Technology Solutions

Preparing for the Next Internet Age

Commercial real estate professionals learned in the late 1980s and early 1990s to repackage their services to deal with a market downturn. Other industries, too, remade themselves as market forces demanded. Many employees of large oil companies who lost their jobs through downsizing now work as consultants for the same oil companies — plus other companies. Real estate brokers saw the same thing happen: Large companies reduced their use of office buildings, but smaller companies made up of downsizing victims leased or bought smaller blocks of space and made up the difference in many markets. That experience will come in handy as wave after wave of information technology transforms the economy and the businesses within it.

Multiplying Productivity
One commercial real estate practitioner who is recognized as a leader in adapting to new trends is John M. Peckham III, CCIM, of the Real Estate Cyberspace Society. Besides preaching to members of his organization about how to do business in the Internet Age, he practices it. At speaking engagements, he proudly shows off his office attire: jeans, shirt, and fuzzy slippers. His commute entails leaving his apartment and taking the elevator down four stories to his office, where he fires up his three computers and goes to work as a one-man operation.

"Everything I sold last year was on the Internet," Peckham says. He predicts that commercial brokers can multiply their effectiveness by at least five times using technology, including the Web, e-mail, and other tools.

And you thought the big challenge of the technology revolution would be getting your computer set up. Companies small and large have accepted the need for desktop computers, laptops, palmtop PCs for their mobile staff, and the other accouterments necessary to wage business today. What only a small percentage of them have recognized and begun to adapt to is the realization that the Internet Age will change the very core of their businesses.

"I don't think people fully get the Internet yet and how it will impact their companies," says Peter Pike, president of PikeNet and a 20-year veteran of commercial real estate. A recent "Survey of Business and the Internet" in Economist magazine agrees: "Certainly the technology matters, but getting the business strategy right matters even more. And that may mean not just re-engineering your company, but reinventing it."

Are you ready? Maybe not. In real estate, brokers have been concerned for some time about how the Internet enables nonbrokers to engage more easily in commercial real estate. But by focusing on others instead of themselves, commercial real estate professionals may be missing the real threat to their competitiveness.

"There has been an outside threat of noncommissioned professionals — like accountants [or] consultants — that have been gradually entering the traditional commissioned space," Pike announced at this year's CCIM International Commercial Real Estate Conference in Toronto. "That's more of an ongoing threat; I don't think that's a new, Internet-related threat. I think the Internet-related threat is more of an internal threat, and that is that some firms or organizations will develop the digital tools that will bind them more tightly to their clients, and so they will develop some advantages that other, nonwired associations and nonwired companies have yet to develop. That's a bigger threat."

The solution apparently lies both in how a company reorganizes its very core and how it interacts with customers and business partners.

What Spielberg Taught Us
Will the company of the future be a megalithic entity encompassing every step of the process, or will it be a one-person shop working with networks of one-person shops? The answer may be neither. And would you believe that we may be looking to Hollywood for that answer?

Pike speaks about BDC, which once stood for "big dumb company," referring to retailers such as Wal-Mart, Walgreens, and Levi Strauss, which people thought would be stuck with expensive retail and distribution assets while newer companies sold cheaply and directly to consumers over the Internet. Now, BDC stands for "big dot com," because these "dumb" companies proved themselves to be smarter and more flexible than was thought; they realized that they still have an advantage by marrying the ether with the dirt. In other words, they sell over the Internet and more traditionally, offer customers the ability to buy online — and if they want to return the item, for example, they can just take it to the local store. Working in the other direction, computer maker Gateway opened up stores to help sell its computers, which it previously did only over the Internet.

The film studios in Hollywood changed their structures more radically years ago. The Economist notes that a studio once had on its payroll everyone from actors to directors to technical staffers, but today it is much leaner and meaner. "[I]t is more like a finance-house-cum-marketing-department. Studios have retreated to their core roles: for a film, they now assemble the teams of self-employed people and small businesses that are today's stars and technical support. The Internet will push other industries in the same direction."

So the large companies still will be with us, but they will be much narrower in focus when it comes to their own responsibilities. And the small businesses still will be around, but they will be plugged into the large ones. "The first and most crucial shift in thinking is to get away from the idea that any business is more or less a free-standing entity," the Economist writes. "The objective for large companies must be to become e-business hubs and for smaller ones to ensure that they are vital spokes. The companies involved must be willing to bring suppliers and customers deep into their processes and to develop a similar understanding of their business partners' processes."

That means that company extranets, in which a company gives selected customers Web access to certain records, will become crucial to retaining clients. "Extranets — here's where you're going to make your money," Pike agrees. So the technology not only pushes companies to reinvent themselves, it contains within itself the tools to accomplish that reinvention. Your Internet site — your basic Web page with information about your company and its properties or services — isn't your moneymaker. Your moneymaking will rely on your services and your data, which you will need to make easier for your partners and clients to access.

Some of these challenges to the real estate industry may not be easily answered, while others suggest a need for considerable flexibility in the way that commercial real estate professionals envision their profession. Once again, the willingness of commercial brokers to be more open about their information will play a big role in their ability to survive the technology revolution.

John Zipperer

Tech Links is written by John Zipperer, new-media editor of the Commercial Investment Real Estate Institute. Contact him at (312) 321-4466 or jzipperer@cirei.com.

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