20 Aug Alex Hillman on Corporates and Growth in the Coworking Industry
Ryan Chatterton, Chief Editor of Coworking Insights here! I want to introduce you to this Q&A with Alex Hillman on a somewhat divisive issue in the industry. The growth of the coworking industry has taken the world by storm. It’s hard to go anywhere these days and not find a coworking space. Yet, with all this growth comes friction. In this Q&A I ask the renowned Alex Hillman for his opinions on everything from the corporatization of coworking to the rise in service providers, plus what he thinks is on the horizon. Alex’s always articulate insights are based on more than ten years of hands-on experience in coworking. He’s thoughtful, but bold in his declarations, which makes him a particularly good read. Enjoy!
You seem to love independent coworking spaces. What is it that makes independent spaces better than chain coworking, at least in your opinion?
Bigger isn’t better, better is better.
So let’s start with how I think about “better” and who “better” applies to.
For a coworking operator, I don’t actually care that much how you choose to operate…just know your category and help your people thrive. Focus, do the work, and create more value than you extract.
Being independent fits my goals better than being a chain ever could. I got into this business for people inside the room, not the room itself. The space is a means to an end.
So I’d rather have one location that’s among the best in the world for our members than divide my attention and energy across 2 or more.
One of the best parts of Indy Hall being independent is that I get to focus on what we’re good at, and ignore everything else. I don’t worry about chains attacking our membership, because I know that our members are here for each other. I don’t worry about doing or offering the same amenities and services that the heavily funded industrial coworking spaces have to in order to woo their clients, because I know exactly what our members come (and stay) for.
For a coworking member, if you love your chain coworking space then I’m happy!
But I get emails every week from people who feel trapped in the chain coworking space that their employer did some exclusive contract with; a chain space where they don’t feel like they belong; a chain space where they feel just as isolated and alone as if they worked from home; a chain space where the staff views is treated more like part of the furniture than like fellow members.
So again, for members, I don’t actually care which coworking space you pick so long as you know that you have options and you pick the space that leaves you feeling good at the end of the day.
Following on from that, what do you think will be the outcome of corporate real estate and CRE firms entering the coworking market?
I can’t predict the future, I just see what I see.
And when it comes to corporate real estate, so far, everything I’ve seen from the CRE world is a reaction to coworking. There isn’t much self-examination going on, or understanding about who really makes up the market.
Instead, I see the CRE world putting on some version of a coworking costume, without really understanding who they’re attempting to dress up like.
Open floor-plans and space designs that “look like coworking” but feel cold and lifeless. Reception staff are rebranded as “community managers” and told to run events in addition to their hospitality role.
If there’s an open or underutilized space, there’s gonna be someone who wants to call it coworking!
The real problem isn’t just that these “tweaks” are reactions, it’s that they’re fearful reactions. Fear of losing clients or market share to this new and fast-growing trend. And it makes sense why: the CRE world is culturally built on scarcity.
When square footage is scarce, it has more perceived value, which is good for building owners and operators. This mindset breeds short-term thinking and reactivity. Add large-dollar transactions to the mix, and you have the perfect recipe for the brutally competitive world of commercial real estate.
But while coworking uses real estate as part of the toolchain, it’s a fundamentally different business. The primary value we offer isn’t scarce square footage, it’s abundant human and social and knowledge capital. Coworking’s value equation means that our available offering (people, knowledge, and support) actually grows in value as our membership grows.
Consider this in stark contrast to the CRE equation where the available offers shrink every time a new lease is signed.
With all of that in mind and ignoring outliers, most coworking spaces thrive when they focus on understanding and serving groups of people who weren’t CRE customers to begin with: freelancers, solo-preneurs, members of remote/distributed teams, and even people who have dedicated offices elsewhere but also have the mobility to choose where they work.
Across industries and demographics, all of these people have one thing in common: isolation.
So what I see a lot of people misunderstand is that for most people who choose coworking, it’s not an alternative to renting an office. They choose coworking as an alternative to working from a lonely home office or dining room table. They choose coworking for the ability to go somewhere they can find and be surrounded by like-minded people. They choose coworking because of the other people in the room, not simply who has the best amenities or address.
If I were running a CRE firm today, I’d focus on understanding the needs of teams and companies that outgrow their coworking spaces and inevitably need workspaces of their own. I’d deploy research teams to coworking spaces with the explicit goal of building relationships with the people who run them. I would specifically hire people from outside of the workspace industry and ask them to figure out why the people who work in coworking spaces love them (rather than simply recreating the surface-level artifacts like open floor-plans and community managers).
Then I would use those lessons in designing new CRE products and offerings – inspired by lessons learned in coworking – for businesses who grow into needing them.
How would you advise indie spaces to prosper in a coworking world with corporate coworking present? Is it as simple as being true to themselves or do they need to change to stay relevant?
The vast majority of what other people do has zero impact on you, your community, or your business.
Do you think a 5 star restaurant pays attention to what the McDonalds down the street is doing?
Indie operators especially need to quit paying more attention to what other operators are doing than their own members. I don’t chase the latest trends. We don’t use the latest tools and technology (unless it solves a serious pain for us). I don’t read 99.9% of coworking industry “news.”
We put all of that energy into focusing relentlessly on our community.
The other thing that indie spaces need to do is quit comparing yourself to other spaces. These days every space is “more than just a coworking space” to the point where it doesn’t mean anything.
The best way to differentiate yourself is not by leading with what you are not and why your version is better, it’s by saying who you are and why that is valuable.
With the increase in popularity of coworking, we’re seeing a big increase in the number of service providers. What do you think about this?
Levi Strauss got rich during the gold rush selling denim jeans and shovels to gold prospectors. So…the service provider boom makes sense. Everybody wants to get their cut of the boom. I don’t blame them.
And we’ve come a lonnnnnng way. There weren’t any tools specific to coworking when we started. Indy Hall’s billing ran out of spreadsheets and manual invoicing (without direct-debit) for at least 4 years. I don’t miss those days, but it was never the thing that was going to make or break our success.
I think that’s the key with all of the service providers: they’re not going to be the thing that defines your success or failure.
So it’s good to be skeptical during a boom like this. If you’re unsure about the quality or credibility of a service provider, don’t be afraid to ask around and get multiple opinions/experiences.
I also recommend that you don’t put all of your eggs in any one basket, either. I strongly opt for “best tool for the job” providers over “kitchen sink” because it gives me flexibility and choice about how we support our community as we grow and evolve.
And what about for coworking conferences, and events?
If you’ve never been to a coworking conference or event of any scale, you really should. Stop admiring the names and faces you recognize from a distance.
Coworking gatherings are unlike any other industry conference I’ve attended: there’s a warmth and generosity, a willingness to help each other (even if some would view each other as competitors), and an open-mindedness about what’s possible (not to be mistaken for blind optimism, which is something else altogether).
I’ve heard countless stories of experienced coworking founders and teammates sharing nitty gritty details of their own “secret sauce” or even opening up their financial books to a relative stranger to share what the numbers really look like. It’s wild.
And it’s a goddamned crime that so many people in the world of coworking haven’t ever met another person in the world of coworking face to face.
You don’t need to go to one of the big branded events, either. In fact, I highly recommend seeking out a smaller regional events with 50-150 attendees. Can’t find one near you? Maybe you can be the one to start one. The best coworking conference I attended all of 2018 was a ~80 person event in Lancaster PA, which also happened to be the first state-wide coworking event in the US.
The biggest problem I’ve seen with coworking conferences the last few years is tied to the core problem that coworking means lots of different things to different people.
So depending on who’s in attendance – and who is given stage time – you might go to your first coworking conference and suddenly believe that in order to succeed you need fancy furniture and a paid advertising budget and investors and…all kinds of other things that can be fun and exciting to hear about but aren’t actually useful advice for most operators.
The other challenge that conference organizers are facing today is the difference between programming for several distinct and different audiences within the wider ecosystem.
At the highest level, one coworking conference may be trying to serve:
- the fast-growing new and aspiring operator audience
- the open for 2+ years audience
- the coworking staff audience
- the business center who wants to understand coworking audience
- the local governments & institutions audience
- …and more.
Now, there’s tons of valuable overlap between all of these audiences, but for the last few years the range of who attends events has made it harder and harder for people to find their like minded peers to learn from.
It reflects in the programming, too. All you have to do is look at the agenda for a coworking conference and ask yourself “who exactly is this for?”. If you’re not instantly certain then it’s probably the result of organizers trying to serve too many audiences at once.
So besides encouraging smaller events, I’d also like to see events that really focus on serving specific groups, and even events focused on specific problems within those groups.
While I’m spinning my wish list, I also think the coworking conference/event circuit would benefit from:
- Fewer coworking founders as speakers
- Fewer service providers as speakers
- Fewer panels, more Q&A
- A LOT more coworking members as speakers
- More guidance and coaching for speakers
- Less time listening to speakers, more time in small groups
Bottom line: most coworking conferences have been following the same core structures since the beginning. I recognize and appreciate the hard work that all of the organizers put into these events, and the crucial role they can play.
That’s why I really think it’s so important to elevate these important industry events, rather than just trying to make them bigger!
What’s the biggest obstacle to overcome in the world of coworking right now? What are we avoiding that we shouldn’t?
We have one word being used to describe a lot of different things.
To be clear, this isn’t a new problem. After I attended the Coworking Europe conference in 2011 I wrote about the challenges that come with the increasing uncertainty of no longer really knowing what people mean when they say “coworking.”
But by only using one word (and having limited ways for subcommunities to form) I think we are avoiding fragmentation because we fear it creating divides. And it makes sense…we’re dedicated to bringing other people together. So the idea of driving people away from each other feels wrong. But fragmentation doesn’t have to divide people, and that’s a really great thing.
In reality, divides already exist. They’re just emotional or political which means they’re invisible to most people most of the time, and most often become visible when conflict boils over.
This invisible fragmentation leads to crises of identity (What is or isn’t a coworking space? Who decides? What if I disagree?). It creates chaos and damages relationships. It literally does the opposite of what we want to do in our communities…to ourselves.
Here’s the thing, I think that by acknowledging the fragmentation that’s already there (and will always be there), we become stronger as communities.
When we keep our differences in the dark we give them power to divide us. We can only embrace our differences when we shed light on them.
That lets people identify differences and stress fractures in the ecosystem and not feel threatened by them. Healthy fragmentation lets people bond deeper and closer. It makes it easier for people to feel connected among small groups, rather than isolated and disconnected in a sea of loose affiliations.
That’s why the famous saying is “a rising tide raises all ships” and not, “everybody needs to get on the same ship in order to succeed.”
Fragmentation isn’t the opposite of togetherness – it’s what allows togetherness to occur.
What’s the most exciting thing on the horizon for the world of coworking? Something surprising. What aren’t we seeing that we should?
While BIG coworking in BIG cities gets all of the sexy press, the coworking happening in small cities & towns and rural regions is very exciting to me. Anecdotally, at the Pennsylvania Coworking Conference, the vast minority of attendees (10% or so) were from the two big cities in our state (Philly and Pittsburgh).
Meanwhile the leadership I saw from entrepreneurs and civic leaders in small towns felt familiar to me: instead of people creating shiny offices for tech startups, I met people creating clubhouses of professional people supporting one another.
“Small coworking” usually looks pretty different from most of the mainstream coworking, but looks a lot more like the kinds of coworking I’ve been working on for the last decade. In a lot of cases, “small coworking” is set up to outlast real estate trends and economic boom/bust cycles.
Which makes sense. Bigger isn’t better. Better is better.