Disruption in Commercial Real Estate: Is this our Kodak Moment? 

Kay Sargent explains why the workplace design industry needs to embrace disruption, otherwise this could be our Kodak moment.

For the past several years we have watched as industry after industry has disrupted and forced to evolve. Be it the hotel sector impacted by Airbnb, or the taxi service changed by Uber and Lyft. But there has also been disruption in the commercial real estate industry, thanks to coworking, WeWork, and changes to the design profession are emerging as well. Not only are we witnessing the evolution of how and where people work, how space is leased, but how workspace is designed and built out is changing as well. We need to embrace the potential for disruption being brought forth and proactively rethinking how we can best serve our clients, companies and the workforce. We need to innovate and evolve. Otherwise, this might be our Kodak moment.

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.

George Bernard Shaw

Kodak is the ultimate example of a company that went out of existence because it failed to realize the shifts in the market and user demands. Corporate real estate companies and the design industry face that prospect if we don’t recognize the shifts that are already occurring and seize the moment. From the need to go beyond just being sustainable to understanding user expectations; from how technology is evolving and impacting the workplace to the need to innovate; from ownership to access. As Stephen Shapiro noted, “When the pace of change outside your organization is greater than the pace of change within, you will be eaten.” The challenge is to look beyond today and see what lies ahead so we can adapt accordingly.

Solving problems they understand = commodity. Finding problems they didn’t know they had = value add.

Daniel Pink

Not all innovation is disruption, but it’s important to know the signs for when it is.

• Progressive innovation is the natural evolution of an existing idea or concept. Progression typically happens in small increments that often go unnoticed over time.
• Non-disruptive creation happens when a new problem or opportunity is introduced, but the existing systems stay in place.
• Disruption creation happens when there is a breakthrough to an existing idea or change that challenges the status quo. It often emerges when someone introduces a cheaper, faster or better way of doing something altogether that makes the existing method obsolete. The music industry, hotel sector, retail stores and movie industry have all been rocked by disruptive innovation. Disruptive creation embraces the philosophy that ‘Different is better than good, but different and good are better than the best.

Creativity is the process of coming up with the new and useful idea, and innovation is the process of making that idea a reality for others to use.

Anderson, Potočnik, and Zhou

But innovation and disruption are not new to us. We are entering the 4th industrial revolution.

The Four Industrial Revolutions:

• 1st Industrial Age Steam –  1784
• 2nd Information Age Electricity – 1870
• 3rd Human Era Digital – 1969
• 4th Cognitive Era Cyber – 2016

Each prior revolution has sparked fears of redundancy, ushered in a need for new skills, fresh approaches and innovative ways of thinking. But we have lived through and thrived after each era, thought it may not have been easy at first. What makes the era we’re living through today unique is the rapid pace of change and the vast number of industries being disrupted simultaneously, to the point that at times it seems never-ending and overwhelming.

Technology is the biggest disruptor today. Sixty percent of business leaders said they struggled to respond to disruption and only 21 percent of them believed they had the internal expertise and talent to deal with disruptive technologies. Companies that proactively embrace new technology and digital transformation have a 50 percent higher return on investment than those doing so reactively. Emerging technologies have the potential to reshape how we approach work and the design of the workplace and position savvy companies with a distinct competitive advantage.

• INTERNET OF THINGS – The Internet of Things (IoT) is a network of devices that enable the collection and exchange of data. It’s machines talking to machines without the need for human intervention. This enables the creation of smart buildings and optimizes space and operations. Currently it is being used to collect environmental conditions and track individuals. But we believe the IoTs becomes the IoE, Internet of Experiences, when the information collected can be used to empower individuals, not just track and monitor them. The real value of the IoTs is when we can leverage the data collected to create better user-experiences. Be it identifying a space that meets your preferred lighting, temperature or noise levels or adjusting the space to your specific settings.
• AMBIENT COMPUTING – an ecosystem of network technology that responds in real time to what’s happening in the business environment—is laying the foundation for an autonomous workplace. By tracking utilization, noting preferences and identifying patterns, sensors provide intelligence that can boost productivity and enhance the user experience.
• BIOMETRICS – The use of unique physical features such as iris and fingerprint recognition or voice identification to authenticate a user can reduce the need for passwords and provide faster, more secure access to services. Wearable technology is also progressing beyond the ability to monitor heart rates and number of steps taken. Medical wearables soon will be able to detect a spike in stress levels or the onset of a cold.
• COGNITIVE COMPUTING, AI AND ROBOTICS – Advancements in tasks that mimic the human brain, machine learning, advanced and predictive analytics, and speech recognition are being employed across many sectors. Chatbots—computer programs that use AI to mimic audio or text conversations—are assisting customers. And AI-powered virtual assistants such as Amazon’s Alexa and Apple’s Siri are enhancing smart devices. As some repetitive and manual tasks are replaced by AI and robotics, new industries will emerge to support these new systems and people will be freed up to shift to new functions.
• AUGMENTATION – Augmentation interconnects the physical and virtual worlds and creates an immersive and interactive realm. Real world objects are augmented by computer-generated perceptual information and are often multiple sensory modalities, including visual, smell and sound.
• HOLOGRAMS – Holograms are beginning to appear as receptionist, information kiosks, and we are now seeing the launch of the first holographic smartphone, Hydrogen One, which projects 3D images on a display without the need for special glasses. Holograms may reinvent the way we interact and take augmentation to the next level.
• 5G – The much anticipated 5G mobile technology is reported to be a game changer. With speeds that are 10 times faster than 4G it has the potential to connect every device, fix bandwidth issues, save energy and transform the way people work and interact.

When it comes to embracing technology for the sake of progress it’s important to remember the words of Stephen Hawking, “Our future is a race between the growing power of technology and the wisdom with which we use it.”

Today’s emerging technologies will have an impact on work, the workforce and the workplace. Be it targeting CAPEX expenses and reducing the need for owned, fixed assets or reducing OPEX, but providing ways to be more efficient and effective via tools or automation. Technology can also help improve the human experience and leverage machines to do the routine mundane task while freeing up people to focus on higher value or more rewarding pursuits. Future work will likely be the balance of man as the “art of work” and machine as the “science of work.” In that scenario man will focus on judgment, emotional intelligence, empathy, ethics, social context and doing the right thing. Machines for their part will focus on computational capabilities, data analysis, pattern recognition, and what is the logical thing to do.

The emergence of the sharing economy has created a new reality – access is the new ownership. Just as people don’t need to own a car anymore, companies don’t need to own all the services and amenities they offer their teams. Why have an expensive, large, under-utilized gathering space on every floor when you can share one with others in the building or the extended community that has all the bells and whistles, all the latest technology and someone that knows how to use it at your service and all you need to do is pay for it when you need it. In the age of the sharing economy we need to be smarter about what we need to own and what we just need access to.

Organizations need to plan on disruption to remain resilient. Jeffrey Saunders offers an example of how we do so with his definition of the elements needed to create a resilience triangle – “radar,” “sword,” and “shield.” The “radar” is the ability to perceive early warnings to capture disruptions before they occur. The “sword” is the ability to be proactive and continuously develop new products, services and capabilities. The “shield” consists of the ability to plan and react to unexpected events.

Speed. Complexity. Need to innovate. These are all things companies are grappling with today. So how do we enable organizations to embrace disruption and innovate? As we shift away from “incremental productivity,” where it’s about things faster, better, and cheaper, a new model is emerging. “Divergent creativity” leverages ideation and co-creation to drive to more game-changing creations that break through boundaries. The “democratization” of meeting where everyone can contribute, leading to inclusive ideation and speed to innovation. This approach to working requires a renewed focus on team work. People working in teams innovate faster, achieve better results and report higher job satisfaction accordingly to a recent Steelcase report. But we also need time to be mindful, so we can get to deep meaningful thoughts, so we need to create environments that provide a balance of team and individual settings. After all, ideas often originate when we are alone … but they germinate when we are together.

If you want to go fast, go alone; if you want to go far, go together.

Vanessa Van Edwards

Companies need to ensure they are truly aligned across multiple attributes – People, Place, Process and Tools. They need to ensure the workplace aligns and supports all these streams.
Many workplaces are still designed to support a linear workflow, the way we used to work, and don’t enable the multiple tasks, activities and behaviors required for design thinking and innovation. Activity Based Working, ABW, allows for options and choice but often doesn’t enable teams, which is important. Neighborhood- based Choice Environments, NCE, leverage the best of ABW spaces but provide a home base, where teams can work in close proximity to one another with easy access to information, consistency, a sense of control over their environment and evoke a sense of teamwork.

Hence the emergence of agile methodology and the agile way of working. Agile Environments align with the Agile Methodology approach and are designed to support cross-functional project-based teams working in close proximity so they can collaborate, track and deliver projects. These spaces initially served team-based organizations that sought innovation through streamlined scrum areas, but they also create a sense of belonging, shared purpose and community.

Pain is knowledge rushing in to fill a gap. When you stub your toe on the foot of the bed, that’s a gap in knowledge. and the pain is a lot of information really quick. That’s what pain is.

Jerry Seinfeld

What we often practice today is ‘unnovation’, the refusal to identify, create, embrace or adopt new ideas, leading to the unnecessary and untimely demise of many businesses, which is ultimately overtaken by external progress. Whether or not this will be the Kodak moment for the corporate real estate industry and design community depends on if we embrace the disruption that is coming and intelligence of which we do so. The lesson Kodak learned should be heeded by all. Are we seeing the shifts that are already occurring – coworking; climate change; automation; prop tech; user control; IoTs; sharing economy; high tech = high touch – and do we understand the impacts they will have? And even if we do so, are we willing to change the status quo and seize the moment? The difference between our ability to do so and our refusal to so do is the difference between evolution and obsolescence.

When the pace of change outside your organization is greater than the pace of change within, you will be eaten.

Stephen Shapiro