Going to Work, after Covid-19
Our definition of “going to work” is undergoing a rapid change, and this will have a ripple effect across the entire economy.
So who is still going to work?
Remote work, i.e. working from home, is set to radically transform not only work and work spaces, but also economies built around the those places where people work.
In the United States, before the pandemic, only at 7% of the workforce worked from home; during the pandemic, this rose to 64%. In Canada, the working from home rate rose from 10% pre-pandemic to more than 40% during the pandemic.
While many large corporations are projected to eventually return in full to their corporate offices sometime in the next year, this will be augmented by increased flexibility to work from home when desired and to conduct internal and external meetings online.
According to a Gallup Poll, 59% of American workers want to continue working from home even after all restrictions have been lifted.
Furthermore, in a Statistics Canada poll, nearly 25% of Canadian businesses expect that 10% or more of their workforce will continue to telework or work remotely following the end of the pandemic. In Turkey, Koç Holding, one of the country’s largest employers, recently announced that its 30,000 office employees will be able to continue working from home one day a week, even after the pandemic is over. Furthermore, those employees will be able to utilize any office within the Holding network of companies as they see fit.
In the case of smaller businesses, many which have discovered how to conduct all their work online, they may never return to a full-time, permanent office space. Working from home and connecting with clients and vendors virtually is not only more cost-efficient but also more time-efficient, less time traveling to and from work, attending meetings, etc.
While a shift to flexible working hours and home office days has been happening gradually for years, the key word here is gradual. The pandemic has pushed that gradual shift to NOW, and while I believe employees have adapted quickly, it is the adjacent economies dependent on people going to work that will suffer (or benefit) the most.
- Urban Services
- Business Travel
- Coworking and Collaborative Spaces
Urban Services
The Economist estimates that in the United States, for every knowledge-based job (i.e. work that can completely be done online), there are 5 other physical jobs dependent on that job. This includes high-skilled jobs such as doctors and lawyers, but also lower-skilled ones such as baristas, hairdressers, yoga instructors, restaurant service workers, etc. that form a secondary economy around main commercial hubs. The sudden shift from office to home has the potential to severely impact those dependent jobs, as they will not be able to relocate or be reassigned as easily.
Even a 20% drop, i.e. if each office worker worked from home one day a week, in clientele for a coffee shop, a hairdresser or a local restaurant could mean the difference between sustainable profitability or going bankrupt.
For most of these urban services, the need and demand for them still remain, however the location where those services are delivered will change. Some of these services will find a home online (i.e. online legal advice or virtual exercise classes) and some of them will simply relocate to more urban settings with delivery options (i.e. hyper-local coffee shops or in-home hair appointments).
Overall, I expect the extreme concentration of urban services to downtown, office-based areas to dissipate, hopefully lowering rent prices and traffic in the process.
Business Travel
Remote work not only affects the commute to and from work, but also the need for business travel. With cross-border travel restrictions in place and limited flight options, only the most essential business travel has been taking place, forcing companies and employees to re-evaluate what is truly “essential” in regards to travel.
Certify, a corporate expense report and travel software provider, estimates that prior to the pandemic around 445 million business trips took place each year, valued at $251 billion. When taking into account travel and meeting expenditures, the Global Business Travel Association estimates total spending to be closer to $345 billion annually. And while a rebound in travel is expected, that rebound may take it’s time to arrive at previous levels.
“This crisis could have a very long shadow. Passengers are telling us that it will take time before they return to their old travel habits. Many airlines are not planning for demand to return to 2019 levels until 2023 or 2024,” warned International Air Transport Association (IATA) director-general Alexandre de Juniac.
A 30–40% decline in business travel will have far-reaching consequences for airlines, hotels, car rental, etc.; many of those that cater specifically to big budget business travelers may simply not be able to stay in business.
Globally, airlines are expected to lose $84.3 billion in 2020, for a negative net profit margin of 20.1%, according to IATA’s latest outlook, released in early June. Several airlines have already entered bankruptcy protection since the start of the pandemic, including Aeromexico, Air Mauritius, Avianca, South Africa’s Comair, LATAM Airlines, Thai Airways, and Virgin Australia.
Furthermore, business class tickets subsidizes the cost of cheaper economy class tickets. With less business travel, ticket prices overall for all travelers are expected to rise. Prices may also be subject to increased volatility/uncertainty as governments close borders sporadically when cases spike, or limit entry from risky neighboring countries.
And this is not even considering the economy supporting large corporate meetings, conferences and conventions, most which will not resume in the next year or beyond. Many such large gatherings have found alternative online solutions, facilitating even larger, more convenient meetups with a global audience, much to the detriment of empty hotel ballrooms, convention centers, catering companies, etc.
Overall, business travel and business meetings are being re-imagined, and much of the physical infrastructure and capital investment designed to facilitate those physical gatherings, may need to be re-imagined as well.
Coworking and Collaborative Spaces
As employees start working more from home, and small businesses vacate their office space entirely, it would seem that coworking spaces would suffer the most. Risk of working in shared spaces with shared resources seem higher than a isolated private office. Freelancers and startups may simply consider the outlay of expenses unprofitable.
Howver, I believe that if coworking spaces pivot and position correctly, this could be the impetus that launches coworking from the realm of startups and freelancers to truly invading the corporate world.
According to an analysis by Coworker, CoworkingResources, following the end of the lockdown in May ‘20, there was a 76% higher share of requests for private offices compared to individual seats, 26% higher number of seats per request in coworking spaces globally, compared to before the lockdowns started.
This shift in demand is being driven by larger organizations and enterprises looking to decentralize their workforces into smaller branch offices (less commuting, less crowds) and remote teams into private flex offices. This also means that coworking spaces will be shifting from large open seating arrangements to multiple individual private offices, repositioning coworking as outsourced corporate office management.
While employees become increasing adept at working virtually, there are still reasons where groups of employees need to collaborate together, meet together or perhaps simply to escape a gaggle of small children at home. Offices will not be eliminated, only redistributed and rebranded.
For example, not all companies have multiple office facilities scattered throughout the city, i.e. Koç Holding, thus they will leverage coworking spaces to provide as many distributed office facilities as possible to its employees while downsizing or completely eliminating the classic single headquarters infrastructure. In the long run, all corporate offices will potentially turn into flexible, on-demand spaces, which is a prime opportunity for coworking operators skilled in managing large office spaces for multiple tenants utilizing shared resources.
Overall, coworking has the potential to experience a boom unlike any other sector, leveraging the limitations of working from home while co-opting its flexibility.
Discussions about the future of work usually focused on artificial intelligence and automation, i.e. elimination of low-skill labor, diversification of work opportunities, i.e. gig economy and international outsourcing, or changing required skills sets, remote work didn’t make the headlines. Now, it is front and center, and entire economies are being forced to adapt accordingly.
Anytime there is a major consumer behavior trend shift, it also spells new potential market opportunities for innovators and entrepreneurs.
Remote working is such a shift.
While functionally, we may be able to complete all our work tasks remotely, there are still plenty of secondary jobs, emotional and social jobs, which cannot truly be satisfied within human interaction. But that is the subject of my next blog post… stay tuned.
Make Innovation Work
Core Strateji is a strategy consulting firm that specializes in supporting leading companies to transform into ambidextrous organizations. Are you ready to move your innovation activities forward?
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