Earlier this week I was on the phone with a major software provider in multifamily. One of my portfolio companies wants to pursue an integration with them, and I was trying to help out. The integration would clearly benefit both companies’ customers. So I was shocked by their response, which was a flat out no.
“But it’s what the customers want,” I started to explain. Their reply? “We don’t care what the customer wants; it’s our software and we’ll decide what data you have access to.”
It felt like I had hopped in a time machine and landed squarely in the early 1990s when Microsoft had a death grip on every technology they created. And it hit me that the growing pains the building industry is suffering right now have a lot in common with Web 1.0 a few decades ago. The good news? Through a few key steps, Microsoft turned things around (they’re currently #30 on the Fortune 500), and so can built-environment innovators. For enterprises hoping to maintain their grasp on market share, or startups hoping to gain some, these lessons are invaluable.
A blast from the past
First, a little history lesson. In the 1990s, Microsoft was top dog. Their software was everywhere, and they milked their monopoly for all it was worth. They pushed customers to pay more and more money for the same features and functionality, with no additional benefit. There was even a federal court case accusing Microsoft of antitrust violations, and there was an effort to split up the company.
Dynasties don’t last
Soon enough, solutions began to emerge that disrupted Microsoft’s vice-like grip on productivity software. GoogleDocs was essentially free Office. SalesForce began chipping away at Microsoft’s enterprise applications. The one-time lack of competition that led to the browser wars ended in near-obsolescence. Internet Explorer usage has fallen from 63% in 2008 to just 7% in 2019.
Lessons for the built world
So what does this all have to do with the building industry? Historically, built-world applications have not been on the radar for larger companies. So the space has been dominated by niche players with high market share in what has essentially been a tech-laggard industry. Those few players have enjoyed a lot of control -- and profit. But we’re starting to see a shift.
New technologies like cloud and mobility have created a new generation of tech power users–that is, industry insiders (and their clients) who know there’s a better way of doing business. They’re more demanding of feature functionality (getting more from a single product) and extensibility (the option for additional capabilities in the future) than previous generations of users.
This shift is driving a new breed of building industry startups. Instead of trying to become an enterprise solution that encompasses every piece of the business (the antiquated “enterprise suite”) these new startups offer best-of-breed solutions that solve very specific problems in the industry. A few examples? ICON is transforming affordable housing. Amenify makes it easy to deliver top tier resident experiences. InfoTycoon provides customer-centric property acquisition and management tools in a mobile app.
The startups’ approach is two fold: find a problem of high value to your potential customers, and chip away at the clients resolve to work with enterprise companies. It can be difficult to convince organizations–or their employees– to take the risk to try a new tool. But their objections can (and will) be overcome, especially as these new tools continue to gain shares of the market. And too often, the incumbents make it easy, exhibiting customer-defeating attitudes like my opening example.
A new outlook for a new age
How can incumbents hope to stay relevant as the built world undergoes the same disruption happening in so many other industries? It’s all about collaboration.
Here’s where Microsoft ties back in. Over the years, three key steps helped Microsoft overcome major consumer resentment and falling market share.
1. Make strategic acquisitions. Incumbents look at acquisitions based on revenue and EBITDA contribution. It’s time to shake up that outlook. Instead, acquire a company because of a specific technology or team that would benefit your organization. In other words, be less focused on cash flow generation, and more focused on serving your customers well. Need an example? Microsoft bought Skype to extend their communication and collaboration platform. They bought Github to extend their relationship with the software development community. Microsoft bought LinkedIn to extend their CRM tools. The list goes on.
2. Play well with others. Microsoft users are no longer limited or required to use the entire Microsoft suite. Strategically, they chose to solidify their position within the ecosystem, rather than demanding they own the ecosystem. This approach unlocked access to a user’s favorite products, so an Excel fanatic can purchase access and use a Chrome browser. These days you can even buy Windows for a Mac. Microsoft continues to win business it would have lost if it stuck to its outdated all-or-nothing approach.
3. Get outside your comfort zone. Traditionally, when an enterprise wants to innovate, there are three options: build, buy, or partner. Generally, these large incumbents end up building everything themselves, building a massive technical debt, because they don’t know how to partner well. In recent years, Microsoft has gone way beyond their four walls in an effort to build relationships with the talent they need to iterate. Microsoft has worked closely with accelerators and incubators, invested in venture funds, and collaborated with startups to build better extensibility into their code base. These partnerships help Microsoft innovate and stay relevant, which is no easy task for a billion dollar business.
As the business of buildings continues to evolve, large organizations (or anyone who wants to think like them) should study Microsoft’s evolution. Learning these lessons now can hopefully save the built environment from its historically laggard path, and set up your organization for continued success.
This story appears as it was originally published on our sister site, www.hiveforhousing.com.