Space as a Service: The Trillion Dollar Hashtag
By Antony Slumbers. Antonyslumbers.com.
January 30, 2019
The changes coming to the world of real estate, encapsulated by space-as-a-service (affectionately and somewhat ironically described hereafter as #SpaceAsAService), represent a trillion dollar-plus opportunity. Everything we are familiar with about how we design, build, occupy, manage and value all the spaces and places around us will change fundamentally over the next ten years. And this will happen whether we like it or not; these changes are being driven by technological advancements that are rewiring the world around us. They have very little to do with the real estate industry per se, but the real estate industry will have to bend to their will. The genie is out of the bottle, and there will be winners and losers. Many winners and many losers.
I intend to explain “what” is happening to cause the period of rapid change we have recently entered and that will persist for as much time as we can realistically predict. Then I will answer the question “so what” — what will the consequences be? Thereafter I will address the “now what” puzzle. In short, how do we ensure we are not on the losing end of this societal shift (as many will be), and what are the success factors we need to embrace to be amongst the winners in the coming real estate gold rush?
But first, a definition and a caveat
#SpaceAsAService has two meanings. First, it refers to space that is procured on-demand, whether by the hour, day, week, month or year. But secondly, it refers to a workplace (however procured) that provides the spaces and services appropriate for the “job to be done” of every individual, as and when they need it. The caveat is that this does not apply to the entire office market, but it does apply to the better end of it. Any company dependant on attracting, retaining and making productive high skilled employees WILL become #SpaceAsAService minded.
18 / 82
18 and 82 are totemic numbers in relation to this subject. They signify the nature of winning in an advanced technological age. I will explain more later (but can you guess why?).
Rain, Steam and Speed
In 1844 the great English artist JMW Turner painted “Rain, Steam and Speed” shortly after the opening of Isambard Kingdom Brunel’s Great Western Railway. In it you see a steam train crossing the Maidenhead bridge at speed, whilst all around the rain is lashing down and the scene is a whirlwind of the elements. On the tracks a hare is seen transfixed by the oncoming locomotive, about to be run over.
The painting is a vivid representation of what it felt like to be alive during the first Industrial Revolution. It feels like the future is rushing towards you, but everything is a bit of a blur. But the underlying feeling is one of palpable excitement. Living in fast-moving times is exciting.
And what fast moving times we are living in. A quotation from McKinsey (A future that works: automation, employment and productivity) in January 2017 points to just how much our lives and society might change: “Overall, we estimate that 49 percent of the activities that people are paid to do in the global economy have the potential to be automated by adapting currently demonstrated technology.”
Note they are referencing currently demonstrated technology, not the technology of the future. Currently demonstrated technology.
To ram home the point here is China’s most successful AI venture capitalist, Kai Fu-Lee, writing in his book AI Superpowers in September 2018: “AI algorithms will be to many white collar workers what tractors were to farm hands: a technology that dramatically increases the productivity of each worker and shrinks the total number of employees required.”
“What tractors were to farm hands” is not a phrase to take lightly. If true these are six words that’ll change the world.
What is happening?
You have probably heard of Moore’s Law, named after (though not designated as such by himself) Gordon Moore, one of the co-founders of Intel. It is based on his observation that the number of transistors on a computer chip doubles every two years. Which is how we have gone from chips with 100,000 transistors in 1980, to 100 million in 2000 and an extraordinary 10 billion by 2016. It is the thinking behind the much touted hockey stick charts you see everywhere, demonstrating the impact of change at an exponential rate.
In computing today though there is something occurring which makes even these extraordinary figures of 100 thousand to 100 million to 10 billion seem paltry. And that is what has been happening in the world of GPUs. Moore’s Law relates to CPUs, which are the processors you have in your laptop or desktop, whereas GPUs are the power behind computer gaming machines. The former essentially computes linearly, one thing after another, while the latter computes in a parallel manner, where many things are done at the same time. And it just happens to be that this parallel processing is exactly what is required by Artificial Intelligence. And that makes a BIG difference.
In fact GPUs have increased in speed so dramatically that between 2013 and 2016 Neural Network Training, which is a foundational process within AI, became 60 times faster, with most of that change occurring in one wonder year, 2015. Doubling in speed every two years has consequences, but they are dwarfed by what 60 times faster in three years means.
So what?
Combine this incredible increase in computational power with the honing and development of AI algorithms and the massive rise in the quantity of data that is now widely available, and you have a technological landscape that has been transformed in just a few years. Suddenly we can do things we never could before.
Which is why computer vision, the ability of a computer to understand the content of photos and videos, has gone from useless to usable. In 2010 computer vision had an error rate of 28.2%, effectively making it interesting but commercially pretty much useless. By 2015 the error rate had dropped to 3.5%. Given that the human error rate is 5% this means that (with caveats) computers can see better than we can. Which is why in China they now have systems that allow for 200,000 faces to be recognised, in real time. You might not like that idea, but the capability cannot be uninvented, and most likely will grow in use.
Speech recognition has also gone from useless to useful, in fact even faster than computer vision. In 2013, the word/error rate (the standard benchmark) was 23%. By 2017 it had dropped below 5%, the human level.
Many people think that technologies develop to fulfill a human need. We want to do something, so the technology industry works out how to do it. “Necessity is the mother of all inventions,” is a term that gets thrown around every day. But that is not how it works; the reality is that behaviours change because some new technology has been invented. And the progress in voice recognition demonstrates this perfectly. Why is Amazon selling over six million Echos every quarter? Because it is a technology that finally works! Sixty times faster in three years has consequences. Voice is a now a viable search interface. Expect to see many more people talking to their computing devices rather than tapping away on a keyboard. Technology changes behaviour just as much as the other way around.
The Machines Have Eyes!
Computer vision and voice recognition are key skills that are enabled by artificial intelligence, which is the prime beneficiary of all this new computing power. But AI has three more key capabilities. First the ability to aggregate and synthesise multitudinous disparate data sets, secondly being very well suited to deductive, inductive and abductive reasoning (almost infinitely sophisticated use of “if this, then that” workflows) and thirdly planning, the setting of goals and how to achieve them.
Which means that all businesses can now exploit 6 new capabilities:
1. The ability to automate processes of increasing complexity and nuance
2. The ability to understand what is happening in picture and videos (just think about that in connection with real estate – we spend so much of our time looking at the built environment)
3. The ability to optimise complex systems (that’s where synthesising datasets comes in)
4. The ability to auto create content; already much of the news, especially financial and sports related, is generated by an AI program working with a template and filling in the gaps by “reading” data feeds.
5. The ability to understand people using language; you’ll see this increasingly in telephone-based chatbot help lines and customer service centres.
6. The ability to make predictions. This is almost the essence of AI; it is not about giving you an answer but rather giving you options and telling you the probability of each one fulfilling the task at hand. AI will drastically reduce the cost, and therefore frequency, of our use of “Predictive XYZ”. At the same time though it raises the value of judgement, as someone has to choose from all the new options available. For now at least, judgment is very much the province of us humans, and will be perhaps the most important skill set to develop in the near future.
All of the above is increasingly becoming available via rapidly commoditising services offered by the likes of Amazon, Microsoft and Google. These tools will, in just a few years, become as commonplace as word processors or spreadsheets. Standard business tools in other words. Artificial Intelligence is not like other technologies though, which is why, to quote McKinsey again, from April 2018: “If you think you can let the technology develop and then be a successful fast follower, think again.”
A subset of AI is something called machine learning and the hint is in that name; the machine learns as it is fed more and more data. It learns from that data and hones and tweaks its processes as it learns more. Meaning that unless your system has had the time to learn it will not be competitive with a comparable machine that has had the time to learn. So playing the usual technology game of waiting for the early adopters and pioneers to make a multitude of mistakes and lose a lot of money before jumping in and simply buying the technology when it works is no longer a viable strategy.
The technology industry naturally tends to favor monopoly; the winners take everything and the rest are left to pine for anti-trust legislation. The AI industry does so as if on crack cocaine. Being left behind is going to become a common reason for business failure over the next ten years. Money alone won’t protect you.
The takeaway?
What then can we take away from all of the above? The answer is simple: All change.
The very nature of work is changing, anything that we currently do that is structured, repeatable or predictable WILL be automated. That is exactly what the “49% of tasks” mentioned by McKinsey is all about. Having analysed over 2,000 work tasks that people are paid to perform, they concluded that 49% of them are structured, repeatable or predictable enough to be automated. They also said that in only 5% of cases could entire jobs be automated, but 49% of everything people are currently paid to do is a big deal regardless. There is barely a job that will not need to be comprehensively reconfigured over the next few years. Over the next 10 years it’s a pretty sure bet that every job will change.
This is where it gets interesting, because as work changes so will the nature of demand within commercial real estate. The demand we have become used to, and that has not changed all that much really from the old Taylorist days, is at last set to be dissolved and reformatted.
But it might not change in the way all this talk of technology perhaps makes you think. Because there is something fundamental missing from a structured, repeatable, predictable world.
What is missing is creation itself: nothing can be made structured, repeatable, predictable until it has been created in the first place. And fortunately for us there is something called Moravec’s Paradox.
Hans Moravec was a computer scientist working in the artificial intelligence field in the 1980’s. He wrote: “It is comparatively easy to make computers exhibit adult level performance on intelligence tests or playing checkers, and difficult or impossible to give them the skills of a one-year-old when it comes to perception and mobility.”
Broadly speaking, computers find it incredibly easy to do things we find incredibly hard and vice versa. Not least of all, we have consciousness and a conscience; machines do not. And whatever you may have heard, a “Terminator” future, of autonomous machines that can do everything humans can, and much better than them, is not on any horizon one can plausibly see today. Speak to any of the serious figures within the AI world and they’ll tell you that we are still taking just baby steps with AI. There may be no limit to how powerful machines can become, but it is not a near-term worry.
There are many trends that are coming together to speed up the switch to #SpaceAsAService.
First, we have the twin trends of the move from products to services and ownership to access. Increasingly we are moving to an almost post consumer world where we are less bothered about accumulating more things and much more interested in being provided with services, experiences and ephemeral pleasures. So we now have Neflix for movies, Spotify for music, Airbnb for accommodation, Deliveroo for food, Uber for taxis and the fastest risers of them all, the likes of Bird and Lime for electric scooters.
Wherever you look people are shifting to on-demand services; why is real estate likely to be any different? All of these services of course have been enabled by new technologies, most importantly the smartphone, and it is this ease of use that makes all the difference. That 1980’s £30 million supercomputer in everyone’s pocket is perhaps the most disruptive technology ever. Summoning what you want, when you want it turns out to be the ultimate killer app. All businesses need to figure out their business models for an on-demand world, real estate will not escape this.
The Changing Nature of Work
That is the fundamental point here: it is only us humans who are in a position to ask the right questions for computers to answer. Technology just is: it is for us to mold it to suit our own ends.
And that is our great good fortune. Because as anything structured, repeatable, predictable becomes automated all these tasks will transition to being what I like to call “old work.” In the same sense that washing our own clothes or cleaning our own dishes is something few of us yearn for in an age of washing machines and dishwashers, offloading automatable tasks should be embraced.
Our future lies in “new work”, and that is where our innately human skills are best focussed. Think design, imagination, inspiration, creation, empathy, intuition, innovation, collaboration, social intelligence, and judgement.
And then think how the spaces and places we need for this human, new work differs from those appropriate for old work. We are moving beyond the “office as spreadsheet,” where desks are lined up in a standard grid and everyone is in their cell doing structured, repeatable, predictable work.
Given this change, an office that is designed around old work is, or shortly will be, obsolete. The future-proof office HAS to be designed for new work. And that means places that catalyse human skills. Places that are designed to enable us to be the most efficient and effective humans we can be. And we will need different settings based on our “jobs to be done”. So we need spaces designed for quiet work, collaborative work, reading, thinking, resting, for events and for learning. And specially fitted-out spaces that allow us to “market in the modern manner” like podcasting rooms or video or music studios.
“Computers are useless: they can only give you answers.” – Pablo Picasso
The imperative has to be for spaces that help us create, help us with all our HUMAN WORK.
These so-called Activity-Based Work (ABW) spaces are popping up fast. Designers Unispace provide some statistics from Australia: By 2020 they anticipate 40% of people within an organisation will be participating in Activity-Based Working and/or working from home. And 66% of organisations will have adopted ABW by the same date. Bearing in mind that ABW can be thought of as “open plan done right” and are spaces that provide the services people need as and when they need them, you can start to see why #SpaceAsAService is truly the trillion dollar hashtag. When people are spending their time on human work try competing without a human-focused workplace.
Secondly, the shape of the economy is changing, with an increasing number of people working freelance, in some form or other, and large companies being net destroyers of jobs. It is often assumed that most people work for large companies, but this is not true. In the UK 40% of employees work for companies that employ over 250 people, 48% for those employing less than 50 people and just 12% for companies between them. In the US 41% of people work for companies with under 50 employees, and 77% for those employing less than 500 people. Just 23% work for larger companies. Furthermore employment growth is mainly focussed in young (under 5 years) and small companies. Since 2010 73.9% of all new jobs in the US have been created by sub 500 people companies. These trends are likely to become more pronounced, as larger companies will surely be the first to automate away entire job functions.
This shape of the economy also surprises people in major cities. For example, in London, where one instinctively feels large companies rule the roost, there are only 205 companies that employ more than 250 people. Remarkably 70% of all occupied units are less than 10,000 sf and fully 50% are less than 5,000 sf. Given the right product/service offering what percentage of those sub 5,000 sf companies could be tempted to not have to run their own workplace? It’s not a low figure is it? I’d go as far as to say that the sub 5,000 sf market is almost entirely up for grabs by #SpaceAsAService operators.
And thirdly, not only have leases been getting shorter for 20 years (down to an average of just seven years in the UK according to MSCI) but with 75% of occupiers vacating their premises upon a lease break (again in the UK, per MSCI) it is clear for all but the real estate industry to see that there is a distinct lack of product/market fit in the the property stock. 75% of occupiers do not move because they have nothing better to do, they move because their space does not provide them with the service they need.
And all of that is before the changing nature of demand, due to technological change, really kicks in. When the need for human-centered workplaces really gains momentum the industry won’t want to be starting from where it is today. Because when demand changes, supply has to follow. Get that supply wrong and you’ll not be looking at 10-20% lower rents – you’ll be looking at total obsolescence.
Google published a report in 2015 entitled Workplace 2020 and in it they concluded: “Flexible working will be the defining characteristic of the future workplace.” They surveyed a large number of their own customers, asking them what percentage of their workforce they expected to be working flexibly by 2020. What they found was surprising, in that the larger the company, the higher the percentage, rising to 66% (up from 10% in 2015) in organisations with a headcount over 6,000. It might well turn out that contrary to much of the industry sentiment, #SpaceAsAService is not primarily a startup niche but rather a pervasive new way of thinking about the workplace. That of course would make sense precisely because the nature of work itself is changing and humans need human-centered workplaces regardless of company size.
Nevertheless that 66% figure did seem awfully high in 2015. In March 2018 though, MingTiandi, a research website based out of Hong Kong, wrote this:“56% of Asia’s top 200 occupiers are already using flexible workplaces in some capacity, and 91% are considering using them.”
So it seems that the very data-centric Google had got their sums right.
A quotation from Ernest Hemingway’s The Sun Also Rises of 1926 springs to mind when looking at this scenario. A character in the novel who had gone bankrupt was asked “How did you go bankrupt?”.
“Two ways,” he replied. “Gradually, then suddenly.” This is how progress develops in an exponential world, nothing much happens for a long time but then, seemingly out of nowhere, everything changes. That’s the hockey stick mentioned earlier.
Real estate today is in an analogous time to the dawn of skyscrapers. An oddity to start with, denounced as unsafe and/or destroyers of value, not that many years passed and suddenly they became the default setting. In times like this the past is not a good guide to the future.
We’ve had the “what?”, and the “so what?”, here’s the “now what?” The most important point to understand is that, going forward:
The real estate industry is no longer about real estate
Of course it actually is, in the sense that everything you know about real estate is and will still be required, but henceforth it will be necessary but not sufficient. From 2019 onwards we all need a new range of skills and an entirely different mindset.
A starting point is realising that no occupier wants an office, what they want is a productive workforce. To an occupier an office means nothing if it cannot help them make all the expensive people within it as efficient and effective as possible. What we as an industry need to do is focus on the productive workforce issue. As Zig Ziglar has said: “You will get all you want in life, if you help enough other people get what they want.”
Forget the real estate side of real estate (you can do that well anyway can’t you?) and concentrate on the people side. After all we all know that the costs of an office follow the 3-30-300 rule of thumb: $3 on utilities, $30 on rent and $300 on employee costs. Helping your occupiers with that 300 number counts way more than anything else.
According to the Leesman Index though we’re not too good at that. Having conducted more than 400,000 employee interviews the current consensus is that only 57% believe their office enables them to be productive. Couple that with an average desk occupancy rate of circa 40% and, truth be told, the real estate industry is a huge double fail. Or put another way, there is a huge opportunity for anyone who can outperform their peers.
What then would success require? I believe eight factors that are organisational, financial and cultural.
These eight factors will play a critical role in creating the office of the future
Success Factor No. 1: Are you a chicken or a pig?
Question: What is the difference between a Chicken and a Pig in a bacon and egg sandwich?
Answer: One is involved and the other is committed.
Knowing who you are in a #SpaceAsAService world is vital. There is not a right or wrong answer, but it makes all the difference. Historically real estate has often been about being a rent collector, whereas in the future, end users are going to want to deal with service providers. To be a service provider though will for many real estate companies be almost an impossibility. Service companies are different beasts in almost all ways from product companies, and real estate has always been a product industry. Build or buy a product and sell/let it. Optimise your business for that. Keep the headcount small, minimise overhead, arrange financing, and collect rent. It is exactly why real estate companies are typically rather luddite and low tech: they have not needed to be anything else. And that is not a bad thing. They are optimised for what they are. Mostly, real estate is about chickens.
The trouble with being a chicken though is that, operating like a product company in what is becoming a service industry, you will be commoditized and you will earn less of the available profit than perhaps you do today. Well-operated #SpaceAsAService spaces are going to generate considerably more revenue than conventionally leased ones, but costs are going to be higher. You may well as a landlord find that your assets are generating a lot more revenue but your net position goes down. After all someone has to pay to create all that revenue. And that will be the Operator you sub all the work out to. That said, you can remain lean and not have to do all that much. Enough revenue might be enough. Who wants the hassle?
Or you may be a fully committed pig, in which case, if you get it all right (and there is a lot to get right) you will potentially do extraordinarily well. Better than anyone else. I believe a few incumbents will pull this off and will grow massively. It is going to be a business that enjoys network effects and powerful ecosystems are going to be very powerful indeed. But you seriously need to be a pig. Don’t kid yourself if you are not.
The third way (there’s always a third way) is to find yourself a partner and co-create your own offering. They do the operational work but you jointly create the brand. Certainly there are operators offering up their services for such arrangements. Working out who is friend or foe is critical. Alignment of interests is vital. It will not work if you view this as a client/contractor relationship, it needs to be much tighter than that.
Remember though that there are certain super pigs growing up and they are going to dominate anyone who does not understand how this landscape is developing.
Success Factor No. 2: From rent collector to service provider
Following straight on from factor number one, with the industry morphing into being about service the nature of the industry’s customers and competitors is changing. A traditional real estate client is whoever pays the rent check every quarter. Whatever anyone says, keeping that person happy is the only thing that matters. And even then not so much, as non-payment of rent is generally not an option. But in the new #SpaceAsAService world, where your occupiers are free to leave at relatively short notice and where their rent is but a part of the total income you hope to receive from them, your customer becomes every single person who enters your property. Providing a great user experience is the be-all and end-all. Different game.
And your competitors are no longer your industry peers. We have already seen Google, Facebook and Amazon get seriously involved in designing and developing real estate. This is just the beginning and many new, non-real estate companies will start to get involved. As everything about real estate becomes more digital, it is an industry flashing “come and get me” to the software industry. The big question is whether real estate can learn software quicker than software can learn real estate.
And that’s before you mention the likes of the lavishly funded WeWork – they are not playing a real estate game, despite what the industry mostly thinks.
Success Factor No. 3: New models for valuation
This is the elephant in the room for many in real estate. We know the current models for valuation are broken and we know the long held bond-like characteristics of the industry are dying out. Mostly it is being brushed aside but as the office market increasingly becomes something operating more like a normal business (a la hospitality), we all know big change is coming here.
The #SpaceAsAService world is going to have different metrics, where total income rather than gross/net rent is the thing that matters. But also it is highly likely that an asset’s value is also going to be, at least partially, determined by new metrics, such as flexibility, productivity, wellness and sustainability. Is your asset capable of being constantly adapted, is it space that helps people be productive, does it provide a healthy environment and is it long term sustainable?
Who could answer those questions, quickly, today?
Success Factor No. 4: Human + machine wins
This is where cultural and operational changes are required within the industry to fit into a #SpaceAsAService world, because in a world of exponential technology we need to become exponentially human.
At the launch of the iPad 2 in 2011 Steve Jobs was famously pictured in front of an image of a street intersection: one branch pointed towards “technology” whilst the other pointed toward “liberal arts.” He was extolling the virtue of Apple as being a company that operated on this intersection. And he said: “It is in Apple’s DNA that technology alone is not enough—it’s technology married with liberal arts, married with the humanities, that yields us the results that make our heart sing.”
Ahead of his time as usual, this need to marry what we define (inaccurately but nevertheless) as hard and soft skills is perhaps the most important business lesson for all of us, regardless of where we currently sit. Garry Kasparov explains it best, in his recent book Deep Thinking: Where Machine Intelligence Ends and Human Creativity Begins.
In 1997 he was the first world chess champion to lose to a computer chess program, IBM’s Deep Blue. At that point he knew the game was up – no human would ever again be the best chess player in the world. Several years later though he started a new form of chess, called Advanced Chess or Centaur Chess. In this you had a human plus a computer play against another human with an identical computer. What he found out was quite remarkable, and highly instructive.
First, he discovered that a human plus a computer could always beat a computer on its own. So human + computer wins. Furthermore though, he found that a weak human plus a computer plus a good understanding and process for making the most of the computer’s capabilities would beat a computer plus a much better chess player who was not adept at using the computer’s capabilities.
Knowing how to work together with the machines is the human’s killer app. Unless you learn how to enable technology to augment yourself as a human, you are going to lose to someone who can.
A characteristic of modern business over the last twenty years is that we have all become more and more specialised, and therefore more and more siloed. But in the modern era, where structured, repeatable, predictable work is being done by machines this will serve us ill. We need to break down barriers; instead of defining someone early on as a scientist, or an artist, we desperately need people who can translate one side to the other. If you look back to the Renaissance, to the time of Leonardo’s Vitruvian Man, there was no distinction between science and the arts: Leonardo knew about painting, architecture, geology, biology, astronomy. His curiosity encompassed everything. We need, in real estate, to become much broader in our interests and more diverse in our companies. Diversity of people, attitudes, gender, beliefs and skills is vital in a service industry. Multi-functional teams must become the norm. The best #SpaceAsAService companies will not look like the traditional real estate company. Making that change can be ignored if you are a chicken, but not if you are a pig.
Success Factor No. 5: Embracing multi-modal occupation
One thing that is certain about a #SpaceAsAService world is that the days of all the employees of a company turning up at the same office every day are well and truly over. So, as a real estate company, you are unlikely to be servicing the entire needs of an occupier by leasing them any one office. Which provides a threat and an opportunity.
It will not be unusual for a company to embrace a multi-modal approach to occupation. Whereas in previous days they may have taken say, 10,000 sf of office on one long(ish) lease, they might well today take just 5,000 sf in that form. Then they will add usage of perhaps 2-3,000 sf of space in a Regus-type serviced office, and then on top of that X number of hours or seats at a co-working provider. In addition, employees will utilise third spaces like coffee shops or hotel lobbies, work from client offices or of course from home. So six different workplaces, each one suited to the task at hand.
In such a scenario where does the landlord fit in? Most likely just in the first type of space, the core leased space. That is a wasted opportunity. If you think about this situation as a software company would, you would be thinking about how you could build your network by providing an ecosystem for your customer. You would be thinking CAC (Customer Acquisition Cost) & LTV (Life-Time Value) and looking to see how much of the other five needs you could help them with. You would be thinking like Amazon with their Prime service: by bundling a wide range of things under the one banner you would be looking to keep them within your network. You would be thinking that you are not selling them a product (the leased office) but delivering them a service by doing multiple partner deals so all those other requirements could be satisfied by your ecosystem. At an advantageous cost to your customer.
Most importantly you would be designing ways where YOU own the customer relationship.
Success Factor No. 6: Brand building – from B2B to B2B2C
As referenced above the user experience of your real estate is THE most important factor in a #SpaceAsAService world. Ultimately the formula for success will be: UX = Brand & Brand = Value
It has often been said that you cannot brand real estate, and even if you do it will not earn you more money. That is product industry thinking. All that changes when your job is to deliver a service. There will be a number of large #SpaceAsAService brands, designed around the “jobs to be done” of different target markets, and these brands will be disproportionately powerful. And valuable.
Success Factor No 7: Property management: From zero to hero
Property managers are in a unique position to move dramatically up the value chain in real estate. Today it is a low margin business (even for the best providers) where you have little differentiation and scant opportunity to achieve competitive advantage. On top of that whenever the landlord needs to save money you are the first to be approached. In a #SpaceAsAService world though, where the UX of a space is critical to achieving maximum revenue, property managers are potentially in a great position, because in many ways they would be the perfect people to assist in creating and curating the user experience. We’ve established that this would require new skills, new people and a new mindset, but someone has to provide that. And the property managers are there, on the ground every day.
What would it take to move from Zero to Hero?
The answer is a lesson in Human + Machine in action. To create a great UX any provider needs the following skills:
Real Estate expertise
Engineering skills
IoT specialist
Data Scientist
Hospitality expert
And these skills need to be built on top off real-time data….
About the building – Lighting, noise, temperature, air quality, and ventilation
About its use – How is your space being used? In precise, granular detail
About your customers – What are their “jobs to be done?” What are their wants, needs, desires
And then this UX needs to be thought of as a permanent work in progress. As with any good software developer the approach must be built around a Build/Measure/Learn framework. In real estate we seldom get beyond build: this has to change.
Success Factor No 8: The office as iPhone
18 / 82 – this is where those two numbers come in. Apple has only an 18% market share globally in the smartphone market, but they make 82% of the entire industry’s profits.
Why? Because they combine, in a curated package, hardware and software and services. Everything about the iPhone is designed to provide such a compelling user experience that enough people can be persuaded to pay super premium prices for their smartphones. The “law” in consumer technology is that products get cheaper, every single year. Apple is unique in having achieved rising prices, every single year. That is the power of UX and brand.
So the final success factor, No. 8 is to advocate for thinking of the “Office as iPhone”, and trying to emulate that level of distinctive, compelling, irresistible, user experience. Doing so seems logical:
Old work is morphing into new work.
New work makes the workplace more important…
…but more complicated. Making it productive is HARD.
Sub 10,000 square feet who has the skills for this?
“I don’t want an office, I want a productive workforce.”
Put together the obvious opportunity is in moving beyond #SpaceAsAService to offer a complete #WorkplaceAsAService.
Incorporating all eight success factors should enable a comprehensive, all-encompassing service to be provided that melds human and machine, technology and the liberal arts, and builds on the unique perspective that only real estate people can provide. I have downplayed the need for real estate skills throughout this article but that is only because it is not worth as much as the industry would like to think unless it is allied with all the organisational, cultural and operational changes we have worked through above.
Consumer goods companies spend tens of billions of dollars a year trying to get a close relationship with their customers and potential customers. The real estate industry has their “customers” in and out of their buildings all the time, but knows next to nothing about them.
IF the real estate industry could realize just what an amazing situation they are in, they could build relationships that those global brands would die for.
The smart ones will see that ultimately this is what #SpaceAsAService is all about.
And why it is a trillion dollar hashtag.
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