Disrupting cliques in multi-family housing to bring innovation to industry

Dave Marcinkowski is a founder/partner in Madera Residential and Ask, aimed at creating smarter, healthier apartment communities.

There is a problem within the multifamily industry. I’m not the first to point it out, but I’ll join the chorus of people talking about it. That problem is clique behavior.

If this was about everyone working together to move the industry forward, that would be one thing. But that’s not the point. Instead, it targets businesses, either by choice or default, that associate their organization with a specific third-party vendor and use only that specific vendor or vendors associated with them. As a result, the industry stagnates, without any urge for innovation. That is a problem. Once an organization joins a clique, that group essentially determines how that organization is run.

While it may seem like the best – or in many cases the only – decision to stick with one clique, it can negatively impact your business and your ability to effectively manage your properties and, ultimately, your ability to innovate. This is why.

The data problem

The problem has several causes, but it is rooted in data and access to it. One problem is that most data in the multifamily industry is locked up with a handful of prominent vendors, and those vendors control the distribution of the data.

First, those suppliers make it prohibitively expensive to access that data. For example, if an innovative startup has an idea that requires integration, it must pay a hefty annual fee — in some cases $25,000 or more — to each vendor to integrate with their database. For smaller companies, which are often home to some of the most forward-thinking innovations, these numbers often mean the organizations cannot integrate with more than one of the major suppliers. That’s standard joining a clique.

Moreover, even with the high cost, suppliers only provide limited access to their data sets. For example, they may share basic information, such as the resident’s name or address, but not provide that resident’s more meaningful information, such as their lease term, rental rate and other charges, credit score, or payment history. This is information that can help improve the products of a new offering, but by withholding this information, the major suppliers stifle innovation.

Innovation or extinction?

So how do we mitigate the impact of these cliques? By changing a few mindsets. First, we need to focus on creating true integrations between our management technologies. And that may mean forming an open collective that not only revolutionizes space, but encourages integration.

More prominent companies need to recognize that they have to work cheaply and collaborate with everyone else in the space or the customer will eventually suffer. And if the customer suffers, all these existing cliques are at risk of dying out. Eventually someone comes along who is not afraid of innovation, but who embraces it. This group will partner with other companies to create products that provide customers with the solutions they want. These synergies will provide the technology – and data – needed to make better management decisions to optimize our real estate performance.

Therein lies the danger for today’s great brotherhoods or cliques. They have to accept this new mindset and completely reinvent themselves or, I would say, risk becoming a dinosaur.

Can you trust that your group will innovate?

Moore’s law essentially states that technology doubles every two years. I’d say in the multifamily industry it’s more once every ten years. And I would also argue that this is due to the few massive platforms that dominate our industry. Let me ask you a question: do you trust your vendor to handle VR/AR, IoT, blockchain, cryptocurrency, remote working and the list of new technologies that goes on and on? All other industries are seemingly at the forefront of these new, evolving technologies, while we wish our residents could apply for, lease, and fully board an apartment from their computers.

The resident is always right

Another critical mindset shift that we need to embrace is to make resident satisfaction the number 1 priority. Residents demand that interaction be easy and convenient. Homes often conduct field surveys to find out what their residents and potential residents want. What we hear repeatedly is the demand for an all-in-one leasing solution. Residents want to be able to view their future apartment, complete the application process and access their unit from one online location.

So if that’s what we keep hearing, why isn’t anyone offering it?

Some companies claim to have a solution that meets this need, but in reality what they have is a minimal viable product that is not really viable. And the reason it’s not viable is that cliques don’t play well with all the different suppliers and products involved in the leasing process. Operators know that renting an apartment goes far beyond data collection, approval processes and e-signatures. Wouldn’t it be nice if a resident could fully board and access their apartment via a smart lock without ever entering the office? Why don’t we have a marketplace where residents can select their utility company, moving company, banking and financial services solution, furniture, etc.? This marketplace would give the resident what they want and need while also creating an income stream for the property owner.

Breaking out

The multifamily industry cannot move forward unless we change our mindset and get rid of cliques. We cannot continue down a path of restricting access to data and ignoring basic residents’ needs. Anyone can become a dinosaur, but we can create an environment of true innovation with just a few simple changes. Let’s say we focus on collaboration, low-cost integration, and creating products that keep pace with new technology and are based on what our residents want. If we did, we would create a stable industry in which any business, big or small, can thrive.

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