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Can Property be Teslafied?
The current pandemic has highlighted the need for technology in almost every business sector especially in the retail sector where former leaders like the Arcadia group have fallen due to changing consumer behaviours.
It would be unfair to say that residential property development hasn’t adopted technology as areas like construction management and sales progression solutions are quite mature.
However, have property developers looked at simply automating manual processes and missed looking at how they could transform their industry? From reviewing the annual reports, and researching the top 10 residential property development companies, it does appear that way.
A Strong “Why”
Elon Musk and Tesla set out with an ambitious “why” which was to clean up the planet. Their “how” was to revolutionise travel with electric cars and thereby reduce carbon emissions. A purpose-driven vision is becoming increasingly important as consumers look beyond the product to make purchase decisions on the ethical values of a brand.
McKinsey research highlights purpose-driven companies grow 3 times faster than their competition and have much higher levels of customer and staff satisfaction. Hence, there are strong business benefits to being purpose-led.
Tesla is a great example and has hit a key chord with consumers concerned about climate change, and it is easy to see how their product relates to the goal and purpose of cleaning up the planet.
Increasingly, a company’s “purpose” is becoming as important as its product. In the property market whilst there is a strong contribution to charitable causes and sustainability initiatives, none of the top developers are led by a strong ethical purpose.
The Golden Thread
The property industry is well renowned for its wealth of data, however, as Dame Judith Hackitt’s report highlights, the fragmented nature of the industry means that data is often lost as it moves between different players. Contrast this with Tesla where data is retained throughout the entire lifecycle of manufacturing through to ownership and resale of vehicles.
Tesla vehicles have a full service history maintained by Tesla and this is shared with second-hand buyers. Gone are the paper manuals as owners are given a portal to access their vehicle history.
The centralisation of data not only benefits the owner, but Tesla uses data to improve their product. Feedback from the car about its usage and performance provide critical direction as to how the car could be improved.
The Ministry of Housing, Communities and Local Government (MHCLG) is looking to introduce property logbooks to reduce property sale transactions, but could developers benefit from property data beyond the sale, for example, to improve quality or product design?
Like new homes, Tesla cars have a range of optional extras that can be fitted to the car before it is sold. However, unlike a new residential property, their cars are “upgradeable” beyond the initial purchase. The car is technology-enabled and as such can be upgraded through a wifi connection.
These powerful upgrades can for example improve the efficiency of the car or provide new features on the console. An upgrade this year increased the mileage range of the battery and the efficiency of the climate control system.
To date technology in homes has been used for the automation of security and heating/lighting. What if technology could help owners optimise energy efficiency or even their household expenditure?
As car owners, we are used to taking any modern car to the garage where a computer downloads diagnostics to highlight what needs to be serviced. Why couldn’t a home be plugged into a platform to be diagnosed for service or improvements?
In 2019 Tesla saw a 91% increase in “service and other” sales, essentially sales outside of cars. This includes servicing, over the air upgrades and merchandising and totalled over $1.65bn. Musk believes that Tesla cars will increase in value over time as they improve through software upgrades and “work for the owner” by becoming driverless taxis in the future.
Beyond this, the company is looking to add an app store so that owners can buy 3rd party apps, music, video’s or games in a similar way to how Apple created a huge new revenue stream from its phones. Such a platform for the home could create a whole new revenue stream for property developers providing an income well beyond the initial sale of the house.
Over time if enough value is provided, subscription revenue from every property sold could provide a steady new income source for developers.
One of the biggest differences between Tesla and its competitors is how it is valued by the financial markets as it attracts huge multiples often seen with technology companies. They didn’t invent the electric car, but they have created a business model that is leveraging the economies of scale. They have a direct sales and servicing model and hence can control the whole value chain for customers.
Through technology innovation, they are creating a new intellectual property which could be monetised at scale by licensing to other manufacturers. In the property development sector technology is generally focused on creating efficiencies through automation. However, a significant opportunity exists for visionary developers to exploit technology to the point where the company is valued much higher.
In the UK a new player in the build-to-rent space, Moda Living, describes itself as a technology company in the residential property space. It is already exploiting technology to not only improve the customer experience but also to manage energy efficiency, building health, security and selling additional services to tenants
Beyond Selling Residential Properties
The key takeaway from Tesla is that using technology they have transformed almost every aspect of the car industry, from direct sales to service, charging points and now even power genera on and power storage from solar roofs and home batteries. They have “digitised the car” to exploit data and generate new revenue streams beyond the initial purchase of the vehicle.
This opportunity exists in property development, the only question is whether your company will be the disruptor or the disrupted?
Dharmesh Mistry is the founder and CEO of AskHomey, a platform that helps new property developers deliver groundbreaking and exceptional customer experience for their buyers. He is also an investor and mentor in Proptech and FinTech. For over 30 years, Dharmesh has supported financial services organisations with technology and management expertise and has a proven track record of delivering transformational innovation and vision. He regularly comments on the industry and is known globally for his thought leadership.