We live in the age of wonders enabled by technology and entrepreneurship. As Arthur C. Clarke put it, “Any sufficiently advanced technology is indistinguishable from magic.”
However, magic was always associated with illusion and, thus, trickery. We’ve witnessed technological marvels like the COVID-19 vaccine, VR headsets, and chipsets with transistors that are so small that they push the boundaries of physics.
We have also seen technological charlatans, like Theranos, FTX crypto exchange, and Nikola. This unfortunate group was joined this week by WeWork, which filed for bankruptcy.
So what is WeWork and why did it fail as a product? Though most people point their fingers at WeWork’s financial issues (which certainly played a part), they fell flat on their products as well. In my opinion, that shares the blame as to why WeWork has ultimately failed. In this article, we will explore what happened from a product manager’s point of view.
WeWork is (was? still is?) a coworking space provider — shared offices where people can work independently or together if they choose to. WeWork offers various services and amenities to its members, such as internet access, comfortable lounge spaces, coffee, meeting rooms, and social events. Basically, it’s a no-label corporate office full of independent professionals.
WeWork was founded in 2010 by Adam Neumann and Miguel McKelvey, and it grew rapidly to become one of the most valuable startups in the world, with a valuation of $47 billion in 2019.
With a good reputation and investment money pouring in, WeWork started several other businesses to better (or at all) utilize the space they had available. Some of these include:
However, that expansion was only a facade for problems that the core WeWork business suffered from. Its downfall began when it tried to go public in 2019 and had to disclose its books and business model details. This process exposed the company’s huge losses, high debts, and unfavorable contracts.
As a result, WeWork’s valuation went down the drain, and Neumann was forced to resign. WeWork also canceled its IPO and received a bailout from its largest investor, SoftBank, who attempted to turn the failing business around. However, as this unfolded another disaster struck: the COVID-19 pandemic hit the company hard as most of its clients started canceling their memberships in favor of virus-forced home-office.
On top of that, WeWork also faced legal disputes with its former CEO, Neumann, and its main investor, SoftBank, over the terms of their agreements.
On 6 November 2023, WeWork filed for Chapter 11 bankruptcy protection in a last-ditch effort to keep the company alive. WeWork said it would continue to operate while it works out a plan to repay its creditors and restructure to create a profitable business.
Well, let’s face it: it is quite clear that this fall had a lot to do with poor accounting and “fake it until you make it” taken to the extreme, rather than pure poor product management practices. However, something in the WeWork product had to fail on a fundamental level, so let’s explore a few theories that may have paved WeWork’s demise.
WeWork tried to do too many things at once and, as per the list above, launched multiple different companies. This likely led to top-level management not giving enough energy and brainpower to the core business.
However, this can potentially have another side. I can picture a situation where the WeWork product manager saw that the core business was not performing well, yet there was a mountain of investment funds along with fields of empty/underutilized real estate space. Perhaps the multiple businesses were desperate attempts to find a profitable venture that could carry the WeWork brand and financials.
That said, I don’t believe that was the right move. Traditionally, a product should seek vertical growth when the core business is stable and can support the company if the side products fail (i.e., Google and its 166 killed products). Doing this the other way around doesn’t sound too… sound. You can’t create a suite of products if you haven’t gotten as close to perfect with your core offering as possible.
One thing is clear, WeWork did not have a competitive advantage. In the coworking space industry, which was already crowded with other players such as Regus, Industrious, and Knote, WeWork was just another player with a very similar offering. It did, however, rely on good marketing to build hype, culture, and design to attract customers.
This was not enough to justify the prices that would make WeWork profitable. I liked this tweet (X?), that suggested that the company should have tried creating offices dedicated to specific professions:
If WeWork had done that, as Greg pointed out, that would go by the principle of focus and could offer something unique to designers, engineers, or other professionals looking to work outside their homes as freelancers. It would also allow them to meet others in their field and collaborate for advice and inspiration.
The idea of specialized co-working spaces might have worked, but that couldn’t realistically happen because WeWork was not data-driven.
Accounting is one thing, but having the visibility of your metrics as a product manager is something different. I can clearly recall my first product management leader, who was obsessed with the metrics of the startup we worked on. I was getting calls mid-breakfast asking me for reasons why one of the indicators failed overnight.
Of course, with a piece of toast in my mouth, I could only muffle that I didn’t know and sprint to the office, only to realize that one of our target markets had a bank holiday the day before. While this is an exaggerated story, it does convey one thing: product managers should be obsessed about the money.
I knew the monetary value of the job applicant when I worked on a job board, I knew the average car deal needed to get a business afloat when working for a car (re)selling product, and when I worked at Microsoft (Skype), I was aware of its economics and how it determined our roadmap. WeWork should have been monitoring the average return on every square meter at their disposal and reacted the moment that ROI was not satisfactory, regardless of the investors’ income.
That would have meant dynamic prices and more flexible leases, as well as dropping certain locations. Instead, as you already read, they appear to have been burning through the venture capital in hopes of finding a truly successful product. They haven’t, and thus, filed for bankruptcy.
You may think that in the intro, I was a little too harsh to WeWork by putting it in the same line as Theranos and FTX (which were, having the benefit of hindsight, scams from the beginning).
I don’t think the founders of WeWork planned to dial up the hype around the project to 11 and squander investment money. However, it’s not the intention that’s common between those three, but the story — the broken promise of changing the world to make it a better place.
There is no “fake it until you make it” in product management. There is only a data-driven loop of improvement based on product learnings and customer feedback. That clearly didn’t happen in WeWork and I doubt this company will be able to make a comeback after failing twice.
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