D |
ALLAS — Visitors to the Adam’s Mark Hotel in mid-June couldn’t be faulted for wondering if a new baby boom was under way in the commercial real estate industry. Most of the speakers at the Realcomm conference held here had something to say about the importance of adoption. They were referring, of course, to the fact that commercial real estate technology is evolving rapidly, and owners and users of work space would do well to implement technology solutions or face an uncertain future in the now-unfolding digital business world.
New business models rooted in technology are evolving more rapidly than ever before and are creating capital at rates unheard of even a decade ago. The forces at work are far more profound than the mere rise and fall of dot-com companies, noted keynote speaker Adrian Slywotzky, co-author with David Morrison of How Digital Is Your Business? (Crown Publishers, 2000) and other books. “A handful of companies, starting in 1995 and 1996, understood that digital is not about dot-coms or about technology, but rather asking the question, How can I transform my way of doing business to build a much more powerful business model with a better yield per customer, much higher profitability for my owners and much better work for my employees?” he pointed out.
The key, Slywotzky maintained, is to not focus on technology at first, but rather to be familiar with customer trends and with the top forces shaping one’s organization, such as growth, productivity, customer retention and other business issues. New business models must address these forces first, he argued. Determining which technologies to adopt will then come into focus. Similarly, competitive analysis of industry peers should begin not with figuring out which player is the most digital, but rather with ascertaining which player has the soundest business model.
Taking an Internet Breather
Analysis of business models in the dot-com arena has surely been under way in the wake of so many failed ventures in the real estate industry and elsewhere. Analysis of the models behind the successful Web-based services would be especially useful; many of these were among the roughly 150 exhibitors at Realcomm.
A panel of consultants convened on the first day of the conference charged with shedding light on why some Web-based solutions have taken off and why some never made it off the ground. The group included Dale Anne Reiss, Ernst & Young’s global real estate industry leader; David Voigt, a partner in the Chicago office of Deloitte & Touche specializing in technology and real estate; David Stanford, executive managing director and a founder of Real Foundations, a construction and real estate industry consultancy; and Daniel Aronson, manager, national strategic team, at Andersen. John McMahan, executive director of The Center for Real Estate Enterprise Management (Centerprise) moderated the session.
The panelists concurred that many Internet initiatives for the real estate industry didn’t make it because they couldn’t demonstrate a compelling value proposition. Aronson even maintained that the technology shakeout in fact should have happened, because real estate “isn’t as fertile ground for e-business” relative to other industries. But that’s likely to change in the next several years, he maintained. On another level, offered a panelist, too many Internet players were chasing too few customers.
For their part, users of real estate systems are retrenching where Web systems are concerned, noted Stanford. “Companies now are focusing on their core business and operations before going heavy into e-business again,” he related, touching on another prevalent theme throughout Realcomm, which is the importance of “blocking and tackling” — paying attention to the key processes and operations of the organization, and not spending intellectual capital exclusively on devising an e-business strategy.
Drivers of Change
Other speakers pointed to a likely dearth of funding for the next round of e-business initiatives, reflecting an overall slowdown in the pace of venture capital investing. But the next surge in Internet activity in the corporate real estate domain will be driven as much by human resources as by capital resources, some panelists suggested. Specifically, the consultants suspect that relatively little spending on e-business solutions will take place in corporate real estate management shops until the current generation of executives is replaced by managers more at ease with analyzing Web-based systems and their potential application in their organizations.
Another driver behind the next wave of Internet activity in real estate will be the retirement of so-called legacy systems in place at corporations — typically computer systems developed in the past that are increasingly difficult to update and maintain and bear little resemblance to today’s technology solutions.
Other topics discussed by the group include the need for data and technology standards that will make the business case for implementing Internet-based and other systems more compelling. These topics and coverage of other Realcomm sessions will be the focus of future Site Selection articles.
