated the adverse outcomes. Based on the analysis, inappropriate leadership, an ineffective business model, a focus on image rather than content, and high expenses have generated adverse effects. Adopting transformational leadership, emphasizing long-term strategies, investing in innovation and branding, and creating a precise budget can help WeWork mitigate potential risks.
Introduction
Various start-ups become interesting ventures for investors due to their innovative ideas, strong branding, talented creators, and potential opportunities associated with these initiatives. WeWork appeared to be a promising idea built on values such as innovation, transformation, and uniqueness. Namely, the organization was built on capitalizing on the changing job market. As multiple start-ups generated more workplaces, WeWork decided to offer freelancers and individuals without an in-office work schedule the opportunity to access a physical location from which to operate. Specifically, the company provided modern office spaces that remote workers could share with one another.
Nonetheless, although the solution to the job market problems appeared to be an interesting segment for investors to explore, its execution lacked consideration of multiple key elements. Namely, the problems associated with the organization’s CEO, poor planning and budgeting, an ineffective business model, and the need for high long-term expenses generated multiple risks that ultimately led to the organization’s downfall.
The report will answer the following question: “Why did WeWork fail?”. To understand how to minimize such risks, the second question is, “What recommendations can be implemented to avoid similar challenges?”. The report will be based on secondary data, a limitation that may impact the results, as the content used during the analysis will be sourced from open web sources. The initial assumption is that ineffective leadership, poor planning, and a focus on branding rather than the business model are the factors that can significantly lower a company’s success in the market.
Methodology
The intention is to conduct an analytical examination of WeWork using secondary data to inform the report’s findings. The secondary data analysis will provide a complete picture of why WeWork failed. Moreover, the qualitative design of the inquiry will generate an understanding of the human experiences correlating with WeWork decision-making and facilitate comprehension of industry-specific characteristics. Data collection will be based on the open web sources that will be implemented in the study. Namely, the information will be obtained from news articles, scholarly sources, and statistical examinations of WeWork’s economic traits.
The sources to be applied include online platforms that have followed the economic path of WeWork and reported on it. Namely, news websites, scholarly articles published in academic journals, and statistics obtained from online sources will be applied as secondary data during the analysis. Researchers highlight that secondary information can diminish the burden of conducting first-hand interviews and surveys with subjects participating in WeWork’s decision-making and operations (Ruggiano & Perry, 2019). Thus, the resources were selected due to their insight into the topic and the presence of information that can significantly assist in the analysis.
Findings
Several findings have been generated as a result of the secondary data analysis. One of the topics that has been reported in multiple sources is the emphasis on leadership. Namely, all the news articles examined have mentioned Adam Neumann’s name as one of the reasons why the start-up eventually failed. For example, the Guardian reported Neuman’s ambitions as purely financially driven and mentioned the CEO’s actions, which ultimately took a significant economic toll on the company (Zeitlin, 2019). A similar conclusion has been drawn by Forbes, which states that the CEO’s extravagant decisions and the organizational culture he implemented harmed the workforce and the company (Schultze, 2019).
Scholarly articles concur with the notion that Adam Neuman and other factors associated with WeWork have ultimately harmed the corporation’s success and long-term prospects (Arora, 2021). Neuman has been regarded as opportunistic because he was loaning the company buildings he partially owned for a higher price, has requested an extremely high fee for leaving the position of CEO, and has been linked to various scandals correlating with how the investor’s funds were spent.
From an economic perspective, the lack of profit can be exemplified by examining yearly financial losses (Table 1).
Table 1: WeWork Net Loss
The circumstances highlight that the business model did not generate long-term profits, despite the organization having a good start in terms of investment and opportunities (Zandt & Richter, 2022). The examined sources support the fact that the business model was inefficient. Namely, Gupta (2022) reflected on the lack of long-term planning, creating an environment where the business could not be profitable. As a result, the circumstances mentioned previously have been the primary elements that contributed to the failure of the WeWork case study.
Discussion
The secondary analysis revealed that leadership was one of the reasons why WeWork experienced unsuccessful outcomes. Namely, a leader who prioritizes individual gain over collective success cannot motivate the team to be company-oriented. On the other hand, it has been mentioned that the business model was initially flawed. In this case, the company has failed to realize that start-ups do not require modern, high-tech offices that are expensive to sustain.
On the other hand, WeWork would renovate expensive buildings and loan the spaces for relatively low amounts of money to attract customers (Gupta, 2022). Thus, neither finances nor consumer preferences were considered in the business model, as WeWork’s idea did not correlate with the reality of the office-sharing market. Lastly, it is worth noting that a lack of planning has contributed to such poor performances. Consumers were not expected to be willing to pay extensive amounts for WeWork’s products, given the high costs of renting and renovating office spaces.
Conclusion
WeWork certainly had a high potential as the brand positioned itself as innovative, which granted investors the desire to support it financially. However, the company has not fulfilled the public’s expectations. The office-sharing platform was not built on an innovative idea, yet the organization’s branding effectively illustrated the initiative’s uniqueness. This generated interest at the start-up, yet no long-term success can be built solely on one’s branding.
One of the problems correlating with organizational failure was leadership. The CEO exploited the brand’s popularity for personal gain, incurring expenses that the company could not afford to cover. Additionally, the company was not based on long-term planning in the first place. Namely, the start-up was not established with consideration for the market and consumer preferences. As a result, WeWork was renting and renovating expensive office buildings before loaning them for low prices to individuals working with a start-up who did not have the capital to invest in expensive property. Last but not least, the expenses, including the bonuses received by individuals with executive functions and the direct spending on renting expensive office spaces, were too high to remain competitive and obtain a stable revenue.
Recommendations
Implementing Transformational Leadership
As one of the first problems the report determines is ineffective leadership, it is essential to highlight strategies to address the current issue.The former CEO facilitated an organizational culture that did not align with the workforce, operated based on personal interest only, and spent company resources on his lifestyle.Transformational leadership has been linked to increased work performance, motivation, and job satisfaction (Khan et al., 2020).Thus, the individuals obtaining executive functions are to accept responsibility for their actions, be open to change and resilience, implement innovation, and become role models for team members. As a result, the workforce will be more likely to work collectively towards the organization’s good rather than personal interests, as exemplified in WeWork’s case study.
Focusing on Long-Term Planning
It has been established that from the very beginning, WeWork was built based on a business model that does not correlate with long-term competitiveness and prosperity within the office-sharing business. The creators did not consider that consumers looking for office space to share with other remote workers do not have the capital to invest in expensive buildings (Castro, 2019).Such individuals are at a stage where the space’s location and innovation are secondary.
Thus, instead of renting offices in populated areas and renovating them, WeWork can partner with landlords who are ready to lease their properties for less money. Moreover, the renovation work that went into fixing the offices is not a priority and cannot be implemented at an early stage. Thus, the recommendation is to lease affordable spaces that do not require significant investments.
Effectively Budgeting the Capital
WeWork’s branding and positioning have made it a promising start. Moreover, initially, it was the most invested-in start-up globally (Arora, 2021). Nonetheless, the funds were ineffectively repurposed to fulfill the impression that the brand was successful. A recommendation is to conduct more analytical research when it comes to budgeting. For example, investing in high-quality experts who would address WeWork’s financial and corporate challenges would be more effective than purchasing private jets and modern offices.
References
Arora, A. (2021). Reeves Wiedeman, billion-dollar loser: The epic rise and spectacular fall of Adam Neumann and WeWork. London: Hodder & Stoughton. Indian Journal of Corporate Governance, 14(2), 275–278. Web.
Castro, A. (2019). This is what really brought down WeWork. Fast Company. Web.
Gupta, V. (2022). Why is WeWork failing (Case study). Bizain. Web.
Khan, H., Rehmat, M., Butt, T. H., Farooqi, S., & Asim, J. (2020). Impact of transformational leadership on work performance, burnout and social loafing: A mediation model. Future Business Journal, 6(1). Web.
Ruggiano, N., & Perry, T. E. (2019). Conducting secondary analysis of qualitative data: Should we, can we, and how?Qualitative Social Work, 18(1), 81–97. Web.
Schultze, G. (2019). Why WeWork won’t work — hello Neumann! Forbes. Web.
Zandt, F., & Richter, F. (2022). Infographic: WeWork won’t work. Statista Infographics. Web.
Zeitlin, M. (2019). Why WeWork went wrong. The Guardian. Web.