We Work’s announcement last week that it is extending the We Work On-Demand pilot program sent ripples across the commercial real estate industry. The program allows anyone to book a desk in a WeWork workspace for $29 per day, or reserve a private meeting room starting at $10 per hour, making access to WeWork’s sharing economy model available on-demand to the general public and not just to WeWork tenants with monthly or annual contracts. The pilot, which was limited to the New York City area, saw 700 bookings made in 60 days, an eyebrow raising success during a time when office visitation has plummeted due to COVID-19, and proving a spark of interest in the on-demand concept.

WeWork isn’t the first shared office space company to offer such flexible access. Cove, as one example, has always offered this pay-by-the-day business model. But WeWork is certainly the largest commercial real estate sector company to date that has made a pivot to offering an ultra-flexible concept. WeWork was disruptive in its concept to begin with. Commercial office space leases are traditionally several years in duration in order to provide “value” over time to tenants. WeWork challenged the long standing commercial real estate status quo by offering its shared office space approach — which was attractive to tenants not just for lease attractiveness but because of its management services and the networking effect of its locations — with short term leases, including a month-to-month option.

The decision to even pilot their on-demand concept was undoubtedly a hot topic of discussion internally at WeWork and kept the financial modelers busy. Should a company that has already carved out a market leading position as a flexible office space provider seek to enable what we might call a “hyper” flexible model of on-demand, pay-per-visit access? Would the on-demand option cannibalize existing revenue generation from existing monthly agreements? Would the on-demand option at least offer a short term solution to the shockwave of declining revenue that the company has experienced over the last nine months? Or, most excitingly, might the new on-demand option unlock even more revenue for WeWork than it was capable of attaining pre-COVID? WeWork obviously decided that the risk of this pilot was worth the potential reward, although we’ll see if on-demand access is a short term or permanent option. It will be important to see the analysis of how many WeWork on-demand customers are net-new customers for WeWork, vs customers who have just downgraded their contracts. I suspect that WeWork wouldn’t have moved beyond their pilot if they saw more of the latter instead of the former, although perhaps getting something (on-demand revenue) instead of nothing (cancelled contracts and no activity) was deemed as more desirable if this was the situation at hand.

If we take a step back, what does WeWork’s business decision to offer on-demand access really mean? It means that, to some degree, whether inspired by COVID-19 or just from natural user evolution, the market has lost appetite for continuing to pay for an asset on an “all you can eat” basis, i.e. show up and use the WeWork space any time over the course of a month. At the same time, the market is demonstrating appetite for a pay-as-you-go approach, i.e. paying each time one shows up to use a desk or a conference room. The on-demand phenomenon in industries that typically require contracts or longer term agreements to participate has gained some traction in recent years pre-COVID, too. For example, UpCounsel, launched in 2012, enables those seeking legal services to engage a specific lawyer on an hourly or project basis, instead of having to sign up for a large retainer with a firm and use only their lawyers. And hybrid subscription/on-demand models like ClassPass, launched in 2013, that enable those seeking fitness options to pick classes across their network of fitness service providers instead of having to join each gym on an unlimited basis.

At Poligage, we are big proponents of on-demand models that provide customers with maximum flexibility and access to a best-in-class service provider for each situation or need at hand. In our case, this means providing access to a world class network of vetted policy and government affairs experts who are available for hourly consultations and projects without any recurring fees. We believe that our on-demand approach will breed satisfaction and increased loyalty over time from our customers. We also believe that on-demand models enable better tackling of the entire “iceberg” of a market. Companies typically evaluate market share potential by looking at those currently participating in an industry and determining what slice of that pie is attainable for them. We refer to this as the “above the water line” component of the iceberg. But introduction of a transformative business model like on-demand can also help companies engage prospective customers who are stuck “below the waterline:” those who are not yet participating in an industry or business because of high barriers to entry, like cost or familiarity. Of course, whatever the business model, revenue vs costs will continue to be the recipe that all businesses have to get right. Managing overhead to go after either end of the iceberg will continue to be a focus for any company considering business model innovation, and this is where use of overhead-minimizing technology can also be an additive game changer.

Overall, e-commerce and other technology that enables the transaction of on-demand business models is changing consumer appetites, whether for their personal or professional needs. It’s exciting to be part of an era of business transformation where new product and services are becoming accessible to people and organizations through innovative business models and other advancements.