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Beyond InnovationJLL Perspectives
Technology and the next frontier of progress
#JLLinnovation @JLLBoston
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New England Market Director
Jim Tierney
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Michael DaviesChairman, Endeavour Partners
MIT Senior Lecturer & Researcher
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Transformation – affect every facet of lifeThe emergence – and a very rapid adoption and evolution – of a platform that will have enormous macro- and micro-scale impacts
1 2 3 4
Platform
Fast, cheap
5 Forces Impacts
Magical
TransformationTransforming how people go about every facet of their lives (micro-scale) leading to macro-scale changes
Empowered citizens
Unleashed productivity
Human networks
Accelerated, disruptive innovation
Sharing, on-demand economy
Economy
Social
Political
Ecological
Easy, ubiquitous
Automation
Evolvable
Travel patternsShopping habits
Residential real estateRetail real estateWork qualityOffice space demands
Socialization
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The conversation has changed
“This has gone from an economics discussion to a socioeconomics discussion.”
-December 17, 2014
Ben Breslau
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0
2000
4000
6000
8000
10000
1500 1600 1700 1800 1900 2000
Each ‘GPT’ spurred a sea change in economics and life outlook
A ‘General Purpose Technology’
World PPP-adjusted GDP per capita (2010 USD)*in relation to select technologies (1500 - 2014)
• http://data.worldbank.org/indicator/NY.GDP.PCAP.CD/countries/1W?displa y=default & http://ourworldindata.org/data/growth-and-distribution-of-prosperity/gdp-growth-over-the-last-centuries/
The ‘smart thing’ revolution, heralded by smartphones,
is not yet finished
Universal access to detailed data, social media, and analytic tools
Universal ability to interact with, create, and act on this data
Universal connectivity
Leadership from the developed world, particularly North America, while the developing world catches up as prices fall
Printing press popularized in
Europe
In 2014, smartphone penetration approaches 50%
of active adults
Steam engine power
Steel mills
Electricity
Digital computers
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Five technologies trigger this transformationWe are in the midst of the most universal technology-driven transformation in history
Information sharing and communication for everyone, everywhere, everywhen
Smartphones
Means to empower everyone, everywhere, everywhen to connect
and communicate
Modular cloud Internet of many Things
Smart machines Rise of the robots
Device agnostic; storage of information and retrieval anywhere
Connecting all devices into the world of
information sharing
Converting machines into controllable instruments providing insightful data
Time saving work automation through
machines
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The evolution of the platformAs platforms grow in capability, they begin to decisively transform consumers’ lives and businesses’ dynamics
1 Fast and cheap
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The evolution of the platformAs platforms grow in capability, they begin to decisively transform consumers’ lives and businesses’ dynamics
1 Fast and cheap
2 Easy and ubiquitous
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The evolution of the platformAs platforms grow in capability, they begin to decisively transform consumers’ lives and businesses’ dynamics
1 Fast and cheap
2
3
Easy and ubiquitous
Big data analytics, machine learning, automation
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The evolution of the platformAs platforms grow in capability, they begin to decisively transform consumers’ lives and businesses’ dynamics
1 Fast and cheap
2
3
4
Easy and ubiquitous
Big data analytics, machine learning, automation
Evolvable, scalable, modular
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5 powerful new forcesThis platform brings 5 powerful new forces to bear on consumers, businesses, and innovation
1 Empowered citizens
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3
4
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Unleashed productivity
Human networks
Sharing, on-demand (economy)
Accelerated, disruptive innovation
Enabling consumers to retrieve any information wherever and whenever they need it; the power of knowledge
Automating routine tasks, simplifying jobs, replacing nonintelligent work with APIs; free up workers’ time, more productive
Promoting connectivity amongst all people; collaboration, cooperation, communication; knowledge sharing
Supplying the resources and jobs when consumers need them; transitioning from ownership to pool sharing of needs
Displacing incumbents with newer, better technology; initially inferior technology for limited people but rapidly improves
• Shopping• Healthcare• News
• Remote work• All hours• Cloud services
• Social media• Knowledge sharing• Call, text, email
• Mobility - Uber, Lyft, Zipcar• Jobs - TaskRabbit, Handy• Lodging - AirBnB
• Lean Startup• Innovator’s Dilemma
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Empowered citizensConsumers access to the universal mobile platform has upended traditional consumer-business power dynamics
1 Empowered citizensEnabling consumers to retrieve any information wherever and whenever they need it; the power of knowledge
Who is affected?
Retail Transit Healthcare Education
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Unleashed productivityWorkers will reclaim their time for meaningful challenges as platforms flourish all routine labor disappears
2 Unleashed productivityAutomating routine tasks, simplifying jobs, replacing nonintelligent work with APIs; freeing up workers’ time to be more productive
Who is affected?
Retail Transit Healthcare Education
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Human networksMore humans are connected across more platforms than ever before – transcending location
3 Human networksPromoting connectivity amongst all people; collaboration, cooperation, communication; knowledge sharing with less barriers
Who is affected?
Retail Transit Healthcare Education
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Sharing, on-demand (economy) Consumers are empowered, and businesses are disrupted, as microtransaction-driven markets aggregate supply and demand
4 Sharing, on-demand (economy)
Supplying the resources and jobs when consumers need them; transitioning from ownership to pool sharing of needs
Who is affected?
Retail Transit Healthcare Education
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Accelerated, disruptive innovationNimble and scalable innovation models lead to business disruption and consumers empowerment
5 Accelerated, disruptive innovation
Displacing incumbents with newer, better technology; initially inferior technology for limited population but rapidly improves for all
Who is affected?
Everyone
Documented through The Lean Startup and
The Innovator’s Dilemma
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5 powerful new forcesThis platform brings 5 powerful new forces to bear on consumers, businesses, and innovation
1 Empowered citizens
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3
4
5
Unleashed productivity
Human networks
Sharing, on-demand (economy)
Accelerated, disruptive innovation
Enabling consumers to retrieve any information wherever and whenever they need it; the power of knowledge
Automating routine tasks, simplifying jobs, replacing nonintelligent work with APIs; free up workers’ time, more productive
Promoting connectivity amongst all people; collaboration, cooperation, communication; knowledge sharing
Supplying the resources and jobs when consumers need them; transitioning from ownership to pool sharing of needs
Displacing incumbents with newer, better technology; initially inferior technology for limited people but rapidly improves
• Shopping• Healthcare• News
• Remote work• All hours• Cloud services
• Social media• Knowledge sharing• Call, text, email
• Mobility - Uber, Lyft, Zipcar• Jobs - TaskRabbit, Handy• Lodging - AirBnB
• Lean Startup• Innovator’s Dilemma
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Higher-order impactsThese forces have brought about dramatic changes across multiple sectors of human activity
Economic impact
Political impact
Social impact
Ecological impact
• Transforming industry and global economic outlooks
• Connecting similar and disparate networks of people to share ideas
• Facilitate mobilization of people
• Empowering citizens with global and local knowledge
• Connecting political movements and enabling activism
• Informing the world of planetary impacts
• Allowing local and global energy optimization through information exchange
Transformation:
• Living• Smaller spaces
• Moving• Sharing, on-demand
economy• Multimodal
• Interacting• Social networks• Multi-communicable• Collaborative
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The future is already hereIt’s just not very evenly distributed
Kendall Sq. represents a technology epicenter of early adopters; Cambridge, MA shows the future state for which lagging areas
will develop into years later
Technology exists in advanced hubs
• Well-educated• Young• Urban• Developed world à North America
Archetype: Cambridge, MA
Global smartphone penetration* **(% of population smartphone subscriptions, 2010-2020)
*Removes 14% of the world population that lives in extreme poverty and 8% over 65 years old** Smartphone subscriptions data and forecasts derived from Ericsson Mobility Report 2014 and 2015
0%
20%
40%
60%
80%
100%
2010 2012 2014 2016 2018 2020
By 2020 globally, every active adult will
own and use a smartphone
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Shift in travel patternsUrban centers are witnessing the ascendance of the carless generation and the rise of multimodal transit
Traditional travel Emerging travel transformation
US car ownership
• Car ownership
• Single driver per a car• Driver requirements
o Parking, insurance, gas
• Unimodal
On-demand sharing economy
• Carless population increase in cities
• Transit when and where needed• Less requirements• Multimodal
o Walking, biking, public transit, driving integration
• Change in city traffic patterns
• Sharing economy: more about collective needs to resources than individual ownership
• Smartphones: connecting consumers to real time information and providers
• Integration: multimodal usage to increase transit efficiency
Insights
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The rise of UberAfter only 4 years, Uber has become a globally dominant enterprise with a PR problem
Financials• Valuation >$50B
• Received $8.21B funding• $1.2B funding raised for China• Earned $2.91B for 2015 bookings• Expects $10.8B for 2015 bookings
• Expects $26B for 2016 bookings
“You’re changing the way cities work, and that’s fundamentally a third rail.” – Travis Kalanick
Disruption• Uber in SF is more than 2X its taxi market
o SF taxi market revenue: $140M/yearo SF Uber revenue: $500M/year
• Ridership growtho SF: 3X increase/yearo London 5X-6X increase/year
• Serving low-income communities traditionally ignored by taxis
Regulatory backlash• Safety concerns of the drivers
o Insufficient background checks
• Operating in over 50 countrieso Protests and bans across
multiple cities, countries
• “Technology company” labelo Not adhering to transit laws
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The inevitability of AirbnbAirbnb represents the heart of the sharing economy; everyday consumers sharing their possessions as micro-entrepreneurs
Financials
• Valuation >$25B
• Received $2.29B funding Completed 40M rooms-night 2014
• Expects 80M rooms-night 2015• Forecasts a $150M operating loss to
expand in 2015
“The community is the first recourse, the platform is the second recourse, and the government is the third recourse, rather than the
reverse.” – Brian Chesky
Disruption
• >1.5M listings in >35K cities in 190 countries
• Offers more rooms than largest hotel groupso Airbnb boasts >1M (not year round)
• Projected to outpace hotels for booking rates• Large hotels suffer investor downgrades
o Analysts expect hotels to lower prices to compete with Airbnb
Regulatory backlash
• Health and safety concernso Not adhering to hotel codes
• Displacing the traditional rentero Apartments coopted for full-time
Airbnbs squeezes out local housing
o SF and NY case studies
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Shift in shopping habitsConsumers are empowered to discover and buy the best item at the most competitive price
Traditional shopping Shopping transformation
US shopping habits
• Brick and mortar store• Advertisements through newspapers,
radio, physical signs• Items fully stocked in store• Mass produced, homogenous
products
Online price comparison, experiential stores, customizable
• Online (exclusive) retailers• Applications to price compare • Pop-up stores, guide shops• Decoupling of supply chain from retail location
• Major shifts in supply chain• Customizable, made to order stores• Enabling the consumer to be a seller• Subscription and renting based shopping
• Empowered consumers: smartphones, online platforms enable consumers to discover an item at the best price
• Personalized shopping: consumers receive personalized products and shopping experiences
Insights
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Shift in socializationUsers constantly connect and communicate, enriching socialization regardless of physical world boundaries
Traditional socializing Socialization transformation
US socializing habits
• In person interactiono Limited in time and space
• Pre-set plans for when and where• Restrained in communication
Everywhere interaction,real-time planning
• Virtual and physical world interaction• Platforms for social profiles• Unrestrained by time and space, ability to
archive and share various forms of media• Real-time communication, impromptu• Multi-communication means
o Words, images, videos, songs
• Influencers: consumers follow friends, favored brands, industry leaders to influence them
• Targeted marketing: consumers’ preferences, demographics, and publicly available information leveraged to provide targeted marketing for shopping
Insights
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Shift in residential real estate Young urban dwellers are not as fettered by traditional transit and space concerns, and prioritize location
Traditional urban housing Emerging housing transformation
US city housing
• Urban planning around parkingo Public transit secondary
• Minimum living space to accommodate all the physical objects to store
On-demand economy reducing spatial needs
• Carless generation not bounded by parkingo On-demand mobilityo Shopping services
• Needs less physical space due to on-demand storage and retrieval
• Urban planning moving away from parking to public transit
• On-demand economy: consumers no longer require as much space or a car to move around or effectively shop
• Urban planning: city planners are adapting to residential changes in needs and preferences; prioritizing public transit near housing
Insights
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Shift in retail real estateBusinesses’ physical space requirements fall as logistic capabilities increase
Traditional retail real estate Retail real estate transformation
US retail location
• Large real estate footprinto Houses all products in one
location• Supply chain and retail location
directly coupled• All products housed in store
Decoupled supply chain to retail locations, integration with delivery
• Smaller, smarter spaces integrated with delivery services
• No longer housing all products in the storeo Decoupling of supply chain to retail
location
• Efficient supply chain: retailers upgrade their processes to transport the right amount of product to the right location
Insights
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Shift in work: when, where, qualityThe meaning of work is revolutionized as the type and methodology of work shifts
Traditional work Emerging work transformation
US work characteristics
• Set location and time• Owning all the resources, property,
and labor• Individual work output
o Limitation in co-working• Monotonous, mindless jobs exist
Automation of routine work,reduced barriers to knowledge work
• Geographic and time disperse for remote collaboration
o Unbounded by office space, hours• Tools and resources support greater co-working• Automation of routine task
• Reintroducing meaningful work: automation of routine labor creates an opportunity for meaningful, engaging work revolution
Insights
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Oxford study on job automation
“Hence, in short, generalist occupations requiring knowledge of human heuristics, and specialist occupations involving the development of novel ideas and artifacts, are the least susceptible to computerisation.”*
* The Future of Employment: How Susceptible are Jobs to Computerisation, page 40
FIGURE I. A sketch of how the probability of computerisation might vary as a function of bottleneck variables.*
Effectiveness of non-automatable workers will rise due to:• Increased compensation• Ease of contact• Better access to knowledge,
analytics, and productivity platforms
Logistic, office, administrative, and production jobs will be subsumed by platform-based automation
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Shift in office space demandsBusinesses are embracing the sharing economy by using resources as and when they them
Traditional workspace Emerging workspace transformation
US workspace
• Traditional closed office and cubicle layout
• Owning or renting the entire property
o No intermingling with other businesses
• Sitting office desk and chair
Automation of routine work,reduced barriers to knowledge work
• Shared, flexible office space to match worker’s and work’s needs
• Open, interactive environments to promote discussion and collaboration
• Emergence of standing and treadmill desks to replace sitting ones
o Standing conference rooms to expedite meetings
• Sharing economy: businesses benefit from the flexibly of using the type and quantity of space they need as they need it
• Collaboration space: office space design is centered on bolstering collaboration and innovative thinking
Insights
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Death of the cubicle
Routinized labor is defunct:• Routinized office spaces will stifle
productivity and signal an anemic company outlook.
• Encourage departments to share common spaces to foster cross-disciplinary insight and collaboration
Greetly replaces the front desk:• An iPad with basic receptionist
functions greets visitors through cloud software
• Clientele consists of small and medium businesses looking to save money and increase productivity
Knowledge workers will demand flexibility and speed from their workplaces to address complex tasks
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Clients will expect transparency, control
Consumer brands are building user expectations that the
physical world is accessible and controllable through a friendly
digital interface
&
This rise of the Internet of Things will increase client expectations
of 24/7 control and software-level access to system functions
(APIs)
The ability to sense, monitor, and control through smartphones will be table stakes for user services – even corporate users
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Smart cities emerge from the bottom, up
* http://www.simudyne.com/case_studies/hospital-evacuation/
Dense areas of innovation – Kendall Square, not Silicon Valleys – will evolve into smart cities due to:• Public-private data sharing• API access and analytics*• Great connectivity• Engaged institutions and citizens
• Future smart cities will not emerge from multi-billion dollar IBM, Cisco, and Siemens projects
• Instead, they will emerge from incremental progress and public-private data sharing
But smart cities will not be catalyzed by top-down initiatives
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The perfect storm of innovationThere’s a new set of imperatives for leaders
Leverage
Magic• “Any sufficiently advanced technology is
indistinguishable from magic” – Arthur C. Clarke
• “[The essence of platform leadership] is a vision that says the whole of the ecosystem can be greater than the sum of its parts.” – Annabelle Gawer & Michael A. Cusumano
Love• “Do you know what my favorite
renewable fuel is? An ecosystem for innovation.” – Thomas Friedman
Change
Focus
• “The future is here, it’s just not very evenly distributed.” – William Gibson
• “The best way to predict the future is to create it.” – Peter Drucker
• “We didn’t have money so we had to think.” – Ernest Rutherford
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What does this all mean for real estate?The 5 forces have created a ripple effect from the macro-scale to the micro-scale
1Empowered citizens
2Unleashed productivity
35Human networks
Sharing, on-demand economy
Accelerated, disruptive innovation
Macro-scale/Socioeconomics
DiversityFlexibilityDensity
ConnectivityControllabilityConfigurability
Building demandsNeeds Services
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Physical cities
Smartphone controlDelivery servicesShared mobilityMultimodal
Mixed use spacesCo-working spacesHome offices
Macro-uncertaintyPlatformsPartnerships
Ease of useAutomationIoT
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Buildings as platforms – vertical villagesSegmented silos of activity are turning into integrated function centers
Pop-up store Cafe Maker space
Residential tenants
Flexible working space
Limited foot printTransient
Collaborative spaceImpromptu meetingsIrregular clients
SustainabilitySupports various sized meetings
Close proximityVertical VillageBuilding requirements
• Supports great connectivity and IoT
• DAS• Wi-Fi
• Tenant controllability• APIs• Automation• Digital concierge• Ease of use
• Modularity, scalability, flexibility
Tenants can configure the space for themselvesNo more analog time patterns; coming, going at all timesCompatible with the sharing, on-demand economy
Scalable, modular, adaptable work space to support client needsRotating clients utilizing the space
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Global Technology Presence Director
Senior Vice President
Pushpa Gowda