The need for growth within our economies is discussed so often that we sometimes fail to remember the reason why it is so important; from a national perspective it dictates the standard of living of citizens. Increases in future production therefore have significant general wellbeing ramifications.
Such growth can occur through (1) increases in physical capital, (2) increases in human capital, and (3) increases in technological development. In sum, technological developments boost productivity growth, which boosts economic growth, which increases the standard of living for citizens of the given country. In fact, an important difference between richer and poorer countries can be seen in the focus dedicated between these sources of growth, with poorer countries focusing on the first and/or second and richer ones on third (Taylor, 2005). It is therefore no surprise why national governments have looked to innovation-based growth models for policy planning and strategy.
Behind Closed Doors: the old logic driving traditional office space arrangements
From a microeconomic perspective, firms look for some competitive advantage in order to survive. This may come from scale or assets, but often stems from the development of innovative technologies, modes of production, or business models, through the successful leveraging of skills and technologies facilitating the novel offering of products or services (Tidd, Bessant, & Pavitt, 2005). The origin of the drive toward innovation strategies is at least partly grounded in the work of Joseph Schumpeter (1883 – 1950) who suggested that the cost of innovation could only be borne by larger market players with significant market power.
The Schumpeterian view is that entrepreneurs will attempt to get competitive advantage through technological developments that give them monopoly profits given their use of such technologies. This is subsequently emulated by other firms which may create further innovations, until eventually the monopoly is undercut, resulting in a steady-state during which firms compete on a product and process basis with incremental improvements to the innovation. Eventually, another innovation shifts the basic conditions within some important aspect of the market, and the process of “creative destruction” begins anew (Tidd, Bessant, & Pavitt, 2005).
What does all this have to do with office space? Within such a perspective it is no wonder why firms stood to benefit from a closed-door mode of innovation and a centralised workforce. All innovative efforts occurred vertically within the firm, and any risk of seepage became significant threats. Having a closed-door policy was in a real sense a non-negotiable matter of survival.
In an ironic twist, today the exact opposite is true.
Opening the Door to Innovation
Innovation is now being democratised, and a growing literature is indicating the importance of flows of knowledge in toward the firm for innovation to flourish. This has contributed to a movement away from the traditional ‘linear’ (closed) conceptualisation of innovation and toward a more ‘open’ and collaborative one. That is, away from the idea that innovation comes about solely by insights achieved through basic research, resulting in technological development which in turn drives the development of new products (Godin, 2011). Though over time the role of research became important throughout the whole process, the model retained its overall ‘closed’ feature. Within this producer-paradigm of innovation, once innovations are protected they are diffused through networks by the firm in a centralized manner through marketing efforts (Hippel, 2005).
But this has been challenged by several empirical studies indicating the important role of users in the innovation process, including user innovators, who go on to freely pass on their innovations peer-to-peer to members of their network, be they professional or personal. Such innovators do not look to protect their invention through patents laws, and collectively grossly outnumber R&D personnel. Innovative companies have recognised this and have taken action. From games-oriented firms such as LEGO through their Mindstorms product range and Valve Corporation through their gaming platform Steam, to innovative companies such as Threadless outsourcing their designs to the crowd, open innovation strategies have become commonplace integrations in both R&D efforts and business models.
Figure 1 – Closed & Open Innovation Funnel (taken from VIIMA)
Traditional office space arrangements were built to reflect the ‘closed-door’ mode of operation which was the standard during much of the 1980’s and 90’s, and which still holds some force in the minds of executives today. This ‘not invented here’ mentality created boundaries which closed off exterior influence in a bid to protect product and process innovations in a movement toward patenting. The company ‘Headquarters’ set up to house all staff from all departments under one roof was therefore a necessary (and costly) mode of organizing the workforce. I believe that because this conception of office space is not compatible with the new open innovation paradigm (or at least, hinders more than it facilitates innovation), flexible workspace will replace traditional office spaces in the near future.
Flexible Workspace: The Evolution of the Office Space
Partly as a response to the tension between these two paradigms, several flexible workspaces have sprung over the past decades, rising in prominence in regions were strong innovation systems and start-up cultures have driven a change in perspective on what a workspace is and what it should achieve. Apart from providing fully-equipped workspace including administrative services and shared amenities, spaces such as serviced office spaces, shared office spaces, and coworking spaces also build an important sense of community within which SMEs find fertile ground for sharing knowledge and creating innovative products, services, organisations or processes. Such workspaces have been the start of several innovative companies, such as Uber, Spotify, Indiegogo, and Instagram, and whilst it would be a leap I’m hesitant to make to say that their use of such spaces made them what they are, I believe that there is something to be said of their willingness to utilise such environments and the ways in which they built their shared-economy business models. I think these examples indicate that in so far as such workspaces are structured to support businesses and an innovative culture, something noteworthy is being done right. And this rings true in our own experience also. BUSINESSLABS is a concept run by B2BMALTA LTD, a business advisory/management consultancy firm with expertise in business planning, market research, funding acquisition and the like. I mention this because through BUSINESSLABS, we have been involved in the innovation process for several interesting projects which came about by social connections fostered and developed through the community housed within the space, whether tenants, coworking members, or event attendees. We have therefore seen the benefits of a more open approach to workspace first hand and continue to promote it avidly.
BUSINESSLABS Flexible Workspace Kitchen and Meeting Space Area
The importance of Workspace Artifacts
The change I have outlined has not only been a strategic one but also a cultural one. The importance of having the right climate and culture for facilitating the creativity necessary for successfully undertaking activities guided toward innovation, and how not achieving these can stifle company efforts, necessitates this change. And this is an important point on and key to the importance of workspace in relation to innovation efforts. The culture of any company can be seen in the artefacts it displays; that is, anything within the immediately observable field of experience, including visual objects and behaviours. Such artifacts are the first level of company culture, and the most amenable to change. Underlying these are the espoused values and beliefs, and more basic underlying assumptions (Schein, 2010). Without getting any more technical than this, I think that because company culture is generally so difficult to change, even more so when that change is as significant as the shift from a closed-door innovation mindset to a more open one, moving away from a firms old workspace arrangements may be an important step to facilitate such a change and prime the workforce toward a new cultural perspective. The benefits of such a change comes from its very tangible ramifications for the modus operandi of the company, from changes in the day to day processes to a physical change in the locations in which the work is undertaken. The movement from a traditional office space to a flexible workspace shifts artifacts, and with it perspectives. Whilst it may not be enough to make drastic cultural changes, but it may serve as an important primer.
Elsewhere, I’ll be discussing the move to a flexible workspace arrangement from the perspective of the employee. To end this piece, suffice to say that given the benefits experienced by employees who were forced toward a remote working work arrangement, the time is right to initiate a change in workspace setup, bringing with it all the related benefits in terms of innovation, employee satisfaction, business continuity and risk mitigation.
References
Godin, B. (2011). The Linear model of Innovation: Maurice Holland and the Research Cycle. Social Science Information, 561-581.
Hippel, E. V. (2005). Democratizing Innovation. Cambridge, USA: The MIT Press.
Schein, E. H. (2010). Organizational Culture and Leadership. San Fransisco: Wiley & Sons.
Taylor, T. (2005). Economics, 3rd Edition. The Great Courses. Chantilly, Virginia, US: The Teaching Company.
Tidd, J., Bessant, J., & Pavitt, K. (2005). Management Innovation. West Sussex: John Wiley & Sons.