Digital Strategy No 3: Thinking exponentially about what your customers want

April 2016

How often do people in your company ask what it is that customers want? As opposed to what they want. How often do you have meetings to discuss what is good for your company, or your department, or your team, as opposed to what is good for your customers? Pretty often I imagine; it is so easy, and we all do it, to let focus shift to our own interests as the lens through which we view our business. We should though, and I think we all know this as well, look at our businesses through the lens of our customers. Once beyond start up stage it is so easy to slip from this mindset, but as Steve Blank has said “No Business Plan Survives First Contact With A Customer”, and this applies on an ongoing basis. Don’t keep up with your customers desires and the only way is down.

Customers needs and desires change over time, often because technology changes. For example satellite phone company Iridium spent $5.2 billion building a global network to support their specialist phones, only to find that by the time they had done this the real customer demand that existed at start up had disappeared as cell based mobile phones had rendered the need for satellite phones almost entirely redundant. People love to take photos, and digital trashed the film industry, but digital cameras were in turn trashed by the incorporation of cameras into smartphones. The best camera is the one you have with you, and everyone has a smartphone.

So it is clear that whilst looking through your customers eyes is vital, it must be done with a view to how technology is advancing, and how new capabilities might alter the landscape. Now, as Nassim Taleb has written, there are Black Swans out there, events so unexpected and so pervasive in influence that nothing is quite the same again. These though are, by definition rare, and whilst you cannot plan for them, you can plan for most ‘disruption’ coming your way. For each industry there are certain technologies we can see coming down the tracks, and in most cases it is only a matter of timing as to when the major impact will manifest itself.

Furthermore, in line with the 50 year old Moore’s Law (where processing power for a particular cost doubles every two years) many of these technologies are developing at an exponential rate. Which loosely means their development will graph to look like a hockey stick. Not a lot happens for ages, and then the upswing takes off rapidly. A lily pond completely covered in 48 days, takes 47 days to get half way there. You get the picture.

Here are 6 technologies developing exponentially:

1) 3D Printing; bigger printers (houses), smaller printers (nano-scale), available materials (including food!). When the Space Station uses 3D printing when they need a particular type of wrench, you start to see the potential. Mass customisation, manufacturing on-demand (no warehouses), repatriation of manufacturing facilities to developed countries.

2) Drones. Ever more intelligent (Google ‘fencing drone’) and dropping in price, expect to see delivery by drone (construction sites?), as well as ubiquity for site inspections (see Apple Spaceship), restricted space photography, marketing videos, 3d mapping, thermal imagery, aerial photography

3) Lidar. The technology instrumental in enabling autonomous cars is crashing in cost and the impact of this fast growing industry (every major car brand is spending billions in this field) will be huge. Imagine city centres with only self driving cars; how we all use space could change dramatically.

4) Industrial robots. Becoming more intelligent, bigger, smaller and less expensive. Hadrian is a robotic brick layer which can build a domestic size house in two days. Automating construction has to be a major growth area.

5) 5g over 4g. The Japanese are aiming to have 5g available in 2018 for the Winter Olympics but 2020 is probably when we will see this technology start to roll out. With broadband speeds in the multi gigabit range 5g will be enormously disruptive. The virtual office will truly be enabled as we will be able to video (perhaps even Avatar using iterations of Microsoft Hololens) chat with multiple people in realtime, at scale, in high definition and with no lag in connectivity. Will the office really be dead this time around?

6) Smartphones/AI. The iPhone is 8 years old this year and the current version is as powerful as a 1990 supercomputer. Moreover, because of increasing bandwidth each of us is effectively plugged in to the vast computational power of data centres run by the likes of Google, Apple, Amazon and Facebook. Couple this with the dramatic rise of AI (Artificial Intelligence) and the range of contextually aware, real time data and information that is becoming available to us is quite staggering. It is clear that each of us will become hooked on having available just that piece of information we need whenever and wherever we need it.

Here then is the future, or at least a good chunk of it. Each of the above technologies are either with us already, and becoming faster/better/cheaper or will be within a few years. Going back to ‘what does our customer want’ how then do we leverage the tools at our disposal?

Break everything down to touchpoints; when, where and how does your customer (and partners or suppliers) interact with your business? Could these touchpoints work better? If you were your own customer what do you think you would want in terms of how you are serviced? Can your customers get anything they need from you, on demand? How hard is it to give you money? How hard is it to get support, or information?

Do your customers want to hear from you more. Or less. And in what format? What is convenient for them?

Think of these touchpoints, these interactions. List them out. Then try and digitise them. Does that improve them?

And where’s the value? How can you provide the most value?

When you break your own skills down into their component parts, and then think of them in connection with the technology available to us now or in the near future, different patterns will almost certainly develop to the way your business runs today. Maybe your investment strategies will change to take account of how you now envisage demand will change. Perhaps you will realise that you have valuable knowledge that was historically too difficult to monetise but that you could today with an online, on-demand platform. Or maybe you can see how you could provide more support to your customers, in real time and at scale, without upping your costs in doing so.

It’s all really a case of stepping back, seeing the overall landscape, developing a sense of situational awareness of where your business stands within your industry or profession, and then zooming in to each product or service you provide and seeing how you can utilise technology to give your customer more of what they really want, as opposed to what they accept today.

And before you say ‘all very well, but we are in a people business’ that is exactly the point. It is by combining the capabilities of modern technology with the empathy, design, intuition and imagination of humans that great businesses are going to be built.

Don’t forget, humanity is the killer app in the digital age.

Digital Strategy No 2: Rethink your customers - and your partners

April 2017

Many years ago Bill Joy, one of the godfathers of Silicon Valley said ‘Whoever you are, the smartest people in the world don’t work for you’. Just think about that for a moment; as you do it becomes so obvious that this must be true. The company you work at was set up to perform a certain function, and to remove transaction costs (see Ronald Coase’s “The Nature of the Firm” (1937) and still relevant) people were hired to perform specific functions. Moreover they were likely hired as they fitted in with your overarching corporate vision. So people get hired who fit a role, rather than on the basis of how smart they are.

So you end up, typically, with efficient rather than effective companies, and ones where innovation struggles to get a look in. Mostly as a natural consequence of a perfectly rational desire to get on and do the job at hand. Which is exactly why companies seldom last long at the top of their industry; they continue to perfect the curve they are on whilst others build the next curve, which puts them out of business. Nothing new here; Charles Handy wrote about this in 1995:

In an analogue world breaking out of these tightly woven groups is hard; networking is, by implication, hard when it has to be done face to face. However much people laud the advantages of in-person collaboration, it doesn’t really scale. You end up talking and working with the same people over and over again. Which can be comforting, but hardly pushes the envelope.

In a digital world all this changes. You really can work with someone on the other side of the world as easily as someone on the floor above you in your office. As has been shown, within an office you rarely interact with anyone more than 150 feet away from you; in fact the vast majority of your interactions occur within 30ft. However, with the right digital tools ‘the death of distance’ does become a reality. You may well sit with, and benefit from, your immediate team but the opportunity to network, interact and learn from other teams becomes infinite. And as MIT’s Sandy Pentland has shown, it is when teams combine the energy of close interaction with the ‘exploration’ inherent in interacting with people in many other social groups, that innovation and productivity is unleashed. It is not knowledge that matters today, it is curiosity. Curiosity about what is possible, who is doing what, how and why and where are new things bubbling up. Curiosity about the future, and the past, have things got worse, how could they be better? And most importantly, who should I be working with, and selling to?

Accor, the hotel group, have just bought One Fine Stay, the website helping people to avoid staying in hotels. So their customer changes, as does their partners. As does their business model, as does their notion of who they are competing with.

Huffington Post is an online media company. Media companies employ journalists don’t they? Well not necessarily, almost all Huffington Post content is donated free of charge by 3rd parties grateful for the personal brand promotion.

Buzzfeed is another online media company. Who are their star employees? Data scientists; working out algorithmically what content attracts the most viewers, and engagement.

And Facebook is the big daddy of media companies, with 1.4 billion customers. But they produce no content either, and nobody pays to use the service. So is Facebook’s customer their users or the advertising agencies and brands they sell space to? The reality is that they have perfect alignment of interests, in that their job is to make the Facebook experience so great for vast numbers of people that the advertising simply follows the audience.

Zenefits is a US HR software company that gives away their software. How does that work? Well, they figured out that if they could get enough HR people using their software then their audience of customers (albeit non paying) would be worth a fortune to insurance companies wanting to sell them services. As so it was, much to the dismay of all those competitors whose business model depended on actually selling their HR software.

So who is going to do a Zenefits in your industry?

In real estate WeWork springs to mind. The traditional office landlord business model involved finding a tenant, signing them up to as many years lease as possible, and then sending them a rent invoice every three months. WeWork, (valued at $16 billion after six years in existence) in contrast do not sell office space, they sell an experience. And a brand, and it is that that people are buying into in droves. Of course they are actually selling office space, but to a different customer and in conjunction with a whole range of different partners to a traditional landlord.

Is this going to be 20% of the office market in five years, 40% in 10? Who knows. It is clear though that the WeWork type value proposition is fit for the digital age, and could not have existed in the analogue age. And that is the point; in the digital world our conception of who we work with, our partners, and who we sell to, our customers, is being upended. It is not that offices will not be needed in the future, or that work will disappear, but that the nature of an office, and the whole world of work, will morph into something very different from what it is today.

We are moving to an on-demand world (not a sharing economy as, like it or not, money is involved) and most of what we consume will be on an ‘as a Service’ basis. And real estate will be central to this. Today I need this, and tomorrow I need that. and very sorry, but your fixed term, no service, take it or leave it lease offering will not do.

What else have you got?

Digital Strategy No 1: IT Teams and digitising the past

April 2016

Technology changes everything, and nothing. In 1954 Peter Drucker wrote “The purpose of business is to create and keep a customer”. PropTech evangelists might be telling you that they are going to change the world, and you, old timer, are going to be disrupted out of business, but you know what, that just isn’t going to happen. Or at least it need not if you take both Mr Drucker’s 62 year old advice and arm yourself with a healthy dose of up to the minute digital savvy. In my view the modern property professional needs commercial nous, domain knowledge and technological skills. Any two will not do, and in that sense the new world is much the same as the old; it’s just the content that is being updated.

What is different is that in the digital age, the volume, variety and velocity of information one has to deal with in business is many orders of magnitude greater than 10, let alone 20 years ago. And that means you need both new tools, and new processes. Hierarchy, and distinct departments within a business worked perfectly well when data was analogue, when information could be passed slowly along a conveyor belt of due process. Remember when mail order meant delivery ‘in up to 28 days’? Well, in those days, not so long ago, you frankly had all the time in the world to get from A to B. Today, those 28 days are collapsing to minutes and much of the time you have no time. And when you have no time, traditional organisation structures just lurch from failure to failure. In this world you need to think networks, where each node is connected to multiple other nodes. Managing complex, fast moving environments needs a diversity of inputs, and that needs teams, or more correctly teams of teams, where groups with specialised knowledge are able to work together rapidly and iteratively. Read General Stanley McChrystal’s book Team of Teams for more on this.

This move from hierarchy to networks is why embracing digital technology is not about IT. In fact, a truly digital company, such as Amazon, has no IT department. Instead of a siloed capability, no doubt buried in the worse space in your office, you need IT skills to be embedded throughout your business. Creating and keeping a customer will involve technology, to a greater or lesser extent, so when planning each and every touchpoint with your customer you need to work out what is required. And the best way to do that is to involve people with the requisite IT skills during the process of designing those touchpoints. How many times have you been alerted about some new service, or research, from a property company, only to find that when you look it up on your smartphone on the way home it is unreadable on a mobile? That is what happens when technology is a bolt on to your business, not part of its DNA. In 2016, like it or not, every business is a tech business.

Once you move away from silos and hierarchical thinking it becomes easier to not commit the No 1 technology cardinal sin, digitising the past. This involves taking an existing analogue process and just putting a digital front end onto it, without thinking how new technologies could be co-opted to make it faster, easier, cheaper or simply less hassle for your customers. For example, you might be asking someone to fill in details of where they are, what time is it, and what the problem is; all things that smartphone in their pocket already knows. In fact, as sensors proliferate, both in smartphones and throughout the built environment there is a whole host of possible data points you could utilise to deliver more contextual, real time information to your customers. That’s how you keep a customer.

As new technology opens up new functionality human behaviour starts to change. Not the other way around. Netflix only exists because of broadband, Uber because of smartphones. Think of your value proposition and your customers and then think how you could use technology to provide more of the former to the latter.

Kodak needs to be your warning here. Many people think it was the move away from film that brought the company down, but it was not. In fact Kodak moved decisively into the world of digital imaging. Their big mistake though was focussing on printing digital images, just as people pretty much stopped printing out their photos. Classic digitising the past; they thought people would carry on printing as they always had, and that it was just the change from film to digital that mattered. The past though was a bad guide to the future and despite huge investment in digital they went bankrupt in 2012.

Technology changes nothing, and everything. Embrace the digital age. And read Peter Drucker.

You need a digital strategy

February 2016

It’s 2016 and you need a Digital Strategy. Without one you will not be making the most of the skills that you have, and will be competing with at least one hand tied behind your back. You might not come up against competition who do have a digital strategy in place, but if you do, unless you have a genuinely unique skill, you will probably lose the fight for new business. Human + tech beats human alone.

So what constitutes a digital strategy? Here are 20 starting points:

1. Digital Strategy is not about IT. Digital should not be an add on to your business, it needs to be part of your DNA.

2. Don’t digitise the past. Rethink your processes to take advantage of new technologies.

3. Think: ‘how can I do this 10x faster, cheaper, better.’ Wherever there is friction, seek to remove it.

4. If you were your customer what would you want? Are there digital tools that could deliver this?

5. Update your technology. Everyone must have a great phone, laptop and broadband.

6. Educate yourselves. Read technology focussed business books. Listen to Podcasts. Send your staff on the Google Squared Online Marketing course.

7. Rethink your partners. In a digital world it is easy to collaborate with more people. Who could you work with to bring an extra edge to your business?

8. Rethink your customer. Can you service different markets? Does digital enable new business models?

9. Move your technology to the Cloud. Google Docs, Office 365, Dropbox etc etc – once in the Cloud everyone has access to everything they need whenever and wherever they are.

10. Think data, think analytics. What data do you have access to? Have you ever analysed it?

11. Eliminate weekly/monthly reporting. In a digital world information should be realtime.

12. Automate everything you can. Embrace the robots.

13. The smartphone is your friend. Think Mobile first. Starting with your website.

14. Think how you would outcompete yourself with digital tools.

15. Market for the year you are in. You may like print, but if your market prefers Instagram…

16. Rework your internal teams. No silos. Mix up people with different skills.

17. Get social. Digital networking works. So Tweet, Blog, Share. Talk with not at.

18. Learn about Agile & Lean business methodologies. They’re not just for software companies. Likewise design, service & systems thinking. Then revisit item 2.

19. Look at the technology everyone else has. What is table stakes and what sets you apart?

20. Think about ‘the digital layer’ that sits atop all real estate. Merging the virtual and physical worlds is a key value enhancer.

The devil is in the detail but the broad principles above are what you need to start thinking about. Because, in reality, this isn’t about having a digital strategy, it is about becoming a digital company. Only then will you be able to take full advantage of those soft, human skills the property world is so famed for.

2016: The Lily Pond Year

I am sure you are familiar with the Lily Pond parable. Of how the Lily starts out really tiny but doubles in size every day. So for a long time not a lot seems to happen, the pond looks no different day after day, but then, as if by magic, the whole pond is covered. And the pond looks entirely different. Suddenly the world has changed.

Well that’s how it is in the world of technology. Moore’s Law, the observation that, over the history of computing hardware, the number of transistors in a dense integrated circuit has doubled approximately every two years, has held for 50 years. And so today we have 1990’s supercomputers in our pockets. The latest iPhone is more than 50 times faster than the original, which came out in 2007. So by the end of 2016, with the iPhone 7, we are likely to have seen a x100 improvement in 10 years.

Similar is happening with bandwidth, storage, WiFi availability, the cost of sensors and Cloud computing. Across the technology industry, improvements are happening at exponential rates. Faster begets faster still.

Well that is very nice for the technology industry I hear you say, but what has it got to do with us in real estate? Our world isn’t changing much; people still go to the shops, work in offices, sit at desks, use PC’s and have meetings. Our industry is much as it was 10 years ago. Before anyone had that supercomputer in their pocket. And anyway, all this change is overhyped, it hardly compares to the 50 years that saw the arrival of electricity, running water, street lighting, the combustion engine and air flight. A bigger screen on my phone. Well whoopee.

Except. This is linear thinking. It’s looking at the world through the lens of GDP growth, a mere few % (if you’re lucky) a year. Which is indeed reality, but it masks the fact that the makeup of economies morphs dramatically even when, in size, they do not change that much. Despite years of hangover from the meltdown of 2008, the global economy is being reconfigured fundamentally. And that is what is impacting on the real estate industry. The Lily Pond is perhaps a third covered; just a few iterations and it will be covered.

So, in 2016 what should you be looking out for in terms of technologies that will be impactful?

First and foremost is not even a technology, but critical to everything that comes after, and that is digital thinking. The mindset that looks at everything around us, and everything we do, and thinks ‘are there technologies that could be brought to bear on this that would make it easier, faster, cheaper, more enjoyable?’. For us as humans. Yes, as Kennedy said, we should do hard things ‘because they are hard’, but there is no need to make anything harder than it needs to be. Humans and machines have different skills, but there are precious few areas where human + machine is not capable of doing more than human, or machine, alone.

Secondly, Virtual Reality is set to hit prime time in 2016, most noticeably with the release of the first Oculus Rift (owned by Facebook) headset. We work in an industry that for much of the time is virtual, in that until we build something it doesn’t exist. We need however, to enthuse and persuade our customers in advance of having anything to show them. Hence the fortunes spent on brochures, videos and CGI’s, most of which are pretty weak simulacrums of what we have to sell. VR has the potential to utterly transform property marketing, by providing immersive, engaging environments that accurately reflect reality, before it exists. 2016 is the year to take this seriously.

Thirdly, if you have not already done so (naming no names), 2016 is the year you must sort out how your online efforts look and perform on mobile devices. So much real estate content is unusable on a smartphone, despite that being for many people their ‘first screen’. UK mobile data traffic almost doubled in the last year. Five years ago 90% of all devices connected to the internet ran Microsoft software, today less than 20% do: to be PC centric in 2016 will damage your business.

Fourthly, you cannot provide too much bandwidth, for your employees or your customers. Ofcom, just before Christmas realised statistics showing how dramatically usage increases online as broadband speeds move above 40mb. Connectivity is the great enabler, the more you have of it the more you can do. And vice versa. The likes of WiredScore are now rating buildings based on their connectivity; below a certain point real estate is redundant.

Fifth, with high connectivity and mobile devices, you open up the opportunity to offer people real time and contextual services. So information or analysis that takes into account temporal and spatial criteria. Truly, what you need to know exactly where and when you need to know it. This is ‘the digital layer’ that sits atop the built environment. The extra data that can help to enrich the experience of a place. So, what is here, what was here, what is going to be here, are my friends nearby, what can I do now, what do I need to know to make the most of ‘the Space around us’? Placemaking was a hot topic in 2015; in 2016 there will be a greater recognition that technology needs to be co-opted to make great places. This is especially true of retail where the whole notion of shopping is moving towards being an experience rather than a narrow distribution channel. The difference between the best and the rest, in retail, is set to widen dramatically and no-one will get to the top without being very technologically savvy.

Sixth, we need, as an industry, to embrace what is possible if we can capture more data from the places and spaces we build, occupy or manage. And that means embracing the Internet of Things, that will enable us to add a myriad of sensors to record, analyse and share information that can be combined to provide insight into how we can optimise our world for the people in it. And then predict (to an extent) what needs to be done in the immediate future to make sure our spaces flex and adapt to perform (in the widest sense) as well as they possibly can. As a by product of making our places work better for humans, we will be more efficient and save money, but it is the desire to be better that will yield the results, not a simple desire to save money.

Seventh, and as a consequence of all the above, 2016 is the year to learn about, and apply, the extraordinary range of machine learning tools that are now available. Essentially these are programs that you feed with large amounts of ‘training’ data, and a set of criteria and variables that are reflected in that data. From there the programs can start to deduce that X = Y, and IF this THEN that happens. Etc, etc. Real estate is awash with data, but still we largely work on hunch, experience and intuition; how much better could we be if we added those human skills on top of far more, more granular and more up to date data? The likes of Amazon lead the way here, even to the point where they are using predictive shipping to get goods closer to people they think are going to order them. Likewise, the burgeoning data driven same day delivery industry will nullify the practise of click and collect as a differentiator for physical stores. Real estate needs data to fight back.

Lastly, 2016 is the year to think about moving beyond having a digital strategy, to being a digital company. That is, a company where every action, process, product and touchpoint, with colleagues, suppliers, partners and customers, is underpinned by an embedded ‘digital first’ attitude, where everything talks to everything else, and where anything that can be automated is automated. Where the whole company works in an agile, iterative way, where teams form and disband as projects start, get worked on, and then finish.

McKinsey recently issued a report saying that “45 percent of work activities could be automated using already demonstrated technology”. Many, in real estate and beyond, recoil in horror at such pronouncements but they should not. It’s not as if we’ve achieved perfection in the built environment. There is so much that could be improved. Dramatically. Recently I heard innovation described as ‘the breaking of constraints’; well, in 2016 the real estate industry should look to leverage technology to break the constraints preventing us building a better world.