skills gap_Higher Education_ChristensenInstitute

WeWork bets on bootcamp to beat the skills gap

By:

Dec 12, 2017

WeWork has been on a dizzying shopping spree. The co-working office space provider has made some splashy real estate purchases in Manhattan, has ventured into residential offerings as WeLive, is running a gym, and just recently barged into the social network space by acquiring Meetup.

These acquisitions further WeWork founder Adam Neumann’s aspirations to build more than just a real estate company, using WeWork’s physical space as a “platform” through which it can provide community, collaborative culture, and a range of other services. This hodgepodge of millennial platitudes has fueled a sky high valuation that invites plenty of skepticism from analysts, given that other real estate companies manage more property but command dramatically lower valuations.

Perhaps the most surprising move was WeWork’s expansion into education. In October, WeWork announced its acquisition of Flatiron School, an immersive coding bootcamp based in New York City.

Is a real estate firm really equipped to run a bootcamp? As random as it may appear, the move has innovation theory in its favor. It turns out that across industries, when performance is suffering, firms tend to integrate across their value chain. Acquiring Flatiron signals WeWork’s potential to integrate across the broken interface between education and the workforce.

Innovation Theory and a Broken Interface

When a market is mature and functioning well, companies can specialize in making different components of a product, knowing that standards are in place to make the pieces fit together. For example, multiple companies make and sell light bulbs, and customers can buy different brands without worrying if the bulbs will be compatible with the lamp sockets at home.

People have long assumed that the interface between higher education and the workforce is equally modular. Graduate from the best college that you can, and you will seamlessly find your way into the workforce. Your degree—and assumably, the skills and competencies you acquired in the course of earning it—will be compatible with some job opening.

Instead, the US simultaneously has 6 million job openings and 6.8 million Americans looking for jobs, with 45% of small businesses struggling to find qualified applicants. Employers and legislators alike argue that the college-to-workforce connection is clearly broken. The 8.5 million federal student loan borrowers in default because they aren’t finding careers with a sufficient ROI would probably second that notion.

Hence the recent push for more apprenticeships, more partnerships between employers and community colleges, and more last-mile training programs like coding bootcamps. People recognize that the supposedly modular interface between higher education and the workforce isn’t delivering what the country needs anymore, and are trying either to provide a missing link in the chain or to weave the two components together in a more interdependent fashion to make sure that people don’t slip through the cracks.

WeWork and Flatiron School

In this context, WeWork’s acquisition of Flatiron School makes sense. As WeWork continuously tinkers with and innovates around this new offering, it can progress towards figuring out how to best leverage Flatiron School’s capabilities. The acquisition has the potential to better serve learners and existing WeWork clients alike.

From the perspective of Flatiron School students, WeWork leases office space to companies—often start-ups—as well as individual professionals, the very entities with which they need to network in order to get hired. Connecting bootcamp grads to employers across 170 co-working spaces seems especially prudent in a time when many coding bootcamps are struggling to scale.

As for WeWork clients, companies are increasingly looking to provide education as a benefit to employees. WeWork can now offer Flatiron School courses, both in-person and online, to all their clients.

Acquiring Flatiron School puts WeWork in the position of potentially competing with workforce solutions providers like Revature and Avenica. Given that WeWork is also providing office space and collaboration services between companies, their workforce solutions package would be practically all-encompassing. The range of possibilities is intriguing, and WeWork now has the resources to experiment with different positions along the value chain.

Time will tell if WeWork will successfully leverage Flatiron School’s capabilities, and if this new offering will help justify WeWork’s remarkable valuation. But WeWork has positioned itself intelligently along the value chain as the education-to-workforce market shifts. If they can successfully navigate the tricky dynamics of the integration process while juggling the bevy of other major acquisitions: WeApprove.

As a research assistant on the Christensen Institute's higher education team, Richard helps investigate novel business models in postsecondary education, professional development, and lifelong learning.