A lot of real estate companies fall far short of their own expectations with regard to digital transformation. This has been established by the recent study Transform to Succeed of IIWM Institut für Immobilienwirtschaft und ‑management, which is part of Aschaffenburg University of Applied Sciences, and Drees & Sommer SE, a consulting company that specializes in construction and real estate. A total of 155 managers and specialists in the sector took part in the survey. Key finding of the study:a discrepancy exists in the real estate industry, particularly among managers in many companies, between their self-assessment of their level of digital maturity and the extent to which digital applications are actually used in data management, data analysis or process automation. With regard to digital transformation, younger specialists also consider their companies to be much less advanced than older respondents in management positions.
In the real estate sector, there is still a lot of reluctance to integrate artificial intelligence, the internet of things (IoT), blockchain and augmented reality[MC1] : 60 percent of those surveyed for the study have not made any use of these technologies so far. Just one quarter of the respondents use instruments like predictive analytics in their day-to-day business, i.e. digital processes which allow them to identify patters in large data volumes and anticipate future results. Only one third of those surveyed apply business intelligence tools. As many as 39 percent of the respondents do not have any measurable digital transformation targets. And at least half of those surveyed were unaware of any clearly defined and communicated digital strategy of their employers. Moreover, for more than every second company it is unusual to cooperate with startup firms of their sector, generally known as ‘proptechs’. The high approval ratings for the following statements are in stark contrast to the results: 64 percent feel that the corporate culture encourages lifelong learning, and 55 percent of the respondents appreciate an optimal level of IT infrastructure support. For just under half, the digital skills of colleagues are beyond question.
Digital Transformation Gap: Study Reveals Gap between Conception and Reality
Many of these results are of no surprise to Dr. Chris Richter, who explained: “Companies are feeling strong pressure to change their digital approach. The study provides us with key indications as to how much progress the digital transition has actually made in companies, particularly with regard to targets for efficiency and sales growth, based on a well-developed maturity model.” The Associate Partner, who heads the Digital Services area at the consulting company Drees &Sommer SE, designed the study together with Dr. Verena Rock, Professor and Director of the course Digital Real Estate Management at Aschaffenburg University of Applied Sciences.
According to professor Dr. Verena Rock, many participants take much pleasure in discussing about innovation, ecosystems and a high degree of diversification in business models. However, closer scrutiny reveals that: “As far as the technological infrastructure, data analysis and data management, as well as process digitalization and process automation are concerned, only a few companies in the real estate sector are in a very good position at this time.”
Maturity Level in Midfield: Digital Maturity Model Identifies Areas in Need of Improvement
For the study, professor Dr. Verena Rock und a project team from Drees & Sommer developed a digital maturity model and assessed it. The model uses three dimensions – strategy, digital transition and transformation – to provide information on how far the digital transformation has already progressed in the different areas of a company. Basis of the study was a quantitative survey of 155 managers and specialists in the real estate sector.
Among those surveyed were senior managers; team or division heads; and specialists (one-third each group). The age structure was balanced. The participants were spread broadly across the stages of the value chain in the construction and real estate industry. In terms of company size, small firms with fewer than 50 employees are most frequently represented, at 35 percent.
Overall, the industry achieved a maturity level score of 3.37 out of a possible 5 points. Broken down into separate parts, the Transformation category has a comparatively high score of 4.44, while Strategy (3.0) and Digital Transition (2.67) are only in the midfield. The scoring shows that many companies are lagging behind, in particular in the fields of data management and data analysis, but also with regard to the development of digital innovation and new business models.
Managers with a Tendency towards Self-Deception
Professor Dr. Verena Rock pointed out: “There are interesting differences in the subgroups included in the survey. On average, older employees and managers claim a significantly higher level of digital maturity in their companies than younger staff members and specialists.” This suggests that managers, who also tend to be older, overestimate the level of digital transition in their company. This is possibly because they believe that they have already addressed the issue properly from a strategic viewpoint. But managers are also quite self-critical, as they question their own role. In their view, the most important reasons for a slow digital transition are insufficient digital leadership, wrong prioritization by managers, and missing commitment at management level.
Digital Transition Faces Many Obstacles
When asked why things are not progressing beyond this, the interviewees mainly cite issues relating to mentality and culture: for around a quarter of them, this is the crucial reason that hinders digital development. One in five people state that there is a general attitude of resistance to change in the company. Organizational and strategic obstacles (18 percent) and technological and processual barriers (14 percent) also stand in the way of digital transformation.
However, real estate companies should not be discouraged by these hurdles. This is because, with a carefully thought-out strategy, the right components for digital transition can be found. Steffen Helbig, Managing Director at the municipal housing company WBM Wohnungsbaugesellschaft Berlin-Mitte mbH confirmed: “Together with Drees & Sommer’s Digital Services team, we developed a customized digital transition strategy that optimally expands our existing range of services. The strategy focuses on a willingness to experiment with new technologies and the rapid implementation of pilot projects, including for example artificial intelligence-driven chatbots and virtual 3D planning boards, as well as digital core processes and the evaluation of ERP systems. Each of these projects directly creates clear added value. At the same time, we keep an eye on the long-term objectives alongside these quick wins.”
Digital Transition Strategies Are Key to Corporate Success
Dr. Chris Richter sees ‘digital’ as a key success factor: “Digital transition strategies should not be viewed in isolation, but as an integral part of the corporate strategy. Used correctly, digital components form the basis for successful environmental, social and corporate governance (ESG) measures, for example, or they reduce the costs of own processes. In the long term, this makes companies more competitive. So, all this represents an important investment in a company’s future.” However, Chris Richter also warns against indiscriminate investments: “The motto ‘the more the merrier' is not good advice for digital transformation strategies. There is no universal blueprint in this case. Each company should decide what is needed and what makes sense for its business, particularly with regard to growth and efficiency targets.
However, the expert’s suggestion is to look at the issue right now: “In the midst of the market crisis, digital transition is one of the most important transformation issues. It influences the company's attractiveness as an employer, the ability of its business models to innovate, and thus also its future viability.”
About the Maturity Model
The maturity model was developed iteratively on the basis of the Integral Competence Model (integral map), designed by imu Augsburg, and the maturity model Digital Business Processes of Germany’s digital association Bitkom, among other sources, and adapted to the specific features of the digital transformation of construction and real estate companies for this study.
When assessing the level of maturity, the study focuses on three dimensions, each with several factors. The first section deals with strategy as a key factor. Core questions include the extent to which a company has digital goals that are clearly formulated and measurable, the extent to which there is room for innovation and new business models, and the status of cooperation with ecosystem partners. In the second section, respondents were asked to provide information on the status of digital transformation in the company. This includes, inter alia, cultural factors, staff competence and change management. The third emphasis is on digital/technical transformation, including technological infrastructure, data analysis and data management, as well as process digitalization and process automation.