OPINION: Embrace innovation from the property sector now or face being obsolete

By Jonathan Hannam, Co-Founder & Managing Partner at Taronga Ventures


Avi Naidu and Jonathan Hannam - Managing Partners - Taronga Ventures (Photo Source: AFR)


At Taronga Ventures we invest in technology focused on sustainable innovation for the built environment. We consider real estate technology as anything that impacts the built environment, so that includes energy and sustainability, infrastructure, data platforms, mobility and smart cities, as well as some of the more traditional Proptech.

Right now we've got about 350 investments that we're reviewing, with a number of early stage companies in and around Brisbane and the Gold Coast, that are looking to enhance or disrupt this space, including startups emerging from a number of the universities.

From Spare Workspace, who are making it easy to book workspaces on demand, to Orb Maps, which aggregates different maps into a centralised location for land buyers, and RealAR, offering AR for residential property buying, renovations and development, there are many varied, interesting projects coming out of this region. 

SurePact is another great local company that has developed contract management software focusing on standardising risk delivery in construction, as well as Levaux, which has deployed globally with their ground-breaking cloud-based intelligent system for building asset management, using wireless autonomous sensor agents to capture data, and ultimately drive efficiency and productivity improvements. 

Our goal is to bridge the gap between these early stage companies that have great concepts and ideas but need capital, mentorship and support with the large owners of real estate that have global portfolios, capital and real problems that need to be resolved.

A big part of making that happen is about getting these organisations to test and trial early stage companies in their portfolios. That requires a certain mindset. As part of testing and trialing these new, innovative early stage companies the larger owners of real estate need to be open and willing to facilitate the participation of early stage companies into their portfolios. 

Over the past three years we have done a lot of consulting with the boards and senior management teams in the real estate sector about how they can drive innovation into their portfolios. 

We firmly believe every board should have an innovation advisor to help to explain the implication of technology on their business. But many do not. 

In many cases Board members have no ability to test how technology will impact their portfolios. The reality is the implementation of technology is happening so fast that many of the corporates cannot make decisions based on the state of change of technology due to the rapid pace of change. 

At a management level it is also difficult to act. Having the Head of Innovation directly report to the CEO helps the entire organisation. What is clear is that there needs to be dedicated personnel to assist with implementation as well as that senior level support. This applies as much to any company looking to invest in innovation in-house as those who outsource it. 

Perhaps a key factor is that for many companies, decision-makers need to start the innovation journey. The main reason for this is that with technology, portfolios can very quickly become irrelevant to the customer if a competing project has made technology changes that enhance the customer experience. 

Just by starting the journey, organisations will have access to new information, ideas and creativity. In our view it is the corporates that don't change that will become less attractive as employers, landlords and ultimately to investors and thus may quickly be obsolete.

One major challenge is that within organisations there needs to be an expectation and also a willingness to fail, which is something we don't really have in Australian corporates. To some extent there must be mindset that, as long as you learn from something, then it's not a failure. 

A lot of the companies we talk to tell us, "We tried something like this once, it didn't work." Our message to them is that environments are rapidly changing and thus maybe the initiative wasn’t in the hands of the right people, or maybe the timing was wrong, or circumstances to make it work have changed. Yet it is clear that the real estate industry in general has struggled with innovation - but perhaps that also makes it so interesting.

The real benefit of RealTech is that can enhance portfolio returns, lead to better health and safety for workers, creating future employment and long term savings. The majority of what we are seeing is not about disrupting portfolios but enhancing business practices. 

We are seeing a great number of real estate groups embracing innovation. In Australia some of the leading groups would include Westfield and Scentre Group, leading superannuation groups like ISPT and Hostplus and we also have tremendous deal flow coming from groups like CSIRO. 

Once a corporate embraces innovation it makes it attractive as an employer, which in turn means the organisation draws in the right talent to create and support that innovation. Where innovation is stifled people feel unempowered and will eventually leave.

The key then is to make a commitment to pursuing innovation and seeing it as a long term goal, being patient with the outcomes as they will take time and not accepting immediate defeat.