RHC executives are still using digital technology to protect the business they have rather than innovating for the business they need to be
In an environment where it is getting harder to find value, RHC companies are looking to technology — and specifically data and analytics — to help them gain a competitive advantage. As the margins get tighter on traditional core real estate assets, companies are taking more chances on secondary markets and opportunistic real estate, including inserting nontraditional assets classes into portfolios, from infrastructure to fiber optics to billboards. Data and analytics tools are helping RHC companies find deals in areas others may not be looking into.
More than half (54%) of RHC executives say they are investing in digital assets through external corporate venture capital (CVC) funds, joint ventures, alliances and M&A, while 44% intend to develop the tools they need in-house or through internal CVC funds.
With 75% saying that their company has a clear vision for digital technology’s transformational impact on its business strategy and an equal percentage saying that their organization has a strong innovation culture focused on using technology for operational, financial and commercial success, we would expect to see more investment in innovation that drives the customer experience. And indeed, when asked in which areas RHC companies have made or are planning to make significant technology investments, 38% say they have devoted past investment in improving the customer experience and creating new products and services; 36% say these will be a part of their future investment strategy.
More telling, however, 46% say they channeled past technology investment into improving internal efficiencies, improving financial automation and reducing risks, while 47% say they will continue to do so in the future. While it’s too early to say which digital technologies will help RHC companies gain a clear competitive advantage, what is clear is that they need to be making bolder decisions to find out.
As long as the sector economy continues to grow, RHC executives still have time to make the bold moves that will position them to thrive
Fortunately, 63% believe that the sector economy continues to grow and their confidence remains high across key market fundamentals (credit earnings, short-term market stability, credit availability and equity valuations). This, combined with three-quarters expecting improvements in revenue and two-thirds anticipating increases in profit margins over the next 12 months, gives RHC executives a few more innings to boost their investment in digital transformation.
Such investments will allow them to make the bold moves that will generate value and better position them to thrive in an increasingly dynamic and disruptive environment.