Proptech and the freedom to fail

Freedom to fail should lie at the heart of any property company’s long-term digital strategy, delegates at EG’s TechTalk Live session heard at MIPIM last week. But how can such a traditional sector get more comfortable with the unpredictable nature of innovation?

A panel of experts from both the property and technology side of the proptech equation delved into how the two industries could better communicate to work together – starting with appreciating their differing approaches to uncertainty.

“There has to be a freedom to fail,” said Rick Robinson, smart cities, infrastructure and property leader at Arup. “Innovation is uncertain by definition and so as a property company looking to innovate you have to have options. You have to build a portfolio where some things fail and some things succeed. Failure is a huge part of digital transformation.”

This was a sentiment echoed by Metaprop NYC managing director Aaron Block, who warned that focussing on succeeding in a limited number of key areas was no longer the way forward – especially when it comes to a digital strategy.

What real estate firms actually need are 15 or 20 experiments working across their business at any one time to create a more innovative, fail-fast environment”

“The idea of having ‘three wins’ sounds a lot like IT strategy to me. What real estate firms actually need are 15 or 20 experiments working across their business at any one time to create a more innovative, fail-fast environment. Yes, by all means, aim for three wins, but make sure they are three of 15, not three of three. The latter is the old way of doing business and if we carry on like that, we have no chance of succeeding in a digital world.”

While KPMG head of real estate Andy Pyle agreed with the idea that there needed to be a shift in mindset, he pointed out that tech start-ups also needed to be aware how difficult this was likely to be for those operating in real estate. Particularly larger companies.

“This is an industry working on delivering assets and buildings that must withstand decades and decades,” he said. “There are people making decisions in companies today about projects where, in some cases, there won’t be a spade in the ground before they retire. The whole concept of ‘fail fast’ is a real struggle for an industry that thinks in terms of decades, capital preservation and stable income generation.

“When I hear start-ups railing against property companies and saying how slow they are I think, ‘Yes, but you need to help them fail fast.’”

Sometimes it is just about not overlooking the small things that can totally change the way your business is being run”

Taking the opportunity to respond as representatives from tech companies on the panel, Ryan Masiello, founder of VTS, and Equiem’s head of business development and global expansion Laura Acklandiene had some thoughts. “I don’t think it needs to be about failing necessarily,” said Masiello.

“Sometimes it is just about not overlooking the small things that can totally change the way your business is being run. Just do the fundamental things, like making sure you and your workforce is mobile. The biggest hurdle people will come up against in the quest for embracing digital transformation is boiling the ocean. You will get nowhere fast.

“Don’t overcomplicate what the big picture needs to be. Internally when you have lots of people talking about tech and not much happening, you have a problem. You need an agile culture. And successful tech strategy will happen in bite sized pieces.”

It all comes down to communication, Acklandiene added. “We know that, as tech companies, the large real estate firms we want to work with have processes to follow. We understand it is a difficult decision choosing to team up with a start-up. What would be helpful for us is a map of your journey. Where are you? And where do you want to be? What do you really want?

“If we know that, it can go beyond working with us or not. Sometimes we can help and we have insights that could be useful for you more generally and we are more than willing to share those insights.”

It is about prioritising, which is never as easy as it sounds”

Anthony Doherty, head of investment solutions, real assets at L&G, added that embracing technology is all the more complicated for a large business. “For a company of our size there are risks and opportunities stemming from technology across all of the business and so it is about prioritising, which is never as easy as it sounds. From talking to tech businesses perhaps it feel like it can be quite simple to connect to a large fund managers’ system. It’s not.”

That is not to say the real estate sector does not have steps to take towards priming itself to be more agile and better positioned for digital transformation.

CBRE’s EMEA head of digital innovation Thomas Herr pointed out that greater transparency will be paramount and this, like embracing failure, is not something that always comes naturally to the sector. “I used to compare property to the used car business,” he said. “Are you really interested in transparency when you are selling second-hand cars? Transparency is one of the major preconditions for digital transformation so it is clear we have a long way to go.”

Over the course of the hour-long session, which marked the launch of EG’s new tech publication, the panellists debated topics from collaboration to cultural shifts and touched on the comparative willingness of property markets around the world when it came to embracing technology.

But ultimately the conversation always swung back to communication, always keeping the end user in mind and taking small steps towards the ultimate goal rather than trying to do too much too soon. As Wiredscore’s EMEA managing director William Newton summed up, working out the things that “need to be tackled and can be tackled today” would be a good place to start for many real estate companies.

“Aim for a 30% improvement and then nail the things to make that happen,” he said. “Take things in bites to progress faster.” And he had a message for the technology companies too. “Always think about the customer. Too many tech companies don’t do that and they have to understand that it will be very difficult for a property company to invest in something that doesn’t have the end user in mind.”