Measuring the benefits of agility at work

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1 Virtual advantage Value Measuring the benefits of agility at work A Research Study by Mark Dixon and Philip Ross May 2011

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3 CONTENTS V1.1 Executive Summary V1.2 Introduction V1.3 V is for Virtual V1.4 Collaboration V1.5 advantage: the business Drivers that will change the way your organisation works V1.6 Value: Monetising Agility Case Studies Conclusions Appendix

4 V1.1 Executive Summary This report identifies the three Vs: Virtual, advantage and Value that will define the benefits of agile working as it emerges over the next decade. As the concept of virtuality gains ground, monetising agility and creating a robust business case for changing the way we work will become essential. Winning strategies at work is all about success. And this success is for both employer and employee as the concept of VWork delivers dividends in a number of areas. New ways of working are already being put in place. In our survey only 8.5% of respondents from large organisations reported that no programme was in place. Of large enterprises surveyed, 62.5% have already rolled out new ways of working. Much has been written about virtual working over the last few decades. The traditional definition of telecommuting or home working and its predicted rise has not materialised. Our survey found that only 1.6% of people who work for large employers work from home most (63.5%) still commute to an office four or five days each week. But interestingly, only 9.7% of people in these organisations would like to work from home. The preference is for local work, within a 10-minute commute from home. As cities become increasingly immobile, we predict a rise in a permeable city where people will work from a variety of locations. Our survey found that people were ready for nomadic work, with 59% saying they now had the right technology tools to work anywhere. Placing a value on agility is one of the objectives of this research. With a move towards virtuality, the traditional approach of measuring workplace performance in or $ per square foot or the ratio of desks to people becomes irrelevant. Instead, we adopt a people-centric approach that also mirrors the idea of internetcentric computing in a buy your own world. Providing real time, on demand services for work, and a cost per capita per month for work provision, gives us a new way of understanding the costs of doing business as well as demonstrating and monetising the benefits. Case studies from early adopters of more virtual approaches to work, from Yell to Boeing and Cisco all paint a picture of significant cost savings and clear business benefits. We see three key stages to becoming virtual, starting with a convergence of the real, followed by a move to an augmented reality and finally a shift to virtual reality. Virtual work, VWork, will be a fact of life for most people as social networking collides with the physical workplace to blur the boundaries. As inter-company collaboration becomes more prevalent, as work gets distributed to lower cost centres and as our towns and cities become more and more immobile, people will begin to look for and adopt new approaches. Organisations need a plan to embrace winning strategies at work. Virtual work is a response to these pressures. It challenges the traditional fixed workplace as the container for work, and instead paints a more eclectic picture of Martini work: anytime, anyplace, anywhere; a fragmentation of the rules of office and corporate life that will be mirrored by a growth in distributed work, both through outsourcing and collaborative work-styles. What is clear is that there is an expectation that the younger workers, the millennial generation and those still at school, will embrace virtual working and reject the traditional office. Of our respondents in large employers, 74% expected this to be the case, and so it is no surprise that 71.9% of them predicted a decrease in the amount of office space that will be required. They see the office as a place for occasional use (51.2%) and would prefer a much shorter commute to an office under 20 minutes compared with over 40 today. Business benefits that can provide competitive, cost or other advantage show that the primary driver for change is people s productivity. AdVantages vary by size of company, but a clear focus on reducing the cost of real estate for the organisation and improving work/life balance for the employee were evident in our survey results. 2

5 V1.2 Introduction In our previous report, Work (published March 2010), we identified the six forces that were shaping the future of work and presented some ideas for how companies could adopt the corporate six pack to get fit for business. Agility has become mainstream as a way of working. But people have struggled to define a value for corporate agility. This report sets out to guide people on that journey. Now we take the ideas forward in VWork: Measuring the benefits of agility at work by presenting the idea of the 3Vs that help establish a measure for monetising agility at work. These ideas have not been developed in a vacuum. We have worked with some of the world s leading companies to understand their issues, objectives and business drivers. We have also analysed some of the key trends that will shape virtual work. Rather than the previous debate about homeworking or telecommuting, our view of virtual work looks at mobility and the changing nature of where and when work is done. The core business advantages of this approach to agile work are defined, and as a result we have monetised agility and presented the idea of an Agility Dividend that lets an organisation measure and quantify the impact that agile work can have on the bottom line. 1 Real Estate Review workplace strategy and introduce activity based working and mobility. Gather data on utilisation rates and real cost of occupancy as well as churn costs. Create an aspirational vision for new workstyles. 2 Culture Introduce change management to prepare people for new workstyles. Move from management by supervision to a results based approach. Identify champions for innovation and change. 3 People Understand demographics and profile the workforce to identify the needs of different groups by age, job function and psychometric analysis. Engage with the workforce to develop opportunities for change. 4 Technology Identify key drivers and enablers of change. Then align technology to the real estate strategy and introduce the appropriate tools for new workstyles. 5 Transport Realisation that continued stress in transport corridors will require a new approach to commuting and mobility, and the adoption of polycentric thinking. 6 Sustainability Reduced quantity of commercial real estate leased, together with better management of property assets, reduced commuting and greener technology will allow targets to be met. 3

6 V1.3 V is for Virtual The History of Virtual Work In 1964 when Stephanie Steve Shirley founded F International (FI) she could not have predicted that it would become one of the first major virtual businesses. By 1985 FI had over 1,000 workers and was winning accolades and awards. Twenty-five years later in 1987, Francis Kinsman s book The Telecommuters i described the growth of FI and other innovative companies such as ICI and Rank Xerox. As Kinsman said at the time: ICI is now making dramatically increasing use of bleepers and cellular radio throughout its operations. It is hard to remember, but in 1987, the UK had only 160,000 mobile phone subscribers and was seen as a leader in Europe against 13,000 users in France and 25,000 in Germany. Now in the UK, 33 million people have a mobile phone. So, almost 25 years on from the publication of that book, in 2011 how much has changed? Why has the forecast revolution at work, where 20% of the workforce would work from home, not materialised? The technology enablers back then were seen by Kinsman to be the continuing miniaturisation of electronic equipment, especially fax; the encyclopedic memory of compact disks But it is interesting that the other technology that ICI had in those early pioneering days is about to arrive. In 1987 Ken Edwards, part of ICI s strategic IT department, commented that 100 sales managers and 700 of their 900 sales staff had electronic mail facilities. The sales managers have dumb terminals accessed directly into the mainframe the sales reps have videotext viewdata equipment which transmits information to and from the local centre. A possible explanation for the slow realisation of telecommuting is that it is not about home working. While the home features in people s workspheres, it is only one of a number of places where people want to work. A more persuasive explanation was that 25 years ago technology was just not ready. In effect, ICI was using cloud-based technologies. Information was delivered to users from remote data centres. It has taken 25 years for the complex, office based, networked personal computer era to come to the end of its natural life. Now, in the age of Web 2.0, we are heading back to the future. Becoming Virtual In their book, Becoming Virtual ii, Jane Klobas and Paul Jackson describe a growing diversity of organisational form as organisations use new technologies to reconfigure work, distributing it more than ever across distant locations, different time zones and even diverse organisations. They go on to identify that: the world is said to be increasingly virtual, a condition in which organisational solidity is only apparent: the reality is one of high performing, dynamic networks which connect staff, enterprises, processes and expertise, where the drive to produce or compete has displaced the need for permanency and structure. That long standing symbol of the business world, the Corporate HQ, will soon be no more. The days of an all-powerful, single location, world headquarters are numbered, says Anil Gupta, professor of strategy & organisation at the Smith School of Business at The University of Maryland. The concept of a corporate HQ will change from a physical location to a virtual network. So the ultimate symbol of solidity, the corporate office, is therefore under attack. The economics of the office are being redefined. As we have seen, the early experiments of telework have evolved into new formats for the firm. They include virtual teams that use new ways to connect, communicate and collaborate; mobile workers that no longer need a fixed desk and a growing virtual supply chain of outsourced functions that are provided by specialists to allow the corporation to focus on its core business. As Gupta notes: The next generation of global enterprise will operate as a network of global hubs with distributed intelligence and direct peer-to-peer collaboration. Key executives will sit close to where the action is, rather than in an ivory tower 10,000 miles away. The next obvious iteration will be an increasingly virtual organisation, following the trend of social networks, to weave together a networked enterprise. Technology, and how technology can support the workforce is key to the successful implementation of agile working. Patrick Foord, Standard Chartered 4

7 Virtual Work There is no doubt that joined-up thinking between Human Resources (HR), Information Technology (IT) and Corporate Real Estate (CRE) functions within the organisation will drive cultural change. But it is not just the collision between the traditional corporate silos to create central business services functions, but the innovation that can come through changing the way we work that will result in a new approach. And it is where the realms overlap that the key for innovation lies, as companies understand they can change infrastructure, behaviours and core business and work processes. Companies moving towards virtuality display certain characteristics and have developed new skills and put in place enablers to succeed. These are both physical and emotional. Enablers of Virtual Work Technology The Right Tools User-centric technology provision Going Thin All technology needs to migrate to the cloud no infrastructure in the office People Vision and leadership Commitment from the top and leading by example Behaviour Process Change management to introduce new capabilities and skills, as well as performance measurement and mentoring Non-linear, with tasks and responsibilities defined Real Estate Location Work sphere identification, with day in the life (DILO) modelling to match work with activities and personal profiles 5

8 Culture workstyle and flexible working The virtual office: from noun to verb Work is no longer a place you go. It is something you do. It has moved from being a noun to become a verb. And with this change has come a realisation that Martini work is now a reality: anytime, anyplace, anywhere 9 bn TOTAL POPULATION RURAL POPULATION URBAN POPULATION People demographics, expectations and behaviour The changes that are reshaping work were identified in our previous report, Work: adopting the corporate six pack. This demonstrated that the combined forces of culture, people, technology, transport, sustainability and real estate were converging to allow companies and their people to fundamentally re-evaluate the proposition of work and in turn challenge the nature of work and the workplace Transport What happens when a city becomes immobile? When it takes two hours to cross a central business district, physical meetings and commuting to a physical workplace are no longer sustainable modes for work Source: United Nations Real estate buildings, cities and work space Sustainability Culture workstyle and flexible working People demographics, expectations and behaviour Number of jouney stages 1.8m 1.0m 0 CAR BUS METRO NATIONAL RAIL OTHER Hour of departure Transport ICT information, communication, web According to the United Nations, the world s population will increase from around 6.5 billion people today to 9 billion people by And while today 3 billion people live in urban areas, by 2050 a staggering 6.5 billion people are forecast to become urban dwellers or two-thirds of the global population. This will double the population of cities in the next 40 years. While we demonstrated in Work that most cities were congested today, the growth predicted by the UN will not just exacerbate the congestion but make many cities immobile as transport growth cannot keep up with population growth. But people are increasingly able to work from anywhere. In our survey, 59% of respondents said they no longer struggle to work effectively outside the workplace. Technology for remote connectivity and mobile working have at long last caught up people are now enabled to be nomadic workers, and so the city will become more permeable, punctuated by a series of places to work. And with emerging technology, this will only get better. New devices from tablets to smart phones will allow enhanced computing power, and connectivity is set to improve with new 4G networks that will deliver cloud-based applications and services to people regardless of their location. 59% of people now feel that they have the right technology to be able to work from anywhere. 6

9 Going Local Commuting is not seen to be optimal today. Out of the respondents that worked for large organisations, 32.1% spent 41 minutes to an hour commuting every day and for 27.4% their daily commute was over an hour. And 47% still commute to the office five days a week only 1.4% work from home. These figures were more pronounced for medium sized companies where 67.3% of people still commute to an office five days a week, showing that presenteeism was still the dominant management model for a smaller business. But the reality of life today does not match people s ideal. When asked what the ideal commuting time would look like, 25.2% would like to have a 10-minute commute and 38.4% would like it to be between 11 and 20 minutes. So 63.5% of people don t want to commute for more than 20 minutes; a far cry from the average of 40 minutes today. The future of work points to the community and a move away from central business districts as the place to try and commute to every day. A new set of workspheres will include a range of new destinations for work that are close to where people live. Localism will be a growing trend globally, as people seek to inject life into their communities and address in the impersonal through new networks in Web 2.0 big society. Intergenerational experiences in both work and home will change the nature of nurture. A portfolio career will see human capital moving from the corporation to a focus on the individual. Atomisation will be countered in the free agent nation by new ways of connecting and housing the contingent workers that are forecast to comprise of 40% of the US workforce by 2020 iii. A more fragmented, localised society will require new ways to connect. Interestingly, only 12.3% of people would like to work from home. BUS LIBRARY REGUS PLANE OFFICE TRANSPORT The ideal commute to work is under 20 minutes (63.5%) with 25.2% of people wanting less than a 10 minute journey to work HOME HOME OFFICE CAR CAFE HOTEL TRAIN 7

10 Virtual Working One third of our UK staff has a boss overseas, said Tim Caiger at Oracle, everything is online. And this trend towards remote management is no longer confined to the global multinationals. Offshoring and outsourcing has led many people to change their organisational models to reduce costs and improve effectiveness, from call centres in India to typing bureaus in South Africa, colocating all functions inside the physical office is no longer the only way to provide support services and functions. The death of distance means that lower-cost centres of production are as connected as a department two floors below, and as interaction costs have vanished, the firm itself is being redefined. The recent announcement by law firm CMS Cameron McKenna that it is outsourcing all of its support functions to Integreon, including finance and IT, is a sign of the changes that will undoubtedly affect all firms based in high cost central business districts. The argument for employing and housing hundreds or thousands of support staff in offices no longer has any economic rationale. Some of the earliest job functions to move virtual are service and knowledge focused roles which place people close to customers. As Vito Chiodo at Telstra said, We have to understand that all departments have different modes of operating. We need to understand customers needs. We view each employee as a customer. So the Core and Periphery or Shamrock organisation long predicted by Charles Handy in The Age of Unreason iv and his identification of portfolio workers, are becoming reality on a huge scale in advanced, global companies. What is clear is that to work virtually, people need new tools to collaborate. Sitting across the floor or popping up to HR on the third floor has to be replaced by new ways to connect people together. Bricks and clicks In our survey, 78.7% of people feel they now have the right technology to be productive in their workplace. Increasingly they are being given the technology enablers to be able to work from anywhere. Of those working for large organisations, 50.8% are enabled with everything they need, while 42.6% have a few tools but it could be better. The barriers to agile working are now being removed. 8

11 V1.4 Collaboration As Patrick Foord said, we want to create an environment that supports pathological collaboration. And this is a recurrent theme as work becomes more distributed. Today we typically deal with single source information that is usually asynchronous. It is viewed and used off line, and typically it is flat what you see on screen can be output to paper. Tomorrow, people will use information in new ways; it will come from multiple sources that are typically synchronous, real time or live, streamed or delivered to new, always-on devices operating with multiple, simultaneous applications. Digital flow will change the nature of the information presented as depth though urls, embedded multimedia and hover information means that what you see on screen can no longer be output to paper. Beyond mobility, this issue of virtuality needs to be addressed.. Ronen Journo, Cisco Today most collaboration takes place between people inside the organisation. Cisco estimates that 80% of collaboration is intra company. This will now change dramatically, with Cisco predicting this figure will reverse to where 80% of collaboration is inter company as people increasingly need to connect dispersed teams. huge rise in the use of video for communication and collaboration. From systems such as Skype and FaceTime to corporate tools such as WebEx, people are now getting increasingly accustomed to seeing the person they are speaking to. Case study : Tesco Tesco, for example, now has an 80 90% utilisation of their Telepresence systems and have embraced WebEx collaborative software. They have found that they are saving two hours per WebEx user per week and travel costs have been cut by 45%. Cisco reports that 60% of the IP packets on their network are now video, and they predict that by 2012 video will account for most traffic on the public internet. This also represents the huge rise of video as a medium for communication. From the use of YouTube to video casts, people are increasingly familiar with its format and power. It s clear there is a range of emerging technology that is set to change the landscape for how we work together both in the same place and across distance. These can all be seen as transformational technologies, because they have the potential to alter the nature of how, why and where we work. Video Video conferencing peaked too early. The adopters of the first systems complained of judder making participants look and sound robotic. Creating the call was fraught with challenges, and the equipment occupied large, engineered, specialist rooms. Now much has changed. The rise of high definition videoconferencing from the likes of Polycom, together with the high end fixed solutions such as Telepresence from Cisco and Halo from HP has resulted in a new era for video as the experience and quality of collaboration across distance becomes close to being in the same room at the same time. Driven by travel savings, there has been a wide-scale adoption of video conferencing as companies realise they can connect to customers, the supply chain and colleagues across the globe and experience productive meetings and other sessions. Polycom s Roundtable video conferencing system provides people with effective tools to combat virtuality. The automated video image of participants in the conference, together with their jellybeans and collaborative workspace means that people can feel connected across distance. But the rise of video is not just about high-end video conferencing. The penetration of lower quality web cams into portable devices such as laptops and mobile phones, as well as fixed PCs, has led to a 9

12 Mobility There are a number of facets to mobility. The key is the combination of a portable device and high-speed connectivity. But the mobility roadmap becomes more overcast as cloud computing allows a new dimension to be realised. The delivery of software as a service (SaaS) from remote data centres is ideal for portable devices that have limitations in processing power, storage capacity and battery life. Processing that is done in the cloud leads to the concept of a thin client that can be used by anyone through a virtualised desktop environment. Indeed the concept of virtualisation will apply across fixed and mobile devices, as more of the software needed for work is hosted remotely. With these tools, and data hosted remotely, a new paradigm will emerge when people come into a space or building they will do so because they need or want to be there. They will no longer have to commute to a container for work because it houses the corporate computing infrastructure. From Obese to Thin As on-demand resources are delivered to people wherever they are and buildings no longer need to house the fixed server infrastructure and its associated power, cooling, raised floor and fire suppression systems, buildings will move from being highly engineered, expensive and complex containers for technology to simple, connected places to work. They will be thin, devoid of most of the paper and equipment that they contain today. Places for people and no longer repositories of files and servers. When NASA introduced the idea of Clickworkers they extended their workforce to a network of volunteers that help identify craters on Mars. The growth of LinkedIn, Facebook and the other social networks extend the power of the physical into the megapower of the virtual, with its limitless boundaries to connect and collaborate. Clicks, and not bricks, will define the boundaries of commerce tomorrow. Virtual presence, Web 2.0, Unified Communications and the rise of the jelly bean The web has moved from being about find and use to a platform that also allows share and expand. This extension is a natural migration into the world of collaboration, and so much of the socalled semantic web is about shared experiences. As people realise the benefits and added value that comes from sharing, tagging and revealing location information, a new era of collaboration experiences will emerge. Real time collaboration or co-authoring will begin to become commonplace, letting people work together across distance and connect in real time, with their jelly bean visible at all times. Source: Microsoft One of the most profound changes that people will experience will be ubiquitous presence indicators the so-called jelly bean that will start appearing in almost all applications and on all devices. Corporate presence indicators such as in a meeting or out of the office appear today alongside names in address and buddy lists. Tomorrow they will appear within all applications alongside people s details to allow a constant view of colleagues, clients and others in distributed networks. And the intelligence will extend to a point where the jelly bean is automatically fed by calendars and, in the future, location aware sensors, accelerometers, digital compasses and GPS data from mobile devices. Contextually aware, geographically located and state driven, these systems will begin to break down the barriers between time and place and also allow in the future the engineering of serendipitous encounters based on people s profile, contextual information and real time location. We will see huge rises in collaboration across organisations as the barriers to secure inter company collaboration are lifted. Collaboration will increasingly use both voice and video, alongside intelligent surfaces and devices that allow people the tools to manipulate data and communicate ideas. 10

13 Geopresence will allow not just the state of a person to be displayed but their real time whereabouts as well. It will become even more sophisticated with context aware presence an idea where only the people that it would be useful to see are displayed based on a project, knowledge or communications flow or time zone. Today s often disparate systems will converge and we predict that a unified communications and collaboration (UCC) suite will become the norm. The advance of corporate presence to include geopresence and context specific presence will usher in a new era of real time communities working on collective solutions collaboration without leaving the document. A Virtual Office? What is the purpose of property? asked Ronen Journo. This is becoming a fundamental question as digital technology and the rise of cloud computing empty office buildings of everything except people. When the servers, software and data reside in the cloud, and computing is delivered as just another utility to people through a browser wherever they are, what is the purpose of the workplace? Most retort that it is about bringing people together, but here there is a dilemma. One large multinational has found that by using web discussion forums rather than to ask questions within a 100,000+ global workforce, half the respondents to a question posed came from people unknown to the person asking the question. And of all the answers back, the most useful came from those unknown respondents. So do we have the right people in the room to solve problems? Their findings would suggest not. Social networks were unknown five years ago. Now they dominate the net, with Facebook boasting 500 million active users, half of which are using the social network every day. And with 700 billion minutes per month spent on Facebook, what happens when virtual networks collide with the real networks that are housed in the workplace? tracking software can map a social network inside a business, showing the real time organisation, modelling teams and go to people. Source: Trampoline Systems The network map (above) may show a glimpse of the future. Here people are mapped by their flow through an exchange server to show who is connecting to who within a company it models the real organisational network, people at work, and not the hypothetical, static structure of departments and divisions. Perhaps this should be the model for understanding the virtual office, rather than translating an organisational chart into a physical office. But while these thoughts point to the rise of virtual networks to replace the physical ones in the office, a new book by Stephen Johnson called Where Good Ideas Come From v contradicts this message. He traces innovation back for 200 years and finds that most of the significant inventions of the last two centuries have NOT come from flashes of inspiration but from communal, multilayered endeavour. Innovation springs out of the adjacent possible the most inventive places are hives of activity where people get together and share ideas, says Johnson. And so do people need to be together to innovate? The mix between virtual and real workspace will be one of the defining trends over the next decade as companies explore the future of work. Getting people to work effectively together will be the key critical success factor. Productivity of people will drive change. 11

14 V1.5 advantage: the business Drivers that will change the way your organisation works A new measure for agility will come from quantifying the benefits that will be derived by the organisation from new workstyles and the business drivers of these were ranked in our global survey. Agile working is not just about agile workers but agile business, expressed a global real estate leader. The idea that agility at work is much more than just a spatial response to changing workstyles is reflected in the results from the question: what do you think will drive changes in the way your organisation works? Other measures suggested by respondents included: Profitability Physical and information security issues Need for physical interaction Regulation and security Non-linear, with tasks and responsibilities defined Collaboration Managing by deliverables not presenteeism Attracting and retaining the right staff What people want Business requirements. You need clever office space Proximity to our clients Company culture Need for interaction and exchange of ideas Client expectations. Customer needs Cost of fuel Global nature of business Top down requirement Collaboration and creativity 12

15 One of the most important business drivers is clearly productivity of people and this was reinforced by some of the comments at the Berne Summit. As Patrick Foord expressed, we need to extract maximum benefit from agility. But how can this be done? We are moving away from fixed location with an emphasis on measuring productivity. By this I mean managing teams with a focus on output, with work being carried out where, when and how people choose to work, as opposed to having staff in a fixed location at any given time, explained Michael Ansah, and this focus on effectiveness is key. The performance of people is still one of the most challenging concepts for measurement. But it is clear from surveys that most people are disengaged at work. Gallup s employee engagement surveys suggest that only 20% of the workforce is engaged in the job they do. It is becoming evident that the expectations of the next generation will change the status quo more dramatically than a current workforce, which is dominated by the digital immigrants who grew up in the analogue era. Of the people we surveyed, a staggering 70.9% thought that younger workers, the millennial generation and the generation still at school, will be more accepting of virtual working and reject the traditional office. Of those working in large organisations, only 8.9% felt the next generation would carry on working in the workplace of today. Agility will explode when the next generation come into the workplace and we need to be ready to ensure that these new members of the workforce can be truly creative and productive End of the line for the traditional office? Not surprisingly, 58.2% of people working in large organisations predict a decrease in the need for office space as a result of future workstyles, with only 7% predicting an increase in space required. So the office will become a place for occasional use according to 51.2% of respondents in large enterprise. This compares to smaller enterprises where people still see the need to commute to their workplace most days (41.6%). Only 8.5% of large organisations have not implemented a new ways of working programme. Chris Kane, BBC The key reasons stated for working virtually in other studies are: 1. Travel time and cost reduction 2. Concentrated work with fewer distractions 3. Wellbeing and stress 4. Work-Life balance and work anywhere. Other reasons that are stated include child and elderly care, special needs and disabilities, sustainability and quality of life. The business benefits are clear. We have also found that most large organisations have now adopted new ways of working. Only 38% still allocate one person to one desk, and 15.4% of companies represented by the survey report that their organisation s new ways of working programme is now adopted, advanced and part of our culture, while 25.1% reported a companywide policy, but we could be doing more. Only 8.5% of large organisations have no new ways of working programme. 13

16 V1.6 Value: Monetising Agility Putting a value on agile work is the next challenge for corporates. We need to find a new measure for the cost of provisioning work that leaves behind the traditional approaches of rent and rates in a per square foot fixed world. As we move away from the historic one-person-one desk approach to work provision, new ways of measuring effectiveness of a property portfolio need to be developed. This becomes more apparent as people need new tools, technologies and locations for agile work patterns. At a very simple level, a clear case around monetising agility within the workspace can be made by taking into account the agility within the overall portfolio and at a site level in terms of how agile and effective is the workplace in meeting the needs of our employees, said Colin King. This will mean we have less space and our property commitments are flexible and fully aligned to the business objectives. Measuring Agility: Company ABC Company ABC employs 1500 people and has an office in the City of London. It took out a 15 year lease on 150,000 square feet and the total cost of the building per annum is 12m or $20m (rent, rates, utilities, operations) and so the total cost per square foot per annum is 80 or $133. This has been the predominant model for measuring efficiency. Over the 15 years, the lease represents a 180m ($300m) liability or 120,000 ($200,000) per head. But how is the office building used today? Company ABC allocates space as follows: But the reduction in space rented is only one way of monetising the value that can be delivered by agile working. To get a broader picture, we have identified a series of value dividends that shape a vision of provisioning work in a buy your own world At a very simple level, a clear case around monetising agility within the workspace can be made by taking into account the agility within the overall portfolio. Colin King, GlaxoSmithKline The majority of floorspace is given over to allocated or shared workstations, with some private offices and associated facilities. What is striking about the current typical allocation of space is the lack of meeting and project rooms today where almost all corporates report a dearth of this kind of resource in a world where collaboration is driving teams to need to work together. But utilisation of an office today is typically only 45%; that is at any one point in time 55% of the allocated desks and offices lie empty. For Company ABC this would result in 825 desks sitting empty at any point in time. 100% 75% 50% 25% 0% EMPTY UNOCCUPIED PAUSING PAPERWORK READNG WRITING TALKING TELEPHONE COMPUTER MEETING Time of day 14

17 Company ABC Monetising Agility in an advanced organisation that already has adopted some space sharing If we take a typical London office building of 150,000 square feet it would house 1,500 people today on a moderate sharing ratio of 1.2 people per desk (1.2:1). The total cost of the building per annum is 12m or $20m (rent, rates, utilities, operations) and so the cost per square foot per annum is 80 ($130). The building houses 1,150 desks, and so the cost per desk per annum is 10,500 ($17,200) At 45% utilisation the cost of unused space is 6.6m ($11m) At 70% utilisation, the cost of unused space is 3.6m ($6m) The number of empty desks on any one 45% utilisation is 632 The number of empty desks on any one 70% utilisation is 345 At a ration of 1.2:1 (people:desks) we find that space is allocated at 130 sq ft per desk ( is the industry average) or 110 sq ft per person ( sq ft per person is typical) Adopting activity based working, where the building becomes a real time resource and operates either at 95% occupancy (to accommodate growth) or in 30% less space would save Company ABC between 3m ($5m) and 6m ($10m) pa. But ABC is an advanced company and it has already introduced hot desking/desk sharing at a ratio of 1.2 people per desk (1.2:1). The building houses 1,150 desks, and so the cost per desk per annum is 10,500 ($17,500). At 45% utilisation, 632 desks lie empty and the cost of unused space is 6.6m ($10.8m) pa. Even if utilisation can be improved to an ambitious 70%, the cost of unused space on any one day is 3.6m pa ($6m) with an average of 345 empty desks or offices at any point in time. Empty desks no longer make sense in a world where people will accept mobility and agility as the most effective and sustainable way of working. But measurement of the benefits of agility is not just about footprint reduction and cost reduction through real estate. Other measures include: Corporate Driver Carbon footprint Churn and down time Less paper speed (collaboration), carbon, space (print/paper/toners/filing/recycling/waste), cost (print/support/maintenance) M&A Onboarding Project development time and delivery Management complexity Agility Benefits and Cost Savings An obvious area for monetising agility heating or cooling, lighting and cleaning empty office space can no longer be justified where commercial buildings are identified as one of the largest emitters of carbon. The cost of churn is usually measured through the facilities cost of moves and changes but this masks the opportunity cost of inefficiency when people can t be located together who need to work collaboratively. Manufacturing paper, distributing paper, printing, storing and recycling the total cost of ownership is significant. Agile work drives out paper, by adopting digital flow. A retail bank in London prints over 1 billion sheets of paper a year. The average financial business outputs 70 pages per person per day. And storing paper files in Company ABC takes 4% of the floorspace and costs 0.5m pa. Mergers and Acquisitions bring immense integration problems, especially with diverse property portfolios. Agile working, with non-specific, unallocated property resources allows much more flexibility in planning and speed in allocation of people and place. One of the biggest barriers to corporate agility remains onboarding, both of new people and new partners (eg outsourcing). Agility streamlines the process, removing barriers to entry for new joiners and partners. Speed will increasingly be seen as a core attribute of an agile business. Fast Company behaviours are about being hybrid, nimble and able to innovate. Speed of decision-making, time to market and development cycles can all be accelerated through agile work. Another focus that has been raised is reducing complexity, especially in business services functions. 15

18 Evidently the ability to free up space will still be the predominant driver to introduce agility into organisations. Disposals or subletting can generate cash receipts, remove leases from the balance sheet and also drive down opex. While property remains the second largest overhead for most organisations after salaries, this will be the most immediate focus for monetising agility. A buy your own world In 2009, Citrix gave its staff the option to buy your own computer or BYOC. A budget of $2,100 ( 1,260) was made available for people to buy the computer of their choice. Mick Hollinson, vicepresident of marketing, says not only has it cut costs, but also staff like the control. Employees love having the freedom to choose whatever they like, he says. The reality is that there are a number of consumer devices that provide services that you just don t see in a corporate laptop, and employees just enjoy their computing experience more. (Staff taking advantage of the scheme must buy a three-year service contract.) Our Information Systems team is focused on providing the best work experience to all employees Mark Dajani, Kraft Foods Kraft Foods is another early adopter of the concept. It announced its innovative BYOC program in 2010, which allows employees to purchase and use their computer of choice at work. The program benefits both the company lower costs and employees more flexibility. Our Information Systems team is focused on providing the best work experience to all employees, said Mark Dajani, senior vice president and chief information officer. We want employees to be productive and comfortable with the tools they use every day to get their job done. So, if they prefer one laptop over the other, why not give them the freedom to customize their work experience? BYOC is a very agile approach and is becoming more accepted as the future for corporate technology provision in an internetcentric, cloud driven world. As Mick Hollinson says: The device is their responsibility, and not that of the company. We don t asset manage it in any way. And he states that: It s shown on average savings of 15-20% versus a traditional desktop deployment. Could the same buy your own approach apply to the workplace? Do corporates need their own office space in the future? Can people be provided with an annual budget to provision work that includes technology, space and support as suits their job and objectives? At Company ABC, the cost per person of providing workspace on the current model is 8,000 ($13,300) per person per year. If we take the annual cost of workspace provision per person as a measure of monetising agility at work, this aligns with the technologyled vision of BYOC. And so 1,875 people on current patterns of work can see the building as home or 2,000 people with new enablers, activity based working and third space provision, which would give a cost of 6,000 ($10,000) per person per year for the provision of workspheres in a buy your own self-service world a 25% bottom line saving. For companies less advanced, with a more traditional starting point, property-led cost savings of over 40% are achievable. Monetising agility is about measuring the BYO cost per person. Just as the cloud will deliver communications software as a service for say 5 ($8) per user per month, so workplace could become an on-demand resource. The monetisation of agility will go through a number of discrete phases for medium and larger enterprises, although smaller and start-up business will be able to leapfrog ahead. As a first stage, the traditional office today will be slimmed; fixed costs will be reduced through the adoption of activity-based working as a prelude to full agility, and so footprint reduction will reduce property overhead by up to 30%. Operation costs reduce, through Monetising Agility moves the measure of costs per person from fixed bricks and mortar to the individual, and their overall work tools. It is open source working where the user chooses. For Company ABC, the cost per person of providing workspace on the current model is 8,000 ($13,300) per person per year. And so the annual cost of workspace provision per person will be the measure of monetising agility at work. It aligns with the technology-led vision of buy your own computer or BYOC a vision that has increasing buy-in from CIOs that are moving towards an internet-centric vision for computing. So 1,875 people on current patterns of work can see the building as home or 2,000 people with new enablers, activity based working and third space provision, which would give a cost of 6,000 ($10,000) per person per year for the provision of workspheres in a buy your own self-service world a 25% bottom line saving. For companies less advanced, with a more traditional starting point, property-led cost savings of over 40% are achievable. Monetising agility is about measuring the BYO cost per person. Just as the cloud will deliver communications software as a service for say 5 ($8) per user per month, so workplace could become an on-demand resource. 16

19 The Road to Virtuality : Value model Variable Costs (OpEx) Fixed Costs (CapEx) Variable Costs (OpEx) Fixed Costs (CapEx) TODAY TOMORROW Variable Costs (OpEx / BYO) Traditional Office Outsourcing Activity Based Working FUTURE Virtual Office Agile Working Cloud Computing less space (lower utilities/facilities costs), less churn and outsourcing of key business services. The future of agile work will see workspaces provided on demand, and consumed on an as needed basis. This will mirror the rise of the cloud that moves technology from capex to opex, delivered as another utility to people as and when they need it. Add place to this, and a true buy your own model for provisioning work emerges. As Colin King points out: The real benefit comes when we create environments that handle virtually everything people need both within the physical and virtual workplace. We have seen that kind of business-focused innovation reduces cost, business risk and enables our business to drive revenue growth. BYO work will provide an annual budget or stipend to individuals to choose the tools, spaces and services needed to produce the desired outcomes. We also see the productivity benefits that result from reduced downtime as always on cloud technologies and portable devices allow agile work to be adopted. Efficiency dividend property (p) fixed (f) and operational (o) cost savings Happiness dividend commuting (c) time (t) and cost (c) savings Productivity dividend downtime (d) employee/salary costs (s) These three elements can be weighted and given a coefficient based on the importance of each factor to the company. They can create an equation for calculating the Agility Dividend as follows: Agility Dividend = p (f+0) + c (t+c) + d (s) The Agility Dividend As well as the efficiency dividend from less or more efficient use of space, we have identified two other key dividends that can be derived through agile work - a happiness dividend and productivity dividend. It adds between 5 to 10% to the bottom line as a consequence of the increased productivity you achieve Chris Kane, BBC From our survey and other research, there is no doubt that people would choose to change the way they commute. This is a factor of both time and cost, skewed by the rush hour commute that correlates congestion and price to the non-agile, traditional working day. Choice allows an individual the ability to rebalance patterns of work and delivers a happiness dividend that is part of a broader move towards recognising health and wellbeing at work. 17

20 Case studies Early pioneers In the 80s, there were plenty of early pioneers of virtual working. As Lisa Lion Wolfe at Hewlett-Packard observed: Managers have to be able to define and measure performance. They really have to analyse the results, not just the tasks or processes vi. They used the technology available at the time. Some of the early examples were: Company Solution Business Benefit Hewlett-Packard Salesforce mobility Increase revenue person Andersen Consulting Virtual working Reduce cost of office overhead Lotus Development Virtual work Put people closer to customers and improve work-life balance IBM SMART More face time with customers and reduced real estate costs of 40-60% Cisco Cisco has used Media Net to create and run virtual company meetings. Not only does this create an event at between 1/3 and 1/10 of the cost of a physical event, but it extends the reach of the event by a factor of between 5 and 10 times. Cisco s annual GSX sales conference was traditionally held in Las Vegas for 13,000 people at a cost of $4,307 per person. Last year the event was held virtually at a cost of only $437 per head, and an additional 3,000 people were able to attend. Interestingly, participants gave a higher rating for the content than the previous physical event. As an early adopter, Cisco is an interesting case study in the future for collaboration. For example, in Q2 2009, 100 million minutes of WebEx conferencing were used. And with 700 Telepresence rooms around the world, Cisco has saved a staggering $250m in avoided travel costs. In 2009, Cisco realised over $1.1bn ( 0.6bn) of cost savings, comprising as follows: Now we are seeing new ways of working enter the mainstream as our survey shows, but for most the approach so far has not resulted in a move to the virtual. Now, as people are equipped for work anywhere, we predict a growing implementation of virtual work principles. Yell Yell s sales team of over 700 worked from 35 nationwide sales offices. But with sales people on the road, the offices were expensive and underused. An initial reduction from 35 to 20 locations was accompanied by enabling the sales team to be mobile with both portable technology and also Businessworld Gold cards so that Yell s people could use a variety of Regus locations as part of their distributed workplace strategy. Simon Taylor, head of property at Yell in the UK, said: Our field sales teams use of and reliance upon a physical place of work has significantly changed in the last year due to developing technology and we no longer require our network of sales offices. Now, a mobile team that is equipped with laptops and remote connectivity solutions is able to work in new locations, reducing Yell s property overhead by 1.5m ($2.5m) a year and at the same time driving efficiency through reduced downtime. Telecommuting $299m ( 180m) Connected Workplace $12m ( 7m) Virtual Expert $125m ( 75m) Remote Collaboration $601m ( 360m) Sales & Marketing $15m ( 9m) In its Bedfont Lakes workplace in the UK, it has increased capacity by 60%, through new ways of working as well as increased work from home. All the tools are now in place to make advanced collaboration a reality. Boeing At Boeing, for example, over 27,000 external suppliers collaborated with Boeing s development teams on the Dreamliner project. The company held over 1 million collaboration sessions in 12 months with this extended community using tools such as WebEx and, as a result, has reduced time to market. A US government study showed that if 20,000 federal workers could telecommute just one day a week, they would save over 2,000,000 commuting miles and 81,600lbs of CO2 emissions each week. 18

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