Harvard Case - WeWork in 2021: The Next Chapter
"WeWork in 2021: The Next Chapter" Harvard business case study is written by Robert Siegel, Jack Strabo. It deals with the challenges in the field of Strategy. The case study is 18 page(s) long and it was first published on : Oct 26, 2021
At Fern Fort University, we recommend WeWork adopt a multi-pronged strategy focused on redefining its business model to achieve sustainable growth and profitability. This includes:
- Shifting from a pure-play co-working space provider to a hybrid model offering flexible workspace solutions, community building, and technology-enabled services.
- Expanding into new market segments like small businesses, freelancers, and remote teams, while leveraging its existing network for cross-selling and upselling opportunities.
- Embracing a data-driven approach to optimize operations, personalize offerings, and enhance customer experience.
- Prioritizing financial discipline through cost optimization, strategic partnerships, and a focus on profitability over rapid expansion.
2. Background
WeWork, a global co-working space provider, faced a tumultuous 2020, culminating in a near-collapse. The pandemic exposed the company's overreliance on a single business model, unsustainable growth, and questionable corporate governance. Despite a successful IPO in 2019, WeWork's valuation plummeted, leading to a dramatic restructuring and a shift in leadership.
The case study focuses on WeWork's strategic challenges in 2021, as it navigates the post-pandemic landscape and seeks to regain investor confidence. The main protagonists are the new CEO, Sandeep Mathrani, and the board of directors, who are tasked with charting a new course for the company.
3. Analysis of the Case Study
To analyze WeWork's situation, we utilize a combination of frameworks:
1. SWOT Analysis:
- Strengths: Strong brand recognition, established global network, experienced management team, flexible workspace solutions.
- Weaknesses: High debt burden, dependence on a single business model, lack of profitability, reputational damage.
- Opportunities: Growing demand for flexible workspaces, expansion into new market segments, technological advancements in workspace management.
- Threats: Economic downturn, competition from established players, changing work patterns, regulatory challenges.
2. Porter's Five Forces:
- Threat of new entrants: Relatively high due to low barriers to entry and the availability of alternative workspace solutions.
- Bargaining power of buyers: Moderate, as customers have multiple options but value WeWork's brand and community.
- Bargaining power of suppliers: Low, as WeWork has a large network of landlords and service providers.
- Threat of substitute products: High, as remote working and virtual collaboration tools offer alternatives to physical workspaces.
- Competitive rivalry: Intense, with established players like Regus, IWG, and local co-working providers vying for market share.
3. Value Chain Analysis:
WeWork's value chain consists of:
- Inbound logistics: Sourcing and managing office space, furniture, and amenities.
- Operations: Providing workspace solutions, community management, and technology services.
- Outbound logistics: Marketing and sales, customer service, and member engagement.
- Marketing and sales: Attracting and retaining members through branding, pricing, and promotions.
- Service: Providing a high-quality workspace experience, community building, and technology support.
4. Business Model Innovation:
WeWork needs to move beyond its traditional co-working model to capture new market segments and create sustainable value. This requires:
- Diversification: Expanding into new service offerings like virtual office solutions, meeting spaces, and event hosting.
- Vertical integration: Acquiring or partnering with technology companies to enhance workspace management and member experience.
- Horizontal integration: Collaborating with other businesses to offer complementary services like childcare, fitness, and food delivery.
4. Recommendations
1. Redefine the Business Model:
- Hybrid Workspace Solutions: Offer a mix of traditional co-working spaces, private offices, and virtual office solutions to cater to diverse needs.
- Community Building: Leverage WeWork's existing network to foster collaboration, networking, and professional development opportunities.
- Technology-Enabled Services: Integrate AI and machine learning to optimize workspace management, personalize member experience, and offer data-driven insights.
2. Expand into New Market Segments:
- Small Businesses and Freelancers: Target these segments with flexible membership options and affordable pricing.
- Remote Teams: Offer dedicated workspace solutions and virtual collaboration tools for distributed teams.
- Corporate Clients: Provide customized workspace solutions and enterprise-grade technology to cater to large organizations.
3. Prioritize Financial Discipline:
- Cost Optimization: Streamline operations, negotiate better lease terms, and optimize technology investments.
- Strategic Partnerships: Collaborate with other businesses to share resources, expand reach, and reduce costs.
- Profitability Focus: Shift from rapid expansion to sustainable growth, with a focus on profitability and return on investment.
5. Basis of Recommendations
These recommendations are based on:
- Core competencies: Leveraging WeWork's existing network, brand recognition, and experience in workspace management.
- External customers: Meeting the diverse needs of individuals, small businesses, and large corporations.
- Internal clients: Empowering employees with the tools and resources to deliver exceptional customer service.
- Competitors: Differentiating WeWork through a hybrid business model, technology-enabled services, and a focus on community building.
- Attractiveness: Improving profitability, reducing debt, and increasing shareholder value.
6. Conclusion
WeWork's future hinges on its ability to adapt and innovate. By embracing a hybrid business model, expanding into new market segments, and prioritizing financial discipline, WeWork can regain its competitive edge and achieve sustainable growth.
7. Discussion
Other alternatives include:
- Focusing solely on traditional co-working spaces: This risks missing out on the growing demand for flexible workspaces and technology-enabled solutions.
- Acquiring a competitor: This could provide access to new markets and technologies but carries significant financial and operational risks.
- Exiting the co-working market entirely: This would be a drastic step and would likely result in significant losses.
Key assumptions include:
- Continued demand for flexible workspaces: The future of work is uncertain, and the demand for co-working spaces could decline.
- Effective implementation of the new strategy: Success depends on the ability to execute the recommendations effectively.
- Favorable economic conditions: A downturn in the economy could negatively impact WeWork's business.
8. Next Steps
- Develop a detailed strategic plan: Outline the specific actions, timelines, and resources needed to implement the recommendations.
- Secure funding: Raise capital to support the new strategy and address the company's debt burden.
- Optimize operations: Streamline processes, improve efficiency, and reduce costs.
- Invest in technology: Enhance workspace management systems, personalize member experience, and offer data-driven insights.
- Build a strong team: Recruit and retain talented individuals to drive the new strategy and execute the plan.
By taking these steps, WeWork can transform its business model, regain investor confidence, and position itself for long-term success in the evolving workspace industry.
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Case Description
This case details the journey of Sandeep Mathrani as he took over as CEO of WeWork, a flexible space provider, in the aftermath of the company's attempted IPO. To execute his turnaround plan, Mathrani must navigate a global pandemic, execute layoffs, rebuild the company's reputation, renegotiate contracts with landlords, and rebuild trust with members and employees. Further, Mathrani must consider how to navigate a post-pandemic world as the leader of a public company that was increasingly blurring the line between digital and physical.
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