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Colocate to Innovate: How Location Strategy Can Channel Greater Talent


Location strategies are becoming a key factor in how companies (and smart cities) compete in the digital age. Here’s how businesses and city planners should be thinking about regional colocation and co-working integration to increase both in-novation and access to a larger talent pool.

The office is changing.

Previously, the first industrial revolution in the late 18th century gave rise to mass migrations of workers from rural settings to urban locales. Fast forward 250 years, and 54% of the world’s population lives in urban areas. That number is expected to increase to 60% by 2030, according to the United Nations.

Today, however, work is no longer done solely in cubicles, in distracting open floor plans, or at centralized corporate headquarters in a predictable coastal city. Indeed, work is increasingly taking place at home offices, in interior industry hubs and at coworking spaces that provide not only interdisciplinary shoulder rubbing, but also inter-company collaboration.

To better understand these changes and the opportunities they present, we conducted in-depth interviews with five leading experts in the fields of urban design, development and architecture. Through these interviews, we examined the interplay among organizations, municipalities and individuals in creating and working in the office of the future that will ultimately usher in The Fourth Industrial Revolution.

Here are four things that we learned.

Colocation on the Rise

Historically, the offices of large organizations were mainly clustered in capital cities or economic hubs, often in industry-specific regions. Back then, offices were simply a place for employees to congregate and create output, much of which revolved around the fulfillment of rote tasks such as invoice processing or paperwork.

Now, however, we see rapid change. Work is beginning to disperse from these predefined urban areas, as businesses fan out to locate nearby needed talent. Start-ups and innovation centers are now springing up around emerging digital hubs in new and unexpected places.

The shift to digital, the rise of data and the growth of platforms, artificial intelligence (AI) and automation, coupled with economic growth, has fueled an intense talent war, with organizations struggling to fill vital digital roles in areas such as big data, analytics, AI, robotics, creative, social media and digital strategy. As such, companies are increasingly attracted to regional talent hubs within tier-1 and tier-2 cities around the world in which they can nurture start-up-like teams within their business.

In many cases, these locations are chosen with colocation in mind, whether with an existing tech community or the company’s partners, customers and suppliers. In our recent study on the changing workspace, respondents made clear that colocation is a major catalyst for innovation. By ensuring proximity to desired talent and key partners, these organizations hope to encourage smoother and more meaningful interactions.

Simply put, a centrally located headquarters isn’t always the best place for innovation. As organizations seek to spur innovation and attract needed talent, they’re colocating teams with start-ups and creativity hubs whose culture aligns with their goals. By sidling up to these outposts of innovation, they’re enabling the cross-pollination of ideas and work practices in a way that wouldn’t be possible inside “the mothership.”

Integration is a Must

Given the economic benefits involved, office planners must prioritize the factors that attract customers, partners and talent into common areas. While establishing a business cluster solves a piece of the colocation puzzle, however, decision-makers also need to consider the human element of innovation — the ineffable quality that electrifies an area with productive energy. For that, companies can look to the burgeoning area of the coworking model, characterized most famously by coworking space leader WeWork.

Entrepreneurs, start-ups and skunkwork teams from established organizations are flocking to the social, flexible office space model. By bringing together numerous workers from multiple areas of expertise, industrial, and cultural fields, coworking spaces create “positive friction,” a concept used by Google in its office design and a proven precursor to innovation.

Forward-thinking organizations are adopting some of the principles of coworking spaces by creating or relocating to multiple-use areas that create positive friction by combining leisure, shopping and business activities. These open spaces are designed for public congregation, ease of mobility, decreased noise levels and fluidity of movement among citizens engaged in both leisure and work activities.

Moral of the story: don’t just colocate. Integrate. Simply moving closer to customers, partners, employees and start-ups isn’t sufficient. Workers need to actually interact with these stakeholders to gain the benefits of colocation. By establishing congregation areas outside of the traditional office, leadership can encourage chance encounters and foster interpersonal communications among a wide swath of workers, disciplines, companies and environments.

Smart Cities Also Play a Role

Our workspace study explored two different types of work that exists in offices: blue work (creative, innovative work) and red work (rote, repetitive tasks). Likewise, the way people move throughout a city can also be thought of in terms of red and blue movement. Blue movement would encompass social interactions, networking, collaboration and innovation activities that workers engage in. Red movement, on the other hand, is the commuting, administration and general tasks citizens perform on a daily basis.

While blue movement can be enhanced by initiatives related to business clusters, colocation, democratized planning and multiple-use areas, the forces that revitalize red movement are intelligent digital technologies. Think of a fully connected smart city infrastructure that alerts visitors to the quickest pedestrian routes based on footfall, traffic light timing and sidewalk conditions, or a prescriptive analytics capability that provides alerts to the imminent failure of connected utilities. 

In addition to increasing efficiency and productivity, such tools can also be a key factor in accelerating growth. With cities such as London expected to grow by 1.5 million residents in the next 20 years, planners need to streamline traffic, foot flow and utility management to maintain a harmonious and fully functional city.

To gain the true benefits of a smart city, municipalities must share their data, be it on living conditions, infrastructure, public services or transport. Helsinki, Finland, was among the first cities to openly share its data, including procurement data, aerial photos and postal code areas. By taking an open approach to data sharing, municipalities can encourage the private sector to develop apps, resulting in enhanced experiences made possible through market competition.

Ultimately, the creation of a smart city is not an endpoint in itself. Rather, it is a facilitator of efficient, productive and safe movement within municipal borders that contain a smart ecosystem. It is these ecosystems that will ultimately power innovation and collaboration in the Fourth Industrial Revolution.

May the Best Culture Win

To turn the above colocation and interactions into something meaningful to the business, organizations must choose a location whose culture encourages a collaborative mindset and agile way of working and partnering. To that end, we are seeing organizations base their location strategy more on desired culture than on industry assimilation. 

For example, companies that might have traditionally chosen Silicon Valley as their home are now settling in Las Vegas, Portland, Austin, Phoenix and others. While some of this movement is being driven by the lower cost of living in these locales, the escape from a high-cost area can also radiate a new vibe that attracts a different type of worker and encourages experimentation with new ideas, employment, culture and work models.

Therefore, when formulating a location strategy that fosters innovation and collaboration, organizations should focus on the following:

  • Flock to talent and culture. Organizations need to situate innovation-minded teams in a location whose culture and talent base is conducive to their business goals, whether that’s in a smaller city away from headquarters or in an area of the capital city where their headquarters resides. Either way, the movement away from the mothership can be a vital catalyst in spurring new ideas and thought processes that are sometimes squelched by senior management teams.

  • Consider the human in the worker. To truly benefit from the cross-pollination of ideas among industries, partners and clients, workers need the ability to directly experience the cultural vibe inside and outside the office. Locations that allow for a mix of leisure and work activities inspire opportunities for chance encounters and positive friction. Also, areas that combine these elements are more attractive for workers to mingle, even after office hours.

  • Make movement a priority. Organizations need to focus on areas that allow for fluid movement, especially when colocating multiple offices in a single city. In addition to easy access to transportation, this also means paying attention to where workers, clients and partners in the local area could collaborate outside the office. “Linking areas” should be scoped out, with multiple locations available for effortless meetups, including café’s, restaurants and coworking spaces.

  • Follow the open data. In our recent workspace study, 43% of business leaders are looking to move to cities with a compelling smart city vision. By opening their data and allowing for the creativity borne of the private sector, smart cities can operate as catalysts for productivity, efficiency and quality of life for workers.

Figure 1

The benefits of fine-tuning an organization’s location strategy go beyond increased productivity, efficiency or even inter-company/inter-industry collaboration. When properly constructed, these new ecosystems can become epicenters of game-changing innovation and creativity that spur start-up activity and enable established businesses to succeed in the digital era.

To learn more, please read “The Future Proof City,” visit our Center for the Future of Work, or contact us.

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