Imagine the possibilities when digital transformation and leadership intertwine in the complex world of multifamily real estate. Our journey through the digital landscape is enriched by stories and insights from my time at MIT with Dr. George Westerman, where we uncovered the essence of thriving in a tech-savvy market while steering clear of common digital adoption pitfalls.
We scrutinize the multifaceted nature of innovation, revealing the art of value creation through a careful fusion of investor satisfaction and customer purchasing power. Through real-life anecdotes and strategic wisdom, we set the stage for you to enhance the leasing experience without pricing out the very customers we aim to serve.
As we dissect the varying innovation archetypes within organizations, from the cautious conservatives to the exuberant fashionistas, we uncover the inherent risks and rewards they carry along their digital journeys.
This episode transcends mere tech-talk, placing a spotlight on the transformative power of leadership, and how fostering a dedicated workforce through education and investment can shape the future of your business.
Whether you're aiming to fortify your digital capabilities or aspire to master the multifamily industry, this conversation offers a blueprint for cultivating digital mastery by uniting groundbreaking technologies with visionary leadership.
Join us for an engaging dialogue that promises to elevate your perspective on digital transformation and leadership within the multifamily realm.
Thank you for tuning in to today’s episode. If you found value in our conversation, please subscribe to our podcast on your favorite platform and leave us a rating and review.
Your feedback not only helps us improve but also helps others find us. And if today’s episode sparked a thought or provided a new insight, consider sharing it with a friend who might also benefit.
Together, we can grow our community and continue to learn and innovate. Thanks for listening, and until next time,
nectarflow™ - AI, Automations & Business Integrations
Interested in a FREE webinar on how to bring AI & Automations into your business? Join us live at our upcoming webinar https://events.multifamilyleadership.com/event-registration
Speaker 1: All right.
00:00:00
So on today's episode, we are going to be talking about the
00:00:03
DNA of a multifamily digital transformation.
00:00:07
And listen, I get it.
00:00:10
You are thinking about your business being more modern,
00:00:15
introducing new technology, and we gotta be up and up on
00:00:17
everything that's going on.
00:00:18
And there's so many products and services out there.
00:00:22
How do we bring them into our organization and how do we make
00:00:24
them stack up so we can create this competitive advantage for
00:00:27
our companies and ultimately, drive better cash flow so we can
00:00:33
reinvest in our business and our processes?
00:00:35
So that may be why you're doing this, but the reality is it's
00:00:39
not easy.
00:00:40
I'm sure you already know this and so many things about how we
00:00:46
do this.
00:00:47
I'm gonna set you up with a little analogy, in that real
00:00:51
estate developers truly get this and they have the secret and I
00:00:58
don't think that anybody's really unlocked it and that when
00:01:04
they build an apartment building, they have a vision for
00:01:08
a future.
00:01:08
They know who's gonna be in the building, who they wanna rent
00:01:11
to.
00:01:11
Some cases they do.
00:01:13
Sometimes they don't.
00:01:13
They see the land as an opportunity and they're going to
00:01:19
help that community do great things and in a future forward,
00:01:24
people will be celebrating birthdays in the homes they
00:01:26
build and there's a lot that has to happen for that victory to
00:01:32
be achieved.
00:01:32
So, going into this process, they have a mindset that it's
00:01:40
gonna take time.
00:01:41
They've got to enroll the community, they have to have
00:01:44
legal in place, they have to have financing in place, they
00:01:47
have to understand supply chain and construction processes and
00:01:50
selections of projects.
00:01:52
And they're set up as developers to think through this
00:01:57
three years, four years down the road, even if they're
00:02:01
flipping it, which means they're in a mindset to know like
00:02:07
they're not going to get income right now but there will be a
00:02:12
big payoff if we do these things right.
00:02:15
And with that mindset they're thinking about the future,
00:02:20
because by the time a customer rents the apartment it may be
00:02:27
further down the timeline from today.
00:02:30
So they're sort of already set up to think big and think
00:02:35
long-term in some aspects.
00:02:38
Right, it's very important to think like that in technology.
00:02:41
Now, what they also know is they engage an architect.
00:02:45
Right, they have engineering disciplines, they're landscape
00:02:48
architect, you have a regular architect, general contractor.
00:02:54
You have all the disciplines of all the people that are going
00:02:58
to come together and make this building come together.
00:03:00
It's not done with one person and they don't try and do it
00:03:03
themselves.
00:03:03
They coordinate and they project manage, they budget,
00:03:08
they forecast, they put the resources in the right areas.
00:03:12
All right, so that's a pretty good setup that, hey, if you
00:03:18
could do that, you could do this technology stuff.
00:03:21
However, what happens when you buy technology, the same real
00:03:25
estate developers, the same operators it's not maybe
00:03:30
short-term thinking a little more short-term thinking Is they
00:03:33
just?
00:03:34
It's almost as if they saw, like, as a developer, they saw
00:03:37
land and decided let's build something there, and they're
00:03:42
like all right, let's go to Home Depot, let's go to Lowe's,
00:03:45
let's get some stuff, and they start putting lumber in the yard
00:03:47
and in the ground and let's go start building things.
00:03:51
How winky would that building be?
00:03:56
How long would that building last?
00:03:57
Would there be ongoing repairs and problems?
00:04:01
Would customers even want it or enjoy it?
00:04:04
Probably not.
00:04:05
Yet that's the way we go about buying products and services
00:04:11
today.
00:04:11
We're buying it from products that were developed without an
00:04:16
understanding of our business.
00:04:18
And I'm not talking about just because somebody knows
00:04:20
multifamily, but your business.
00:04:22
Do they know your business?
00:04:25
The way you've set it up, the way you've structured your
00:04:29
processes?
00:04:29
Probably not.
00:04:31
And so there's some tension there to digitally transform
00:04:35
your business, because I know you want to do it.
00:04:37
It's just hard to do Now.
00:04:41
Recently, when I completed my certificate at MIT, leading
00:04:44
under or learning under Dr George Westerman, he talked this
00:04:49
was for applied generative AI and digital transformation of
00:04:52
the business, and in there there's deep technical neural
00:04:57
networks and AI and large language, like all the stuff to
00:05:00
know from an engineering standpoint, but it's paired with
00:05:04
really good business stuff, and one of the takeaways from this
00:05:10
experience was you know, it's not really the technology that's
00:05:16
the solution, it's probably you , the leader, that's the
00:05:22
solution, because, as we know, in multifamily the technology to
00:05:26
fix all of our problems already exists.
00:05:29
Right, the technology is there, and sometimes we only look
00:05:35
inside multifamily for options for solutions, as if, I don't
00:05:40
know, healthcare hasn't solved that problem, or the automotive
00:05:43
industry, or space travel, right , restaurants who else has
00:05:50
customers?
00:05:50
Car washes who else has got customers that have done things
00:05:54
that we can learn from?
00:05:55
So digitally transforming an organization is hard work Number
00:05:59
one.
00:06:00
A lot of times in W2, employees meaning people that have a
00:06:04
single flow of income are challenged with this and they're
00:06:08
not always supported, because the people that created the
00:06:12
wealth have never had to do this and they have lots of money now
00:06:17
to prove that they were right.
00:06:19
So you have a new employee that's excited about the
00:06:25
possibilities of the future, and why would they take a risk of
00:06:30
their own income to put pressure on themselves to fall flat?
00:06:35
So through, like the multifamily innovation council
00:06:39
becomes a great frequency to support those organizations that
00:06:41
are trying to make those moves, but just know it's not easy.
00:06:45
So if you're trying it and you're not doing it, don't just
00:06:48
sit tight, take a breath.
00:06:51
Let's focus on the capabilities and move through this.
00:06:53
So at MIT, we went through the DNA of a digital transformation
00:06:59
and I'm applying this to multifamily and I'm gonna take
00:07:03
you through that here in just a moment.
00:07:05
The framework Think of it like a two up of you know, a Y and X
00:07:11
axis.
00:07:11
Right, you got two different things we're going after there.
00:07:17
But what's most important about Dr Westerman's study is you know
00:07:22
, in In just the media and all the news and noise around,
00:07:27
what's happening with what leaders should be doing.
00:07:29
Just listen to CNBC every day.
00:07:31
Right, it can feel like a lot of pressure to do something and
00:07:35
if we rush a process, nothing goes happens.
00:07:37
But what Dr Westman did is he we've studied, we're seeing the
00:07:43
news a lot of like Apple and Tesla and Amazon and all these
00:07:48
great companies doing these innovative things, and that's
00:07:52
great, but it may not apply to you.
00:07:54
It may not matter in your market with the way you've
00:08:00
structured things, the way they do it or what they've done.
00:08:03
And so, while it's nice to hear those stories and see the
00:08:07
exciting trends, what will really make a difference, though
00:08:12
, in your business and Dr George Westman studied this many
00:08:17
companies, some of the all the you know most of them, and we'll
00:08:21
go through the research line by line, but I will tell you the
00:08:26
takeaway from this was he was looking at the boring companies
00:08:30
that were doing interesting things, and what he was looking
00:08:37
for was what, what were they doing that was making a
00:08:42
difference?
00:08:44
And he ended up with a two up.
00:08:48
And I mean, you know, if you were to draw four squares on a
00:08:51
paper, the bottom left would be beginners, and that means that
00:08:57
they're low on digital capability and also leadership
00:09:03
capability, okay.
00:09:05
And on the far right box, the lower right, would be
00:09:11
conservatives, right, so they're high on leadership capability.
00:09:15
They've got a great vision, right.
00:09:17
They're.
00:09:18
They're doing great things, a lot of focus on governance,
00:09:23
right, and then so on the bottom is, if you were to draw this
00:09:27
box, you don't want to be on the bottom.
00:09:28
On the bottom, on the left, is beginners.
00:09:33
On the bottom, on the right, is conservatives.
00:09:35
Now, as you visualize this, as you listen, the top left is what
00:09:41
he calls the fashionistas.
00:09:42
Right, these are the ones that are like the early adopters.
00:09:48
They're high on digital capability, they're the ones to
00:09:51
try the new thing.
00:09:52
They're beta testing, they're stacking things on top of each
00:09:56
other.
00:09:56
They're go go and they're not really connecting it all
00:10:00
together into like a single platform or digital platform.
00:10:04
They're just adding, adding, adding things.
00:10:06
They're early adopters, right.
00:10:08
And the top right, which is digital masters, is where we
00:10:16
want to be.
00:10:16
That's what we're all aiming for, which means that you are
00:10:20
high on digital capability and also high on leadership
00:10:25
capability.
00:10:27
Now, what's fascinating about digital capability because here
00:10:30
we are talking about the DNA of the multifamily digital
00:10:35
transformation is in order to have digital capability.
00:10:39
You're focusing on customer experiences, right, you're
00:10:43
focusing on the operations, the employee experiences.
00:10:46
Also some business model stuff, right, you've heard
00:10:51
centralization and all these other things, but in that
00:10:56
digital capability, there's no mention of tech.
00:11:00
There's a mention of customer experience.
00:11:06
There's a mention of operations .
00:11:08
There's a mention of employee experience, of business model
00:11:13
and a digital platform to connect it all, because when
00:11:16
it's connected, all you have experience, you have the better
00:11:19
customer experience, you have the data right.
00:11:22
You may have a different model as a result of that, and that's
00:11:26
what's fascinating.
00:11:27
That's why I tell you, it may not even be tech as the answer.
00:11:31
It may be the digital DNA transformation of your
00:11:36
multifamily company through leadership.
00:11:38
That's the answer and having that technology to connect
00:11:46
everybody through the process.
00:11:47
And so again, he's looking at these boring companies that are
00:11:53
doing interesting things.
00:11:54
There's a lot of studies and there's been written about this
00:11:58
too.
00:12:02
Now, the digital masters are both high on leadership
00:12:06
capability and digital capability.
00:12:08
Now, leadership capability means they've got a great vision
00:12:11
and with that vision, they're engaging their employees right
00:12:17
and they have the right technology and they have the
00:12:20
right leadership in place and they've created a digital ready
00:12:25
culture.
00:12:25
That's the digital master.
00:12:33
You have a vision for the future, you're engaging your
00:12:38
employees, you have the right technologies, you're connecting
00:12:42
those technologies into a single digital platform, you have the
00:12:47
right data, you have the right leadership and you have a
00:12:52
digital ready culture.
00:12:55
Now, conservatives on the opposite side of those things
00:12:59
right, the bottom right.
00:13:00
This is where most multifamily is right now.
00:13:03
Now, when I say that, it's whenever we hear we're behind.
00:13:07
And behind to whom?
00:13:11
Because somebody's cashing checks and they may be for what
00:13:15
they designed their business for .
00:13:17
So nobody should tell you how to run a business unless right,
00:13:22
well, you're the owner.
00:13:23
The owner of the investor is decides what happens.
00:13:27
There are the ones taking the risk.
00:13:28
Right, we may have ideas, but the conservatives are just, by
00:13:34
nature, so much wealth has been created in multifamily that they
00:13:38
haven't had to take any risk.
00:13:40
You know, we've just been able to get away with just keep
00:13:46
raising the price on the customer.
00:13:48
But I will tell you, the path to leadership of the CEO of the
00:13:53
future is not like the really wealthy CEO.
00:13:58
It's the technology.
00:14:00
Even if you look at Duncan Donuts, the CEO's vision is like
00:14:05
to support the franchise with technology resources, and now
00:14:10
they got some innovation and ads and things like that selling
00:14:14
donuts thinking about technology .
00:14:19
So we've been able to get away with just charging customers
00:14:22
more.
00:14:25
If multifamily is about creating wealth, two of the wealthiest
00:14:28
people on the planet care about A Bezos with Amazon that the
00:14:36
customer of the future is going to care about costs and we're
00:14:38
going to try and get people what they want without friction and
00:14:43
at a lower cost.
00:14:44
He just kind of innovates to knowing like people are always
00:14:47
going to want lower costs of things.
00:14:48
He's thinking about his customer, so he's got a lot of
00:14:52
them.
00:14:52
Elon Musk, when asked about supply chain and all these other
00:14:57
things like are you going to raise the price of the Tesla?
00:14:59
And he did his famous like pause and think and think about
00:15:03
this answer, give a thoughtful one.
00:15:04
And he said it's not that we're trying to lower the cost or
00:15:11
increase the cost of the car vehicle, it's that he's trying
00:15:15
to increase the value of the vehicle.
00:15:18
And I don't think we'd think about that in the multifamily
00:15:28
industry.
00:15:28
How do we increase the value of the leasing experience we're
00:15:35
thinking about?
00:15:35
How do I buy a property?
00:15:37
How do I put some money into it , fix it up, rent it for more,
00:15:42
sell it to somebody else at a higher rate, and I'll make my
00:15:45
profits and find another one and repeat the cycle.
00:15:49
The problem is, every time somebody does that, the basis
00:15:52
gets higher and higher and you end up with where everybody
00:15:57
loses and there's market crashes and regulation comes in,
00:16:02
because you can't just keep expecting the customer to pay
00:16:05
more.
00:16:06
You're reducing the customer's purchasing power and you're
00:16:09
pushing people, you're pushing customer segments, out of your
00:16:11
market.
00:16:12
So we've been able to get away with that, which is fine.
00:16:18
A lot of wealth has been created and a great experience
00:16:20
has been made in multifamily and apartment living.
00:16:22
But I can tell you can do both.
00:16:25
The investors should still get returns.
00:16:27
Rent healthy rent increases are great for markets.
00:16:30
People want to pay for great things, people want luxury
00:16:36
brands, people want to pay high prices for things and there's
00:16:41
value.
00:16:42
The value has to be more than the cost, right?
00:16:47
So when we're thinking about that, that tells you, as you're
00:16:51
digitally transforming these organizations, to think about
00:16:54
ways to increase the value of the organization and the renting
00:17:00
experience, the employee experience.
00:17:02
Imagine increasing the value of hiring somebody at your
00:17:06
organization that you can only afford to pay them this because
00:17:09
of the budget, but you're increasing the value of them
00:17:13
working there by providing them access to investment strategies,
00:17:17
access to meetings that are taking place, that they're
00:17:20
learning how to be an investor themselves and maybe they go off
00:17:24
and buy their first apartment transaction and create some
00:17:28
wealth for themselves and, by the way, they stay working with
00:17:35
you because you made them that or gave them access to that, the
00:17:39
loyalties there, and now you've got an employee that it doesn't
00:17:42
have to work there but wants to work there.
00:17:45
It's a really great thing if we can figure this out.
00:17:50
What I mean by that is in conservatives, they're too
00:17:53
focused on governance.
00:17:54
This is the organization that doesn't want to try something
00:17:58
new, doesn't want to move.
00:17:59
They want to play it safe.
00:18:01
Some of the biggest companies I talked to in the industry that
00:18:06
you all know they ask questions like who else is using that?
00:18:11
Well, what about this company?
00:18:14
It's almost as if they don't trust themselves.
00:18:18
It's because of safety.
00:18:23
They're going for safety.
00:18:24
They're basically saying well, that company over there said yes
00:18:29
, makes me feel better, that should be an easier decision.
00:18:35
I can make that decision.
00:18:38
We need to trust our own instincts.
00:18:40
We need to trust our own leadership capability, we need
00:18:44
to understand our own communication styles, all that
00:18:46
stuff, and we need to trust our own failures, because that is
00:18:50
where we learn.
00:18:51
But in the bottom, let me describe the two up here.
00:18:54
At the bottom of the four square, you have the beginners
00:18:59
on the left right, you have conservatives on the bottom
00:19:03
right.
00:19:03
At the top, you have fashionistas on the left and you
00:19:08
have digital masters.
00:19:09
On the top, right and at the bottom axis you have leadership
00:19:13
capability, and on the left axis , leading up, you have digital
00:19:17
capability.
00:19:18
So, fashionistas the top left are high on digital capability,
00:19:24
low on leadership capability.
00:19:25
Digital masters are high on digital capability and also high
00:19:31
on leadership capability.
00:19:32
That's the goal.
00:19:33
It's the conservatives that are low on digital capability but
00:19:39
high on leadership capability, and they're high on leadership
00:19:42
capability because they have records of history, years,
00:19:48
legends of success, piles of cash, strong governance, big
00:19:53
properties all the way around the country and the world to
00:19:56
show evidence of success, and they're too focused right now on
00:20:00
governance, and that can keep you out of the game.
00:20:05
So what we can do is we can focus on increasing our digital
00:20:11
capability, thinking through how we can move organizations to
00:20:16
set a new direction, right Eye, that vision of what you wanna do
00:20:19
with your organization and just be the.
00:20:22
It's not the tech that's gonna solve you, it's the.
00:20:26
Don't get off track.
00:20:28
Get on track and get the people together aligned with your
00:20:33
vision.
00:20:34
Now let me give you a few stats that are important to know
00:20:37
around why it matters the fashionistas, as I mentioned,
00:20:44
they're.
00:20:44
Those are the ones that are innovating like crazy, but
00:20:48
they're not tying everything together.
00:20:49
And the conservatives on the off, parallel to that, are being
00:20:54
really careful.
00:20:55
They're essentially trying to not waste money, but they're
00:20:59
really not innovating the way that they should.
00:21:01
Now the fashionistas what they're doing?
00:21:06
These are the ones that are early adopting.
00:21:08
They're going crazy, going fast .
00:21:12
They're driving more revenue through their capacity because
00:21:18
they're trying more things, and you can get some false signals
00:21:21
with that.
00:21:21
They can feel like progress is happening, but what happens is
00:21:25
they have a lower profit margin.
00:21:26
Now, on the off, parallel of that, the bottom right you have
00:21:30
the conservatives, and they're not necessarily wasting money
00:21:35
because they're not trying anything new.
00:21:36
They're not off being distracted, but their profit
00:21:42
margins are good.
00:21:43
Right, they're the ones doing really good on the profit
00:21:46
margins, but they're not driving revenue like the competitors
00:21:51
are, so they're leaving some money on the table.
00:21:54
Now the digital masters, which is at the top right these are
00:21:59
the people that are putting it all together.
00:22:01
They're sort of reinforcing their feedback loop with their
00:22:05
employees.
00:22:06
They're driving a 9% more revenue and 26% higher margins
00:22:14
compared to the other large companies in their industry.
00:22:18
So if you're conservative, you're gonna miss the game.
00:22:25
You're gonna miss some opportunities.
00:22:26
You're gonna be playing it safe .
00:22:28
You can play in a lot of governance, but you're gonna
00:22:30
have good margins, but you're gonna leave some revenue on the
00:22:32
table.
00:22:32
You have to start thinking about what that means to your
00:22:35
financial equation.
00:22:36
And if you're fashionistas and you're just trying a bunch of
00:22:41
stuff fast, fast, fast and you're not getting the
00:22:42
leadership capability up, then you're getting false signals.
00:22:46
You're growing revenue, it can feel like there's growth, but
00:22:48
your margins are lower and it's not good.
00:22:51
So what we wanna do is we wanna get you up to the top right,
00:22:53
which is that digital masters, high on digital capability and
00:22:57
higher in leadership capability, and you are pulling it all
00:23:00
together, engaging your employees around your vision,
00:23:03
bringing it in the right technology, and you have the
00:23:05
right leadership and you have a long-term view, like you do in
00:23:09
the development process, as I opened up this episode.
00:23:12
So I hope this was helpful.
00:23:13
There's a lot more to this process, but the takeaway that
00:23:19
you wanna understand is the technology choice itself is not
00:23:24
the answer.
00:23:25
It's your ability to lead and develop the organization in this
00:23:31
way, and that's the unique ability that you have and
00:23:36
probably want to develop.
00:23:37
So hope you guys have a great episode.
00:23:40
If this was useful, please let us know in the comments, or if
00:23:45
there's a way that you wanna engage with us, you can go to
00:23:48
multifamilyaipodcastcom.
00:23:49
You can leave us a message there, you can leave us a note,
00:23:53
let us know what other episodes, whatever content, you'd like to
00:23:56
hear, and we'll see you guys in the next episode.
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