There’s an existential problem no one likes to talk about in real estate: really, truly understanding the differences between leadership and management. Leaders and managers are not the same thing. Yes yes, I hear you say, but in the time-critical container of transformation, knowing the difference between leading transformation and managing change could be real estate’s saviour.
By general consensus, a good manager is someone who can execute a defined plan, as agreed and optimised over a long period of time. This is Six Sigma territory, where the aim is to manage as efficiently as possible. In this management context, we know what our product is, we know who our customers are, and we know what our job is – to get our product to our customers as smoothly as possible, at the lowest cost to us balanced with the maximum cost customers will bear. This is how business works at the top right of the ’S’ curve, where we are dealing with established markets, the largest number of customers, and pretty much commoditised products or services.
This is real estate as an industry for the last twenty or thirty years. Yes, we have cycles of demand, but the product is much the same as it has been, and the competition is doing exactly the same as you are. In good times you all do well, and in bad times you all suffer. In this world, managers have thrived, and made a lot of money. Here, being efficient has trumped being different, and being different has been a bug rather than a feature.
As Charles Handy, the great management writer has written, industries evolve in repeated ‘S’ curves from genesis to commodity. Right now, real estate is seeing the start of its next ‘S’ curve; we are back down at the bottom left, where commoditisation needs to be replaced by innovation, and Six Sigma must give way to Agile. Most centrally though, the entire real estate industry is being re-imagined, and we are moving from being ‘sellers of product’ to ‘deliverers of service’.
Let’s be real, when leases are shortening into non-existence, we’re effectively shifting from rent collectors to service providers – for what else can we be? Not only this, we find ourselves competing with new entrants that leading industry figures didn’t spot as market risks five years back.
In Fortune magazine recently there was an article describing ‘forward thinking urban design and new digital technology to create people-centred neighbourhoods’. Want to hazard a guess at which REIT or major real estate company that was referring? Google!
Having just secured permission to start their transformation of 800 acres of Toronto waterfront, the ‘developer’ in question was Google. In a similar vein, the article could have included a story about Facebook leasing space for 3,500 staff in California – not from a real estate company – but another ‘Tenant’, namely WeWork. I’ve lost track how many global Property-Tech Power Lists I’ve read where Amazon founder and CEO Jeff Bezos is listed in first place. The bottom line is that the sand beneath our feet is shifting, and will continue to shift.
So what should we be doing? The best answer I have is to consider Robert Frost’s words from 1914: “the best way out is always through”, he wrote. Don’t bring a knife to a gunfight; understand the drivers of change, embrace them, and re-purpose your company for a new environment. Having worked in software development for 20+ years one becomes very blasé about change. No piece of software is ever finished, no language survives all that long, next year will be unlike this year, and no you cannot work out in advance exactly how your customers will use whatever you build. Most likely they will devour the functionality you are not that fond off, and ignore those special features you love. But it does not matter, because the industry is not designed to be right. It is only designed to be flexible. Build something, measure how it works, learn from it and iterate.
I advise real estate board members to try and think of real estate like the iPhone. It only has 18% of the global smartphone market but makes 82% of all the profit. Why? Because it marries hardware and software together to create a user experience for which customers happily pay a large premium to enjoy. Real estate leaders today must only be thinking of their users, more specifically only the user experiences that delight the segment of the market you are targeting.
Profitable buildings will be full of happy people; so I urge leaders to think only of the team you need to put together that will create great user experiences. That may be a solo endeavour or one built on partnerships.
It is hard. It requires new skills, but it is doable. Most people will fail, but to the winner go the spoils.
Antony Slumbers has been a software development and technology strategist in commercial real estate since 1995. Now, he consults and works with real estate boards on Transformation, Technology and Innovation. A well-known speaker in property, he is a globally recognised expert on PropTech, and #SpaceAsAService. For more go to antonyslumbers.com or talk to him on Twitter @antonyslumbers
This article is featured in our full report A Very Modern Leader: Contemporary Leadership In Real Estate & Construction which you can download by clicking the link.