65th Real Estate Talk: How digitalization is changing the business models of the real estate industry.
Digitization will lead to profound changes in the real estate industry. Not slowly, but faster than many would like. Where these might take hold and how companies can successfully deal with the change was discussed at the 65th Real Estate Talk at Metropol.
The "digital leaders" are taking off - companies that lag behind are being swept out of the market. This is the provocative finding of the "Digitalization Barometer" of the Lucerne University of Applied Sciences and Arts (HSLU). While companies have focused heavily on process optimization in the past, they are now realizing that it is a matter of fundamentally questioning business models. They expect the greatest threat to come not from established or foreign competitors, but from innovative startups.
The successes of Uber and AirBnB have obviously also made decision-makers in the real estate industry think twice. In the meantime, many companies have launched strategic initiatives for digitization. However, the HSLU study concludes that knowledge of customer needs and customer behavior is still shockingly low in many places. This is a poor basis for surviving in an increasingly competitive environment.
"It turns out that the companies that are innovative and ahead of the game have not only been able to increase market share and revenues, but have also been able to attract the better and more innovative employees," explained Dr. Markus Schmidiger, study author and moderator of the 65th Swiss Real Estate Talk, which was attended by more than 100 guests at the Metropol in Zurich on September 27.
Attractive corporate culture
Employees and leadership seem to play a key role in the transformation to a digital company, as Peter Scherer, partner at Amstein+Walthert AG, an engineering and consulting firm, explained. The dynamics of innovation are increasing dramatically. It is becoming increasingly difficult to distinguish hype from effectively sustainable innovations, he said. However, waiting too long until everything is clear and certain is not an option either.
Amstein+Walthert therefore asked itself what an engineering company could look like in 2025. Since then, new, potential business areas and technologies have been deliberately tried out by employees released for this purpose and tested for their potential. Integration into the organization is then not ordered top-down, but based on entrepreneurial initiatives by employees. New opportunities for which no product champion can be found are not pursued further.
"Responsible people who implement an idea with strength and commitment are essential," a realization that Ivo Lenherr, co-owner of FSP Architekten AG, has also come to. His company regularly makes new technologies and tools available to interested employees, from 3D printers to BIM labs. What usually started as evening and weekend hijinks by a few crazy employees has always spread throughout the company as a contagious virus within a very short time, says Lenherr. As a result, important process optimizations have taken place. At the same time, the company's participative, self-responsible and entrepreneurial culture has made it so attractive to digital talent that it can now choose from a large number of applications, while other companies are desperately looking for skilled workers.
Digitization as a mindset
BIM, for example, is part of everyday life at FPS Architekten AG. Planning is always done in 3D with a digital avatar; project meetings take place in the data room with 3D glasses. Problems can thus be discussed directly and the necessary decisions made immediately. The quality, speed and accuracy of the processes could thus be massively improved. Collaboration with specialist planners takes place via shared data models in the data room with simultaneous access to all relevant models.
For Lenherr, BIM and digitization are not software, but primarily a mindset: "Companies that think of technology and software first when it comes to digitization usually suffer shipwreck." FSP Architekten AG, like most companies that successfully implement digitization, started with the question of the right business model. This led to the requirements for the employees of the future and the definition of promising processes. Only then did the search for relevant technologies and software begin, with the result that a promising business model and an entrepreneurial culture emerged, but more than 90 percent of the work can be covered with established standard software.
Efficiency gains and cost reductions
As became clear in the further course of the discussion, digitization reduces hierarchies not only in the area of management, but also in cooperation between companies, and promotes and demands networks: companies can no longer be successful on their own; they have to network. In the construction industry, too, this is giving rise to multi-level supplier networks and modularized procurement strategies.
The classic trade-oriented awarding of contracts to the cheapest provider has definitely had its day; the friction losses that result are far too great. Well-established networks that think and act in terms of the whole are much more efficient, while at the same time increasing quality and speed as well as profitability for all involved. Thus, a major change is also underway on the construction site. Concepts that have long had a negative connotation in the industry, such as modularization, standardization and prefabrication, are once again becoming more attractive and are gaining acceptance. But here, too, the human factor and leadership are decisive.
Construction sites examined using the "lean philosophy" show that only five to ten percent of activities actually add value. With appropriate cooperation, collaboration and planning, this share can be increased to 30 to 35 percent - and the resulting efficiency gains and cost reductions finance all necessary investments within a very short time.
Real added value in demand
In Silicon Valley alone, there are currently more than 350 so-called prop-tech start-ups - and new products and solutions are launched on the market almost daily. Some of these will quickly disappear again as hype, but some will change the business models in the long term. Disruptive technologies such as virtual / augmented reality, the Internet of Things, artificial intelligence and cloud computing are expected to have great potential. Thinking in terms of platforms, both for market mechanisms and for products and services, with the resulting new standards or peer-to-peer and sharing opportunities will fundamentally change many business models.
The Internet as the "world's largest copying and switching machine" will deprive many business models of their current financial basis. Genuine added value will be required in order to continue to be successful in the future. Understanding customer problems, thinking in terms of processes, working in networks and the ability to attract committed and innovative employees and keep them productive will be essential, according to the unanimous conclusion of the panelists. (ms)
The presentations as well as impressions of the event can be found here.
You can order the comprehensive, 450-page study "Digitalization Barometer - The Real Estate Industry in Digital Transformation" from the Lucerne University of Applied Sciences and Arts at the price of CHF 90.00 at ifz@hslu.ch
