Winners & Losers in PropTech: 16 Differences

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2019 has kicked off with something of a feeding frenzy in the world of PropTech. There is much talk of this company investing, that startup raising, and the thousands of new entrants from all around the world looking to ‘disrupt the biggest asset class in the world’. Well, here is a tip: most startups will fail and most investments in using startup technology will fail as well.

Why? It is simple:

“Winners win because they do the ‘right’ things. Losers lose because they don’t’ 

Winning in the real estate industry of the future is not about knowing which company to invest in, or what technology to buy, but in understanding how to think about technology and the nature of truly digital businesses. It is about a mindset, learning, and constant iteration as much as anything else, 

Below are 16 differences between Winners and Losers. On what side of the fence do you sit?

1.Winners understand the speed of change / Losers don’t follow the tech industry

Technology drives behaviour, not vice versa. Societies undergo rapid transformation when technological change is rapid. And today, technological change is especially rapid. Moore’s Law, essentially the doubling of computing power every 18 months or so, might have held for 50+ years but other areas of computing are developing much faster. GPU’s, the processors largely used for artificial intelligence, have massively outshone CPU’s (the standard unit of measure for Moore’s Law) over the last 6 years. Neural Network Training (a foundational process for AI) increased in speed 60 times between 2013 and 2016. The scale of computational power available to leading AI practitioners increased 300,000 times between 2012 and 2018. Yes, that is not a typo - 300,000 times.

And this has consequences. Professor Amy Webb’s company, The Future Today Institute, released their latest annual Tech Trends report last week (free to download at https://futuretodayinstitute.com/2019-tech-trends/) and this contains 315 trends that will impact significantly on business and society within the next 0-10 years. i.e within the lifespan of a major development project.

Winners in real estate companies will know this, and whilst not needing to discern every granular implication will be cognisant of major trends, because trends impact on behaviour and fundamentally behaviour drives real estate demand. Losers, on the other hand, will carry on as they have historically within real estate knowing next to nothing about developments in the world of tech.

The flip side, of course, is that PropTech winning companies will update their knowledge sets by diving equally deeply into how the real estate industry functions, what incentives different sections of it respond to, and the nature of competitive advantage within the market. Losers, and many fall in to this camp today, will know little, and care less, about real estate. Both sides have much to learn.

2. Winners know about networks, ecosystem and what ‘being digital’ means / Losers know nothing about networks, ecosystems and ‘being digital’ 

Digital companies are different to analogue ones, in six areas: Data, Customers, Competitors, Networks, Ecosystems, Platforms and Marketplaces. Knowing the difference is a major difference between winners and losers.

Truly digital companies (think of tech being an interwoven thread throughout the organisation as opposed to the IT department down in the basement) are built upon data. Without having your data ‘in order’ you cannot be a digital company.

Digital lends itself to direct to consumer, or as Tim Cook of Apple would have it ‘the iPhone is the most personal computer we have ever built’. Each of us has a £25,000,000 1980’s Super Computer in our Pocket, connected thanks to the Cloud and the likes of Google, to just about ‘all the world’s information’. As such digital companies can provide each of us with personalised, contextual, on-demand data and services. In real estate this should be leading us to communicate not just with those responsible for official matters concerning our assets but every single person who enters into our spaces. Our Customer has changed.

As has, or might, our Competitors. Winners are paranoid about whether the tech industry will learn real estate before they can learn tech. In the years ahead our competitors are very likely to not be traditional real estate ones.

So we need to understand the power of networks. Every tech business aims to build as large a network of users as possible, and to understand their wants. needs and desires well enough to be able to build an ecosystem of partners who can help them sell, up-sell, or side sell as many non core products or services as possible. Ultimately tech companies aspire to be platforms or marketplaces where they curate their networks by matching supply and demand, buyers and sellers. GAFA - Google, Amazon, Facebook, Apple - are as powerful as they are because they are mighty platforms and marketplaces.

in real estate, despite interacting daily with the majority of our customers, we tend to know very little about them, and mostly do not think of networks, or platforms. An exception, which hopefully elicits the right response, is of course WeWork. They emphatically do understand the value of networks.

3. Winners have the Four V’s of Data sorted / Losers have Data ‘issues’

Building on point 2 above, winners invest in the Four V’s of data: Volume, Variety, Velocity and Veracity.

They know how much data they have, they seek to ensure they have the variety of data that is required to garner true insight, they know exactly whether their data sources should be captured annually, monthly, daily, hourly, by the minute or even the second. And they are ruthlessly honest in defining just how ‘true’ their data is. Data does not have to be 100% accurate, but if it is not you need to know, and know whether that matters.

Winners invest the money time and effort in to getting their data in order. Losers have ‘data issues’, and in the years ahead that alone will destroy many an established company.

4. Winners work in multi-functional teams / Losers work in silos

The Ultimate Marketing Machine (https://hbr.org/2014/07/the-ultimate-marketing-machine) is a Harvard Business Review article from 2014. In it the authors describe how solving a customers problem, or need, or desire requires the input of three different types of people. First people who can ‘Think’ and who are focussed on data and analytics. Secondly people who can ‘Feel’ who are focussed on customer engagement, and thirdly people who can ‘Do’, whose job is to build the solution. Each different problem needs a different mix of the ‘Think, Feel, Do’ toolkit; sometimes the solution is more technical than anything else, whereas in other instances the problem is a very ‘human factors’ one. Regardless though, you always needs a mix of inputs.

Much the same core thinking lies behind the practice of ‘Design Thinking’ or ‘Sprints’ (see the book by three Googlers - https://www.thesprintbook.com/).

Steve Jobs nailed it in 2003:

 “Most people make the mistake of thinking design is what it looks like. People think it's this veneer – that the designers are handed this box and told, “Make itlook good!” That's not what we think design is. ...Design is how it works.” 

Now maybe you do not think of your role in real estate being about design, but ultimately everything is. ‘How it works’, for you, you customer, partner or stakeholder is the bottom line.

Start thinking about the UX, or User Experience, of everything you do in business and you soon realise that this is where competitive advantage lies. As we move from a world mainly focussed on selling Products, to one more involved with delivering a Service, the UX you offer your customers is the difference between you and your competitors. 

The best UX wins, and winners know that only multifunctional teams can collaboratively create a great UX. Losers carry on with what is, sadly, largely the norm, working in silos. That doesn’t work so well know does it? Why is it likely to in the future?

5. Winners know the difference between disruptive and sustaining technology / Losers think all technology is equally important

‘We need to buy some PropTech!’ - who has heard or read that? Yes, I thought so, too many of us. Or ‘we’re not a tech company, we can’t build any technology’. Again, this is not a novel thing to read or hear.

And of course, completely the wrong way to think about technology. Understanding the difference between technology that is table stakes and that which is a competitive advantage is vital, but also something that only winners do.

‘Anything that can be bought is by definition not a differentiation’

The great management writer Charles Handy (in The Empty Raincoat) used S-curves to to demonstrate the need for significant and regular reinvention and change. Technologies, and businesses, start at the bottom left with real innovation, maximum competitive advantage, but few customers (or competitors) and work their way through the S, hitting customisation and then productisation, and then finally at the top right, with the biggest numbers of customers, but also the most competition, end up being commoditised.

Knowing where you business is, or the component workflows and divisions within it, is absolutely vital to knowing what type of technological strategy to adopt. Anything in the upper right hand side of the S you may as well buy in, as all your competitors will be doing the same, and whilst you must have this technology, it is just table stakes. Think Word, or Excel or Yardi, or Altus.

During the central part of the S, where services tend to be highly customised but still available off the shelf, you are often best to partner with someone who can help you leverage the available tools better than your competition. But at the bottom left you are at the point of maximum competitive advantage. You have something no-one else does. Often this becomes something competitors acquire over a period of time but the opportunity exists to build a persistent competitive advantage. Most particularly at the moment, use of Artificial Intelligence can enable strong and persistent advantage because unlike with most technologies, being a fast follower with artificial intelligence is very hard. The hint is in the term ‘Machine Learning’, which means the system learns through experience and over time. There is no short cut through this learning process so the entity that has the best data to learn from, will benefit from a flywheel effect where better data leads to better learning which leads to more data which leads to more learning. 

Team up AI with a firm grasp of the benefits of networks and winners really will have powerful competitive weapons. Fail to understand why just ‘shopping’ for tech is a bad policy and you’ll be deep in loser territory.

6. Winners think of Real Estate as a Service industry / Losers think of Real Estate as a Product industry

Two trends have been growing in strength over the last few years and they are the move from Products to Services and Ownership to Access.

Increasingly we are moving to an almost post consumer world where we are less bothered about accumulating more things and much more interested in being provided with services, experiences and ephemeral pleasures. 

So Uber instead of Cars, Spotify instead of CD’s, Netflix instead of DVD’s: on-demand this, on-demand that. Why bother to own something you seldom use, that becomes out of date rapidly, or that you really cannot afford. Rent it when you need it.

And Real Estate is not immune from this trend. 

In fact the real estate business is no longer about real estate, or soon won’t be. Just as it is now easy to buy almost any Software as a Service, so it will become with real estate. Space, as a Service, is the future of real estate. On demand and where you buy exactly the features, and services, you need, whenever and wherever you are.

The key point is that real estate is moving from a Product to a Service. And that means that organisationally, culturally, financially our industry is fundamentally changing. We will need a different mix of people, with new and different mindsets and skills. Yes we will still need all the real estate knowledge that we have today, but going forward that will most definitely be necessary but not sufficient.

Losers will persist in thinking real estate is a product business, where the physical asset represents the value and the sun around which everything else rotates. Winners will realise the physical asset is just the wrapper; the business is about what goes on inside that wrapper.

7. Winners put the customer at the centre of their business / Losers put themselves at the centre of their business

How many meetings have you been in when the only topic of conversation has essentially been about how you, as a company, wishes the world worked? It is a constant of modern business; in a way understandable as we all try and configure our businesses to work in a way that suits us best, whilst too often forgetting that ‘it’s not about us’.

Jeff Bezos and Steve Jobs provide the best summations of the winning way to think:

“You’ve gotta start with the customer experience and work backwards to the technology.” Steve Jobs

“The most important single thing is to obsessively focus on the customer. It’s our job everyday to make every important aspect of the customer experience a little better.” Jeff Bezos

It’s back to the UX point; ‘how it works’ matters and only by focusing on the customer need can you win.

8. Winners ‘Build, Measure, Learn’ / Losers stop at ‘Build’

In the software industry there is a golden rule for development. You Build, you Measure and you Learn. And then you repeat the process. Software is never finished, it is always in permanent beta.

In real estate we typically stop at ‘Build’. A project is finished and everyone disperses. No-one measures performance, or how well the asset meets the needs of the customer, or successfully addresses the KPI’s it was designed around (in fact the notion of KPI’s is generally ignored). Which is why so many buildings perform so badly, according to their users.

Real estate, especially the workplace, needs to be thought of as software. We will build it, we will measure how it performs (across a wide range of physical, and human, criteria) and we will adapt it accordingly. Optimise, optimise, optimise is the new location, location, location.

9. Winners are ‘Learn-it-Alls’ / Losers are ‘Know-it-Alls’

This is derived from something Microsoft CEO Satya Nadella recently said in an interview about how he likes to think of himself. In a world where change is a constant, and what you knew yesterday might not be right for today, winners have to be endlessly curious and voracious acquirers of new knowledge. If you’re not, you’ll be a loser.

10. Winners understand what AI is good at / Losers don’t understand what AI is

AI is clearly a big topic, too big for this article, but at root it has five key capabilities:

  1. Perception - Understanding the world based on sensory input, such as images or sound

  2. Communication - Natural Language Processing, Speech Recognition

  3. Knowledge - Aggregating, synthesising multiple datasets or streams

  4. Reasoning - The application of logic : deductive, inductive, abductive

  5. Planning - Setting goals and how to achieve them

Which means that all companies can now exploit 6 new capabilities:

  • Understand people using language

  • Automate processes

  • Optimise complex systems

  • Understand what is happening in pictures and videos

  • Create content

  • Make predictions

McKinsey in January 2017 wrote this:

‘Overall, we estimate that 49 percent of the activities that people are paid to do in the global economy have the potential to be automated by adapting currently demonstrated technology.’

The critical point is that anything ‘structured, repeatable, predictable’ will be capable of being automated by AI. And that involves a great deal of the tasks performed everyday within the real estate industry.

Winners will get to grips with AI, and the best will aggressively try to leverage it within their businesses, as it is uniquely powerful. 

Losers will not make the effort (this is hard), and over time will live to regret that.

11. Winners realise companies want a productive workforce / Losers think companies just want an office on a ‘reasonable’ lease

Following on from all the above it is clear, to winners, that no company actually wants an office; what they want is a productive workforce. Historically they needed to have an office, today they do not. They must be made to want rather than need an office, through the provision of a range of services and overarching UX that does enable their workforce to be as productive as possible. That, essentially, will boil down to #SpaceAsAService (see https://www.propmodo.com/space-as-a-service-the-trillion-dollar-hashtag/)

Losers will continue to argue that people ‘need’ an office and that companies are only really after a bit more flexibility in their leases. Good luck with that in five years time.

12. Winners embrace automation / Losers avoid automation

Don’t bring a knife to a gun fight. If something benefits from, and can be automated, it will be automated. If your business makes money out of manually performing tasks that will be automated, then the best thing to do is either move out of that line of work, or be the first, and best people to automate it.

Mostly automation will allow people to do more with less. So you could take the attitude that there is only X amount of Y to be done and therefore automation will wipe out your business, or, by enabling A to be delivered 10x cheaper, faster, better than now, you could see automation as an opportunity to massively grow your addressable market.

The only thing that is clear is that losers will fight automation, with inevitable results. It might take time, but the end point is certain.

13. Winners think ‘Human+Machine’ wins / Losers think Machines will wipe out Humans

As with the attitude towards automation, losers tend to look upon ‘the Machines’ as an existential threat that is going to wipe them out. Images of the Terminator come to mind far too fast.

The reality is that we are many decades away from the sort of ‘Artificial General Intelligence’ that would enable the sort of super intelligent machines that pose a real threat to mankind.

The reality is more in line with what is known as Moravec’s Law, which states

"it is comparatively easy to make computers exhibit adult level performance on intelligence tests or playing checkers, and difficult or impossible to give them the skills of a one-year-old when it comes to perception and mobility”

Human + Machine is the smart way to think about the future. The path of using technology to replace humans is a dead end. Far better is to think how humans can be augmented by technology, and indeed how technology can be improved by humans. 

14. Winners obsess over ‘Value Propositions’ and ‘Product/Market Fit’ / Losers assume their Value Proposition is OK, and what’s ‘Product/Market Fit’?

In the tech industry everyone obsesses about ‘Value Propositions’ and ‘Product/Market Fit’, concepts made famous by Alex Osterwalder and Steve Blank respectively. In the first, one dives deeply into how well one’s product or service matches the exact needs of a customer and in the second how well suited one’s overall business is to the market, and how big that market is. The point being to place a laser like focus on pleasing the customer, and to precipitate repeated iterations until that is achieved. 

In software you know you are winning when growth goes exponential, whereas in real estate a number of different measures could be used. One of the best, but least used in the industry, is your NPS or Net Promoter Score. This is:

‘an index ranging from -100 to 100 that measures the willingness of customers to recommend a company's products or services to others. It is used as a proxy for gauging the customer's overall satisfaction with a company's product or service and the customer's loyalty to the brand.’ 

Winners will increasingly be following the tech industry in making these two concepts central to their businesses. Losers are unlikely to know what they are.

15. Winners look to be 10X better / Losers look to be a 10% better

Absolutely critical to how to think about PropTech and the future of real estate is to reject the notion that the industry is working just fine and all we need to do is ‘digitise’ it. Digitising the past is one of the worse mistakes to make. All that will do is move you on 10% or so, and it is what losers are doing, and will do. We have a wide range of extremely powerful digital tools at our disposal and we must use them to rethink ‘how it works’, as Steve Jobs described the role of design. Almost every area of real estate could be re-designed to be 10X better than it is now. Either a much better experience, or 10X faster, 10X cheaper, 10X quicker or 10X smarter.

Thinking 10X requires you to use all the tools covered here to go back to first principles and consider just how good something could be.

Take Uber: the experience of simply tapping your phone, getting in to a car and then getting out at your destination is definitely 10X better than the old ride hailing, fumbling around for change and shouting directions at the driver way of old.

Take your own speciality in real estate and rethink it. Make it 10X better. 

16. Winners think Better before Cheaper and Revenue before Cost. Losers the opposite.

This last difference between winners and losers is inspired by another Harvard Business Review article, this time written by Michael Raynor entitled ‘Three Rules for Making a Company Truly Great’ (https://hbr.org/2013/04/three-rules-for-making-a-company-truly-great)

The three rules are:

  1. Better before cheaper—in other words, compete on differentiators other than price.

  2. Revenue before cost—that is, prioritize increasing revenue over reducing costs.

  3. There are no other rules—so change anything you must to follow Rules 1 and 2.

For me these are what PropTech and Future Real Estate should be all about; Aspiring to being better, and pricing accordingly, not looking to cut costs and price your way down to gaining a customer.

They used to say you could not brand real estate. And maybe in a product centric industry that might have been true. But in the world of new real estate, where the service, the UX, you deliver is what sets you apart, you assuredly can. Putting better before cheaper and revenue before cost is a core component of how to do it.

So that’s it, 16 differences between winners and losers in the new world of PropTech driven real estate. Mostly representing a new mindset, inspired by the best companies in the technology sector. Not only might these companies be amongst our best customers, they have much in their DNA we can learn from.

Antony