Digital Blue

Digital Blue

Ready for the digital transformation

Digitization is changing the economy and society to an extent that seemed inconceivable just a few years ago. Disruption and scalable business models are the new buzzwords. But what do they mean and what prospects do they offer for the construction and real estate industries?

There is virtually no sector of the economy or area of life that can escape the digital transformation. The transition is accompanied by far-reaching dematerialization: Photo collections have become files that you can store on a smartphone or in the cloud. Wikipedia has replaced multi-volume encyclopedias. Books can now be purchased digitally and read on an e-reader or other device. Records, audio tapes, films and telephone books are just some of the media that are moving to the smartphone. Smartphone owners can share activities immediately and with millions – indeed billions – of people (almost) anywhere in the world.

Disruption winners and losers

No technological change in recent decades has brought such massive and lasting change to structures, communication processes and habits. That is why this type of change is called ‘disruptive’. The impact of this trend on the publishing industry, for example, is huge.

Silicon Valley has recently become a kind of global world market leader for disruption and scalable models. Platforms dominate the digital economy. They are muscling in to act as intermediaries between manufacturers and conventional retailers on the one hand and customers on the other.

Examples include Amazon (a retailer with no retail space), Facebook (a media company with no media) and Uber (a taxi company with no taxis). Google acts as a search engine – that is, as the platform for platforms – generating huge advertising revenues in the process.

The real estate industry also faces challenges

The automobile industry is also facing upheaval. The keywords here are autonomous driving, shared mobility and electric drive systems. And while the banking and insurance industries have become alarmed at the rapidly increasing number of fintech and insuretech companies, the real estate industry does not seem to be fully aware of the new players in the digital transformation.

Of course, the real estate industry in Germany is considerably more complex and more heterogeneous, and the basis of existing business models – property itself – is still very analog and highly diversified. This means that – in some areas at least – disruptive and scalable business models are much more difficult to implement than in the industries discussed above. But the alarm bells should be ringing loud in any industry where customers receive offers from brokers and finance providers.

An increasing number of property technology startups are succeeding in penetrating the industry. The ‘Immobilienscout24’ platform, for example, has shown how a new business model can be scaled up in a relatively short time in the real estate industry, dramatically changing the structure of the value chain. The real estate sector now is abuzz with numerous brokerage, financing and digital platform startups.

Is the ‘Smart City’ the city of the future?

The major planning and construction tasks of the future lie in the area of cities and megacities with their well-known challenges. Google is particularly active in this area.

The company’s laboratories and research departments are working on self-driving cars, quantum computers, cancer treatments, and a drone delivery service. And soon, software will not only control smartphones, but also cars, household appliances, and even Google robots developed in-house. Satellites and balloons at the edge of space will provide the entire planet with Internet access. On October 2, 2015, the 1998 startup Google founded a holding company called Alphabet and moved all its business divisions to it. The structure of this holding makes it clear that it is part of an overarching plan, the main aim of which is to digitize life in cities. Users surrender their data and, in return, are permitted to participate in Google’s vision of a better and more efficient future.

The master plan for the smart city, the digital city of the future, is evidently to be developed by Sidewalk Labs. Initiatives include

  • Digital buildings as smart homes with new ownership models, such as shared ownership.
  • Digital mobility management of limited road capacity, autonomous driving with electric cars, and shared mobility
  • Digital management and personalized social services with digital health check
  • Digital energy management

These plans naturally require a high-speed digital infrastructure in cities, with upgrade of fiber-optic networks to 5G to handle the huge data streams.

Alphabet is also involved in these projects with appropriate subsidiaries, including Fiber (a company for the rollout of fiber-optic networks), Nest (as the basis for smart buildings of the future), and Google Maps (which supplies geodata for the digital city). But one thing is clear: ‘Smart’ alone is definitely not enough for the future of urban planning!

How can we advance digital technology in the construction and real estate industry?

Drees & Sommer experts can advise you on these different aspects of digitization. Whether planning, building and operating with the aid of Building Information Modeling (BIM), providing solutions for a sustainable BLUE CITY (for example with Cradle to Cradle®), or providing services covering all aspects of ICT – we are your reliable partner!