If you were a small business owner looking for office space in the 1980s, your options weren’t ideal. You could save money by camping out in your garage or your parents’ basement, or you could spend a fortune on renting an office space.
This was the dilemma Mark Dixon found himself facing. Tired of working out of hotel rooms, he started Regus (now known as IWC) in 1989 to provide business owners with affordable office space. Regus now has 3,000 locations in 900 cities.
It would be 21 years before a true competitor emerged in the form of New York-based WeWork, which has 651 locations open or coming soon in 115 cities. Surely with a two-decade headstart and five times the number of locations, Regus would be the industry’s dominant player, right? Wrong. After just nine years, WeWork is now worth an estimated $47 billion. Regus is estimated to be worth just $3 billion.
How did WeWork come to dominate the market so quickly? By tapping into the power of community. Let’s look at the approach each company took, see how Staples is evolving to be more like WeWork, and dig into some lessons we can learn from this battle.
Regus Took A Utilitarian Approach
When the dot-com bubble burst, Regus’ business in the U.S. collapsed. Coming out of bankruptcy, Dixon took a creative approach to rebuilding his company. He opened locations in airports, partnered with American Express and focused on adding video conferencing to his locations. His approach got Regus into 120 countries.
Regus’ approach has always been utilitarian. When you rent a space with Regus, you get all the trappings of a normal office: a shared executive assistant, shared conference room, private office space and even a coffee maker and a water cooler.
For a small-business owner, you get the optics that you work for a big company. For some people, that’s perfect. But as WeWork proved, other people want more than just the bells and whistles that come with an office. They want an experience.
WeWork Started With A Community Focus
Although they’re in the same industry, WeWork views its 10 million square feet of space much differently than Regus does. Where Regus sees individual companies taking up their slice of a shared space, WeWork wanted to build a community-based ecosystem that functioned like a collective. That’s why all the walls inside are glass — it allows everyone to see who’s working and invites collaboration between companies.
It’s also the reason certain locations offer yoga, barber shops, gyms, laundromats, and coffee bars with proper baristas. WeWork doesn’t want to fill its space with tools of the trade — they want to use it to create experiences that bring its tenants together.
WeWork locations allow vendors to offer lunch-and-learns to discuss new products, and different locations will partner with local restaurants to offer tenants exclusive discounts. While it may sound trivial, WeWork uses these perks to build that sense of community.
Staples Envisions A New Future
What could Staples, an office supply store, learn from WeWork, an office space provider? It learned lot, as it turns out. In Toronto, the 33-year-old office supply giant has opened a new concept store to serve the city’s thriving startup culture.
Staples Studio now offers entrepreneurs event spaces and coworking facilities. The mission of this new space? To help you “work, learn and grow.” Doesn’t sound like the old Staples at all, does it?
That’s the point. Staples wants to be a one-stop-shop for its customers. If you’re an SME, you can get your supplies, space and even your professional enrichment all in one place. In the Staples Spotlight space, speakers offer talks on topics ranging from marketing and branding to online security and self-care.
This concept store represents a dramatic shift for Staples. It’s a signal that they want to be the go-to brand for small and medium-sized businesses. Is this a sustainable business model? I don’t know, but living in Toronto, I can tell you that the new store is a hive of activity. Their spaces are booked, and A-list speakers are coming to present there.
What Can We Learn From WeWork’s Success?
For old school and new school businesses alike, I see three takeaways from the battle between WeWork and Regus, as well as the bold pivot that Staples made.
1. Hire someone whose job is developing new ideas. If you want your company to push the envelope, it can not be someone’s side job. They’ll never prioritize it.
2. You need commitment from the CEO all the way down. A community focus like the one exhibited by WeWork and Staples doesn’t happen without total buy-in.
3. You can’t measure your success by the same old metrics. This is where buy-in from leadership becomes vitally important. Staples never would’ve pivoted if they remained devoted to metrics like store openings, foot traffic and sales volume per store.
Yes, you still need to be a profitable company. But now Staples is looking at metrics like rent and the caliber of the guest speakers they’ve booked for spotlight talks. Here’s why: When you focus on building a community and not just a company, the quality of your foot traffic improves. You get one customer spending $200 instead of ten customers spending $10 apiece, which is something every business wants.
Not only that, but the customers spending more are repeat customers, another staple (pun intended) of old-school business success. That’s the beauty of a community focus — it doesn’t forsake traditional metrics. It improves them across the board. That’s how WeWork blew past Regus on its way to an estimated worth of $47 billion — and what gives Staples hope it can avoid the fate suffered by other large retailers. How will your business follow suit?
Taste The Coffee 2019