Coworking is Disruptive Innovation

The term disruptive innovation was coined by Harvard professor Clayton Christensen and popularized by his classic 1997 book The Innovator’s Dilemma.

According to Christensen:

Disruptive innovation describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.

The Christensen Institute adds that a disruptive innovation

... is formed in a niche market that may appear unattractive or inconsequential to industry incumbents, but eventually the new product or idea completely redefines the industry.

Coworking clearly fits this model.

The early coworking spaces (circa 2008) were targeted at a niche (freelancers and other independent workers) that was considered unattractive and inconsequential to the commercial office space industry, including the executive suites industry sub-sector. 

The spaces were also definitely low end.

The pictures below (click to enlarge) were taken in 2011 at Citizen Space, one of our favorite early coworking spaces. Located in an old building in a low rent SF neighborhood, you entered Citizen Space through a loading dock.

 

And inside it wasn't anything like today's coworking spaces.

 

But as Christensen points out in his 2015 HBR article What is Disruptive Innovation:

... as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price. 

And while early coworking spaces weren't elegant, they delivered the functionality their overlooked customers were looking for at a price well below other alternatives.

Fast forward to today and it's clear coworking has not only become a successful industry, it's disrupting and changing the entire commercial office real estate industry.

Repeating a quote from our post yesterday:

Everything that we know about landlords and how workplaces are designed, built, managed and staffed is being disrupted ...

When we first started tracking coworking back in 2007 we thought it had the potential to disrupt the commercial office space industry. It's now clear it's doing so.

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