In search of the ultimate performance

From the Olympics to world cup tournaments and major endurance events such as the Tour de France, the aim of the top tier competitors remains the same: to outperform the opposition.

At its core this seems the simplest of objectives but one, for the most part, we take for granted. Provide two athletes with the same conditions – the same physiology, the same training, the same equipment and the same funding – and one will still prevail.

This version of outperformance appears at its starkest in the world of sport. By definition sport is binary; a world which is structured exclusively around the notion of winning or losing.

But is this applicable in the wider world, or in business? Is there really such as thing as winning and losing, or does the majority exist within a sliding scale of relative success?

The world of fund management and stock market trading certainly conforms to the more binary construct. The sole motivation for anyone managing investments or trading stock is to outperform the market.

Beat – or outperform – the market and be judged a success. Underperform against this defined benchmark and be judged accordingly.

Fast-growth tech companies are also often characterised by traditional notions of winners and losers. In the race for funding, it is often a case of first mover advantage – thereafter it’s a case of grabbing market share before the final sprint to secure an exit.

Against these measures it is easy to see why this sector is so littered with high-profile casualties. For every Spotify, there is a Napster. for every iPhone, a Blackberry and for every Netflix, a Blockbuster.

When it works to its potential, the tech sector demonstrates the value of outperformance. The best examples involve a product or an innovation that improves upon – or outperforms – what previously existed. Putting aside its well-publicised governance issues, there can be no denying that Uber has significantly enhanced the user experience of ordering a taxi. Where private hire companies existed unchallenged for decades, Uber disrupted the status quo with a more user friendly and transparent service that has changed the landscape irrevocably.

As Jonathan Ive, the former chief design officer for Apple, once opined: “It’s very easy to be different, but very difficult to be better”.

Herein lies the current challenge for the real estate sector. How can an industry that has traditionally been rewarded for prudence, patience and conservatism pivot to become one that is innovative, fast-paced and progressive?

In common with other sectors, it is by now well established that innovation for innovation’s sake is not necessarily the key to unfettered success. Concepts such as WeWork and The Collective were undoubtedly meeting a market need and have done much to shift the dial of innovation in real estate, but have both come unstuck through a lack of financial viability. Similarly, in the residential sector, manufacturers of pre-fabricated homes – once feted as the solution of the ongoing housing crisis – have fallen by the wayside despite seemingly fulfilling an existing need.

Having established that innovation alone is not the recipe for success in real estate,

we need to examine the other ingredients required to outperform.

One of the most interesting things about this sector is the mix of ingredients required to deliver success. To deliver a successful development requires creativity, tenacity, patience, collaboration, financial acumen and a dose of good timing. Very few individuals – or even organisations – possess these traits in aggregate.

The most successful developers and investors understand this and assemble best-in-class consultancy teams – from planners to architects, contractors, marketing consultants and leasing agents – to deliver projects that enhance their local neighbourhoods, deliver an optimum experience for their end-users and generate robust financial returns.

The key to outperformance across this diverse range of metrics involves a level of creativity not normally credited to the real estate sector, an obsessive attention to detail and a deep understanding of financial modelling. Too much focus on just one of these elements without sufficient emphasis on the others is a surefire way to ensure these assets underperform in one way or another.

Just like the athlete who focuses on strength and conditioning to the exclusion of skills or psychology, the real key to success lies in committing to excellence across the spectrum of key metrics. Commit to just a small improvement across these and the aggregate benefit is significantly enhanced – a theory best summarised by the marginal gains theory espoused by Sir Dave Brailsford.

When appointed to the role of performance director of British Cycling in 2003, Brailsford was faced with the task of turning around the team’s ailing performances.

At first glance Brailsford had an uphill task ahead of him, but his approach was elementary. By committing to a concept he referred to as “the aggregation of marginal gains”,

he concluded that applying a 1% margin of improvement across everything you do is the easiest way to outperform the competition.

This approach – which was applied to obvious areas such as athlete nutrition and the choice of equipment, but also to less obvious issues such as the quality of pillows being supplied to riders – paid off quickly. Within just two years under this regime, the British Cycling team won 70% of the applicable gold medals in the 2012 Olympic Games. This compared to a previous tally of a solitary Olympic gold medal achieved since 1908.

The marginal gains approach is not limited to cycling or the world of sport alone and is relevant to any walk of life. In a business context, this can be applied to individuals’ performance and the overall performance of business functions, and for real estate firms it means applying marginal improvements across the development and investment lifecycle and every aspect of the end-user experience. In a cyclical and illiquid market there are rarely opportunities for overnight success, but the application of incremental improvements is one way to maintain momentum and provide the foundations required to outperform the competition over the medium-to-long term.