Technological innovations ranging from sophisticated sensors to algorithms that sift through mountains of operational data to extract new insights are taking hold across the commercial real estate sector. But it is crucial to avoid becoming distracted by the allure of innovation for its own sake, and concentrate on how to assimilate advances in a way that generates value for companies and their clients, according to panelists at the 2018 ULI Fall Meeting in Boston.
Innovation is “a means to an end, but it’s not the goal,” explained Joe Karbowski, chief operating officer and chief technology officer for Asure Software, which provides cloud-based software for workplace, time, and labor management. “If you get distracted by the shiny things, you might not be following the vision.”
How a technology is used strategically is crucial, Karbowski said. For example, a company that deploys sensors and analytics to measure the use of its buildings could put that knowledge to use in collapsing its real estate portfolio. But to generate optimal value, those savings could be reinvested in improving the quality of its workplaces and providing amenities for its employees, so that it helps improve recruiting and retention of talent, he said.
While many companies feel the need to gather a lot of data with the view that its value may emerge later, it also is easy to become lost in the flow of information, panelists said. To generate value, it is necessary to scrub data to ensure quality and to analyze it in a way that points to action.
“The ‘why’ piece is the secret sauce,” said Christopher Mayer, executive vice president and chief innovation officer for Suffolk Construction. He cited the use of analytics to sift through information about construction site accidents and near misses, gleaned in part from photos that show the extent to which workers comply with wearing safety gear. “If you can save just one of those people from being injured, that’s 600 to 700 people across the company in a year who would not be hurt,” he said.
While the commercial real estate business has a reputation for being slower to innovate than other economic sectors, speakers challenged that notion. Kirk Rabius, vice president of asset advisory services for global infrastructure design, finance, construction, and operations firm AECOM, said that his firm “is very much focused on holistic thinking” that integrates innovations in a variety of areas, ranging from transportation to energy use, into construction. Beyond that, the company looks beyond optimizing construction to the impact upon future land use, he said.
In addition, Rabius said, it is important to plan toward assimilating innovations gradually, rather than in hasty shifts. Instead of rapidly shifting to using autonomous vehicles, for example, “there are phases to get us there.”
While panelists stopped short of the notion that companies should rewrite their mission statements to include innovation or devote a set percentage of profits to it, they noted the value of creating leadership positions that focus on fostering change. Rabius noted that in the public sector, many cities are creating the position of chief innovation officer to coordinate change across multiple departments.
While some innovations become transformative, there also is a risk of ending up on the list of expensive projects that fail and ultimately are discarded. Kevin Aussef, chief operating officer for real estate services firm CRBE’s capital markets line of business in the Americas, said that for innovations such as software tools to succeed, they need to stimulate genuine engagement by employees, rather than forced compliance. Engagement “is not a switch that you can turn on and off, but a collection of behaviors,” he said.
Companies should avoid simply requiring a tool’s use because the company has invested a lot of money in it, Aussef said. Instead, ideally, an innovation becomes accepted as people in a community begin to use it together, he said. “Instead of 80 people downloading an app, it’s about content sharing, about creating a social environment.”
Mark Grinis, the real estate, hospitality, and construction leader for professional services firm Ernst & Young, served as the panel’s moderator. He noted that chief executive officers across the commercial real estate sector have widely varying views on the impact of innovation. Some leaders have told him that they are sick of hearing about autonomous vehicles and how they will affect future parking requirements, because they will not see the effects of that shift for many years. But another leader, the head of a real estate investment trust with data centers in its portfolio, told him that “you have no idea what’s coming—it’s bigger than you think.”