Disruptive innovation is good for the FM industry

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There is an urgent need to combine sustainable and disruptive innovations to evolve FM for the new world of work.

By John Hinks

Over the last 30 months, Zurich Insurance’s Corporate Real Estate and Facilities Management team has hosted several online crowdsourcing events to provoke conversations across the FM industry about its future. Our first forum asked people to re-imagine FM in 2017 based around 16 themes spanning from the business relevance of FM through to the nature of work and workplaces of the future. Over 500 people joined the initial debate and, as the discussions progressed, we hosted further forums to pursue the emerging themes, including a debate dedicated solely to the future of client-provider cooperation.

Overall, the picture of the FM industry that emerges across all of these forums is one of disruptive attack from the impacts of digital technology – from the associated challenges produced by new attitudes and new ways of working. It’s an industry that needs massive transformative change to service this changed demand profile, plus the way the industry itself operates. And it’s an industry struggling with its strategic change capability, with the limitations of a historically thin R&D commitment and from the lack of a forward-looking talent strategy.

However, the forums also revealed a powerful innovation landscape rich with opportunity – including the platform offered by ubiquitous digital technology for innovating our service operations, the opportunity created by this flux in what work means and how people do it to assist business in redefining their approach to corporate operations and the opportunity of globalisation dynamics to innovate our service operations (especially in emerging and rejuvenating markets where capability and innovation are increasingly the competitive differentiators).

Our current approach to innovation is to use it to sustain FM’s old industry model and one of the key revelations from these forums was that the industry urgently needs disruptive innovations in its value proposition and how it operates.

What’s holding us back?

The existential challenge is where could or should we start? What are the major blocks or the prerequisites to disruptively innovate our value proposition and our way of working?

After all this time, CRE still has no objective way of indicating the value that it brings to business, and until we can address this it will, rightly, remain a fundamental block in being interpreted by the business as a strategic lever rather than as a cost-side function. However, because what drives the businesses in the information age necessitates different ways of working, the way forward demands a new CRE value proposition, one based on a better understanding of what releases productivity for different people working on different tasks in different contexts, and where much of what they do individually and as teams involves analysing, exchanging, validating, negotiating and assimilating information. People are increasingly paid to think not do, and digitisation and automation will advance this further, so businesses need workplaces that explicitly support that.

This requires FM to develop evidence of how customer value is created or lost, but a prerequisite of this is a more fundamental understanding of how the workplaces and services affect the way people, teams and businesses operate. For instance, how do changes to the workplace actually influence how teams cooperate? How do workplaces embody and express the cultural norms of a business, including how managers lead and teams cooperate or compete? How can we create corporate workplaces that help people achieve personal flow across all the different types of work they do there? And if people are consistently doing some types of work off the corporate footprint, can this tell us anything useful about the corporate workplace?

However, addressing these sorts of challenges will require a seismic shift from today’s focus on building-centric inputs to thinking about how our services and workplaces actually add to or detract from customer value. And acting on any of this will require a radical redesign of the entire FM ecosystem, which at the very least will affect the FM delivery model.

The traditional, and lengthy, sourcing process is arguably sustaining today’s vicious circle of commodity services, low margins, dissatisfied customers and failure to innovate within contracts. A fundamental change is needed to the current pricing models to reflect today’s competiveness differentiators for business. To achieve this, however, FM will need to develop new ways of articulating intangible value that cannot be easily measured using conventional thinking. In the meantime, this situation continues to sustain today’s procurement processes, pricing models, concepts of value and service level agreements (with their inbuilt sustaining metrics). The net effect has been commoditisation, a stifling of differentiation and hence a cycle of decline of service relevance across the FM industry.

The idea of the intelligent cooperative

To tackle these challenges, the FM industry first needs a revolution in how providers and clients work together – something our second forum described as the ‘Intelligent Cooperative’.

The way procurement and FM interoperate today creates inherent tensions for the very partnering we need in order to foster change. An intelligent cooperative between clients and service providers requires time and effort from all parties, and a shared commitment to mutual learning and development. The short-term contract doesn’t help, so maybe businesses (and FM) need to step back and think about whether the contract approach is serving them, or the other way around?

Meanwhile, the so-called ‘integrated solutions’ have, to date, been more about bundling existing services, while sustaining the existing operational and FM industry fragmentation, than about catalysing profoundly new ways of cooperating to achieve synergistic value. This needs to change so that business benefits are able to drive the nature of integration.

It is not clear whether the FM industry leadership collectively has the cultural skill set and experience necessary to achieve sustained competitive differentiation through, and in the face of, globalisation. The industry is still in a reactive mode. There is a need for collective action in areas where there is mutual potential for all, which is the essence of ‘co-opetition’.

Let’s look at the most obvious opportunities:

Beyond buildings

Concepts of work are changing. Perhaps the workplace will continue its transition and become a social hub as digitisation followed by automation sweeps across the knowledge economy and takes out the basic tasks. For instance, what if offshoring turned out to be the cost-efficiency solution to sustaining existing labour-intensive business operating models? If the corporate workplace remains one of a number of places where work routinely gets done, could FM use this to develop a disruptive innovation in its service model, such as a model centred on people not buildings?

A service model that supports work, not just the workplace

Is there an opportunity for the creative use of digital technology and big data, especially if FM is willing to imagine services that centre on the person, not just when they are working on the corporate footprint? Linked to this, as FM goes digital too, we will have the chance to use very smart technology to optimise workplaces and to provide mass personalised services for individuals or teams, probably on-the-fly.

Energy as a long-term challenge

The energy and sustainability dimensions of the FM role are growing steadily and there lies the most obvious opportunity to develop smarter ways of working and translate these into innovative value models for the future.

Getting started

The FM industry has been based on a race to the bottom for decades and our forums revealed that we are there, not least because of the self-reinforcing dynamic involving both supply and demand sides. If we want FM to advance much further, we need structural innovation in the industry value proposition and how it operates.

The good news is that it looks like sustaining innovations will continue to proceed by the logic of efficiency gains, many enabled by the advances in ubiquitous digital technology and the primacy of new ways of working and energy challenges. All this does is buy us the time to prepare the ground – the bigger challenge for our industry as a whole is that we need to work together to think strategically about what structural changes we need and how to achieve them. Our future leaders will be those who actually cooperate to deliver mutual benefits from taking a different approach.

In many ways, these are the best of times for innovating our industry and our way of working, because the key conditions for innovation are in place in a way that they weren’t a few years back, and because most businesses recognise that their operating models are being fundamentally challenged by the same conditions. So we are all in the same moment of flux.

However, in an industry of fast followers, what we clearly need are examples of how cooperative innovation by clients and service providers do indeed break today’s vicious circle to produce tangible benefits for all. While there is much that we could do to prepare the ground for change – for instance, promoting innovation as a core professional behaviour, something crucial for an FM industry based on people – what it seems we really need are first movers, with the motive and vision to change a lot of things at once and in a coherent way. We are probably looking for visionary clients to make the space for visionary service providers to rise to the opportunity to do different things together.


John Hinks is the global head of innovation (Zurich Corporate Real Estate and Facilities Management) of Zurich Insurance Group Ltd.


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