Meeting Rooms

Neumann Retires Completely, leaving a pile of mess

21.09.2020

Original Article by  Li Ruiwu & Chu Junhong National University of Singapore Business School 2019-11-18

Included in topics

#Shared Office Series7

 

 

If measured by “fame and fortune”, WeWork founder Neumann is a successful entrepreneur.

Recently, not only has he received nearly 1.7 billion US dollars in rewards, his name and the WeWork brand he created have also become “famous” worldwide.

WeWork founder Adam Neumann (Adam Neumann)

 

There are roughly three goals for entrepreneurs, exit before listing, exit after listing, and build a century-old enterprise. Judging from the fact that Neumann realized his equity of 700 million US dollars before submitting the IPO application, he did not leave the market sadly, but chose the first option wisely based on his accurate judgment of “time, place, and people.”

Could it be that he took advantage of Sun Zhengyi’s madness?

About the Author

Li Ruiwu

National University of Singapore Business School

Chinese EMBA Class 21

Founder and CEO of O2Work

About the Author

Chu Junhong

National University of Singapore Business School

Associate Professor of Marketing

Academic Director of the Master of Marketing Analysis and Decision

Research fields: management channels, e-commerce, network effects, retail competition, etc.

“Smart” disciple and godfather “Take Up the Offer”

 

SoftBank CEO Sun Zhengyi clearly admitted in the 2019-2020 interim financial report analysis meeting: He has made a mistake in his investment judgment on WeWork and is reflecting on it. “Crazy Godfather” Sun Zhengyi seems to have lost to his disciple Neumann, Neumann who seems crazier than Sun Zhengyi succeeded in retiring, while Godfather Sun Zhengyi became the hero to become the “receiver”.

Softbank and the Vision Fund already own as much as 80% of WeWork. Of course, SoftBank CEO Sun Zhengyi is helpless and at the same time made a wise choice to take over WeWork.

Sun Zhengyi, founder of SoftBank, recently reflected on the negligence of WeWork corporate governance and supervision, and the US$5 billion “acceptance” of WeWork caused SoftBank to show its first quarterly loss in 14 years.

 

As Sun Zhengyi said, although he is deeply regretful, his strategy and vision have not changed. If SoftBank fails to come up with an appropriate rescue plan in a critical moment, it will cause panic for the owners and tenants, and the cash flow will be fry up in 11months.

At that time, if there were delays in the payment of employee salaries, property rents and supplier payments, and the brand reputation established for many years fell to a negative value, then any visionaries would become a bubble.

The disaster of extinction will become evident.

Objectively speaking, SoftBank CEO Zhengyi Sun and WeWork founder Neumann have played an extremely important role in the global promotion of the coworking industry format. It is they who have made all kinds of enterprises quickly realize the economics and benefits of shared office space. convenience and community value.

It was Neumann who keenly discovered that members who move into coworking spaces urgently need professional and commercial resources, and created the concept and model of office communities; it was Neumann who created an open office space with a public area larger than that of an independent room. Office scene, and discovered the importance of the internal staircase to the community atmosphere; it was Neumann who made Sun Zhengyi realize the huge market potential of the coworking space industry model, and invested more than 8 billion US dollars in two years; it was Neumann’s passion And madness, it is also Sun Zhengyi’s conceit and madness that enabled WeWork to reach 847 spaces in 125 cities around the world in just three years.

After rigorous investigation and analysis, IWG, the originator of the service office with craftsman spirit, also created the coworking office brand SPACES, and the number of coworking spaces in operation has reached nearly 300.

With pioneers exploring the way, more companies and individuals have realized the potential market of coworking space concept. Various types of shared office brands is also springing up, and a hundred flowers have blossomed and a hundred schools of thought contend. This is enough to prove that Neumann and Sun Zhengyi’s judgment on the trend of the coworking space offices market is not only correct, but also possess far insights.

But being a entrepreneur is alike being a human, true successful means you are living healthily. Any ideas and practices that seek quick success will ultimately backfire.

By Staking a claim to territory in fast expansion indicates you are the winner?

 

On October 15th, WeWork discovered high concentrations of formaldehyde in about 2,300 public telephone booths in 223 shared office spaces in the United States and Canada. This is caused by fast expansion and the negligence of the company corporation disaster. Although it was decisively closed later, it had already caused adverse effects.

Toyota’s rapid expansion of production and neglect of quality control has brought about the painful lesson of the global recall of 7.43 million vehicles. The CEO of the Toyota family publicly apologized to the world. Starbucks Coffee’s rapid opening of stores and neglect of employee training and customer experience have caused the stock price to fall by nearly 50%, and founder Schultz can only go back into battle.

Cases from all walks of life, and so on, tell us that the development of enterprises is not only driven by huge amounts of capital. Funds can be injected at a time of 1 billion US dollars, 2 billion US dollars, or even 10 billion US dollars, but the culture, brand, and team building , It will take 10, 20, 50 years or even longer to build the operation management system.

All of this requires a team of people with unified values, goals and professional capabilities to achieve it. It is them who implement quality control, it is them who finds fatal problems in the subtleties, and it is them who promote the steady growth of the company, not just large amount of capital.

Alcohol and money can only stimulate madness and insanity, they can never stimulate passion and ideals. Without ideals, or empty ideals, it is difficult to support corporate culture, and it is difficult to unite a team without corporate culture. The team not only needs culture to cohere, but also needs continuous improvement of professional ability to win over customers and generate profits.

Is there a future for coworking/shared office space?

The situation of WeWork undoubtedly reminds fellow same industry operators that they need to think carefully: What is the essence of coworking/shared office? Who are the customers? What does the customer need? How to meet customer needs? In this way, we can systematically sort out what to retain, what to exclude, and how to optimize the retention of our clients?

What industry a company belongs to is often identified based on the nature of the products and services it provides, rather than the products and services it uses. The intelligence of Japan’s TOTO toilet seat is almost abnormal, but TOTO still belongs to the traditional sanitary hardware industry. No matter what scientific and technological methods are used and what kind of intelligent platform is created, the essence of coworking/shared office space is still to provide office space leasing and cooperation services.

Office models range from traditional offices, home office, Starbucks’ third space to IWG’s serviced office and WeWork’s coworking office space. Why has home office not become the mainstream? Why has Starbucks, which provides free WIFI and is equipped with charging ports, become a business space?

Now that 5G has arrived, why is the coworking office space becoming more and more popular? In fact, no matter what kind of office models, in its essence, it is the place where people work. “People-oriented” is the basic concept that office spaces services need to follow.

The first thing that a coworking/shared office space should pay attention to is whether the basic environment of the indoor space and office equipment and facilities are beneficial to the staff to work easily, efficiently and healthily. On this basis, it can provide business, financial, legal, etc. requirements for business operations as needed. Professional supporting services, as well as organizing community activities and creating a community atmosphere.

In fact, companies and individuals that needs office space are very different, which determines the form of coworking office space will also vary.

Is it to focus on market segmentation and create a theme space for a certain professional field or industry, or is it to provide open office space for large, medium and small enterprises in all walks of life regardless of industry format? Is it just to focus on office facilities and equipment, or to create an eco-friendly coworking/shared office space based on people’s physical and mental health?

Additionally, as a coworking office space where the public gathers, what public services are provided? All these require careful consideration of each coworking/shared office space.

Coworking office space is a place where people work. It is neither a coffee shop nor a bar, nor a gym or a kindergarten. Infinitely amplifying personalized needs that are not related to work to attract customers will only distort and harm the space itself and the structures of the business.

At the same time, although coworking/shared office space is a new term, not all “fashionable” terms can be linked to it, and not all “fashionable” can add colour to coworking/shared office. Don’t make any falsehoods. Adhering to the fundamentals, putting people first, and creating tangible value for customers, the coworking/shared office space will have richer value.

At present, WeWork has signed a property lease contract that locks in more than 47 billion U.S. dollars in irrevocable rent payable, which has not been included in the space decoration, maintenance costs and various changes in operation costs, but based on its 4th quarter 2018-2019 Judging from the operating income of US$3 billion in the third quarter of 2009, it is impossible to judge when it will be profitable.

In the trend that future economic expectations are still weak, this is sign is very dangerous. To this end, the chairman appointed by Sun Zhengyi began governance and rectification, organizational restructuring, management adjustments, layoffs, closing down the loss space, selling off business sectors not related to the main business, and disposing of unnecessary assets such as Gulfstream business jets in an effort to expedite Compress cash outflows and sort out a profit model.

However, long-term property lease contracts with high labour costs and high rents, high renovation costs, and high-cost free service adjustments are closely related to the property contract period, renovation life and customer leases, and have strong inertia. There is still a long way to go to solve the problem fundamentally.

If you don’t want to develop steadily, it will be difficult to advance and retreat freely. Shared office has huge market potential, but it has entered a reshuffle period. Brand operators need to calm down, keep their feet on the ground, and make long-term discussions.

Text: Li Ruiwu (NUS Chinese EMBA 21 class, O2Work founder and CEO), Chu Junhong (Associate Professor, National University of Singapore Business School)

     

     

     

     

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