WeWork, a coworking space company, was once valued at over $47 billion. However, the company collapsed in 2019 and filed for bankruptcy.
As a strategy and business operations professional, I have analyzed WeWork’s failure and identified the following key factors that contributed to its downfall:
Unsustainable Business Model
WeWork’s business model was based on leasing office space at a discount and then subleasing it to its customers at a markup. This model was unsustainable because it required WeWork to constantly expand and raise capital to finance its leases. When the company’s IPO failed in 2019, it was unable to raise the necessary capital and its business model collapsed.
Poor Corporate Governance
WeWork’s founder and CEO, Adam Neumann, had complete control over the company and was known for his erratic behaviour and lavish spending. This led to a number of questionable decisions, such as Neumann’s wife being paid $5.8 million for designing the company’s trademark WeWork logo.
Lack of Focus
WeWork started out as a coworking space company, but it quickly expanded into other areas, such as education, housing, and even its own version of a bank. This lack of focus led to wasted resources and poor decision-making.
Intense Competition
The coworking space market became increasingly saturated in the years leading up to WeWork’s collapse. This made it difficult for WeWork to differentiate itself from its competitors and maintain a competitive advantage.
Lessons Learned
Strategy and business operations professionals can learn a number of lessons from WeWork’s failure:
- Develop sustainable business models. It is important to develop business models that are sustainable in the long term. This means avoiding business models that rely heavily on constant expansion or a steady stream of capital.
- Ensure good corporate governance. Good corporate governance is essential for any business. This includes having a clear separation of powers between the board of directors and the management team. It also includes having transparent financial reporting and auditing practices.
- Stay focused. It is important to stay focused on the core competencies of the business. Expanding into too many different areas can lead to wasted resources and poor decision-making.
- Be aware of the competitive landscape. It is important to understand the strengths and weaknesses of competitors. This will help businesses develop strategies to differentiate themselves from the competition.
By learning from WeWork’s failure, strategy and business operations professionals can increase their chances of success.
WeWork Model failure
A specific example of how WeWork’s business model was unsustainable is that the company was losing money on every sublease in 2019. This means that WeWork was paying more for the office space it leased than it was charging its customers to sublease it. This is clearly not a sustainable business model, and it is one of the main reasons why WeWork collapsed.
Another example is WeWork’s poor corporate governance. In 2019, WeWork’s board of directors failed to hold Neumann accountable for his erratic behaviour and lavish spending. This allowed Neumann to make a number of questionable decisions, such as paying his wife $5.8 million for designing the company’s logo. This example shows that WeWork’s board of directors was not doing its job properly, and it is another reason why the company collapsed.
Conclusion
WeWork’s failure is a cautionary tale for strategy and business operations professionals. By learning from the company’s mistakes, businesses can increase their chances of success.
If any suggestions/recommendations or help are required, please feel free to contact me.
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