Two Peas in a Pod: In real estate you need to Educate to Innovate
Bob Dylan: "It's Alright, Ma (I'm Only Bleeding)" 1965
Andy Grove, employee No 1 at Intel, wrote a book in 1988 entitled “Only the Paranoid Survive”. It had the subtitle ‘How to exploit the crisis points that challenge every company’.
34 years later it’s a tome for our times in the real estate industry, as we face ‘crisis points’ on many fronts.
Over the last two years the office sector has learnt what the retail sector learnt over the last 20 years: customers no longer need offices to work in, as they no longer need shops to shop in.
Which rather upsets the apple cart. The certainties of the last forty years have gone out of the window. Deciding what to build where used to be so easy. Offices go here, retail goes here, and residential goes here. Get out the cookie-cutter and away you go. Real estate was not an easy industry, but it wasn’t complicated. You asked investors what they wanted and you built it for them.
Today it most certainly is complicated. Starting with the customer. Whereas what investors wanted was all that really mattered historically, from now on what customers want, actual occupiers and users of your space, is what matters. And, to be honest, often they do not know.
Where we are heading is not an acceleration, or an iteration, of the past. It is a fundamental mistake to think where we were in January 2020 is where we will be returning to, post pandemic. At scale we have learnt that remote working, by and large, works. We have learnt what does work, and what does not work. Furthermore we have all learnt to use the technology that enables us to function as an economy at a level that very few thought possible pre pandemic.
We are now able to look at how we live and work through a different lens. One that shows us we have new options, we have new choices, and we have new needs. And we are not going to give them up.
Which is all very well and good on a personal level but as people working in real estate it does pose a problem. How DO we decide what to build where? What do our customers want? What will they pay good money for? What is an office, what is a home, what is a shop? The form factor and functional specifications of each of these is changing. Asset classes are sort of morphing into each other. Is this a permanent change? Has it got further to go? Where is value to be had?
To further complicate things, we are still in the midst of a pandemic. We have our theories about what the future might bring, but nowhere in the world is anyone operating a post pandemic economy. So do we really know anything…. for sure?
And real estate projects take a long time. It’s no use being right for the market today, or in the immediate future, when in 2-5 years, or 5-10 the market might have changed fundamentally again.
What does #FutureProofRealEstate look like? How do we create the products and services that will be in demand tomorrow and 10 years hence?
The answer is that we need to educate ourselves about the levers that are being pulled, and are available to pull, around ourselves and at the wider societal level. And then we need to use what we learn to innovate our way to new business models, new products and new services that have product/market fit, and are scaleable and flexible enough to remain relevant come what may.
So we need to:
Understand the big picture. How the meaning of location is changing, what happens when technology enables an economy of abundance rather than scarcity, whether agglomeration theory still holds, and where does this open up new opportunities.
Understand the theory behind the oft talked about notion of ‘disruption’. How market leaders can be displaced by new entrants who do a worse job than them, but do something else that customers decide they value more. How to respond to disruption, and how to develop a strategy that maintains competitive advantage.
Understand the importance of data, what data actually matters and how to get hold of it, and how to use it ethically.
Understand how the tech industry thinks, and how to apply this to real estate. And then the 5 steps to innovating with technology.
Understand how #SpaceAsAService is transforming the workplace and catalysing new business models.
Understand how technology is transforming our homes and the housing lifecycle.
Understand how to finance change. Who is going to enable all these new products, services and business models? Which sources of finance should you be using at different stages of your companies development. And above all of this understand why innovation is hard in real estate, where and why blockers exist, and how to get around them.
Understand why ESG is so important, and will be a major component of every conversation in real estate for the next decade and more. How do you develop with ESG as a north star, and why it represents perhaps the biggest opportunity ever within the real estate industry.
All of the above is what each of us needs to approach with a ‘lifelong learning’ mindset. The topics are huge and constantly evolving. Build solid foundations of knowledge and then take it from there. You’ll never know everything but knowing more than your competitors is what you should be aiming at.
Innovation is a tough business. And, like learning, never stops. As with software, it is never finished. Build, measure, learn, and repeat, is how the software industry operates. Within real estate we need to do the same. Think of real estate as software. Constantly adapting to the wants, needs and desires of humans.
The future success of the real estate industry is going to be driven by people continually learning and continually innovating. And doing so amongst other like minded people. We all have to educate each other. A hive mind of the world's most interesting, innovative people is what we should aspire to.
Real estate is at the heart of everything in society. People spend 90% of their time inside real estate. Collectively, we need to build the best built environment possible.
And besides, as Mr Dylan so brilliantly put it:
‘he not busy being born, is busy dying'.
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PS. The next cohort of the Real Innovation Academy’s #FutureProofRealEstate course, where we teach all of the above, starts on the 25th of January. Please join us by registering here - realinnovationacademy.com