Innovation: If not now, then when?
The Cathedral of Santa Maria del Fiore, Florence. Dome by Brunelleschi. Started 1418
To brutalise Leo Tolstoy, every non innovative company is the same, but every innovative company is innovative in their own way.
When you look at innovative companies they are all doing so in their own particular way. It can be difficult to understand what one can learn from individual companies, especially from sectors not our own.
There are though a set of principles about innovation that are generic and timeless. There is a ‘way to think’ about how to be an innovative company, that will stand you in good stead, in whatever industry, as an individual, a team member, an employee or an employer. Learning how to ingest the innovative spirit is a crucial human and business skill.
Today we are in an environment where being innovative is not just a nice to have but an absolute necessity. The highest inflation for 40 years, war in Europe, a recovering but badly damaged global supply chain, the fallout from a worldwide pandemic, and the ever looming impact of climate change. These are not normal times. We are in a bad and dangerous place, that could be manageable but might also spiral out of control.
And the real estate industry is at the heart of all of this. We spend 90% of our time indoors, in real estate, so everything that affects the wider world manifests itself, in one way or another, in real estate.
So. Innovation: if not now, when?
To be fair, innovation has been a warm, if not hot, topic within real estate for some time. However, if we are honest about it, we have often been better at innovation theatre than innovation itself. About appearing to be embracing innovation, rather than actually doing so. True, many large companies now have ‘Innovation’ departments but in practice these tend to be small, if not tiny, with no guiding ‘North Star’, little genuine ‘air cover’ from CEO’s, and with meagre resources. Enough to facilitate a press release but not enough to get much done.
I say this whilst knowing there are some solid exceptions. We are talking as a rule of thumb here. Also, it is not meant as a criticism, or at least not a harsh one. Because as an industry historically we have not needed to be very innovative. Not a lot changed year by year and, mostly, our customers needed what we had to sell. We’ve been not quite a ‘take it or leave it’ industry but certainly much more so than other sectors.
All this though is or has changed. Whereas we used to be about selling products (four walls and a roof) we’re now moving fast and far into being a service industry, where delivering a service is what we do. We are now being asked, forced, to come up with spaces and places that are inherently flexible, across many dimensions, and that continually respond and react to changing wants and needs. And when your business is about developing and testing hypotheses, and iterating and rolling out the ones that work, you need a level of inherent innovativeness that is orders of magnitude greater than has been needed in more static environments.
And that’s where we are in real estate today. We need to become innovation machines.
Here are a number of ways to make that happen.
Everything starts with understanding your customer. How well do you know them? How well do you understand their wants and needs? What matters to them? It’s an odd thing that in the real estate industry we have our customers in our buildings much of the day but we hardly know very much about them at all. Admittedly we’ve not needed to historically but now that people no longer need a shop to go shopping, or an office to work in, we need to get to what is it about our buildings that makes them places people will want to come to, and spend time in? Customers need to be understood in granular detail. They need to be segmented, probably grouped into ‘personas’, and then analysed in depth. For every persona, for every ‘job to be done’ it’s worth using the ‘Value Proposition Canvas’ to help you discern where you need to focus your attention. I’ll cover this more in a future post.
Your team working on innovation needs to be autonomous and multifunctional. You need it to consist of people from different departments, with different skills and with more and less authority. You want representation from across the board; juniors, middle level executives and senior leaders. Innovation teams must not be a club of the like minded. The more diversity of thought, experience and skills you can inject into innovation the better.
You must have a clearly articulated company vision. What is the purpose of our company, what does it stand for, what values does it aspire to? Why are we innovating? What for? What do we hope to achieve? What matters? It is possible the purpose of the innovation group is to help define all of this, but either way you need a ‘North Star’.
The innovation team must be away from the C suite, but close enough for it to always be top of their minds. You need to give the innovators space to breath, but knowledge that what they are doing matters, and is a key interest of the powers that be.
Most specifically you need to have solid ‘Air Cover’ from the CEO that part of your mission is to focus on how competitors would compete with the company, in order that, if necessary, you can compete with yourself first. It needs to be explicit that how things are done today is not accepted as being the way they should be done. The innovation team is not there to deify the status quo.
There is a somewhat clunky term called ‘Psychological Safety’ that has become well known in certain business circles. Google in particular is keen on talking about psychological safety. Despite it being leaden, its meaning, which is that people must feel enabled to think how they wish, talk as they wish, and fail without fear of retribution, is important. Especially in innovation teams every voice must be heard, every opinion noted and considered, and every hypotheses tested. From a standing start one does not know what ideas turn out to be good, or from where they might come. You need to foster an open, idea dense ethos amongst the innovation team. Get it all out there, leave no stone unturned.
Establishing a foresight function has merit. What’s coming down the tracks? What scenarios might play out, over the next 2 years, within 2-5 years, or 10, or long term? What technologies are likely to impact the company short, mid and long term? Where do our products and services sit on the ’S’ curve. What is a great business today that might not be if X or Y happens. What are the chances of X or Y happening, and when? And so forth. Maybe built around concentrated workshops every quarter, a foresight function helps to alert the mothership of storms, or sunny uplands, ahead. And hopefully gives it time to reset, recalibrate and restructure as necessary.
You need to get into the habit, wherever possible, of building with your customers, not just for them. Co-creating products and services. This keeps you deeply embedded in the thought processes of your customers and helps you optimise against real, rather than hypothetical, needs. There are caveats to this, and Apple is the poster child for this approach, where you very much don’t involve your customers. But this only works if you have unique insights into the future utility of your products and services that would be hard to explain until they actually existed. Try explaining the iPhone before it existed. On balance, building with not for is the better approach.
Steve Jobs was famous for saying ‘Real Artists Ship’, and you should. Get something done, in the hands of users. The vision might be huge but no vision comes to life fully formed. ‘How do you eat an Elephant? - one spoonful at a time!’ This should be your mantra. There is a lot of tech ready for use in real estate today. Perhaps not perfect but well worth testing out. Get it in one building, learn from that and then iterate. In the same way working with customers is important, so is working with suppliers. Help them help you.
Probe what people would pay for. By working with, and talking to, a very diverse and inclusive group of people you should be able to gauge what different segments of the market value, and how much they’d be willing to spend on something. Test as many options as you can. We are all different.
Try to develop partnerships with complimentary groups, and don’t be afraid to steal great ideas. Picasso said ‘good artists copy, great artists steal’. By which he meant some ideas are great because they are built on certain fundamental truths that have depth and nuance. That are worth adopting at a deep and pervasive level. Often these ideas are exogenous, whereby they originate from outside one’s organisation or usual peer group. Cast your net wide.
Seek out your own blind spots. What weaknesses do you actually have? That maybe you don’t normally think about, or even acknowledge. Where are you vulnerable? Keep a top 5, and test them regularly. How vulnerable is vulnerable? And over what time scale, or under what circumstances. Can you envisage a ‘Black Swan’ event hitting your company? Where would it come from?
Remove friction and enable discovery. Learn to love the UX, the user experience, of working for, or with your company. Break every interaction, every workflow down, and look at how much friction doing A or B or C involves. How hard is it to do business with your company? Be a secret shopper - test out working with yourself. And then ask yourself, does everyone who needs something have easy access to whatever it is, wherever and whenever they need it. This is the discovery question? Can I access anything I need, anywhere? If not, why not?
Innovation teams need to be responsible as a group. Everyone involved with an innovation needs to be co-responsible for its success or failure. Never make an individual the sole person responsible. Everyone needs to feel invested in an innovation. Everyone needs to care. And never pass on costs relating to trialling an innovation to a business unit so that if it fails their P&L is impacted. If someone is at risk from challenging the status quo they won’t help you do so. Not all innovations work, or are ultimately worthwhile adopting. You need to make it OK to try, and fail if so be it.
You need to work at speed, as momentum matters, and you need to communicate amongst yourselves constantly and in depth. Everyone needs to know everything that impacts on what they are trying to achieve. Always.
And finally you need to foster a spirit of cultural alignment where the default presumption is that change is good. The whole company needs to be conditioned for change. Innovation is not a sideshow, or something ‘they’ do. It is something we do. We are an innovative company, by instinct and preference.
All of the above can apply to any company in real estate. As you’ve seen it is largely about mindset and how one operates as a company. You can take many specific approaches, and head in a multitude of directions but so long as you keep to these guide rails you will be well placed to succeed.
The real estate industry, over the next decade, is going to see the rise of many new ‘Brands’, each offering a range of new products and services, with new business models aplenty. The best participants are going to differentiate themselves like never before, and most likely be more successful than ever before. And they will innovate like crazy. Against this many will keep to a bit of innovation theatre, not grasp just how fundamental the changes affecting the industry are, and will see value drain away, faster than they could ever have imagined.
Unlike the old days, we are not all going to rise and fall solely dependant on the real estate cycle. Some will thrive regardless, and some will be crushed.
And the beauty of this? It’s going to be down to the choices we all make. We have agency. And that is a beautiful thing.
PS. Filippo Brunelleschi needed several major innovations to construct what is still one of the largest domes in the world.
For a quick explanation click here
Or for a great book on this most extraordinary building, click here