Summary of EY's article: How commercial real estate firms use technology to secure a future
Ernst & Young's real estate advisory team recently published the results and insights from a study on the progress and remaining challenges for real estate and how it is adopting technology. The article provides enlightening and encouraging signs of progress as well as highlights some key barriers and ways to overcome them for real estate companies to adopt and successfully implement technology. Below is a summary of their findings as well as some of my commentary on it.
Disclaimer: A significant portion of the content below is taken directly from EY's report and should not be construed as my own original content. Click here to view the full report.
This report was a collaboration between EY's real estate advisory and an organization called CRETech, which is a sort of company that organizes events and other services focused on technology and digital transformation of real estate. It highlights that real estate has recently achieved a lot of progress in terms of adopting technology, particularly in the past few months, however it still drastically lags behind in most cases and is still a long way from being setup to greatly accelerate this transition. The report is divided into three chapters with some key highlights from each described in the foreword. The ones below are those that I find the most interesting:
Those who adapt and reap the benefits of a fully realized technology platform are likely to fare better.
One way to improve program and transformation management is to establish a transformation management office.
This year has been an inflection point, intensifying the need for technology solutions to better address a more flexible work experience in addition to improving efficiency and reducing costs through the automation of certain processes and the elimination of error.
Ultimately, the winners in this highly competitive space will be those who adapt and reap the cost savings and operational efficiencies that a fully realized technology platform can deliver. That is where investor capital will migrate to, widening the competitive gap even more.
As I mentioned, the article is divided into three sections which they establish to be key steps to implementing a fully realized technology strategy:
Develop a technology strategy
Build a path to implementation
Develop a sourcing plan
Chapter 1: Technology adoption needed now more than ever
According to EY, the market is bifurcated between leaders and followers. The leaders are advancing rapidly with well-thought-out and extensive technology strategies through which they can begin to improve efficiency and reduce costs. These solutions will also potentially transform the ability of these real estate companies to leverage internal and external data to make better investment and operating decisions. Despite, this many companies still struggle to execute this transition.
Another topic of interest is automation. Automation will also free up resources to engage in higher-value activities to “do more with less.” This is a concept I regularly stress. I have seen incredible amount of wasted time performing tasks that could be streamlined, automated, or eliminated entirely. This does not happen out of a lack of willingness to invest in resource development and knowledge documentation as well as commit to retraining employees and changing habits. Holding back potential users are the skill sets of staff members (53% of the survey respondents recognize that they do not have the required tech talent), and the traditional if-it-isn’t-broken-don’t-fix-it culture toward legacy systems that continue to function, though not as effectively as currently available technology. Despite a myriad of new innovations, disruption from the pandemic, the same problems persist.
Chapter 2: A three pronged approach to technology adoption
As mentioned above, the report sets out a three part method to help overcome these challenges.
Develop a technology strategy: A company’s technology strategy must align the enterprise architecture with the strategic direction of the organization. Companies will not realize the full benefits of adoption without a carefully articulated technology strategy that allows each application to communicate across the entire business platform in a fully integrated infrastructure. The ultimate ROI for each tool comes from full integration and the total buy-in of the entire culture. That is quite the mouthful so what does this actually mean. Firstly try not to buy randomly. At a minimum, have a basic plan for what you want to get out of the tech you will use, and why you will proceed to add more. Figure out what processes within your business are inefficient or bad and use tech to help improve them. If you are not sure, a simple question you can ask is will this piece of tech save me time. If the answer is likely yes, it will worth exploring. Whether a new piece of tech will directly save you money may be challenging to figure out is some cases, but saving time will at least fee you up to work on more important things and support faster growth or better quality.
Build a path to implementation: Two critical questions should be top-of-mind for real estate owners: What is your business case for implementing tech, and how will implementation roll out? Flexibility and scalability should be key considerations. Companies also need to refresh their approach regularly to keep their infrastructure current, which creates a strong foundation for further implementation. Companies developing a tech-implementation strategy may wish to take an enterprise-wide approach through consecutive small iterations — always keeping the ultimate technological goal in mind. The small iteration option is fancy wording for don't try to find a single piece of tech to fix or support everything. This will be too hard to figure out, take too long to evaluate, and will invariably not do everything as well as other options. Pick a business problem, find something to fix it, and then move on to the next challenge. When selecting supplier, try to stick with those that can connect to many other systems so they can work together and feel like they are one.
Develop a sourcing plan: Sourcing reliable providers, and not just the cheapest solution, is essential to the process, and they, too, must be seen as collaborators in the transformation. As most suppliers follow the SaaS model, you no longer need to worry about a heavy sunk cost that will not pay off. Take advantage of free trial periods and try many tools that do the same thing. The demo from the sales person will not really tell you how well it works. You will not truly know until you start actually using it, so try, try, and try some more. If you use one for a little while and it does not work out, migrate to something better. The more you use them, the better you will get at evaluating tools and the less likely you will be to need to change.
Chapter 3: Transformation management is key to implementation
The real estate industry is not a tech-savvy sector, so technology providers and real estate owners need to work together to bridge the knowledge gap in a way that is inclusive and engaging. Simply put, training and hiring of tech savvy people is huge and should be prioritized for real estate companies if they want to take advantage of the possibilities technology offers.
Another big issue we see is program and transformation management. One way to improve program and transformation management is to start by establishing a transformation management office. Creating a central team ensures a consistent and comprehensive integration of strategy, delivery, risk management and realization to ensure business objectives are achieved. This could come in the form of one or more people who take this on full time, or some kind of committee of employees who take on this challenge and have the competency to successfully deliver. This may be led by a CTO, either in official or unofficial capacity of your company does not have one. You can also take on a CTO in the form of a consultant if you do not want to create the position as a full time employee.
In addition to the CTO, another critical position in the transformation office is the company CFO, the keeper of the keys to the company coffers. Companies need a truly forward-thinking change agent who can do more than improve the status quo. The right CFO will help drive this agenda in a way that is highly effective.
In addition, we cannot underemphasize the important of active communication. All personnel should be made aware of these new initiatives through official channels so they understand the company is fully committed to it and will buy into the plan.
To conclude, EY has compiled an excellent and insightful report that is hopeful for the progress made and the escalated pace, but still cautious in restraining from making any claims that a dramatic shift has taken place and real estate has departed from its somewhat complacent and resistance attitude towards technological advancement.