One thing was clear at ICSC ReCon 2010, Social Media has changed the game for retail firms. I believe Social Media will change how companies manage real estate. The following is my blog post from the JLL ICSC blog.
Social Media is Here to Stay
In my colleague’s earlier blog, she references the importance of understanding the social media world, and how to best leverage it for quality conversations with customers.
Another important consideration is how social media affects retailers from an operations perspective. In my experience working with large corporations, I have found that retail locations pose an especially difficult management challenge due to the sheer number of locations and the wide geographic distribution. Social media and Web 2.0 tools can help retail real estate professionals manage programs such as new store selection, multi-site project management and facility management, in the following ways:
1. Effectiveness – Channels such as instant messaging and Sharepoint sites allow managers to share ideas and get feedback more quickly and concisely, improving the effectiveness of processes for site selection, design and operations.
2. Speed to market – Real-time interaction in concise formats also accelerates processes, which can sometimes make all the difference in competing for the best sites and best tenants.
3. Service quality – Monitoring social media channels allows store managers to address customer concerns at 21 st Century speeds. One Yelp.com complaining about the cleanliness of a store can hurt sales; three or four bad reviews can do much more serious damage.
The bottom line: Companies need to learn to use social media tools to add business value. The most successful companies will be the ones to embrace new communication channels and stay ahead of real time knowledge.
In 2007, I wrote the following article for IFMA regarding outsourcing and the "Extended Enterprise". Back in 2007, companies were outsourcing to become best in class and to innovate. Leading companies still have this goal. Today, as we emerge from the hangover of the "Great Recession", companies are under more pressure to manage costs and to grow, without allowing expenses to expand. In other words, many C-suite executives are asking their teams to accomplish more with less. This dynamic is accelerating the push into real estate outsourcing in virtually all industry sectors.
The Extended Enterprise and the Future of Corporate Real Estate"
Corporate America is moving away from traditional vertically integrated business models to a more complex approach that maximizes every link in the value chain by leveraging best-in-class resources from within and outside the enterprise. Corporate real estate and facilities managers are increasingly faced with the choice: defend the status quo and risk losing competitiveness; or leverage the extended enterprise and prepare for significant change.
As companies seek to maximize efficiency throughout the entire value chain, they are focusing their attention on functions where they excel, and tapping best-in-class expertise for non-core functions. Done right, these “extended enterprises” are delivering unbeatable results department by department.
The extended enterprise approach recognizes that a business is made up not just of its management, employees and shareholders but also its partners, service providers and customers. This elimination of inside/outside boundaries is driven by the need to deliver more value, increase speed and flexibility, and compete in the unforgiving global economy.
The extended enterprise concept is a natural outgrowth of a company's transition away from vertical integration, the idea that the company should own the entire value chain. Vertical integration was designed to give management control over quality and speed of delivery. But it required a company to excel at every aspect of business, and not many companies could live up to that. Companies that farmed out non-critical tasks to expert service providers typically gained an advantage over competitors that adhered to vertical integration.
via www.ifma.org "
The following article was recently published in the Sourcing Interest Group – Inside Sourcing May 2010 Newsletter
Real Estate: A Sourcing Catalyst for Achieving the 'New Normal'
By Bryan Jacobs
Many industries have reached an inflection point in the growth cycle, having recovered from the shock of the recession and now poised for growth. In the “new normal” economy, companies are managing growth more carefully than in past recoveries, taking care not to increase cost structures along with revenue.
Sourcing executives are responding to this challenge by adopting broader and more innovative uses of third-party services to purge excess costs without sacrificing performance. Corporate real estate and facility operations offer a rich vein of opportunity for cost realignment through strategic outsourcing..
Many sourcing organizations are actively using third parties to manage real estate services, and more are evaluating options, looking to understand capabilities and trends.
There are two primary reasons for the interest. Real Estate and Facilities Management (RE/FM) yields high-impact efficiencies because it represents not just one or a number, but dozens of line items of interrelated costs. Reducing those costs intelligently is a sophisticated task because it involves managing demand above and beyond just achieving lower unit costs. Proper systems and talent are needed to integrate cost reductions without impairing operational flexibility. When done well, an entirely new layer of consistent savings and best practices emerges.
Secondly, real estate activities dovetail with two other corporate functions that are commonly outsourced: Information technology and human resources. Changes in workplace technology, employee recruitment and productivity affect—and are affected by–the physical environment where work takes place. An increasingly connected, mobile workforce needs a different kind of workplace. And this simple fact creates cost and operational performance opportunities that only an advanced strategic approach can fully capture.
Organizations outsource real estate facilities management for a number of strategic reasons:
Outsourcing enables the internal RE/FM team and its leadership to focus on strategic objectives and relationship management rather than the daily urgencies of tactical, low-value operational management. Moving the focus of corporate real estate management from execution to higher value-added strategic functions is the first step in restaging an organization and is the basis for a graduated value curve by which to assess the four fundamental types of outsourcing models.
Simply stated, value grows from retaining core attributes (leadership, strategy and planning, customer relationships, and outcome management) and pushing away non-core functionality (administration, project activities and tasks, facility management, specialized skills and tactical management). In a challenging economic environment like the one faced today, focusing on the core strategic functions in an organization is more important than ever.
One common operating model keeps the leadership in-house and close, but empowers a qualified partner to become accountable for operational delivery. After the operations have been shifted to a service provider, there are five key areas for cost savings.
Truly innovative sourcing organizations structure complex, integrated RE/FM outsourcing arrangements to manage bundled costs, streamline processes and share accountability, consistently reducing costs while remaining fluid enough to adapt to changes in business conditions.
Building Ties to Shared Services Partners
Recently, I was interviewed alongside a CRE client for EquaTerra’s blog. It served as a reminder that most business professionals engaged in outsourcing are not focused on the real estate and facilities management business. In the world of business process outsourcing (BPO), most of the big players are in information technology, human resources, legal and management consulting. When you consider the relative size of spend, corporate real estate may represent a major uptapped–or underutilized–outsourcing opportunity for many companies.
As we’ve become more involved with comprehensive outsourcing organizations like EquaTerra in recent years, we’ve found best practices in other fields that may be applicable to the real estate and facilities business. At the same time, we’ve found that outsourcing professionals in other fields are not always aware of the tremendous synergy between different BPO functions in areas such as workplace strategy, which works best when RE, IT and HR are aligned.
Strengthening ties across the shared-services platform has been a CoreNet Global theme for years, and I’m sure we’ll be hearing about it at the Summit over the next two days. As more and more companies establish shared-services models for overseeing and integrating multiple business functions (both outsourced and in-house), the opportunity to enhance value through collaboration and innovation-sharing is expanding geometrically. That’s good for our clients and our business. If IT and HR will bring the bat and mitts, we’ll prepare the field–let’s play ball!
April 20th, 2010
Clearly, CRE professionals are still learning how social media tools will alter the workplace. Much of the discussion at CoreNet has been around how to use tools like Twitter, LinkedIn and Facebook in a corporate environment to network and market. The more important topic that corporate real estate professionals still need to address however is how using these tools which provide interpersonal connectivity and 360 feedback, can positively change how Corporate Real Estate and the workplace is managed. Here are just a few examples.
- The ability to collaborate across large distances, share ideas faster and engage in feedback will make workers more productive. This shift will change how work is done and ultimately improve how some real estate is used and designed.
- The marketplace will become more transparent. Tenants will be able to provide direct feedback about buildings, find information about the availability and quality of space and even research the reputation and skills of individual service providers.
- Occupants can give more direct feedback faster which allows corporate managers to obtain real time knowledge of satisfaction levels and naturally facilitates more direct communication about services.
The bottom line is this, companies that learn to use social media tools to add business value will succeed as the economic recovery continues.
At the Sourcing Interest Group Summit, I had a chance to talk to a few of my clients and Equaterra about trends in our industry.
From the Equaterra Blog:
Trends in Real Estate and Facilities Management Outsourcing: An Interview Trifecta
Lee Ann Moore, CMO, EquaTerra
We have seen increasing interest in Real Estate and Facilities Management (RE/FM) outsourcing, strengthening capabilities in the provider community and strong value drivers for outsourcing RE/FM. At the recent Sourcing Interests Group conference it was clear that many buy-side attendees were actively using third parties to manage these services, and many were evaluating options, looking to understand capabilities and trends. Given the buzz around this emerging area, I was happy to have the opportunity to interview a senior executive-level RE/FM buyer at a high-tech firm (who, for confidentiality reasons, cannot be named), Bryan Jacobs, principal and international director at outsourcing provider Jones Lang LaSalle, and Ron Walker, managing director of EquaTerra’s RE/FM practice. Following are excerpts from our interview.
Lee Ann Moore (LAM): Buyer, you outsourced RE/FM globally to Jones Lang LaSalle (JLL) in three key areas – real estate management, facilities management and lease administration. Please tell us about the approach you’re leveraging in the outsourcing of these functions.
End-User Executive (EUE): A couple of key factors have contributed to our success to date. First, outsourcing has not been perfect, but it has created value for us in large part due to our willingness to approach our provider as a partner versus a vendor. We firmly believe this partner mindset opens up value opportunities for us. Second, it has freed up our people to focus more on strategic real estate issues around the world, while JLL focuses on the operational issues. It is a healthy, thriving partnership.
LAM: You mentioned several value drivers for the outsourcing decision. Can you provide some addition detail on where you saw the value in outsourcing RE/FM?
EUE: Our primary objective was to transform our worldwide real estate organization. We needed a firm which could scale and adapt to our changing and globally expanding business. Additionally, our facilities vary across the globe, and even in our largest facilities we could not afford to keep a full range of subject matter expertise in house. In our smaller facilities we had fewer options, which presented us challenges in many regions. And, although JLL is taking more tactical work, we expect the relationship to provide savings while improving our service delivery model and pushing us to a best-in-class solution. A recent example that helps validate our decision to outsource RE/FM is when we had two critical uninterrupted power supply (UPS) failures. JLL engineers immediately responded to the situation. Additionally, their response time to provide specialized equipment was much faster than we could have delivered in a crisis or non-crisis situation, made even more important because of the failure. We have numerous examples like this that continue to validate the decision.
LAM: Bryan, what pricing models are most common in these arrangements, and which models seem to work best?
Bryan Jacobs: There are three primary models we observe in the marketplace, with no one model being right for every company. First, we see cost plus models that work well with clients that want transparency and flexibility in pricing. This model can also have built-in incentives that may be appealing to a certain set of buyers. Second, we observe fixed price models ideally suited for clients looking for predictability and balanced fees across time. Finally, we see a guaranteed maximum model which is a blend of the first two approaches. It provides a ceiling yet gives room for pricing to fluctuate with the market. This inherent ambiguity seems to work better in situations where there is strong trust between the buyer and the provider.
LAM: Ron, you have a broad view of the providers, the market and client demand. What is your perspective on the RE/FM marketplace – provider activity, pricing models and buying trends?
Ron Walker: This is an exciting market because of the strong provider capabilities around the world. That is the primary driver for the activity and success in the marketplace. I have heard many stories in which buyer companies have struggled to adequately support their multi-geography facilities, and have found real value in using the third-party real estate and facilities firms. The provider firms have responded well by offering the pricing flexibility like Bryan describes above. We expect this market to continue to expand as the global footprint of multi-national corporations continues to shift into new, developing countries.
To learn more about integrated sourcing of real estate and facilities management, read EquaTerra’s position paper Bigger Better and Broader Linked.