There is a common belief that startups are ahead of corporations when it comes to innovation. Small companies are agile, quick, and do not have the organizational bureaucratic infrastructure to hold them back. In contrast, corporates are bound by their ways of doing things and short-term return on investment (ROI) targets. A study conducted by Harvard Business Review shows that since 2000, 52% of Fortune 500 companies have “gone bankrupt, been acquired, or ceased to exist” due to digital disruption, and 75% of S&P companies will be replaced by 2027.
Fundamentally, just as every other industry, the real estate industry is not immune to disruptive digital transformation. This immediate need to innovate results from enterprises seeking to adapt to a new wave of technologies affecting their sales, markets, and customers. Today, corporates should always exploit the need for new skills and talent in order also to improve their business model, internal processes, and value chain. Similarly, Sven Dumortier, Chief Technology Officer at Banimmo, said: “everything around us is getting smarter, except for work. However, spaces should work for people, be flexible for people, and be controlled by people. We should plan today’s office to be just like the office of the future, flexible, personal & controllable”.
To their advantage, large organizations have many resources such as a successful product or service, a solid customer base, a robust brand recognition, and some extra cash reserves to streamline innovation and venture into new ideas. On the one hand, innovation cultures are fun, exciting, create the feeling of belonging to the employees, and add value to the organization. On the other hand, innovation cultures are hard to maintain and sustain.
How do real estate corporates innovate?
Corporate innovation is not just about product innovation or service innovation. Innovation can include departmental innovation, process innovation, or business model innovation. It also means to have the ability to think outside the box, to have a tolerance for failure, to have the willingness to try and experiment, to be able to encourage collaborations, as well as to envision the future and build it today. Essentially, Thomas Pary, the sales and account manager at C-innovation, explained that the main idea of innovation is to respond to everyday life challenges, avoid disruption, and be future-proof ready. He also reinstated that innovation in the real estate and construction industry is key to responding to all new legislation and regulations in the built world.
In that mindset, to remain a dominant force, corporate innovation should be a priority. One of the most critical ways to innovate is through startup engagement opportunities such as investing in venture capital, internal and external collaborations, and, for instance, joining innovation communities. Accordingly, Bonzom and Netessine (2016) drew up the “Swiss-knife” of corporate engagement tools.
Bonzom and Netessine (2016)
Investing in a venture capital fund
The above diagram presents the different opportunities corporates can undertake to enhance collaborations with startups and create innovation. For example, a venture capital arm or a corporate venture department can be a key asset to credible and robust access to talent and innovation. Startups need investments and resources, and in return, they can offer innovative ideas that can potentially disrupt the market. However, corporates must allow startups to function autonomously and freely.
Internal and external collaborations
Another way of innovating can include both internal and external support services. To illustrate the internal support, Piet Derriks, managing director at Immoweb, stated that there is a very structured process on how they work with innovation, “Within our company, all employees can pitch their innovative ideas. It is also important to note that opening the opportunity for each individual to cast an idea creates an amazing buzz in which everybody is involved and can help in innovating”. In other words, many employees are naturally creative but cannot execute or communicate their ideas due to their defined scope of work. Therefore, removing barriers and creating an adapted environment for employees to test their ideas is vital for corporate innovation.
On the other hand, corporates could also seek the support of an external partner or expert in order to help solve an internal challenge. For instance, Bert Cuyt, the head of the office at Structura.biz, explained that in the real estate market, the increased need for information and the large set of data on buildings, that can be extracted and processed for different properties is crucial for the innovation in the B2B real estate sector. Hence, corporates are also seeking collaboration with startups to instantly and efficiently provide such information.
Joining an innovation community
In addition, corporates may also consider joining an innovation community that offers events, networking, and sourcing new solutions and inspirations. Noemie de Crombrugghe, the CEO of PropTech Lab (Belgium), said: when we welcome corporates into the community, we learn how they perceive innovation, their internal needs, and the need to increase their maturity levels of innovation. For example, corporates want to offer their employees the possibility of being up-to-speed with innovation, being boosted by other players, and getting inspired by the innovative solutions that already exist and operate on the market.
For more than two years, PropTech Lab observed that corporates with enough innovation knowledge are frequently asking for more tangible accompaniments. More and more corporates are undertaking personalized innovation programs. For example, the Fast Track To Innovation (FTTI) and the Tech-Veil (TV) are two services PropTech Lab offers to corporate members willing to boost their innovation awareness and opportunities by discovering, defining, developing, and delivering their innovation vision and targets.
Leten, Van Dyck, Silvestri (2018)
In that relation, we see that different stakeholders in the industry set different innovative targets. First, it is essential to know that the architect’s role and value will shift and change. Coen van den Wijngaart & Iwein Meyskens, the executive partner & managing partner at archipelago architect, emphasized the transformations they see happening in different project phases. They said that as architects, the need to consider new materials and new ways of construction is empirical to the concept and design of the building, the surrounding and the environment of the urban space, and the future re-design, reconstruction, and the dismantling of the building. Similarly, Delphine Desgurse, the innovation director at IKO Real Estate, added that the macro-trends around the industry, such as sustainability, urban transportation, mobility, and urban design, are all impacting the value chain and business model of the industry. The need to focus on digital transformation, shorting the value chain with the end-user experience, and considering improvements on the building, urban, and district levels is essential to sustain and maintain a leading position in the market.
Great conclusion for corporate innovation!
In conclusion, while innovation can be explained as several things, we should not forget that innovation is a process that we put in place to survive, grow, and escape disruption, said Michael Goldberg, the managing director at Phicap. More so, contrary to what is believed, a study made by BCG showed that while the scale of smaller startups’ makes it easier to coordinate, their innovation success rates were lower than the incumbent firms. In other words, when incumbent firms strategically use their tools and resources, they successfully innovate. As innovation involves exploring the uncertainty, tolerance for failure, willingness to experiment, and being open to other ideas, these latter should all be essential characteristics of corporations with innovative cultures.