Overcoming Obstacles to Build a Data-Driven Culture for Your CRE Firm
While the commercial real estate industry (CRE) has historically been slow to adopt new technology (and even lagged behind other financial sectors), the market has come around in recent years, open to the opportunities enabled by data. But it’s not enough to simply have data – you also need strategies, processes, and tools in place to make that data actionable. Despite many CRE companies producing thousands and thousands of data points and having the required conversations around how to leverage the information, a true data-driven culture frequently remains just out of reach.
So, what can be done to address this challenge?
The Meaning of “Data-Driven”
A data-driven culture is one that incorporates data and experimentation into all aspects of the business, embraces the use of data in decision-making, views data as a strategic asset, and promotes data literacy throughout the company. To put it in simpler terms, being data-driven means having a forward-looking, prescriptive mindset (i.e. what will happen tomorrow), rather than a rear-view-mirror descriptive mindset (i.e. what happened yesterday).
A study from Northeastern University found that about 60% of companies still base at least half of their regular business decisions on intuition instead of data, and only 1/3 of companies currently identify as being data-driven. That means missed opportunities, lost revenue, and reduced efficiency while your competition is getting ahead. Tableau proposes, “Becoming truly data-driven requires changing mindsets, attitudes, and habits – embedding data into the identity of an organization; people have to want to use data and encourage others to do the same.”
Obstacles to a Data-Driven Culture
Despite all the data that CRE firms are creating, many asset managers and investors continue to make those instinct-based decisions. At an individual level, some people may be unsure how to access or use the data. At the company level, shifts in culture, resistance to change, limited access to data, and lack of process and alignment are some of the biggest challenges organizations face. For these reasons, it’s not surprising that in a survey by NewVantage Partners, 93% of business and technology leaders identify people and process issues as their primary obstacle to having a data-driven culture. Below are a few more issues impairing the shift to fully embracing and leveraging data.
Challenge 1: Cultural Resistance: A survey by database management company Exasol said that two out of three companies experience employee resistance to data-driven decision-making, even when 73% of respondents indicate their employees understand the benefits of data. People may be scared of the unknown or even worried that technology and data will eliminate their role; in reality, making the shift would merely enable them to dedicate more time to value-add activities.
Challenge 2: Data Silos: Small businesses use an average of 40 apps across the organization, while enterprise-level companies leverage an average of 211 apps. The irony? While having these tools is a great first step toward a data-driven silo, the problem is that much of this information stays isolated within each application, and more tools actually means harder data-driven decision-making. With this much information available, the thought of wrangling all that info may be overwhelming.
Challenge 3: Lack of Process and Alignment: Similar to data silos, you have organizational silos: functions are isolated from other functions, teams are isolated from other teams, and leaders can even be isolated from other leaders. This problem all boils down to miscommunication. Over 50% of people in companies that are working towards a data-driven strategy feel that they have not been properly informed, highlighting the disconnect.
How to Kick-Start Change
Adopting a new approach and driving change throughout the organization is not a small or easy task. However, a successful data-driven culture can yield powerful results and generate meaningful insights for the firm, ultimately creating exponential gains and uncovering new business opportunities. There are three key areas to consider when striving toward a fully data-driven culture.
- Technology: The first step is to get the right tools in place. A key aspect here is how you can collect the data from across your dozens of tools to make the information more meaningful and actionable. Technology such as Lobby CRE breaks down the data silos by bringing together datasets from across third-party systems to provide meaningful context, visualizations, and insights. With all your data in a single location, rather than across those many applications and dashboards, it’s easier to access the data, navigate, and analyze in real-time.
- Strategy: The second step is to think about the internal and external strategies. Internally, what methods, processes, protocols, and responsibilities do you have in place to define, standardize, protect, and store your data? Who has ownership over what pieces of data, and who is accountable for proper data governance? Externally, how will you leverage the data and incorporate it into day-to-day business? What problems are you trying to solve? What are your data-driven initiatives and goals? What new questions are you now equipped to answer, where before there were limitations?
- Culture: The third step is to get buy-in and build champions (i.e. people who are committed change leaders). This starts by attaining executive sponsorship and driving top-down engagement. Your leaders have the ongoing responsibility of setting and adhering to the company’s cultural tone, communicating the vision and benefits of data-backed decision-making, establishing the expectations for data initiatives, and modeling the behavior (i.e. leading through example). From there, identify a ‘change agent’ (preferably a senior leader) from every department to boost buy-in. Next, create a sense of urgency, outlining how the data can provide actionable insights, enable you to make smarter deals, produce opportunities, reduce portfolio risk, automate reporting, and drive business success, as well as save time, eliminate most manual processes, and quickly provide analysis for frequently-needed information.
During times of transition, it can be easy to fall back on old habits and settle for the status quo. But ultimately, these actions will prompt new habits, promote data acceptance, and become second nature throughout the organization. With digital transformation, your CRE firm will be well-positioned to navigate shifts in the market, compete effectively, and make smarter business decisions.
Learn how Lobby CRE’s easy-to-use solution can help you smoothly transition to a data-driven organization with a solid culture to match.