WeWork’s business model claims to leverage the space-as-as-service model. It consists of a set of services meant to sustain the growth of the companies as part of the membership model, composed of four primary tiers: standard, configured, on-demand, and Powered by We (Custom).
Whereas the commercial real estate model has pretty much focused on collecting rents from tenants, with a small part related to common area maintenance fees.
The space as a service (SPaaS) model introduces a set of products and services that makes space rented only the foundation of the whole model. Indeed, with space, this membership model leverages several elements such as:
Data
Technology
Ancillary services spanning from health to lifestyle
Let’s look at this model by looking at the company that pioneered it, WeWork.
Quick glance at the WeWork SPaaS model
How the WeWork Platform is structured around the space-as-a-service model, where members get access to a set of services from Insurance to Education, Technology, Lifestyle, and more. (Source: WeWork S-1)
In other words, beyond the physical locations offered by the company, WeWork also offers a set of services meant to enable members to scale their teams.
Thus, WeWork presumably leverages on technology to build a platform able to offer a set of services to deliver what the company claims as “a premium experience to our members at a lower price relative to traditional alternatives.“
Thus, the core of the revenue model is a membership and on top of that, a set of ancillary, value-added products and services.
WeWork claimed savings for its members, (Source: WeWork S-1 form)
As the company might leverage a growing number of members, it will be able to develop a set of products and services on top of those memberships. Thus, using the membership as an entry point for customers to build on top of it a sort of add-on model with more and more services.
The membership model WeWork launched revolves around four primary membership tiers:
Standard
Configured
On-demand
Powered by We (custom)
WeWork members’ tiers based on its space as a service model (Source: WeWork S-1 form)
As the WeWork space-as-a-service model is based on a subscription, membership, which implies a continuous relationship with its customers, also implies a set of metrics that enable the company to track, on the one hand, its ability to reach the full capability of the buildings.
And on the other hand, to measure and track the members’ growth and sustainability.
Workstation Capacity
As specified by WeWork, “workstation capacity represents the estimated number of workstations available at open WeWork locations.“
This metric helps the company assess the capacity to sell membership on the platform.
Memberships
As specified by WeWork, “memberships are the cumulative number of WeWork memberships andon-demandmemberships.” Powered by We service is comprised of the other revenues, as explained below.
Quick glance at Powered by We offering
Powered by We is a tier that comprises a set of customized services around the core membership, such as:
Design services
Construction and delivery capabilities
Cost savings in the supply chain, from furniture to supplies;
Onsite community team to energize work environments;
Enterprise-ready technologies, also comprising workplace insights dashboards
Enterprise Membership Percentage
Enterprise memberships represent memberships attributable to enterprise members, which are organizations with 500 or more full-time employees.
As of June 1, 2019, that represented 40 % of WeWork memberships revenues.
Those enterprise members are extremely important because they sign agreements with longer-term commitments for multiple solutions across our global platform, which enhances our revenue visibility.
Run-RateRevenue
Run-rate revenue for a given period represents the revenue recognized by GAAP for the last month multiplied by 12. That is an operating metric.
Committed Revenue Backlog
Committed revenue backlog represents totalnon-cancelablecontractual commitments, net of discounts, which will be recognized as revenue subsequently.
Contribution Margin
The contribution is defined as membership and service revenue less location operating expenses, adjusted to exclude non-cash stock-based compensation expense included in location operating expenses. This is another key operating metric.
Key takeaways
WeWork pioneered a model called space-as-a-service. Whereas the traditional real estate management company offers basic services for common area maintenance and a few other things.
WeWork leverages its platform business model to offer a set of services that range from healthcare to lifestyle to help the organizations part of its membership program to scale while keeping the real estate costs relatively low.
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.
A digital business model might be defined as a model that leverages digital technologies to improve several aspects of an organization. From how the company acquires customers, to what product/service it provides. A digital business model is such when digital technology helps enhance its value proposition.
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketingorganizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Cloud business models are all built on top of cloud computing, a concept that took over around 2006 when former Google’s CEO Eric Schmit mentioned it. Most cloud-based business models can be classified as IaaS (Infrastructure as a Service), PaaS (Platform as a Service), or SaaS (Software as a Service). While those models are primarily monetized via subscriptions, they are monetized via pay-as-you-go revenue models and hybrid models (subscriptions + pay-as-you-go).
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
Direct-to-consumer (D2C) is a business model where companies sell their products directly to the consumer without the assistance of a third-party wholesaler or retailer. In this way, the company can cut through intermediaries and increase its margins. However, to be successful the direct-to-consumers company needs to build its own distribution, which in the short term can be more expensive. Yet in the long-term creates a competitive advantage.
The C2C business model describes a market environment where one customer purchases from another on a third-party platform that may also handle the transaction. Under the C2C model, both the seller and the buyer are considered consumers. Customer to customer (C2C) is, therefore, a business model where consumers buy and sell directly between themselves. Consumer-to-consumer has become a prevalent business model especially as the web helped disintermediate various industries.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Businesses employing the brokerage business model make money via brokerage services. This means they are involved with the facilitation, negotiation, or arbitration of a transaction between a buyer and a seller. The brokerage business model involves a business connecting buyers with sellers to collect a commission on the resultant transaction. Therefore, acting as a middleman within a transaction.
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
