The real estate industry is in the middle of a generational shift.
A digital one. With a simple goal: everything that can be done digitally should be. I am obviously over-simplifying. But you get the point.
The transformation is working. But only somewhat. Per McKinsey’s work with leading companies, 70% of transformation efforts fail. Yes, that means, the new IT effort you started last week or the one that has been going on for the last year only has a 30% chance of working.
That’s not terribly encouraging.
Why do such efforts fail? Lack of team buy-in, limited digital skillset, inadequate change management structures and processes are some of the reasons, McKinsey goes on to suggest.
I would also add that at the core, some of the efforts - that tend to be IT and tech focused – miss certain capabilities that PropTech uniquely provides. What capabilities and why are they relevant to the real estate digital transformation toolkit?
No transformation effort can be complete w/o customers integrated into it. Traditional IT systems - CRM tools, IT databases, campaigns management tools, etc. - are great for myriad things (e.g., targeting customers, customer outreach, etc.) but rarely become an integral part of our customers’ lives (e.g., does your customer really care about your CRM tool?) But relevant PropTech - e.g., say a resident-facing app or a service delivery app – does become an integral part of our customers’ lives. And when it does, it provides a unique opportunity to integrate customers in the digital transformation journey thereby making it holistic.
Ask anyone to assign a top-line dollar value of adding more IT servers or cloud compute resources and you’ll see puzzled looks. But do the same with the value of a resident-centric app and you’ll get tangible metrics tied to real business results that include - but are not limited to - quantified resident engagement, retention increase, productivity bump, etc. For example, data points showing productivity saving of 70% is not uncommon. PropTech delivers both top-line and bottom-line impact that is tangible and quantified.
Using an IT system, when was the last time you were able to get actionable insights into resident engagement? Or leverage engagement levels to make better opex / capex decisions? Or leverage it to get transactional revenue (e.g., % cut of every transaction resident does in a neighboring restaurant or laundry-mart)
With PropTech, not only is this possible. But already happening. For example, data points showing how resident engagement leads to 50% increase in online app payments are not uncommon and only represent the tip of the iceberg in terms of the possibilities.
While PropTech is far from ideal and has a long way to go before it becomes the default tech for real estate, it’s definitely promising and heading in the right direction. And savvy real estate players know this and are adopting it at feverish pace to complete their digital transformation toolkit.
Do you think PropTech is a key digital transformation tool? Why or why not?
Nitin is the CEO of Mobile Doorman, a former Management Consultant at McKinsey & Company and Board of Trustees Member at the Naperville Public Library. He advises Company Boards, CEOs and BU heads on product strategy, growth and operations. He also has multiple US patents (5) for design and development of mobile, wireless and networking technology including a patent to extend smartphone battery life. Nitin holds a masters in Electrical & Computer Engineering from the University of Texas at Austin and an MBA in Marketing & Finance from the University of Chicago Booth School of Business.