Digital Strategy No 4: Data, analytics and the big but

April 2016

It was the great St. Thomas More who first referred, in 1532, to the problem of finding a needle in a haystack (though he said ‘meadow’). Nearly five hundred years later, whilst still much quoted, it isn’t generally a problem we have anymore. Because we have powerful magnets, in the form of data, algorithms and computers. To find a needle today you need to first hypothesise what type it is, and then decide, and acquire, the data that you can interrogate that will lead to it. A more modern saying comes from Google: ‘in God we trust, everyone else bring data’.

Data is though a troubling mistress: it can represent correlation or causation. Knowing the difference is a skill worth learning and a source of strong competitive advantage. Which is why understanding data is such a key part of any digital strategy.

So how do you use data to boost your business? First off you need to be alert to its importance; once you set your mind to thinking ‘could ABC data help me achieve XYZ outcome’ you will start to be aware of all the data that surrounds your day to day activities. Instead of bemoaning that we are all drowning in data you will start to think of it as fuel, something that can power something else. And as the use of data permeates our lives we are naturally becoming more attuned to what is possible. For example, who doesn’t just ‘look it up on Google’ when they need to know something, or check their train is on time via an app, or order that book that someone is talking about on the radio as you lie on the sofa.

It is data that is removing friction from our lives, enabling us to spend more time doing something than planning to do something. And in a nutshell, for businesses, that is the second point to address; what are our customers after that data could help us provide in a more frictionless way? How do we make this service, product, interaction, building, city smarter? And by smarter we mean more attuned to the needs of the consumer, not the provider. Well today, one of the key ways is through data.

How do you make this happen:

1. Start with an hypothesis. If we knew X would we be able to predict Y? Or rather, could we say Y is 80% likely to occur if X happens? Because computer prediction is actually about probabilities rather than forecasting the future, and whilst not perfect, high probabilities can save you an awful lot of time and money.

So, in the context of real estate, one might ask: ‘when will this homeowner move’, ‘when will this company need a bigger office?’, ‘what asset would this investor buy?’, ‘how much will this building cost to run?’.

2. Once you have your hypothesis you need to define the metrics you would need to answer the question? So you might ask ‘what is the average time someone in that street stays in their home’ or ‘show me every asset that this investor, or investors like them, have bought in the past’ or ‘show me historical costs for a similar building, with similar tenants’.

Nobel Laureate Daniel Kahneman has told us all about ‘Thinking, Fast and Slow’ and the relevance to business is great. Citing real estate again, the industry loves the notion of ‘Fast’ thinking, which is really our instinctive reaction to any situation, our gut if you like. ‘We are a people business’ is symptomatic of ‘Fast’ thinking; through our networks we ‘just know’ the right person for that space, or the perfect investor for that building. Such ‘knowledge’ is indeed a valuable asset, but the future belongs, I think, to more ‘Slow’ thinking. Being asked what is 2+2 is an easy thing for our fast thinking mind to deal with but what is 28,489.2 times 6,870.306 requires the different skill set embodied in our slow thinking mind. In real estate, we need to be looking at how greater use of data, and analysis, can enable us to answer more questions, that are more complicated, and provide answers that are more optimally attuned to real needs, desires and aspirations.

With better data, we can define better metrics, and with better metrics we can do a better job, both for ourselves and our customers. Hunches have their place, but now that we have more data, more sophisticated algorithms, and faster computers, we should be making use of them.

3. Ask the right question, use the right metrics to answer, and you should have an outcome of insights that are valid and verifiable. These of course may well disprove your hypothesis, in which case you can move on to test another. Insights that lead to you not doing something can of course be just as valuable as those that lead to action.

This stage is a prime example of why ‘the robots’ will not take all our jobs, because it is for you to discern whether your insight really is causation, or just correlation. Have you the data you need, and enough of it, to take this answer as final? Do you believe the answer? Does it surprise you?

It is an absolute truth that data is the great enabler of the modern world. Without data all the computational power at our disposal, all the machine and deep learning algorithms at our behest, are worthless. The more you have the better, but there is a big but. It is still our brains that need exercising in asking the right questions, and judging the final validity of what the machines are telling us.

The world is moving from running on oil to running on data, and knowing where data fits in your digital strategy is up near the top of ‘must have’ skills.

Being Digital in Property - Your starter for 10

April 2016

21 years ago I heard MIT’s Media Lab founder Nicholas Negroponte give a lecture on Being Digital. It has taken 21 years, but what seemed obvious then has at last gained general acceptance. Tech is now big, though today you have to call it #PropTech, as if it is something new. and disruptive. It isn’t, and in Property at least, it won’t be.

And it isn’t, and won’t be, because every business is becoming a digital business. Some are taking training steps, whilst others have the gait of a Usain Bolt, but no-one can afford to not move down the digital road. And the great thing is that with 21 years of what the economist Carlota Perez has described as the technological ‘Installation Phase’, we are now moving into the ‘Deployment Phase’. In a nutshell the infrastructure is in place and the world (or at least half of it) are entering a golden age where new technologies are rolled out and capitalised on. So, as long as you don’t shut your eyes and pine for the last golden age, we are all in a position to take advantage of some extraordinary hardware and software.

What?, So What?, Now What?

1. Smartphones. The most important technology the world has ever seen. A market ten times bigger than any other, billions of people worldwide are buying new phones every two years. And every two years they are doubling in capabilities. As Benedict Evans says “The smartphone is the new sun”. More and more your will run your business via your phone, so ensure you have one no more than two years old. And it must be either an Apple iPhone or Android based. Those two operating systems have both won the war, so do not buy a loser.

2. Tablets. The work you do not do on your smartphone you will probably do on a tablet. Yes you will hear people say “But I can’t do real work on that”, but the nature of real work is changing and for perhaps 90% of what needs to be done, a tablet is adequate. They are also fast, light and portable with long battery life. if you are (really) heavy Office users then buy a Surface Pro 4, otherwise either of the iPad Pro’s. These are for work so no cheap copies please.

3. Laptops. Being mobile is the future that is here today. By all means keep your desks with large screens on them, but move to laptops as the default ‘PC’. And seeing as they are substantially cheaper than they were 20 years ago no cheap ones here either.

4. Cloud based software. Whether you are a one man band or multinational, you all have access to the same software, via SaaS (Software as a Service) Cloud apps. Do not buy software you have to load locally or install on your network (as a rule of thumb). Office 365 or Google Apps for Work is foundational, thereafter a CRM, Project and/or Task Manager and Dropbox covers a lot of everyday requirements. Mailchimp is excellent for email marketing. If you need industry specific tools try before you buy. Do not buy anything that is not mobile friendly (this will remove many property software vendors straightaway – good).

5. Broadband. The faster the better. If you can stretch to Gigabit broadband (through the likes of Hyperoptic) buy it; the more you have the more you can do, even if you cannot see what you would use it for today. Ultrafast opens up a hidden world of capabilities (trust me on this).

6. Apps. You will obviously have mobile versions of your core and industry specific apps, but other must haves include the Google set (Search, Maps, Translate, Photos etc), CityMapper and The Trainline for local travel, Slack (end of email?) and LinkedIn for business communication, and then the full range of social media apps. You may think Facebook, Twitter, Instagram, Snapchat and the like are for play, but they are not. Or not exclusively. They are where you will find your customers.

7. Podcasts. More and more industry or domain specific Podcasts are becoming available. There are excellent technology, strategy and management ones as well as an increasingly good one from EG itself. Download a Podcast app, subscribe via iTunes or Google Play and listen to them on the way to and from work.

8. MOOCS. Massive open online courses, from FutureLearn (Open University), Coursera, Stanford, Oxford or many other places are a treasure trove for continuous learning. Often short courses, heavily video based they are perfect for your tablet!

9. Google Squared Digital Marketing Course. Every property company should have at least one member of staff who has done this course, which takes six months and is all online. The Property industry is, by and large, not good at online marketing; this course would help put this right.

10. Books. Yes, paper is allowed, even in a digital company. And there are at least 6 must reads each year. Follow me on Twitter for digitally focussed recommendations.

So 10 practical recommendations for running digital businesses. None are onerous, most are fun, and together they will help keep you beyond the clutches of the #PropTech marauding hordes.

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.