The State Of Digital Transformation In The Real Estate Industry 2022: The Four Pillars
Every industry that existed before the Internet now faces the same challenge: How to transform to compete in a digital economy. The COVID-19 pandemic exacerbated the challenge, and industries that were still dragging their feet pre-pandemic, have no option but to take this bull by the horn if they wanted to be part of the future. Often accused of being one of the dinosaur industries, real estate has undoubtedly a huge hill to climb.
The pandemic has profoundly impacted how we use our living space and our expectations of it. As stakeholders across the real estate value chain are ushered into the post-pandemic world, there is a growing acknowledgment that our physical space must be liveable, sustainable, resilient, and affordable[i]. To deliver on that vision, it is time that real estate accelerates its pace to transform digitally. However, real estate companies must remain aware that - being a capital-intensive, siloed nature industry they are in, with longer business cycles than other sectors and products and services that are more abstract- the journey to digitize will require patience, resilience, and determination.
The overarching objective of digital transformation in real estate is to deliver stakeholder value and expectations, with the business drivers being income generation and asset appreciation.
This article is the second of a series of articles exploring what real estate companies must consider if they want to become more focused on digital transformation.
Pillars of Digital Transformation
It is established that digital transformation is not about updating technology but upgrading strategic thinking. Legacy businesses like real estate need to rethink their underlying assumptions in 4 areas of strategy― organisation set-up, customers, data, and technology - to reinvigorate their plans and capture new digital world opportunities. Working together (and as they integrate into the organisation), these pillars will push real estate companies to disrupt their business models, improve operational performance, optimize portfolios and harness the power of big data, PropTech, customer networks, and human skills to reimagine their organizations and maximise their ROI.
Let’s look at each pillar and the different dimensions it includes.
Organisation Set-Up
Fact:?How an organization is set up helps drive the acceptance and adoption of change initiatives. Real estate companies must answer a key question at the very onset of the digital transformation journey: How do I set up the organisation to enable such change?
Critical dimensions of an organization set-up include organisation structure, operating model, leadership, culture, talent, and skills. Real estate companies must address these dimensions along the following lines:
Customers
In the age of the digital economy, the relationship between real estate companies and their customers represents one of the most significant challenges of all and the most exciting! Technology impacts how customers source, find, view, rent, buy, and utilize their living space. And technologies such as VR and the Metaverse, for instance, are not making life for legacy real estate companies any easier. To survive these cataclysmic shifts in how to engage and win customers, real estate companies must first become obsessed with their customers! They must put the customer’s best interest at the heart of their transformation strategy. Those real estate companies that embrace customer-centricity as a mindset will be able to create maximum value for the buyer or tenant and will win market share. Without adopting a client-centric model that focuses on delivering on a customer experience strategy, legacy real estate companies risk becoming irrelevant and will ultimately fade away.
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Big Data
Data is a crucial ingredient – if not THE key ingredient - to digital transformation. It is the lifeblood of every department in any organisation and the bedrock of every strategic decision. Real Estate companies are no different. Big data will play a vital role in how they operate, differentiate themselves in the market, generate value, predict risks and unlock opportunities. Therefore, the need for an effective data strategy cannot be overstated. While historically, data in real estate was consumed for traditional analytics and reporting for shareholders, the future is distinctly different. Identifying data sources, how to gather it, where to store it, how it gets analysed and by whom and for what purpose, and insight reporting to stakeholders are key aspects companies must address in building a robust data strategy.
Real Estate Technology
Stakeholders in real estate such as property developers, brokers, real estate agents, investors, or asset managers must start to embrace technology to meet the evolving customer demands. But, more importantly, to remain relevant, real estate companies must make sure that integrating digital technologies is a crucial part of their digital transformation strategy.
The real estate industry, in general, was a late adopter of technology in comparison to other sectors, such as media and telecoms. However, that is changing with more real estate companies realising the value that technology can bring to their portfolios. No doubt, the COVID-19 pandemic has also played a role in disrupting the industry, with businesses having to accelerate the adoption of technologies to address the challenges of executing real estate transactions and managing properties remotely, as an example.[ii]
As a result, we see an increasing number of PropTech startups that are offering products & services to the real estate industry in the areas of artificial intelligence and machine learning, predictive analytics, CRM, virtual reality (VR) and augmented reality (AR), big data, building information modelling (BIM), drones, blockchain, cloud computing, IoT, and of course, the Metaverse. The significance of digital technologies in real estate is represented by the explosion of PropTech solutions that promise to aid companies in propelling customer experience to new levels and improving operational efficiencies. As a result, digital platforms can provide real estate companies with a competitive edge and ultimately modernise and impact the growth of the real estate sector as a whole.
Rethinking the future of real estate, now
No industrial revolution is without complexities and specific industry challenges[iii]. Real estate companies must develop digital transformation strategies that address key components to modernise the industry as fast as possible. What is clear is that tremendous opportunities exist for those that make the leap.
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EMEA Programmes Manager for Dubai World Trade Centre
2 年Brilliant article!
CFO & Strategic Finance Leader
2 年Great Article Hanadi ????