The Network Garden - Mark Sigal's Blog

Successful Platform Strategy is a Never-Ending Political Campaign

Successful Platform Strategy is akin to a never-ending Political Campaign, where the platform provider is fighting to win the hearts and minds of the platform consumer and the key platform adoption influencers, such as integration partners, sales channels, analysts and media.

One user, one vote, every day moving forward or backwards in terms of opinions, outlook, engagement and leverage.

This is why most platform strategies fail...so much has to go right and so much has to be synchronized for the platform to succeed and continue to succeed over time.

Measuring What Matters: What's All of this Real Estate Data Good For? (Shopping Center Business)

(This article was published as part of Shopping Center Business’ Retail Insight series.)

The great paradox of the real estate business is that, on one hand, it’s the single largest asset class on the planet with a global estimate of $228 trillion, and it generates tremendous amounts of operating, financial and market-level data. On the other hand, real estate is an industry where too much of the decision-making process is done by gut, too much of the reporting process is done by spreadsheet and too few of the recurring processes leverage automation. Unfortunately, many still opt to throw humans at problems that systems have mastered.

But, the real estate game — and retail real estate, in particular — is changing. Data-driven systems are shifting the industry from the “Excel Hell” of spreadsheets to automated decision support tools based onyour data, and automated tracking and reporting systems based onyour business rules for recurring activities, including:

• Rent collections
• Retail sales tracking
• Leasing, lease renewal and deal flow analysis Proof of insurance compliance
• Consumer sentiment tracking
• Consumer location intelligence
• Portfolio acquisition and disposition analysis

When Information Scarcity Becomes Surplus

Futurist George Gilder once noted that when a formerly scarce resource suddenly becomes a surplus commodity, tremendous wealth is created through the innovation and industry transformation it fosters.

A good example of this is the role that the convergence of big data, cloud computing and mobile broadband played in the rise of Apple, Google, Amazon, Facebook, Netflix and Uber. In each instance, these companies were not only able to create high-margin, global-reach businesses that generate tens to hundreds of billions of dollars in revenue, but they changed our very concept of what media, communications, search/discovery, retail and transportation could be.

In the retail real estate space, these same dynamics are driving massive innovation in formerly sleepy market segments, such as property management, construction management, portfolio management, facility management and real estate agent tools. Innovation drove capital investment from venture capital and private equity to the tune of $20 billion in 2018 alone across commercial real estate segments ranging from property management and analytics to Internet of Things (IoT), construction management and real estate agent tools, according to market analyst Venture Scanner.

Extending the Reach of Property Management and Accounting Data

A common industry driver is the fact that forward-thinking shopping center owners and operators want to extend the reach of their existing property management and accounting data to all of the folks outside of accounting. These personnel need access to the data inside of MRI or Yardi, but are unlikely to log into those environments themselves. This group typically includes executives, asset managers, property managers, leasing, lease administration, legal, analysts, marketing, development, due diligence, and third-party clients and investors.

The “win” associated with embracing a data-driven system is three-fold. First, it levels the playing field inside a company so everyone has access to the same information, meaning the company can deliver better service, make fewer errors and operate at scale with one voice. In this regard, such systems become the corporate memory ensuring best practices don’t walk out the door when key employees leave. These systems also provide a path to onboard new hires systematically.

Secondly, information, such as rent, merchant sales, occupancy, budgets vs. actuals, NOI, property type, tenant type, region and key lease provisions, can be standardized and then “warehoused” in databases where it accrues over time.

Data-driven systems become push-button simple to spotlight key trends, track variances from prior periods and better benchmark performance relative to peers — both inside the company and cross-market.

Lastly, these systems are designed to ingest multiple data sources. This doesn’t simply include property management and financial data, but extends to consumer sentiment (think Yelp), location intelligence (think Google Maps or shopping center wi-fi data), marketing event data and merchant credit rating data, meaning that for the first time it is now possible to run analysis using “consolidated” data.

This approach enables portfolio owners and operators to better understand:

1. Which retailers and retail categories are the healthiest or at greatest risk based on multiple factors, including timeliness of rent payment, occupancy cost percentages being within historical ranges, credit ratings, and consumer satisfaction based on quality, service and perceived value (which can be measured to track net promoter scores).

2. Which center marketing events generate the high customer “lift” relative to non-event days at the lowest “cost per lift,” which events tend to lead to the most loyal customers and, as identified by massive mobile data patterns, which trade areas a given shopping center draws from.

3. Which properties are the greatest acquisition or disposition targets. This can be analyzed based upon relative NOI performance to the center’s peers in a given region, or by merchant health scores (for key tenants and as a composite property), co-tenancy default exposure, and the impact of consumer shopping patterns and trade area reach.

“Intelligent, Actionable Data — when coupled with Automation — changes the game.”

The above examples are based on actual applications utilized by clients and partners that work with BrightStreet Ventures portfolio companies, representing tens of billions of dollars of asset value across thousands of retail properties and tens of thousands of retailers.

Netting it out, Intelligent, Actionable Data — when coupled with automation — changes the game, and the future is here today.

The Terrible Truth About Amazon Alexa and Privacy

Adam Clark Estes of Gizmodo has written a terrific article on what the Amazon Alexa represents as a backdoor into the personal privacy of consumers.

The "money shot," which should give every Amazon Alexa owner pause is the notion that there is a microphone in your house, and you do NOT have final control over when it gets activated.

Let me repeat that. Amazon is on record as stating that they have a team of thousands that listen into excerpts of user sessions to better improve the product. That control is bound by a Terms of Service, written by Amazon, which gives Amazon a lot of latitude, which can be updated at any time, and which, by virtue of the United States having no meaningful federal protective policies when it comes to privacy, largely trusts the industry to self-police.

Also, as the article notes, and as any Alexa owner can attest, Alexa is subject to false positives where the user said something that was not intended for Alexa, but Alexa interpreted differently and recorded anyway.

This is bad, and let me tell you why. If you've been paying attention to Facebook's numerous transgressions, obfuscations and outright lies when it comes to (mis) appropriating and failing to protect consumer data (e.g., a recent $5B fine), you should know that:

1. Facebook is just an easy and obvious example of how economic self-interest can lead to some really heinous outcomes.
2. As Cambridge Analytica's mis-use of Facebook data in the 2016 election shows, it takes very little data to build a powerful profile on a consumer that is exploitable in numerous ways.
3. Security is the other side of the privacy coin, and as the joke about security breaches goes, there are two kinds of people. Those that know they've been hacked, and those that don't; the point being that most everything is hackable in some form, and the hackers are more sophisticated than those protecting against hacks, especially in the realm of the Internet of Things. Just imagine a bad actor securing programmatic control over every Alexa device, searching for certain incriminating key words, which accrue in your personal file in the cloud, and the bad outcomes that can yield (blackmail, self-incrimination, robbery, etc).
4. As a sanity check, ask yourself this. Were it the federal government wanting to a put a smart speaker in everyone's house, most people would (rightfully) lose their shit. But call it Alexa, and market it as a humanizing, pithy consumer device, and it's suddenly a stocking stuffer.

Listen, I love Amazon as much as any consumer, but I also know this indelible truth:

Digital lasts forever - like, literally - but Terms of Service only last until there's a Regime Change or a Business Model Change, and that's an asymmetry that should give every consumer serious pause.

Put another way, we all have a responsibility not to put ourselves in a place where just by living our lives as we are, we could encounter “existential risk,” and however low a probability you may attach to this calculus, it's certainly non-zero, and the potential risk is indeed existential.

Food for thought.

UPDATE: There is a new story that Google employees are eavesdropping in customer's homes via Google Home Speakers. I say it again and again. The difference between an Apple device, and a Google Home/Amazon Alexa/Facebook device is that the former does not make its money by monetizing better forms of surveillance. You have to see people and businesses in terms of their motivations. What you incent is what you reap. 

Related: Is Facebook a Brand you can Trust? (O'Reilly Radar)