The imminent bankruptcy of WeWork, a global co-working space company, is a wake-up call for investors and startups alike. The company, which once had a valuation of 62 trillion won, has reportedly hired bankruptcy experts after executives left in succession due to difficulties finding a meeting point between vision and strategy. What's astonishing is that WeWork has continued to be in the red for eight years since it disclosed its performance, revealing the limitations of a business model that is no different from traditional real estate leasing, despite its self-assurance as a tech company.

And criticism of WeWork founder Adam Neumann, often cited as the cause of WeWork's myth and failure, continues even after he left the company in 2019.

Eliot Brown, author of "The Cult of We" and a WSJ journalist, summarized WeWork as a case that represents the cultural numbness surrounding IT startup investment in modern times in an interview with Wired. He points out that the fact that investors were consistently persuaded by Adam Neumann's repetitive pitching style for over a decade, despite having the structure of a poorly run real estate company, was based on the claim that WeWork had the characteristics of a high-growth technology company. And the investors' criticism and regret toward Adam Neumann reached its peak with SoftBank Chairman Masayoshi Son's decision to strip him of his management rights in 2016, after SoftBank had poured money into WeWork since 2016. But as a result of all this, Adam Neumann made a lot of money, and investors lost money.

Why did these related investors repeatedly make decisions to continue investing in WeWork, which had faced multiple crises, even in situations where they did not see tangible business results? Is there no explanation beyond the critical gaze directed at founder Adam Neumann? I argue that the reason might be found in the "Unmet needs" embedded in WeWork's pitching deck, which may have helped fuel investors' expectations. In other words, I wonder if investors understood the distinction between unmet needs rooted in the design thinking model, which is a value proposition that focuses on current deficiencies, and the fact that their investments are essentially bets on the future.

The design thinking approach that has virtually taken over the business world over the past 20 years often assumes that the value of products or services stems from consumer interaction. Moreover, the widespread belief that focusing solely on users to identify deficiencies increases the likelihood of great successtends to keep us stuck in the current patterns associated with the product.This approach and perspective also applies a simplifying assumption that reduces humans to users with tasks to complete or things to do, obscuring the efforts in the larger sociocultural realities where people experience and give meaning to those products and services, which can actually be problematic.

People experience things in a much more diverse way, based on history, memories, social characteristics, preferences, and symbols they have confirmed in their own lives. Moreover, one of the ways we experience things is to collectively value or empathize with products and services through these value structures. Therefore, our understanding of value should include not only individual "users" but also the larger range of dynamics of changing human experience. Therefore, the limitations of user-based transaction and interaction models centered around products and services become more prominent when predicting future market trends, which can pose significant uncertainty for investors seeking undervalued companies or early-stage investment opportunities. It's a scary prospect for them to know where to invest without understanding the changes in this world.

In this regard, it is necessary to identify the following points to confirm whether the "discovery" of new and innovative current value propositions remains a lasting value beyond the perspective of existing investors.

First, the "power of the process" should be critically evaluated. The step-by-step methodology of planning and producing current products or services, including empathy, definition, ideation, prototyping, and model testing, is a familiar approach taught in business schools and implemented in the industry. This method clearly distinguishes each concept and provides a tangible foundation for the process. However, this approach can sometimes play a role in forcing ideas into existing paradigms too early, which could potentially lead to bad investments.

Adding a process to identify what constitutes a larger range of factors that make up human experience and how they are mutually structured in the R&D stage may seem like a factor that only slows down the pace of business operations at first glance. However, if you confirm and understand the road you are walking, taking this process can minimize trial and error and become the choice to reach your destination as quickly as possible.

Second, it is important to reconsider value propositions that are considered "familiar" in each industry. Questioning and reconfirming the entirety of the world where value has been established allows for the "identification" of familiar values, not the "discovery" of unfamiliar values. This can lead to opportunities for clear and lasting value propositions. For example, Ford focused on developing features and new vehicle categories that support a satisfying user experience, rather than investing in high-cost features that are familiar and infrequently used, by confirming various situational aspects of using cars at home, beyond its focus on cargo capacity and engine performance improvements.

Making the right investment decisions will require not only identifying current unmet needs but also a deep understanding of how people live their lives in various personal, public, social, and cultural dimensions to identify the flow of more lasting value structure changes. The discovery of unmet needs that chase specific deficiencies and the revelation of familiar but changed values, both overmet needs, can both help in the process.

*This article is the original text of the column published in the Electronic Times on September 11, 2023.

References

Global co-working space company 'WeWork' faces bankruptcy

A New Book Reveals Why WeWork Didn't Work

WeWork hires restructuring advisors amid financial woes

Charted: The Rise and Fall of WeWork⁠⁠⁠⁠⁠⁠⁠