Geoff Colvin wrote “The Upside of the Downturn” in the depths of the Global Financial Crisis. Few people were writing optimistic business books in 2009, so this one stands out.
Colvin presents that downturn as “The Greatest Opportunity,” arguing that the most challenging conditions determine winners and losers. “Periods of extreme stress and challenge are reliably when dramatic competitive change takes place,” he writes.
As real estate investors begin to face a more challenging economic and financial environment, these lessons could come in handy. Tightening of monetary policy, a more recessionary outlook, and declining real estate values mean we could be looking at another downturn. So, it is a great time to revisit some of the critical lessons from Colvin’s book.
To avoid wasting a good crisis, real estate investment managers need to accept a radical new reality and create new solutions to clients’ new problems. Fortunately, many new tools, technologies, and datasets are available to facilitate this adaptation.
Accept a radical new reality
Jack Welch said, “Confront reality – not as you wish it were, and not as it used to be, but as it is.”
This is essential advice today. Indeed, Colvin argues that “none of the other strategies for managing this recession will work until this one – facing a new reality and resetting priorities – has been fully pursued.”
This is challenging. Leaders can be very attached to existing strategies designed based on assumptions about favourable conditions. Letting go of these or admitting that previous actions may now seem like a mistake is hard.
Many will delay accepting the new reality, perhaps by insisting on waiting for more data. That delay is the source of opportunity which the more entrepreneurial will seize – you can react more quickly than others.
Remember Charles Darwin’s key observation that “it is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”
The critical change that real estate investment managers need to respond to today is the change in clients’ requirements.
