Academic journal article Journal of Real Estate Literature

Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption

Academic journal article Journal of Real Estate Literature

Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption

Article excerpt

Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption, by Thales S. Teixeira, 345 pages, February 19, 2019.

Over the past year or so, I've become a big fan of the concept of systems thinking and have tried to apply it to understanding the new real estate ecosystem. Systems thinking, loosely defined, is the process of breaking a big problem into numerous smaller problems, then repeating the process again and again until you can no longer break them into smaller pieces. Once all the individual pieces are defined, you then begin to think about the dynamic relationships between all of those pieces and how one affects the others.

It has been an enlightening experience to say the least. I realized not only how little I consciously considered each individual component of an analysis, but how little information is available that would allow such a detailed analysis. Over the last ten to twenty years, the world has changed pretty dramatically while the real estate industry largely has not kept pace. Many lessons have jumped out of this research, two of which I'd like to discuss here.

The first is that improvements in technology have made the collection and analysis of data much more viable and powerful than it used to be. There is an immense amount of "microdata" that has not and is not being used effectively by the real estate industry (think thousands of Excel models built bespoke for each individual property; there is no central repository for all of that data because there was historically no large-scale use for it). The second is that real estate is no longer the strictly local investment it used to be. Because real estate has become one of the major asset classes (for multiple reasons beyond the scope of this review), the industry has become much more affected by the larger economic and capital markets forces that were not as prevalent in the past.

I think there is enormous potential in a framework that allows us to understand the new real estate industry better, but I have also struggled with the application of the concept and how to put it to use in real world situations. Distilling application from concept is not always easy. Much of my research while trying to figure out how to develop better technology and capabilities for the real estate industry has involved organizations such as DARPA, NASA, JPL, Skunk Works, Bell Labs, etc. I have found that looking outside of the real estate industry for ideas on how to progress has been much more fruitful than looking inside our own industry.

Recently, a book called "Unlocking the Customer Value Chain" by Thales S. Teixeira, a professor at Harvard Business School, was suggested. The author discusses mostly consumer and retail applications, but I found tremendous value in his concept of understanding the chain of events involved in any process and how to identify the value of specific areas of that chain that could potentially be improved or disrupted, a process he refers to as "decoupling." Teixeira repeatedly stresses that analysis for any business should not come from the perspective of the business, but from the perspective of the customer, in whatever form that customer may come.

Most industries have (or had) incumbents that, over time, brought every piece of a chain of products or processes together to make it easy for customers to get everything done under one roof. When the process a customer undertakes for a purchase involves numerous steps that are all addressed by the same company, that process is said to be "coupled" or "bundled," and serves to make execution of the entire chain of activities more seamless than each activity being accomplished through different firms. Often, however, individual steps in this process are not as efficient or effective as they could be, causing the consumer to spend time, effort, or money that would not be necessary with a more efficient system.

I believe the current business models in the real estate industry have not adapted well to changing consumer preferences, the use of available technology to streamline many activities involved in real estate, or opportunities to capitalize on capabilities new technology has presented. …

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