04 July 2019
Diversity, differentiation and disruption
Performance prediction As the UK continues to languish in a productivity slump, the search for what makes us more productive has value. Researchers led by Dartmouth University believe that they can predict with some accuracy, which employees are high performing, and which are not. Based on a similar assessment focussing on students, the researchers analysed data feeds from a series of wearables and fixed sensors implanted in the workplace to test the performance of 750 employees over the course of a year. The study found that it could predict with 80% accuracy whether an individual was a low or a high performer, based on factors such as heart rate and resting time. In this case, higher performers typically used their phone less, had periods of day sleep and exercised more. Could this replace your year-end appraisal? There is of course a question of cause and effect and any appraisal of performance based on input metrics rather than outputs may unjustly reward those who artificially replicate these inputs and under-reward those that are just more efficient. Nevertheless, the idea of tracking people as they navigate places such as office and retail premises is still gaining traction. The real estate industry needs to consider its role in this. Operators such as WeWork see an opportunity in this space, using spatial analytics (e.g. Euclid, acquired this year) to drive productivity services. For more traditional landlords there remains the question of whether to deliver the sensor / data infrastructure as part of the core real estate offering or leave this for the tenant to resolve.
Diverse talent To say that the property industry is not renowned for its diversity would be to put it politely. The industry is however on a path of change and this is a subject that we are passionate about at C&W. In the modern world, diversity is increasingly seen as a moral obligation for corporations. Regardless of whether you share this view, diversity is simply good business. This point was put succinctly by Andrew Hauser (Exec Director at the Bank of England) last week in a speech about diversity in the FX industry. In this speech he cited evidence to support three contentions: (1) diversity allows you to fish in a bigger talent pool, (2) diverse teams make better decisions by applying multiple perspectives, and (3) diversity increases empathy with one’s customer base. He also pointed to three factors which will accelerate change looking forwards: (1) technological disruption is skewing the skills mix away from male-dominated ‘boiler room’ brokerage environments and towards creativity, client service and risk management. 50% of wholesale banking profit will (according to McKinsey) be created by 10% of the future workforce, but as yet these roles don’t exist, (2) similar tech trends are opening up market participation to new players, which tend to attract more diverse workforces with different skills, and (3) culture change (both centrally driven in response to regulation, and bottom up, driven by the expectations of a younger workforce) is a glacial force shaping the future of the industry. There are many direct parallels here with the world of real estate. As skills requirements in our industry change, the challenge for all parties will be to stay relevant by bringing in new perspectives.
Experience matters It is difficult to escape the cliché formed around the subject of experiential retail, but is this a trend that is here to stay, or a fad that will fade once the structural changes in the retail market have worked their way through? The answer is, in a great paper on this subject by my colleagues in the US, that it is here to stay. You can read a copy of the report here and I paraphrase as follows. Our economy has over centuries increased in the complexity of the products created, from agrarian commodities, though standardised industrial goods to specialised service offerings. However, as all products (including services) have become to a degree commoditised by globalisation and technological processes, the next layer of added value comes from differentiated experiences. The experience is not just a lure to an established product, but a new economic category of itself. Experiential purchases make people happier than material ones, and 72% of millennials prefer them for this reason. They are also less comparable, and so the price point is more defensible. In the age of Amazon, convenience of location for retailers is much less of a factor of competition, and for most retailers, value is a hard to find in competition with the discounters. Hence experience is a driving factor for physical retail that will continue to be relevant in the future.
#LondonLiving2019 London is the powerhouse of the UK economy and a leading force for innovation on a global stage. However, the demand drivers in the capital are becoming increasingly complex and interwoven with London’s social fabric and infrastructure pressures. C&W’s sister company, DTZi, is publishing a 12-article series exploring how we work, rest and play in the capital. The first in the series, which you can find here, was penned by Jessica Mueller, my former team member and key contributor to this blog in its early days. In this she poses the question of disruption to London’s residential market. Disruption is an inevitable force and tends to impact consumer markets, like residential, more quickly. Nevertheless, it seems that supply side constraints are attenuating the need to innovate. Whilst product specification and consumer demand in London’s rented sector are bifurcating, a lack of consumer choice props up the status quo. This can’t last. As we’ve seen in other sectors, it can take just one new organisation to shine a spotlight on the inadequacies of the industry and pave a way for rapid change. Unlike other industries, there is a really low market concentration in resi (particularly when second hand stock is factored). The barriers to entry are also lower than in the commercial markets, which leaves the sector open to new and non-traditional players. The question might therefore be whether the industry is willing to disrupt itself in spite of its current position of strength, or sit on its hands and hope that no one else does.
Making a noise Sometimes technology can solve issues that we are just not ready to have solved. For many years, our cars have been noisy, polluting machines that have an adverse effect on our urban environment. Great news then that electric vehicles will resolve both the noise and the pollution? Not quite. Whilst people don’t tend to like the noise that cars produce, it seems that we aren’t quite ready to live without it. Responding to safety concerns, as of this week all new electric and hybrid cars must be fitted with an ‘Acoustic Vehicle Alerting System’. Otherwise put, they must by law make a fake noise, and that noise must be of equivalent volume to a traditional car. Already car manufacturers have been scrambling to find their own noise. It is difficult to believe that our cars will always need to be noisy; rather that the invention of quiet cars is ahead of its time and so we have needed to despec them in order to address our own inadequacies. There are many examples of this across history, including Thomas Edison’s electric pen (released in 1875, 135 year before the iPad was released), and Hero of Alexandria’s coin operated vending machine which dispensed holy water, some 2,000 years prior to the mass production of consumables like chocolate bars. As with all great innovations, timing is everything.
All referenced reports can be found on our website under 'Snippets'. Take a look here.
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