A recent real estate report found that, following healthy gains, Houston's medical office market might see less action in the near future. Photo via Getty Images

Houston’s medical office market is on a roll.

A report from commercial real estate services company JLL shows net absorption and transaction volume saw healthy gains in 2022:

  • The annual absorption total of 289,215 square feet was 50.5 percent higher than the five-year average.
  • Transaction volume notched a 31.7 percent year-over-year increase.

Meanwhile, net rents held steady at $26.92 per square foot, up 1.3 percent from the previous year. The fourth-quarter 2022 vacancy rate stood at 15.9 percent.

Despite those numbers, the report suggests a slowdown in medical office rentals may be underway.

“Tenants who may have previously considered building out or expanding their lease agreements are now in a holding pattern due to increased construction costs and higher interest rates,” the report says. “These factors are having a direct impact on financial decisions when it comes to lease renewals, making it more likely that tenants will remain in their existing location for the foreseeable future.”

Still, the report notes “a number of bright spots for the future of healthcare in Houston.” Aside from last year’s record-high jump in sales volume, the report indicates an aging population coupled with a growing preference for community-based treatment “will lift demand even higher in coming years.”

The report shows that in last year’s fourth quarter, 527,083 square of medical office space was under construction in the Houston area, including:

  • 152,871 square feet in the Clear Lake area.
  • 104,665 square feet in the South submarket.
  • 103,647 square feet in Sugar Land.
Last fall, JLL recognized Houston as a top city for life sciences. According to that report, the Bayou City lands at No. 13 in JLL’s 2022 ranking of the country’s top 15 metro areas for life sciences. JLL says Houston “is poised for further growth” in life sciences.
A new report shows Houston has attracted federal support as the life science industry expands locally. Photo via Getty Images

Report: Federal funding, increased life science space drive industry growth in Houston

by the numbers

Federal funding, not venture capital, continues to be the main driver of growth in Houston’s life sciences sector, a new report suggests.

The new Houston Life Science Insight report from commercial real estate services company JLL shows Houston accounted for more than half (52.7 percent) of total funding from the National Institutes of Health (NIH) across major Texas markets through the third quarter of this year. NIH funding in the Houston area totaled $769.6 million for the first nine months of 2022, exceeding the five-year average by 19.3 percent.

VC funding for Houston’s life sciences sector pales in comparison.

For the first nine months of this year, companies in life sciences raised $147.3 million in VC, according to the report. Based on that figure, Houston is on pace in 2022 to meet or surpass recent life sciences VC totals for most other years except 2021. JLL describes 2021 as an “outlier” when it comes to annual VC hauls for the region’s life sciences companies.

JLL notes that “limited venture capital interest in private industry has remained a challenge for the city’s life sciences sector. Furthermore, it may persist as venture capital strategies are reevaluated and investment strategies shift toward near-term profits.”

While life sciences VC funding has a lot of ground to cover to catch up with NIH funding, there are other bright spots for the sector.

One of those bright spots is the region’s rising amount of life sciences space.

The Houston area boasts more than 2.4 million square feet of space for life sciences operations, with another 1.1 million under construction and an additional 1.5 million square feet on the drawing board, the report says. This includes a soon-to-open lab spanning 25,000 square feet in the first phase of Levit Green.

A second bright spot is the migration of life sciences companies to the region. Two Southern California-based life sciences companies, Cellipoint Bioservices and Obagi Cosmeceuticals, plan to move their headquarters and relocate more than half of their employees to The Woodlands by the first half of 2023, according to the report.

“Houston’s low tax rate and cost of living were primary drivers for the decisions, supported by a strong labor pool that creates advantages for companies’ expansion and relocation considerations,” JLL says.

A new report says Houston “is poised for further growth” in life sciences. Photo via Getty Images

Houston named a market to watch within the life science sector

h-town on the rise

Houston is receiving more kudos for its robust life sciences sector.

Bayou City lands at No. 13 in JLL’s 2022 ranking of the country’s top 15 metro areas for life sciences. JLL says Houston “is poised for further growth” in life sciences.

Here’s how Houston fares in each of the ranking’s three categories:

  • No. 12 for supply of life sciences-oriented commercial real estate
  • No. 14 for access to life sciences talent
  • No. 15 for life sciences grant funding and venture capital

Earlier this year, Houston scored a 13th-place ranking on a list released by JLL competitor CBRE of the country’s top 25 life sciences markets. Meanwhile, commercial real estate platform CommercialCafe recently placed Houston at No. 10 among the top U.S. metros for life sciences.

JLL applauds Houston for strong growth in the amount of life sciences talent along with “an impressive base of research institutions and medical centers.” But it faults Houston for limited VC interest in life sciences startups and a small inventory of lab space.

“Houston is getting a boost [in life sciences] from the growing Texas Medical Center and an influx of venture capital earmarked for life sciences research,” the Greater Houston Partnership recently noted.

Boston appears at No. 1 in this year’s JLL ranking, followed by the San Francisco Bay Area, San Diego, Washington, D.C./Baltimore, and Philadelphia.

Last year’s JLL list included only 10 life sciences markets; Houston wasn’t among them.

“The long-term potential of the sector remains materially unchanged since 2021,” Travis McCready, head of life sciences for JLL’s Americas markets, says in a news release.

“Innovation is happening at a more rapid pace than ever before, the fruits of research into cell and gene therapy are just now being harvested, and revenue growth has taken off in the past five years as the sector becomes larger, an atypical growth track.”

A new report from a real estate firm has Houston high on its list for emerging life science hubs. Photo by Dwight C. Andrews/Greater Houston Convention and Visitors Bureau

Houston named a top life science emerging market

health tech

Houston is moving up the life sciences ladder.

In October, commercial real estate services company CBRE ranked Houston second on its list of the top emerging clusters for life sciences in the U.S. Pittsburgh took the No. 1 spot, while Austin sat at No. 3.

Now, commercial real estate services company JLL also is giving Houston's life sciences sector some love. JLL recently issued a report identifying Houston as one of the top emerging markets in the U.S. for life sciences.

Among the markets covered in the JLL report, Houston ranked seventh for the number of STEM degrees among people 25 and older (409,354). The gives Houston an edge in terms of life sciences talent.

JLL puts Houston at No. 8 in another life sciences category: wage positioning. This refers either to wages above the industry average that entice life sciences talent or wages below the industry average that attract cost-conscious employers.

"Traditional top life science markets will likely retain their positions; however, it's encouraging that Houston, home to one of the world's largest medical centers, continues to rise on the list of markets for further advancements in the life sciences sector," JLL says.

According to the Greater Houston Partnership, Houston has more than 1,760 life sciences companies, hospitals, health care facilities, and research institutions with a workforce exceeding 320,000. Houston's major corporate employers in life sciences include Abbott, Bayer, Fisher Scientific, Merck, Mylan, Novartis, and Philips.

Of course, the Texas Medical Center — the world's largest medical complex — plays a critical role in the region's life sciences sector. The medical center's TMC3 life sciences hub, set to open in 2022, promises to lift Houston's life sciences profile even more. The 30-acre, 1.5-million-square-foot TMC3 campus is projected to create 30,000 jobs and generate an economic impact of $5.2 billion.

Houston-based real estate developer Hines also is getting in on the life sciences game. It is leading establishment of a 52-acre life sciences hub, Levit Green, adjacent to the Texas Medical Center.

In February, commercial real estate firm NAI Partners pinpointed these as the Houston area's current and potential hotspots for life sciences:

  • 1,345-acre Texas Medical Center complex
  • 4,200-acre Generation Park mixed-use development
  • Katy
  • League City
  • New Caney
  • Pearland
  • Sugar Land
  • The Woodlands

NAI Partners noted that life sciences clusters ranking above Houston in the CBRE report sit on the East Coast or West Coast. That makes Houston "the essential location for top-tier, forward-thinking life sciences companies interested in expanding into new geographies," says Holden Rushing, senior vice president of NAI Partners and a member of its life sciences and health care team.

NAI Partners says Houston has affirmed its reputation as one of the most appealing places in the U.S. for life sciences properties.

"Between its highly educated talent pool, nationally regarded health care industry, and business-friendly environment — including being one of the few states without a personal, state, or corporate income tax — Houston's cost-effective tax structure makes it a choice location for any company looking to establish a presence or expand its current footprint," says Travis Rodgers, chief operating officer and executive vice president of NAI Partners.

Fuse Workspace is the latest coworking concept for the west side of town. Photo courtesy of Fuse

Dallas coworking company to open its first location in Houston

new to hou

Dallas-based Fuse Workspace is gearing up to open the first of what could be several coworking spaces in the Houston area as various coworking providers ramp up their Bayou City presence.

Fuse will unveil its first Houston location March 2 at CityCentre, a 47-acre, mixed-use development on the former site of Town & Country Mall in the Memorial City district. The grand opening is set for April 30.

Included in the 29,000-square-foot Fuse space, at 12848 Queensbury Ln., will be Houston's first showroom for Varidesk, a Coppell-based provider of standing desks and other office equipment.

John Herring, brand manager and director of operations at Fuse, says Houston, Austin, and Dallas are the company's target markets. A Fuse space is scheduled to open in July in the Austin suburb of Bee Cave.

"We love Houston and see a great future for our brand here, with multiple locations," Herring tells InnovationMap. "We don't have definitive plans to announce yet, but we have several strategic locations in the area that on our list."

Fuse is a division of DPG Partners LLC, a developer, owner, and operator of coworking spaces in Texas, as well as Hilton and Marriott hotels in Texas and Arkansas.

Fuse Workspace is the latest coworking concept for the west side of town. Photo courtesy of Fuse

The Fuse location at CityCentre will feature about 23,000 square feet of Class A office space, along with about 6,000 square feet of outdoor space. Highlights include:

  • 90 private offices
  • Three specialty suites, including one already leased by Varidesk
  • Four terraces
  • Seven conference rooms, including a podcast studio
  • Event space accommodating up to 100 people

"Our goal is to create an outstanding experience in the office through décor, amenities, programming, conference space, and our concierge staff," Herring says.

Fuse is joining a number of coworking providers that have set up shop in and around Memorial City. For instance, Life Time Work, affiliated with a nearby Life Time Fitness gym, opened last year at City Centre. Memorial City also is home to The Cannon, a 120,000-square-foot coworking campus.

Commercial real estate services provider JLL predicts 30 percent of the U.S. office market will be "flexible" space, such as coworking setups, by 2030. That compares with less than 5 percent in early 2019.

In the Houston market, 1.9 percent of office space was considered "flexible" in early 2019, according to JLL, versus 2.8 percent in Austin and 1.7 percent in Dallas.

"Our research, and our conversations with corporate executives across the globe, indicate that flexible work is not just a passing trend — it's woven into the fabric of the future of work," Scott Homa, senior vice president and director of U.S. office research at JLL, said in a 2019 release. "Even though some markets are better positioned for rapid growth, this still leaves significant runway for expansion across all U.S. office markets."

An October 2019 report from Yardi Matrix, a provider of real estate data, shows the Houston market with 113 coworking spaces encompassing more than 2.2 million square feet. By comparison, Dallas-Fort Worth had 159 coworking spaces exceeding 3.5 million total square feet, and Austin had 47 spaces surpassing 1.2 million total square feet.

"The penetration of coworking is highest in markets with new-market economies and tight vacancy rates," the Yardi Matrix report states.

According to JLL, the office vacancy rate in the Houston market stood at 22.8 percent in the fourth quarter of 2019. But office occupancy is improving, according to a JLL report, as more than 1.85 million square feet of space was absorbed in the Houston market during the fourth quarter of 2019. For Houston, that marked a 20-year high for positive net absorption in a single quarter, the report states.
Houston's industrial development has grown, and a contributing factor is the rise of e-commerce activity. Getty Images

E-commerce growth is sparking some changes in Houston's industrial real estate market

Making moves

With retail e-commerce sales in the U.S. projected to soar from $501 billion in 2018 to $740 billion in 2023, it's no wonder that Houston's industrial market is expanding faster than Santa's bag of toys.

E-commerce is one of the main drivers of an upturn in industrial construction in the Houston area. Estimates from four commercial real estate services companies show that during the third quarter, anywhere from 13.3 million square feet to 18.5 million square feet of industrial space was under construction in the region. That volume is up considerably from the second quarter of 2019 and from the same period in 2018.

Around the country, the "need for speed and choice" to appease shoppers is driving a lot of the increased demand for industrial space, Hamid Moghadam, chairman and CEO of industrial REIT Prologis, recently told Wall Street analysts. That, he said, is because "the more choices you want and the quicker you want them, the more inventory you need to position near the customers."

Rob Stillwell, executive managing director in the Houston office of commercial real estate services company Newmark Knight Frank, says many of the local industrial facilities geared toward e-commerce are being built in and around pockets of residential growth. This includes a swath from I-10 West in Katy to I-45 North toward The Woodlands. Among the facilities popping up in that corridor are massive projects for Amazon, FedEx, and UPS, according to Stilwell.

"E-commerce is likely a contributing factor to many distribution operations in Houston, but not the sole reason for the strong demand seen in the market," Stilwell says. Many new or expanding industrial tenants in the market do have an e-commerce component, he adds, yet won't be leasing space just for e-commerce purposes.

In Houston, e-commerce-fueled construction of industrial space is especially prevalent near George Bush Intercontinental Airport, according to commercial real estate services company Cushman & Wakefield. However, Houston's northwest submarket is seeing the most industrial construction in the area, with 5.5 million square feet underway in the third quarter.

Commercial real estate services company JLL pegs the southeast submarket as the hottest, with its third-quarter report showing 3.5 million square feet of new industrial projects underway there.

Aside from e-commerce, the Port of Houston and the petrochemical sector are propelling industrial construction in the area, Cushman & Wakefield says.

Around the Houston area, nine of the 89 industrial spaces under construction in the third quarter exceeded 500,000 square feet, Cushman & Wakefield says. Several of those lack a specific e-commerce element. This includes a 1 million-million-square-foot manufacturing facility for Coca-Cola, a more than 770,000-square-foot distribution center for Home Depot, and a nearly 550,000-square-foot distribution center for Costco.

Cushman & Wakefield warns that Houston's industrial market could suffer from an oversupply of space, as well as from a drop in shipping activity prompted by ongoing trade disputes and a decline in oil prices. Although industrial vacancy is expected to rise slightly through 2021, the company says, "demand continues for more modern, state-of-the-art facilities and market fundamentals remain healthy."

During the third quarter, only one-fourth of the space under construction in the Houston area was preleased, according to commercial real estate services company Colliers International. However, another 10 percent to 25 percent of that inventory should be preleased before the facilities are completed, the company says.

The area's industrial vacancy rate rose to 7.7 percent in the third quarter as new projects came online, Cushman & Wakefield says. Once more supply arrives, the vacancy rate is expected to tick up.

"Low interest rates and robust investor demand are expected to continue generating strong interest for Houston industrial assets. On the fundamentals side, the market is closely watching new inventory additions," JLL says.

Ad Placement 300x100
Ad Placement 300x600

CultureMap Emails are Awesome

Houston startup scores $12M grant to support clinical evaluation of cancer-fighting drug

fresh funding

Allterum Therapeutics, a Houston biopharmaceutical company, has been awarded a $12 million product development grant from the Cancer Prevention and Research Institute of Texas (CPRIT).

The funds will support the clinical evaluation of a therapeutic antibody that targets acute lymphoblastic leukemia (ALL), one of the most common childhood cancers.

However, CEO and President Atul Varadhachary, who's also the managing director of Fannin Innovation, tells InnovationMap, “Our mission has grown much beyond ALL.”

The antibody, called 4A10, was invented by Scott Durum PhD and his team at the National Cancer Institute (NCI). Licensed exclusively by Allterum, a company launched by Fannin, 4A10 is a novel immunotherapy that utilizes a patient’s own immune system to locate and kill cancer cells.

Varadhachary explained that while about 80 percent of patients afflicted with ALL have the B-cell version, the other 20 percent suffer from T-cell ALL.

“Because the TLL population is so small, there are really no approved, effective drugs for it. The last drug that was approved was 18 or 19 years ago,” the CEO-scientist said. 4A10 addresses this unmet need, but also goes beyond it.

Because 4A10 targets CD127, also known as the interleukin-7 receptor, it could be useful in the treatment of myriad cancers. In fact, the receptor is expressed not just in hematological cancers like ALL, but also solid tumors like breast, lung, and colorectal cancers. There’s also “robust data,” according to Varadhachary for the antibody’s success against B-cell ALL, as well as many other cancers.

“Now what we're doing in parallel with doing the development for ALL is that we're continuing to do additional preclinical work in these other indications, and then at some point, we will raise a series A financing that will allow us to expand markets into things which are much more commercially attractive,” Varadhachary explains.

Why did they go for the less commercially viable application first? As Varadhachary put it, “The Fannin model is to allow us to go after areas which are major unmet medical needs, even if they are not necessarily as attractive on a commercial basis.”

But betting on a less common malady could have a bigger payoff than the Allterum team originally expected.

Before the new CPRIT grant, Allterum’s funding included a previous seed grant from CPRIT of $3 million. Other funds included an SBIR grant from NCI, as well as another NCI program called NExT, which deals specifically with experimental therapies.

“To get an antibody from research into clinical testing takes about $10 million,” Varadhachary says. “It's an expensive proposition.”

With this, and other nontraditional financing, the company was able to take what Varadhachary called “a huge unmet medical need but a really tiny commercial market” and potentially help combat a raft of other childhood cancers.

“That's our vision. It's not economically hugely attractive, but we think it's important,” says Varadhachary.

Atul Varadhachary is the managing director of Fannin Innovation. Photo via LinkedIn

Houston researcher scores prestigious NSF award for machine learning, power grid tech

grant funding

An associate professor at the University of Houston received the highly competitive National Science Foundation CAREER Award earlier this month for a proposal focused on integrating renewable resources to improve power grids.

The award grants more than $500,000 to Xingpeng Li, assistant professor of electrical and computer engineering and leader of the Renewable Power Grid Lab at UH, to continue his work on developing ways to use machine learning to ensure that power systems can continue to run efficiently when pulling their energy from wind and solar sources, according to a statement from UH. This work has applications in the events of large disturbances to the grid.

Li explains that currently, power grids run off of converted, stored kinetic energy during grid disturbances.

"For example, when the grid experiences sudden large generation losses or increased electrical loads, the stored kinetic energy immediately converted to electrical energy and addressed the temporary shortfall in generation,” Li said in a statement. “However, as the proportion of wind and solar power increases in the grid, we want to maximize their use since their marginal costs are zero and they provide clean energy. Since we reduce the use of those traditional generators, we also reduce the power system inertia (or stored kinetic energy) substantially.”

Li plans to use machine learning to create more streamlined models that can be implemented into day-ahead scheduling applications that grid operators currently use.

“With the proposed new modeling and computational approaches, we can better manage grids and ensure it can supply continuous quality power to all the consumers," he said.

In addition to supporting Li's research and model creations, the funds will also go toward Li and his team's creation of a free, open-source tool for students from kindergarten up through their graduate studies. They are also developing an “Applied Machine Learning in Power Systems” course. Li says the course will help meet workforce needs.

The CAREER Award recognizes early-career faculty members who “have the potential to serve as academic role models in research and education and to lead advances in the mission of their department or organization,” according to the NSF. It's given to about 500 researchers each year.

Earlier this year, Rice assistant professor Amanda Marciel was also

granted an NSF CAREER Award to continue her research in designing branch elastomers that return to their original shape after being stretched. The research has applications in stretchable electronics and biomimetic tissues.

------

This article originally ran on EnergyCapital.

Houston expert shares 3 leadership challenges inspired by jazz improvisation

houston voices

Crises, whether supply chain disruptions, natural disasters, or the arrival of an upstart rival, are a revealing moment for leaders. Such scenarios can push companies to the brink of meltdown or usher in dramatic organizational transformation. Whether an organization withers or thrives during a crisis is shaped by its resourcefulness—how it uses its existing resources.

The pandemic decimated many industries, but the performing arts industry faced especially grave challenges: rampant unemployment, limited prospects for revenue, and an existential crisis over the relevance of the arts in dire times. Initially, musicians could not congregate to practice, performance halls were shuttered, and classical music was the last thing on the public’s mind.

As tough as these circumstances appeared to be, what collaborator Kristen Nault and I learned during a multiyear study of two prominent orchestras surprised us: Not only was it possible to survive trying times, but it was also possible to emerge better because of them. The leadership key? Becoming nimbler by thinking more like jazz ensembles and less like classical orchestras.

Business leaders often call this agility, but for a musician, this is the realm of jazz improvisation. Our research found three critical changes in leadership practices that helped leaders facing disruptions act like talented jazz musicians. Leaders in any industry can apply these practices during their organization’s next crisis.

The Resource Paradox During a Crisis

An organization’s most significant challenge during a crisis is that it typically needs resources — including time, money, expertise, equipment, and connections — at a time when activating resources has become more difficult. When faced with high levels of uncertainty, a leader’s first instinct might be to pare down investments to lower the risk of worst case outcomes. Ironically, such defensive behaviors can contribute to the organization’s demise. Threat rigidity sets in, with the leader doubling down on old habits and control mechanisms that make it difficult to harness the full potential of resources.

Instead of fearing crises, leaders can learn to embrace their hidden benefits. And by following the adage “Necessity is the mother of invention,” organizations can unlock the full power of their existing resources to respond to a challenge. Research on resourcefulness finds that when leaders take this approach, they can foster collective creativity to help groups solve problems in adverse times.

During the COVID-19 pandemic, many businesses discovered ways to access more knowledge (to understand how to repurpose products and services), capital (to invest in IT infrastructure), and connections (to identify new markets for revised products and services). Resourcefulness helped businesses pivot: Bakeries pivoted to selling raw ingredients for home chefs, clothing companies to producing face masks, vacuum manufacturer Dyson to designing a ventilator in 10 days, and distilleries to manufacturing hand sanitizer.

A Tale of Two Symphonies — and Leadership Approaches

At the onset of the COVID-19 pandemic, we engaged in a multiyear research study with two of the world’s premier symphony organizations, the Houston Symphony and the Revenite Symphony (a pseudonym because the organization requested confidentiality).

When we began our research, it was an open question as to whether Revenite and the Houston Symphony would survive. Both organizations had struggled financially before the pandemic, with millions of dollars in losses and even more significant budget deficits. Both organizations were also steeped in customs and traditions, which, as any business leader knows, makes change difficult. Yet, crises often produce one valuable resource needed to instigate considerable change: urgency. Urgency makes it possible to rapidly implement changes that might otherwise have taken years (or not happened at all). A lack of urgency dooms many change management initiatives, making its abundance during a crisis an opportunity not to be overlooked. As we interviewed and observed symphony executives, staff members, and musicians, we discovered that the leaders of each organization took very different approaches to addressing the crisis and mobilizing their resources to respond.

Revenite announced a suspension of operations near the start of the pandemic. Its leadership could not envision how to pivot its labor and fixed assets, such as its performance hall, to capture new sources of revenue. As one Revenite executive told me, “I don’t think we had a sense of what the pathway toward restarting the business was going to be. … There were too many unknowns.”

After furloughing all of the musicians and most of its staff, Revenite focused on surviving. The organization radically slashed costs to 25 percent of the pre-pandemic budget and tried to get the remaining skeleton workforce to increase productivity to keep the symphony chugging along. Leaders sought to wait things out until the pandemic subsided. This defensive strategy led Revenite to constrict resources when the organization needed them most.

Afraid to go broke, the organization retreated — at a significant cost. Revenite lost any relevance to its community at this time of great need. Several difficult-to-replace musicians quit the industry. Trust between leadership and all employees, already strained from the furloughs, further deteriorated as Revenite’s leaders centralized control of the organization and focused on squeezing the remaining labor force to do more. Many employees felt burned out from working long hours with little purpose. No one, including executives, understood the “why” behind the work. As one executive said to me, “I’m working to sustain a thing that has no inherent meaning other than its survival. That’s a really weird place to be. … Our mission is to perform orchestral music.”

In contrast, the Houston Symphony made an early commitment during the pandemic to remain open. It abandoned the long-term planning that symphonies typically engage in (measured in years) and shifted to figuring out the next few weeks — for its concert program, staffing, safety practices, and marketing efforts.

At first, congregating in the performance hall was not allowed due to regulations and safety concerns. So instead, the Houston Symphony turned its musicians’ homes into performance venues. The musicians teamed up with musically talented (but not professional) family members, including partners and children. Instead of relying on a huge production team, the makeshift videos in its Living Room Series of performances were created by a minimal number of staff members. Other orchestras that livestreamed performances tried to re-create the symphony experience on Zoom, with 70-plus musicians appearing in tiny square boxes. The Houston Symphony realized that it would inevitably disappoint its customers by trying to transform a rich in-person experience into a mediocre online one. Instead, it reimagined the delivery of its content by inviting customers to learn about musicians and their families in an intimate setting while listening to enjoyable music.

When the Houston Symphony moved to livestreaming full concerts without an in-person audience, it could reach new geographic markets not possible with in-person-only events. It charged an admission fee for the virtual concerts (which was uncommon) and attracted donations from a wider variety of patrons. This brought in additional resources, such as revenue, new supporters, and media attention, as well as an enhanced reputation among industry peers.

Importantly, these decisions also created extra time for the organization to figure out how to safely and effectively return its patrons to the performance hall, which Houston did long before most other symphonies. However, the organization went further, using the pandemic to usher in a more profound transformation.

Instead of making deep cost cuts and unsustainable workforce reductions like Revenite did in the name of resourcefulness, the Houston Symphony took a strategic approach to resourcefulness. Leaders focused not on simply surviving but on strengthening the organization’s long-term outlook — financially, operationally, and in terms of its mission:

  • The need to be more mindful of costs during severe financial distress helped leaders balance the budget, a goal that had proved elusive in years past. The entire organization made a newfound commitment to follow a pathway of greater fiscal responsibility into the future.
  • The organization expanded its donor base beyond Houston and reached customers worldwide with the paid livestreaming product. Although at face value a livestreaming ticket yielded fewer proceeds than an in-person concert, many attendees were first-time patrons. Additionally, a large portion of these people donated money in addition to buying the livestream tickets.
  • The symphony maintained livestreaming performances after returning to a full, in-person concert schedule — earning incremental revenue with little added effort.
  • In a striking change, the organization introduced its patrons, who traditionally heard Bach, Beethoven, and Mozart, to a more diverse set of composers. Prepandemic, the pressure to fill 3,000 seats deterred the Houston Symphony from experimenting with new composers: When programs featured unfamiliar works, filling the theater with ticket buyers was a challenge. But that pressure disappeared when the performance hall was restricted to less than 50 percent capacity. The organization brought in much-needed new voices, and its audiences responded positively — so much so that the symphony upped its efforts. In the year before the pandemic, fewer than 1 percent of the symphony’s classical concerts featured musical pieces composed by members of underrepresented populations or women. In the 2023 fiscal year, and with Houston’s hall at full capacity, that number expanded to 72 percent.

Learning to Get Jazzy: Three Strategies for Leaders

Many organizations, whether a symphony, manufacturing company, or professional services firm, are metaphorically structured like an orchestra. They have conductors (leaders) and rely on sheet music (routines and practices) to coordinate different parts (teams, divisions, or functional areas) of the enterprise. Organizational leaders aim for reliable and standardized performances, much like conductors aim to make the matinee performance of a symphony the same high quality as the evening one. Through many rehearsals (that is, the repetition of behaviors), it is possible to make incremental improvements, but leaders seek output that, by design, is predictable and relatively static. Operating like a symphony orchestra allows organizations to thrive in environments of stability and low uncertainty. But during a crisis, this type of model can be disastrous.

Our research found that the Houston Symphony significantly changed its operating model. It pulled ahead of peers in the industry when leaders changed the operating metaphor to that of a jazz ensemble. As one executive told me, the collective team saw the power of flexibility: “Leadership has come from the admin and staff side and the musician side. … We’ve combined different kinds of music and programs that [we] would never do before. I would say that as a large organization, we’re operating more like a small organization.”

That is the kind of result that many business leaders navigating disruptive crises only hope to nurture within their teams.

How did the Houston Symphony’s leaders inspire the organization to become so nimble? Our research found three critical changes in leadership practices that enabled them to adapt.

1. Keep the music playing.

Like a jazz ensemble, the Houston Symphony tried to keep the music playing, literally and figuratively. While Revenite stopped playing music and functioning as an organization, the Houston Symphony kept playing … anything. For example, the livestreamed Living Room Series was a far different product than a fully staffed professional production with 70 musicians in a 3,000-seat venue. However, those performances brought in new patrons and donors, and nurtured the symphony’s relevance in the community. This experiment also helped build the organization’s experience with livestreaming, which proved to be an important launching point for a more comprehensive virtual offering. Leaders, staff members, and musicians discovered their hidden capabilities around playing different types of music, utilizing novel technologies, and coordinating in new ways.

Without clarity on how the pandemic would unfold, the Houston Symphony focused on short-term decisions, asking “What can we play this week?” instead of trying to have an answer for the rest of the year. This allowed the symphony to have the most relevant information to inform its operations — real-time information that could be used to make decisions today, instead of relying on shaky assumptions about an unknown future. Leaders of any type of organization can understand a crisis by experimenting and then taking stock of lessons learned instead of remaining frozen by fear and uncertainty.

2. Don’t wait to practice transparency.

Houston’s leaders fostered strong trust between management and all employees. As resources become scarce during a crisis, it’s easy for trust to erode if decisions lack transparency. Instead of shrouding decision-making in secrecy, the Houston Symphony invited representatives from the front-line staff to weigh in on critical decisions. Relationships with the musicians’ union strengthened. By revealing sensitive information and disclosing the dire predicament the organization faced early on, leaders built trust and sparked a sense of urgency. Both were required in order for the team to quickly make significant changes.

Trust also came from empowering employees to experiment and not punishing them for making mistakes. For example, the marketing team had to try different campaign messages until they found one that resonated with patrons. The development team turned the mere fact that the symphony was playing into a comeback story—one that donors eagerly supported. The operations team discovered ways to socially distance musicians and audiences and continually modified its plans as the pandemic evolved.

3. Collaborate on a postcrisis identity.

Finally, the Houston Symphony constructed a new postcrisis identity that reflected its leadership role in the community. Instead of trying to return to pre-pandemic norms, leaders expanded the organization’s mission to cater to a wider, more diverse set of community members. The organization committed to experimenting with new types of music and continued with livestreaming to introduce audiences worldwide to a larger repertoire of selections. Expanded educational programs helped it reach underserved communities, providing a stronger foundation to diversify the artistic talent base.

Having helped shape the Houston Symphony’s comeback during the pandemic, employees embraced this community centered vision and rallied to keep the transformation momentum going. Additionally, they all came to see their own skill sets differently. After effectively coping with major adversity and helping to build a stronger organization, employees came to see themselves as capable crisis navigators — which will help everyone during future crises.

A Second Act

As our research progressed into its second year, we grew increasingly certain that Revenite would fold. We turned out to be wrong. As the organization neared the brink of death, Revenite’s leaders stopped waiting for the crisis to abate and ushered in a dramatic turnaround. It began when leaders engaged in updating. Updating is a leadership competency in which prior beliefs are revised to better address problems. It’s often a struggle for leaders to change direction after committing to a course of action, but Revenite’s leaders managed to dislodge their previous views of the crisis as the organization withered. They managed to adapt, as any jazz musician must.

Although the relationship with Revenite’s musicians had been deeply tarnished, leaders restarted a dialogue. The full impact of the furlough and Revenite’s decision to suspend operations became clear. Leaders updated their assessments of employees’ emotional states, gaining a more vivid understanding of how they had suffered economically and emotionally. Musicians explained that they had felt disconnected from their love of performance and struggled to stay sharp without practicing as an entire orchestra. After learning about employees’ hardships, leaders finally felt an urgent need to course-correct.

Revenite’s leaders next updated their assumptions about financial resources. They finally acknowledged that cost cutting was not a viable business strategy or a pathway to transformation. Instead of viewing employees as cost centers, leaders shifted to seeing them as revenue generators. By becoming more strategic with their resourcefulness, Revenite’s leaders could mobilize their existing resources to respond to the crisis more effectively. Musicians returned from furlough and started helping to increase revenues through donor outreach and, eventually, concerts.

Leaders also started noticing more about how other entities were adjusting to the crisis. They found inspiration in the Houston Symphony’s ability to operate during the pandemic — and also learned from Revenite’s musicians’ efforts to create COVID-safe concerts to raise money for themselves during the furlough. These examples showed Revenite’s leaders that operating during a pandemic was possible — something they had thought was insurmountable earlier in the year. By the end of year two of the pandemic, Revenite was well on its way to returning to its precrisis strength.

When a crisis hits, getting jazzy will help leaders in any industry adapt and positively transform their organizations. Instead of fearfully retreating at the onset of a crisis, using resourcefulness as a set of strategic tools can help leaders turn a threat into an opportunity. By unlocking the hidden potential of existing resources, organizations can emerge from a crisis with better financials, stronger operations, higher team morale, and a reinvigorated sense of purpose.

------

This article originally ran on Rice Business Wisdom and was based on research from Scott Sonenshein, the Henry Gardiner Symonds Professor of Management at Rice University, author of Stretch: Unlock the Power of Less — and Achieve More Than You Ever Imagined (HarperCollins, 2017), and coauthor (with Marie Kondo) of Joy at Work: Organizing Your Professional Life (Little, Brown Spark, 2020).