THE BLOG
The Genius of Charles Handy
It could have been written today.
In fact many ‘gurus’ are re-writing it today. Passing it off I think is the phrase:)
A summary* of Charles Handy’s 21 year old, The Elephant and the Flea.
‘Charles Handy's book 'The Elephant and the Flea' is a metaphorical exploration of the changing nature of work and organisations in the modern world.
Handy uses the metaphor of the elephant and the flea to represent two types of organisations: the traditional, large, hierarchical organisation (the elephant) and the small, flexible, entrepreneurial organisation (the flea). He argues that the traditional organisation is becoming less relevant in the modern world, as technology and globalisation have led to a shift towards more flexible, decentralised structures.
Handy suggests that individuals must learn to adapt to this changing landscape by developing their own personal brand, taking responsibility for their own careers, and learning to thrive in a more fluid and uncertain environment. He also explores the concept of the "portfolio worker", who balances multiple income streams and works for multiple organisations simultaneously.
Overall, Handy's book encourages readers to embrace change and adapt to the new realities of work in the modern world, rather than clinging to outdated models of organisation and career development.’
Isn’t it brilliant? Trends are trends. Fads are fads. The former has longevity, the latter not.
*Courtesy (surely not Copyright) of ChatGPT.
Delusional Thinking on Planet PropTech
The Desperate an by Gustave Courbet, 1843-1845
Yesterday I listened to a podcast with two PropTech VCs and the CEO of a very large PropTech software company. And I was genuinely shocked.
After two or so years of the Pandemic and a good year or more of ‘normality’, one would expect real estate industry insiders to understand how fundamentally the nature of knowledge work has changed.
Mostly, companies operated as well whilst in lockdown as they did when all in the office.
And post lockdown it has been as clear as the sun in the sky that, mostly, no-one wants to lose much of the agency they gained from working from home.
Yes, people want to get together, but only when it actually adds value, has a purpose, and is clearly planned.
And they are doing so, roughly two-three days a week.
What they want when they get to the office is now supported by oceans of data, as is what tasks and activities are best done in an office, and what better suits ‘elsewhere’.
We are very much in ‘known knowns’ territory. No guessing required. Any company that wants to understand what people want can easily find out at the macro level, and even easier amongst their own employees.
Everything you need to learn about how to operate hybrid workforces effectively, how to maintain culture whilst mainly distributed, foster innovation remotely etc is readily available to anyone who bothers to look.
And the obvious conclusions are as obvious as they were by mid 2020.
Knowledge work is now a distributed game.
Offices are no longer NEEDED.
People need to made to WANT them.
We have the digital tools to work in a manner that befits the 2020s, not the 1980s.
And all of this is like a gateway drug to realising one doesn’t have to work in the stultifying, presenteeism centric, hierarchical, regimented, command and control, intensely inefficient and ineffective way we did pre Covid.
Don’t believe that was the case? Look up the data? Ask around how your colleagues enjoyed old school office life. Look at how reluctant everyone is to go back there.
But returning to our podcasters, none of the above applies, or seemingly has even been considered.
Their reality is (to paraphrase):
Bosses know working from home = slacking.
If you can’t see people working, they probably aren’t.
People are ‘lazy bastards’ (yes, they actually spat this out).
Culture and innovation only happen in offices.
You will never progress in any company unless in the office all the time.
Office centric companies are definitely more productive than any other model.
One day a week away from the office, probably Friday, is enough.
And finally ….. the balance of power will soon be changing and bosses will simply order people back.
Full on macho management was, and will be again, the way to operate.
From which of course followed that the office market might be struggling now, but will recover and return to where it was pre pandemic. Sure, we need to add some more amenities, and do some sprucing up, but you know, business is business and this is how it’s done.
This is delusional thinking.
Discussing this afterwards, someone suggested to me that ‘it’s their bread and butter, their business, so they HAVE to take this line’.
I get that, and understand one has to ‘talk one’s book’, but in this case delusional thinking will help no-one. What will be will be.
And just last week Cushman & Wakefield published their ‘Obsolescence equals Opportunity' report in which they stated just how much US office stock is no longer fit for purpose.
Only 15% of existing stock is ‘Top Class’, leaving 85% at different stages of the slope to obsolescence. 25% already is.
Which is a problem as ‘Top Class’ is what makes people WANT to go to an office. If the space is not ‘Top Class’ it’s likely there are better, cheaper, more convenient options.
So to be peddling the line that the podcasters were is not only delusional but missing out entirely on the plethora of new opportunities this changed market dynamic is opening up.
So much space needs to be repurposed, repositioned, demolished or otherwise transformed.
It is going to happen. You may as well start preparing.
Once you start seeing large investors giving back the keys to very large assets you know where this is going.
When you see traditional offices operating at 20-50% occupancy and even lower utilisation you know where this is going.
And when you see the strong demand for good to great assets, with good to great #SpaceasaService operators you know where this is going.
Sadly many real estate people, even those on the PropTech side, cannot or won’t see the writing on the wall.
And I, for one, know exactly where this is going!
The Unreal Side of Real Estate
Stop and Look – Orange and Yellow by Mark Rothko (1956)
I read an interesting interview today with Gábor Bindics. a cultural manager interested in the impact of spaces on social life, who is is based in Bratislava (link in comments).
He works primarily on public spaces, and asks this excellent question "Why is it that when we create a space today, we mainly focus on the physical part of it? We have great architects of physical space, but lack architects of social and experienced space?”
Why indeed?
One other sentence really made me think.
Where he says ‘every space has a quality that consists not only of the physical part but also of the social and subjectively experienced part.’
Which really chimed with my #SpaceasaService thinking, which is heavily focussed on the ‘humanity’ of space, in the sense of providing the perfect environment for enabling people to complete their ‘jobs to be done’ efficiently and effectively. And for helping them be as happy, healthy and productive as possible.
So I dived in some more:
Does ‘every space have a quality that consists not only of the physical part but also of the social and subjectively experienced part?’
To which the answer is surely yes.
The physical part of a space includes its tangible elements such as its size, shape, layout, lighting, and materials.
The social part of a space includes the activities, behaviours, and interactions that occur within it, as well as the social norms and values that influence those activities and interactions.
The subjectively experienced part of a space includes the feelings, perceptions, and meanings that people attribute to it based on their personal experiences, memories, and cultural backgrounds.
All of these elements combine to create the overall quality of a space, which can have a significant impact on how people use and perceive it.
This makes perfect sense for public spaces but does it apply to commercial offices?
The answer is again, I think, yes.
Commercial office spaces are not just physical structures, but also social and experiential environments.
The quality of a commercial office space is not only dependent on its physical design and layout, but also on the social interactions that take place within it and how people subjectively experience the space.
So for example, a well-designed office space with natural lighting, comfortable seating, and modern technology may be physically appealing, but if employees feel stressed, isolated, or uncomfortable within the space, then the quality of the office space would be low.
On the other hand, an office space that fosters a sense of community, collaboration, and well-being among employees can contribute to a positive work environment and boost productivity.
This has to be right doesn’t it? Especially in this age of hybrid, distributed and remote working?
We really should be designing our workplaces not just with functionality and aesthetics in mind, but also with the social and subjective experience of the occupants as a key consideration.
As I’ve said for years ‘The Real Estate Industry is no longer about Real Estate’!
Thoughts?
Seven characteristics of the best PropTech companies
Relativity, by M. C. Escher, 1953
So what separates the truly exceptional PropTech companies from the rest of the pack? It is a question that many have pondered, and one that requires a nuanced understanding of the rapidly evolving landscape of digital disruption in the real estate industry.
First, the best PropTech companies understand that their success is not just about selling technology. It is about creating value for their clients by helping them solve their most pressing business challenges. This requires a deep understanding of the real estate industry and the ability to think creatively about how technology can be applied to create value.
Secondly, the best PropTech companies are not just focused on short-term gains. They are in it for the long haul and are committed to building sustainable (I.e profitable), scalable businesses that can adapt to changing market conditions. This requires a willingness to invest in talent, technology and infrastructure, as well as a willingness to experiment and iterate until they find the right product/market fit.
Thirdly, the best PropTech companies are relentlessly focused on user experience. They understand that the success of their products and services depends on how well they meet the needs and expectations of their users. This requires a deep understanding of user behaviour and an ability to create intuitive, user-friendly interfaces that make it easy for users to achieve their goals.
Fourthly, the best PropTech companies are agile and responsive to market changes. They understand that the real estate industry is constantly evolving and that their success depends on their ability to adapt to changing market conditions. This requires a culture of innovation and a willingness to experiment with new ideas and approaches.
Fifthly, the best PropTech companies are committed to building strong relationships with their clients. They understand that trust and transparency are critical to building successful partnerships and that their success depends on their ability to deliver value to their clients. This requires a commitment to open communication, a willingness to listen to feedback, and a dedication to meeting their clients' needs. Vitally, these strong relationships provide the distribution needed to rapidly get adoption of new products and services.
Sixthly, the best PropTech companies will build ecosystems with other suppliers. They understand that they are a node in a network, a cog in the enormous real estate ‘system’, and must be able to easily connect with old, as well as new, services. Real value comes from integration. 2+2 can = 5.
And finally, the best PropTech companies will have products or services that are 10X better than the alternative, the status quo. That can offer clear differentiation for their customers, and push them from sticking with ‘the way we do things here’.
In summary, the best PropTech companies are those that are focused on delivering value to their clients, building sustainable, scalable businesses, creating exceptional user experiences, being agile and responsive to market changes, building strong relationships with their clients, integrating with ecosystem partners, and have 10X products or services. These are the companies that are leading the way in digital disruption in the real estate industry, and they will continue to shape the future of the industry for years to come.
So….. is that you?
Our Four Great Challenges
Detail from Edvard Munch (1863–1944),The Scream. Lithograph, 1895. Private collection, Norway.
Many people, especially on LinkedIn, talk about challenging times, speed of change, and ‘how not to get left behind’.
Mostly though the substance of their arguments are relatively trivial and could have been written at any time over the last 40 years. Much change is actually rather slow, disruption is limited and the same old same old companies carry on as they always have.
But occasionally certain industries are hit with tumultuous change. Tech being the obvious example. In a few generations we’ve gone from mainframes, to PCs, to smartphones. And from client-server, to local networked applications to everything being in the Cloud.
And the undisputed, impregnable industry leaders, those whose power was ‘too great’, suddenly found themselves as also rans. IBM got trashed by Microsoft, who got trashed by Apple. When platforms change, leaders change. Every dog has its day.
But ….. it takes something big, really big, to fundamentally redesign winners and losers in an industry. Incumbents can handle most threats, but tsunamis are tsunamis. Sometimes resistance is futile. You can’t buck the market.
In evolutionary biology they call these moments punctuated equilibriums, where a species splits into two distinct species, rather than one species gradually transforming into another.
I’m wondering if the real estate industry is at just such a moment, especially the commercial sector.
Four massive challenges need to be faced, between now and 2030, now less than seven years away.
First is decarbonisation. Using London as an example, 80% of its office buildings are below the minimum standard of energy performance demanded by existing regulations, and will need to be upgraded by 2030. This equates to an equivalent of 15m sq ft per annum. Per annum!
Much the same applies around the world. 2030 represents a brick wall the industry is careering towards. Anyone hitting it will see value destruction on an unimaginable scale.
Secondly is the impact of the move to hybrid, distributed and remote working. Last week Cushman & Wakefield produced a US centric report saying they found ‘an unprecedented imbalance in supply and demand which, by the end of the decade, will result in a surplus of 330 million square feet of vacant office space that hasn’t kept pace with demands to support hybrid working and efficiency/ESG priorities.’ Delve in to the report and it looks even worse. Only 15% of office stock is currently absolutely fit for purpose. The rest requires some to a great deal of remedial work to be brought up to scratch.
The way we wish to work has fundamentally changed and is not returning to ‘how things used to be’. Most of the supply side needs to change to match current, let alone future demand.
Which brings us to the third massive challenge. What on earth is to become of all this space?
Decades ago Management guru Peter Drucker wrote that ‘office buildings would be similar to the pyramids — we'd come to marvel at them, but they'd serve no functional purpose.’ For a lot of them this is coming true. The flip side is that the best offices will be in more demand than ever before, but that’s ‘the best’. Wither the rest?
We can convert some to residential, repurpose some as hotels, or urban farms, or logistics centres, or whatever. But finding a use for all the obsolete space is going to be difficult, to put it mildly.
And the fourth massive challenge flows on from this: how are we going to save our cities from the revenue crash implied as a consequence of the above. And from the changing patterns of use. How are we going to create cities where people want to be? Where will people want to do whatever it is that they’ll want to do in the future.
This behavioural change impacts way beyond offices. It will impact every real estate asset class. Every assumption we have stored as to what to build where is being thrown out of the window. City centres are seeing this right now, but everything is connected and the flywheel of change will permeate everywhere.
Together these four challenges could melt the minds of real estate people. They require depths of thinking that one seldom needs to employ. If ever there was a wicked problem, this is it.
But if ever there was an opportunity to ‘change the world’ this is also it.
It’s also why #SpaceAsAService really is The Trillion Dollar Hashtag. Because it applies across the board in real estate. Wherever you look we need spaces that provide the services, physical, digital, social and emotional, that people need, wherever they are.
Work that out and good things will follow!
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The next cohorts of the online ‘#SpaceAsAService - The Trillion Dollar Hashtag’ course starts April 17th. One for Europe & the Americas and one for APAC. Visit trilliondollarhashtag.com for details and to register.