THE BLOG
So.. did my dreams come true?
In December last year I wrote a post entitled ‘#PropTech resolutions for 2017’. With the year almost over I thought I’d revisit it to see if my dreams came true:)
So here we go:
1. Stop talking of #PropTech; technology is not a bolt on to ‘Property’. If you are in business, you are in the technology business.
I’d say I lost the battle but won the war here. #PropTech has never been talked about so much as it has been over the last year, and my preferences aside, the term has proved very useful in marketing terms and as a tent peg off which a whole host of ideas and conversations have hung. Against that I think we are ending the year as an industry that has realised that talk of #PropTech does mean that many still place the ‘Tech’ bit in a silo and that much work is still required to emphasise the ‘If you are in business, you are in the technology business’ bit.
2. Don’t know much about technology? Get someone in to brief you. Keeping up with tech is not your job, but it is your job to exploit what is possible. Find out.
A score draw? Perhaps, but perhaps a narrow defeat. I’ve not stopped talking tech to people in the industry, and the number of people looking to ‘find out’ has grown dramatically, but I feel there is still a lot of lip service paid to technology, with not nearly enough follow through. Real Estate is still largely an analogue industry.
3. After doing No 2 you will know that near as damn it, you should be able to run your business from a phone or tablet (Marc Benioff of Salesforce tries to).
Total #Fail here: Running a real estate business by pdf is more likely than from a tablet:)
4. With No 3 sorted, feel free to laugh at competitors not fully mobile enabled. They will not be competitors for long.
The #Fail gets bigger: until a fully digital real estate company emerges no one will be laughing at those left behind….
5. ‘I will format any reports we write for mobile.’ What is it about the Real Estate industry that makes them upload print formatted documents, that are unreadable on a phone? Look around you; what are people looking at? Yes, their phone!
And again, no dreams coming true here. In fact only yesterday I heard of how shockingly inefficient much of the investment sector still is, with presentations being manually put together by inserting data stored in pdfs!
6. Double your hardware budget. Getting your workplace ‘right’ is important but equipping your team with the best possible technology is way more so. A company with great tech could succeed in a terrible office, whereas a great office is useless without great tech.
Well… did you?
7. Sort your office out. The Stoddart Review at the end of 2016 showed only 53% of employees believe their office helps them be productive. An unproductive office is like leaving piles of cash on the table after concluding a deal. Low hanging fruit; pick it.
Low hanging fruit still hanging there, waiting to be plucked. Although with a valuation ending the year at over $20 billion it could be said that WeWork has been harvesting like mad.
8. Less is more is the perfect Life/Work balance mantra. Eat less but better. Drink less but better. Take less office space but make it better. Work less but better. And use technology to enable all of this.
A Win at last. Certainly in London at least there is much evidence that larger occupiers are downsizing their requirements 20-30% when given the opportunity by a lease break or end. This trend can only grow - Per head we all need a lot less space, at least in terms of long leasehold space.
9. Then do More, with More. Technology gives us all leverage. More (of the right) technology will allow everyone to do more with more. If you can do X in an analogue world, you need to be looking to do X times 10 in a digital one. Countless examples of this exist. It is not fantasy.
Another #Fail - Real Estate has not even started in doing more, with more. Combined Google, Apple, Facebook and Amazon have a market capitalisation equivalent to the GDP of India yet they only employ around 700,000 people, and Amazon warehouse workers form even the bulk of that. That is productivity.
10. Buy software that makes you more efficient – BUILD software that gives you a competitive edge.
I am going to claim a Win here. Many people have argued this with me this year, saying real estate companies are not up to developing software and should always buy it in. But they are wrong, especially when it comes to the large companies. I’ve not seen any competitive advantage accruing to companies that buy in their software. And you won’t: you will see much consumer surplus generated but little competitive advantage. For that you need to Innovate!
11. Try and get rid of your IT Department. Technology needs to permeate your business, not be the butt of jokes and hidden away in the worst space in your office. Amazon does not have an IT Department; neither should you.
Think I’ve won the argument but currently a #fail - the smarter set realise they need multi functional teams with pervasive tech skills throughout their organisations but I’ve yet to see this executed on. Next year…..
12. Prepare to hear everyone tell you how their software uses AI and Machine Learning to ‘insert hyperbolic phrase here’! Mostly, they will be clueless as to what that means.
An outstanding Win: 100% correct on both counts.
13. BUT AI and Machine Learning ARE the most important technologies out there and WILL change your world. My No 1 resolution would be to learn why and how.
And another Win: next year this really will be BIG.
14. Start by hiring Amy, an AI Digital assistant (x.ai), to organise all your meetings.
A Win, though more for Alexa than Amy. 2017 was the year the idea of talking to your computer went mainstream. Kudos to Amazon.
15. Technology is changing the world to being ‘on-demand’, and our industry is not immune. In fact, ‘The Real Estate Industry is no longer about Real Estate’. Make 2017 the year you think about the Service you provide, rather than the Product you sell.
Biggest Win of the year: #SpaceAsAService is now ‘a thing’ - big and getting bigger. This is the juggernaut coming to change real estate. Follow my ‘twin’ @spaceasaservice to keep up with everything going on in this area.
16. Finally, realise that whilst you probably aren’t that knowledgeable about tech, most #PropTech people know very little about Real Estate. The two sides need to converge. Let’s kill off #PropTech by 2018.
Let’s just roll this one forward. Tech meet real estate, real estate meet tech: you need each other:)
Overall then, did my dreams come true? Of course not, but then dreams aren't supposed to, are they?
A Tweetstorm - Analogue Real Estate:(
A quick Tweetstorm from yesterday as I realised #PropTech really hasn’t changed the real estate industry very much at all:
Talking with someone selling high end investment data into the commercial real estate industry today. Honestly did not know whether to laugh or cry.
Biggest issue? Large % of Customers insist on pdf reports. Quarterly. Why? Because they don’t use tablets, or even laptops much and have no interest beyond headline numbers.
Never use the online system but demand endless customisation - all of which is available online. Thus data is late, static, inert and expensive to produce.
Worse than that; many then get PA’s, juniors or interns to take numbers from PDF’s and enter manually into presentations or other documents.
And guess what? Most of the data has to be manually pulled out of 3rd party source systems and re-keyed into research db’s
In summary: many ‘prestige’ CRE investment funds run as if in the Stone Age. The end reports look impressive but it is all mainly guesswork or a pig’s ear dressed up as a silk purse.
As I say, should we laugh or cry? Or frankly, IMHO, get really angry that this farce is acceptable and accepted. So much innovation will be stopped in it’s track because of this pathetic analogue behaviour.
The sooner the fantasy of investment professionalism is outed the better. This world serves a tiny few and disadvantages the rest of us. The misallocation of capital must be vast. Time for it to end.
VIDEO - 10 Signals of Fundamental Change
The talk below was given to GVA in the City of London in November 2017.
From Offices To Imaginariums - a Podcast
I sat down with workplace expert Ian Ellison to chat about how technology is changing the work we do, and the impact this will have on the fundamental point of the office.
In an hour we cover a wide range of topics but all highlight the considerable charge impacting the entire built environment.
Innovation in Real Estate: It’s now or never
“Productivity isn’t everything, but, in the long run, it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.”
And where does productivity growth come from? Largely it is from Innovation, though of a particular type. According to the National Bureau of Economic Research in the US ‘there are substantial positive impacts of product innovation on revenue productivity, but that the impact of process innovation is more ambiguous’.
This explains why, despite the nationwide UK level of productivity being substantially below trend since 2008, the picture at the micro level is very different. There are many companies whose productivity, and growth, has risen dramatically. If you look at these companies, and they are mainly technologically sophisticated companies (if not necessarily ‘tech’ companies) you will see that they have innovated aggressively in developing new products, rather than refining existing processes.
Again this is not surprising; any student of Clayton Christensen or Charles Handy knows about the innovation ’S’ curve and the difference between sustaining and disrupting innovation. Refining processes is for those in the top right of the ’S’ curve, commodity or monopoly providers of mature products to large audiences. The downside here of course is that that road is a dead end and Handy’s ‘Second Curve’ will eat you up. It is only a matter of time.
And where is the establishment commercial real estate industry? Sadly, up there, top right, innovating away, but only in refining processes, most likely by ‘digitising the past’. In other words, going nowhere, suffering from either valuations at huge discounts to asset value or running out of ideas and falling back on buying back their own shares.
Meanwhile, where is the ‘new’ commercial real estate industry? Creating new products (though really these new products are mainly services) and creating new and considerable value.The poster child is of course WeWork, which has gone from zero to $20 Billion in just seven years, but there are others like investment startup Cadre who’ve raised $113 million to date, or meeting room/hospitality company Convene who’ve raised the same. VC fund Fifth Wall has raised $240 million. Any company raising nine figures is anticipating creating 10 figures of value. Will they all succeed? Probably not. Will they Innovate process? Definitely not. Will they create new Value Propositions, with new Business Models? Absolutely.
Do these companies pose a threat to the incumbent mainstream real estate companies? The conventional wisdom today is no, in fact it is not at all uncommon to hear WeWork be dismissed as ‘a fad’. Wiser voices though are starting to be heard: Cain International Chief Executive Jonathan Goldstein was recently quoted as saying. “Currently landlords like us are doing lease deals with them (WeWork). But I am convinced that within two years they will turn around to people like us and say they want to do management deals, and because they will be such big occupiers they will be able to dictate the terms of the market. Landlords will have to think about whether they are willing to deal on that basis.”
And that is just the start of it. Agency faces a deeply problematic future: besides the rising tide of ‘flexible’ space being taken largely directly from operators, there is increasing use of AI, feasting on astonishing computing power and tsunamis of data, being used to algorithmically match demand with supply.
An RICS report in the summer suggested that 88% of a Surveyors work could be automated within 10 years. McKinsey say that 49% of ALL work performed today could be automated using ‘currently demonstrable technology’ and this technological ‘take-over’ is fundamentally changing the nature of the office space people need. Much that exists today will become obsolete or requiring of major overhaul.
In turn the very nature of who are the real estate industries customers and competitors is changing. The reality is, and this is definitely not accepted wisdom, every single person who enters your space IS the customer, and your competitor is either the existential worry that your product is no longer ‘fit for purpose’ or, as the industry becomes ever more technology driven, the major technology companies. When real estate becomes conceived, designed, built and constructed primarily via software and hardware (robotically) who do you think understands that world best? Well….
All the above could be taken very negatively but in reality, for the company that has ‘Carpe diem’ in their DNA, this is the best time ever to be in the real estate industry. Sheer scale and financial muscle is no longer the be all and end all; brains, attitude, agility and a ‘startup spirit’ have outsized power today.
Innovation is the key to productivity growth, and within real estate will be the single biggest differentiator between those companies falling down, and those rising up, the value chain.
How one builds an innovation culture is for another post but for now wouldn’t it be great if I could have used UK, rather than US, examples of large, significantly funded commercial real estate startups?
It’s time to get serious about innovation. It really might be now or never.