“The bottom line in the New Economy is that it’s all about service,” said Bill McNee, president of Saugatuck Technology and the featured speaker at the Nov. 8 FutureWatch breakfast forum. “I truly believe that the chief information officer of the future will become known as the chief workplace officer. If you thought that place wasn’t important anymore now that the Internet has taken over, think again. Workplace design experts told IDRC attendees that, in today’s highly competitive job market, place is critical. If place and connectivity are the keys to the successful workplace environment of the 21st century, then “smart” buildings are the infrastructure that will house this environment. Location is rapidly being replaced by integration as the number one factor driving corporate real estate strategy. Every aspect of Web-enablement must now be considered when making site selection decisions and formulating global workspace strategies. A byproduct of rapid pace of change is the need to review corporate strategies with greater frequency, said the experts at the Florida IDRC World Congress.
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RLANDO, Fla. — Corporate real estate executives have a choice: Change in the face of the e-business revolution or risk being made extinct by it.
In a nutshell, that was the overriding theme of the 76th North American IDRC World Congress, held Nov. 4-8 in the tourism capital of the world: Orlando, Fla. Surrounded by theme parks and the millions of pleasure seekers enjoying them, some 2,300 IDRC attendees heard a dose of straight talk from e-business experts who’ve witnessed the failure of hundreds of companies in the dot-com world.
Bill McNee (above right), president of Saugatuck Technology, told IDRC World Congress attendees
in Orlando that the chief information officer of the future will become known as the “chief
workplace officer.”
Titled “Quick Learning and Fast Solutions: Corporate Real Estate in an E-Business World,” the Florida World Congress featured talks from some of the nation’s leading authorities on the Internet, workplace design and Web-based strategies. Among them was Evan Schwartz, author of Digital Darwinism and the conference’s keynote speaker.
“I look at the Web as the new landscape of doing business. The first phase was 1995 when Netscape went public, starting a phase of Internet IPOs that lasted five years,” said Schwartz. “The second phase is the one we are witnessing right now, and it is more than just a market correction. It is what I call ‘Digital Darwinism,’ a shakeout of the dot-coms.”
Schwartz, who has spent the past five years interviewing CEOs and entrepreneurs all over America, said that the same forces putting many of the dot-coms out of business can put backward-looking corporate real estate executives out of business. The key to success in corporate real estate today, he said, is to recognize the five major trends shaping the business landscape:
Evan Schwartz (above left), author of Digital Darwinism, calls the World Wide Web “the new landscape of doing business.”
“As a result of all of these forces, we are seeing a leveling off in the Internet economy as the species of companies are getting much smarter,” said Schwartz.
So how does a corporate real estate executive stay competitive in such a rapidly changing environment? “In the New Economy shakeout, the survivors will be the ones who add value,” said Schwartz. “The future is not just about the Internet; it is about internetworking businesses, and the infrastructure implications of this are enormous.”
Before corporate real estate executives can adapt, however, they must recognize what the principal changes entail. Throughout the course of the Florida World Congress, five themes emerged as the most significant changes taking place in the marketplace.
Theme 1: It’s Not Just about Technology
Corporate real estate executives will become CWO’s, and what we will see is an emerging workplace service model. The power is increasingly shifting to middlemen in workplace services.”
The New Economy, in other words, is more about the places and environments in which people connect than it is about the technology they use to communicate. Cyberspace, in essence, becomes just another place for doing business — not the business itself.
Prentice Knight III, vice president of the IDRC Foundation, said, “The advent of the Internet has taught us that we must make the customer the center of everything, including our Web strategy, and the CRE of the future must be the integrator between the customer and the supplier.”
Bringing every aspect of business, both internal and external, together into one seamless flow of information-sharing is ultimately what the Internet is all about, said Schwartz. “Integrate Web commerce with the rest of your business,” he told IDRC attendees. “And integrate the Web with every aspect of your partners’ enterprises.”
John Stanfill, president of PropertyFirst.com, an online marketplace for the commercial real estate industry, described four key areas in which the Internet will broaden the corporate real estate profession’s scope: knowledge, speed, relationships and reach.
The Internet will expand the industry’s knowledge base, as content providers enrich the information they make available by providing, for example, market comparables. Speed associated with Internet access to information will translate into real dollar savings and even increased profitability, Stanfill said.
Relationships between investors and owners, tenants and occupiers and others will benefit as communication improves via the Internet. And reach refers to the ability of the Internet to reach vastly more people when marketing a property.
Theme 2: Place Is More Important Now Than Ever
“What’s really new about the New Economy is a shift from a company-dominated world to a world where the people call the shots,” said Carnegie Mellon University Professor Richard Florida. “That affects all of us, and that makes place more important now than ever before. Mark my words: Place is the last frontier. The new issue in the 21st century is the war for place.”
Comparing the modern work force to the cast and crew on a Hollywood movie set, where everyone is a free agent, Florida said that space matters because everyone wants to be able to identify with the place he or she works.
“Life after the New Economy is witnessing a convergence between hot companies and cool places,” he said. “People want a place they can identify with. People construct their identity around places.”
And what are the “cool places” these workers seek? New Economy towns that offer the best of Old America with all the luxuries and amenities of New America.
“The new parallel reality are the old American downtowns,” said Andres Duany, founding principal of Duany Plater-Zyberk & Co. and the godfather of Neo-Traditional design. “In suburbia, you need a car trip for every single human activity. We have invested in a fantastically inefficient system. What’s ‘in’ is the old urban fabric.”
What’s “out,” Duany said, are sterile class A office buildings and sprawling suburban office campuses that force everyone to drive a car. “I don’t know how many of you hold class A office space, but get rid of it,” he told a gathering of IDRC members. “Class A office buildings with huge atriums are all dinosaurs. The cool people today wouldn’t be caught dead in class A office space. Your workers even show up today informally dressed and make your class A atriums look stupid. Your buildings don’t make them look stupid. They make your space look stupid.”
Harsh words from an Old World design realist, but criticism that appeared to be welcomed by those in the audience — especially by those corporate real estate executives faced with the task of converting more and more workers into telecommuters.
Duany pointed out that some 25 million Americans now work primarily from home, a fact that makes “single-use” space virtually obsolete. The answer to this problem isn’t to build more traditional office space, he said. It’s to create more flexible, mixed-use space that encourages people to work from home, live where they work, shop and eat where they work, and get from point A to point B without having to get into a car.
George de Guadiola, developer of the New Urbanism town of Abacoa in Jupiter, Fla., said he has built exactly this kind of workspace in a new town in Palm Beach County. In Abacoa, single- and multifamily housing co-exist on the same block with office space, restaurants and retail shops. The result? More than 200 jobs with an estimated economic impact of $9 million have been created in the town over the past six months.
What’s the secret to the success of Abacoa? “Everything here centers around our concept of place-making,” said de Guadiola. “We have professors and students living in the same housing complex. Our public venues, such as our sports stadium and outdoor parks, are critical to our place-making. The reason is simple: People want to be engaged with their world.”
Theme 3: All Buildings Must Be Smart Buildings
Never before has so much attention been focused on the bandwidth, power redundancy, wireless applications and fiber optic wiring of the buildings needed by competitive companies of the New Economy. Without these features, the technology experts say, the workspace is nothing more than an empty shell.
Julie Benezet, director of global real estate operations for Amazon.com, said there is no such thing as a basic warehouse anymore. “All of our distribution centers must be very, very smart because they must account for every variable in the ordering and shipping process: the type of credit card used, the shipping vendor selected, whether the item is to be gift-wrapped or not, and who is supposed to receive the purchased item,” said Benezet. “And this is particularly a major challenge when you have to put up 4 million square feet (371,600 square meters) in just six months, as we had to do.”
What’s driving this development is the fact that companies are finding themselves in the middle of a supply-chain revolution, and the time between product manufacturing and customer delivery is getting more and more compressed with each month.
“What we are seeing is an emerging distribution model being driven by overnight access to the large population bases of the world,” said Paul Congleton, managing director of ProLogis Trust. “Companies today are being forced to reduce costs and match supply and demand. Wal-Mart, for example, now operates its own private satellite communications network to manage its dedicated fleet of 2,000 trucks.”
Dell Computer, another innovator, became a $12 billion company in 13 years by totally revamping its supply-chain management.
“Re-configuring and re-rationalizing your networks are vitally important,” said Congleton. “Your communications infrastructure is absolutely critical now because of the need for increased data flows in your distribution centers.”
That also means that the workers in these high-tech facilities must be smarter. Even fork-lift operators must have keyboard skills, and call-center employees must be Internet literate to staff the Web-enabled operations of the future.
“We are being forced to do this (make our buildings smarter) because the e-commerce customer is a different breed,” said Benezet. “The e-commerce customers are educating us as much as we are educating them.”
Theme 4: Integration, Integration, Integration
“Companies that do not invest heavily in integration application technologies will likely fail,” said McNee of Saugatuck. “The key is integration, integration, integration.”
McNee defined integration as the process by which companies merge every aspect of Web-enablement into every facet of their operations — from supply-chain management and vendor relations to customer service and product development.
“By 2004, business-to-business e-commerce exchanges will reach $7.3 trillion, representing 6.9 percent of the global economy,” he said. “The problem is that through 2003, 75 percent of all enterprises will under-budget their e-business transformation costs by 50 percent or more.”
A large part of the problem in Web integration is simply figuring out how much all of this costs. “We don’t yet understand the integration costs of B2B. They typically show up 150 percent over budget,” McNee added.
Further complicating the mix is the fact that, for every 10 openings for information technology jobs, there are only seven people available — and finding and retaining quality IT personnel is critical to any successful integration strategy.
Theme 5: Review Your Strategies Early and Often
“Never plan more than 24 months ahead,” said McNee. “And do not develop an e-business strategy independent of your full business strategy.”
IDRC attendees specifically were challenged to do two things in this regard: evaluate their own company’s “e-Q,” and prioritize action over planning.
Peter Pike, president of Pikenet.com, said that to test your company’s e-Q, you must be able to answer yes to the following questions: Does your company use e-mail to proactively develop relationships? Is your staff accessible online? Is your portfolio available internally through an Intranet? Are the Intranet and contact management accessible online, and is the Extranet/workflow accessible online?
“If you can answer yes to all these questions, let me know,” Pike said jokingly. “But that is where corporate real estate organizations are heading.”
Dr. Jeffrey Pfeffer of the Stanford University School of Business told IDRC attendees “how to get things done in a dot-com world.” The number one prerequisite, he said, is to place action above talk.
In order to survive in the New Economy, said Pfeffer, you must understand the three challenges of today’s corporations: act fast, possess the ability to learn and build a culture of implementation.
“To build a culture of implementation, you must celebrate learning and value action,” he said. “Accept mistakes and drive out fear. Let people be themselves and make decisions. And finally, get people working together and focusing on the strategy. Knowing is not enough. If you’re really going to succeed in a dot-com world, you not only need to know; you need to do.”
