The Future of Office is Phygital
Physical + Digital (Phygital) — a term that describes the blending of digital experiences with physical assets
We are in a magical moment, a moment to completely rethink work — how, where, and why we do it. For so many of us, work is our identity and provides a sense of self. This pandemic and its forced pause has schooled us on surrendering. We ceased control of how and where we did work, and we were forced to experience an entirely different flow to our day with work bleeding into all aspects of our life. For some, this experience has increased frictions at home, and for others it has removed them — like a commute.
First, it is important to note that distributed work is nothing new. The trend was already growing prior to 2020 and the pandemic has accelerated our understanding and acceptance that “work” happens anywhere and is more widely dispersed; a pattern not likely to reverse in 2021. The pandemic has driven us to apply nearly costless tools to visibly communicate across town and time zones using digital infrastructure — as distance is no longer a friction.
The real question facing every industry on the planet is when things “normalize,” what customer behaviors (i.e. new or old formed habits) will endure in our post-pandemic world. Human habits are like water, flowing toward paths of least resistance. And in our newfound freedom from the office, there is gravity working against the office. I do believe the office will have to perform a different job and will need to pull against gravity. People will need to be “intrinsically motivated” as Daniel Pink describes in his book Drive. The best talent will be driven by opportunities for autonomy (flexibility), mastery (learning) and purpose. Therefore the office as we know it, will likely perform the job that cannot be done at home; setting direction, driving culture, fostering community and learning — essentially achieving business nirvana for the individual and organization.
When things “normalize,” what customer behaviors will endure in our post-pandemic world?
I suspect in the normalization of the post-pandemic world, we are likely to see many organizations return to their offices as if nothing happened, taking the path of least resistance and reinforcing old habits. However, everyone will be watching organizations that do not return as before, who outperforms. Most companies hold long-term leases for office space where most in-person work was performed, and these spaces have sat largely vacant since early last year. While these spaces still remain an asset for most organizations, they have become a liability for others who secured too much space for years of projected growth that now will not play out. This high-priced, underutilized inventory represents an opportunity for a more elegant solution.
So, where do we go from here?
Building an Operating System, an End-to-End Solution for the Workplace
The traditional levers every property owner uses in “selling” office space remain a) price, b) quantity (i.e. square feet) and c) term — similar to many other commodity products. The office owner has typically relied on the scarcity of space to create value. And these physical assets have fairly ubiquitous forms that are often copied over and over again without any customer input. But workspace doesn’t need to be a commodity, a static dumb object. The market needs an end-to-end “operating system” for the physical workspace that can learn, personalize the experience, offer convenience with insight and continuous improvement. This type of product could also give customers exactly what they need, when they need it, versus getting more than what they want. Products and services that offer continuous improvement are very, very sticky because they provide a totally different experience, proposition. Here are some strong examples of bringing physical products to life with the addition of technology layers, creating infinite ways to keep building value.
“No operating system exists for the physical workspace that can learn, personalize the experience, offer convenience with insight and continued improvement.”
Smart Cars: From Vehicle to Learning Platform
In 2011, cars had lots of disparate electronics and nifty amenities used to differentiate the manufacturer and its models. However this capital intensive industry had no reason to develop an end-to-end software solution encompassing the entire car. Then Tesla launched the Model S, its highly-priced premium electronic vehicle that had the ability to update vehicle software over-the-air (OTA) making the machine more of a computer than a mechanical device. Suddenly the rest of the auto industry was made instantly obsolete as they continued to sell cars incapable of OTA or learning and improving. In 2014, I purchased a Model S and frequently experienced how Tesla’s digital platform continued to increase value to its customers with each update. Just last week Tesla pushed out an update that gave me a digital lock on my mechanical glove box — yes, a new feature on a car I purchased seven years ago. More value for the same or better price.
Smart Bikes: From Commodity to Community
In 2013, a stationary bike company named Peloton pursued funding for a stationary bike married with live streaming content. The content would be in the form of fitness classes under a monthly subscription from studios where patrons could attend remotely. At the time, the stationary bike, which had been around for centuries, was purely considered a commodity product, alongside workout videos. However, as technology advanced with widening bandwidths, Peloton constructed a distributed network of bikes, essentially a virtual classroom for people anywhere to participate in classes. Peloton took the experience of riding a bike at home and turned it into a community experience, making exercise more enjoyable, a key habit forming ingredient. As Peloton launches its next generation of hardware, one that the instructor can control from the studio, it is deepening its end-to-end physical + digital strategy with more content, and offering its customers more value (personalization, insights, improvement) for the same or better price.
Wearables: From Telling Time to Tracking Vitals
Apple didn’t invent the smartwatch but in 2014 it elevated this category forever with its well designed extension of the iPhone into a wrist notification device. Around 2018, Apple pivoted the watch into a health and wellness product, offering its wearer diagnostics and individual health data normalized against the population. This elegant time telling device was also capable of notifying its wearer or others of key health metrics to improve and save lives. As an early adopter of the Apple watch, now on my fourth generation of the product, I’ve seen how the data changes my behavior and improves my quality of life beyond what analogs can do. Last month when I took a little spill on my mountain bike, the watch recorded a jolt and sounded an alarm, asking if I was ok or if it should proceed to call 911 if I failed to respond within the minute. This notification was based on simple movement patterns and my deviation over time, offering me not only more value, but life-saving technology in the form of a watch.
“….And we believe this product will redefine what people expect from its category.” — Tim Cook (Apple Watch launch 2014)
My point in these three stories is to highlight the value of phygital products, blending a digital layer into physical assets. The car, bike and watch are all static objects that with the integration of software and connection, are able to offer personalization, experience and learning — or exponential value to their customers and, in return, the companies creating them.
The pace of workplace change is likely to flatten post pandemic, yet I expect the size and shape of offices to morph with each lease expiration as owners and users optimize for workforce needs, organizational culture and productivity enhancement. Like competitors to Tesla, Peloton, and Apple, office owners will need to evolve their products to provide their customers more value or suffer commodity pricing in a flooded market.
In the next several quarters, as we surface from this pandemic, I believe our repressed economy will run hard and fast outside the gate for dynamic industries and markets. I’m not focused on our sector’s buzz vernacular like smart buildings, digital twins, workplace digitization, hotelification and workation apps, etc. These are tools that haven’t found the key problem worth solving — the effective distribution and assignment of space. Then talent needs leadership, policies, structure and space that truly offers people autonomy, mastery and purpose over boring, static, commoditized office spaces with nice branding.
Let’s get phygital!