System Overload: Part 2
How to choose real estate tech among a plethora of options
Image source: @titsay on X
Tldr last week’s post, System Overload: Part 1:
We have a seemingly indefinite number of tech vendors to choose from, yet we have limited time to allocate for decision-making and limited budget to spend. How do we choose what tools to use?
Today, I will keep the promise I made to you last week.
I will give you a framework for decision-making. I used this framework as a buyer of commercial real estate tech (aka CRE tech) and as a tool when I was selling software to real estate firms.
Startups, my advice to you is at the end of this essay.
Without further ado, I give you the framework…
CRE Tech Decision-Making Framework
The Do’s:
1. Create a healthy culture around decision-making.
Ensure your culture AND compensation structure does not penalize individuals for making mistakes in tech choices. As we learned last week, we don’t have full control over whether a CRE tech implementation succeeds or fails. And we mentally account for our inevitable failures. This creates an internal belief that we’re “bad” at picking new tech, which is (probably) not the case.
You must measure the success of each tool. Do this on at least a quarterly basis. For example, when I measured my CRE firm’s tech the first time, I found that a significant number of users for a very expensive research tool (you know the one) hadn’t logged into said tool in over a year. I promptly removed those licenses and allocated our savings towards tech that our team did use.
Now, you may be thinking to yourself, “But wait, Jen - you just said that mental accounting is really bad!” Exactly. That is why you need to structure strict rules around your review process.
No finger pointing.
Maintain a zero-regrets mentality. You made the best decision you could with the information available at the time.
If you chose a CRE tech tool that failed, identify what part of your process needs to be tweaked to prevent a similar situation. A bad system will beat a good person every time.
Lastly, and perhaps most importantly, avoid death-by-committee. Give the decision-making reins to a competent resource (or three, if you’re a larger organization).
2. Identify pain points where your firm needs to improve.
We established that there are too many CRE tech companies to choose from, and our brains can’t simplify when there’s too much data. Therefore, you must narrow the funnel before you even start looking.
DON’T WASTE TIME LISTENING TO PITCHES THAT AREN’T ABOUT YOUR PAIN POINTS. YES I AM SCREAMING BECAUSE YOU REALLY NEED TO HEAR THIS.
To define pain points, create small functional groups of 8 or fewer people to discuss 5-10 areas for improvement.
Not all pain points require technology to solve. You’ll be surprised how often a change in procedure will suffice.
As a counterargument to myself, Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses.” He implied that relying on consumer input here is quite risky. So let me caution you. I am not suggesting that you ask your team for input on solutions, only pain points. You must determine what your team will want before they figure it out.
If you or your team don’t follow my advice and do identify a perfect solution to your problem that doesn’t exist yet, then please go build it. Otherwise, go back to your comfy, risk-free Eames chair, sit your ass down, and write an email thanking your favorite CRE tech founders for helping you.
I could do an entire post on the pain points meeting. Maybe I will. Because focusing on problems and not solutions in CRE tech is really difficult for most of us… except when it comes to customer support.
3. Rank pain points. Then, select one pain point to solve at a time.
I can’t prescribe exact actions to weigh one pain point versus another. Our industry is too broad, and each company bespoke. Trust your judgment.
Next, set a deadline for solving your pain point. Nothing will get done otherwise. Full stop.
While nothing in CRE tech is technically irreversible, you will have pain points to solve that require more effort. For irreversible-ish ones, give yourself a longer runway to solve them.
Finally, focus on solving one pain point at a time. Dr. Andrew Huberman, a famous Stanford neurobiologist (at least, he’s famous to us podcast-listeners) warns against the mythological siren of multitasking.
4. Ask for help.
Connect with your peers to find out what tools solve their similar pain point. Ask for details about their experience.
Sure, you run the risk of a competitor-peer being untrue, but most people are good people who are just as lost as you and looking for answers. It’s less risky than relying solely on VCs or advisors, who are incentivized to get you to use their products. Always keep in mind the incentives of whom you speak.
As another counterargument to myself, be sure to avoid social proof. No one likes a lemming (actually, lemmings quite like one another, I suppose).
“Where all think alike, no one thinks very much” - Walter Lippmann
Finally, you must speak with current customers of any CRE tech product you evaluate. Or if you’re willing to be the first customer, God bless you!!
5. Read reviews and case studies.
Try Reddit’s r/CommercialRealEstate or r/RealEstateTechnology and the company’s LinkedIn posts to see if they have comments or likes. DM folks that commented or liked to get their feedback. And if you’re in multifamily, you can try my Startup of the Week, Revyse.
Of course, check out the CRE tech’s company website. They should have free resources and case studies where you can learn about their product or problem they solve in more detail.
As yet another counterargument to myself, The Psychology of Investing describes the problem of groupthink. The trouble with subscribing to reviews or peer feedback is that many of us do so without using our own judgment. I am simply suggesting that you use word of mouth as your first potential filter and then online reviews as another potential filter.
6. Make a decision, and sign as short of a contract as you can.
Shorter terms require you to re-evaluate more frequently. Yes, it’s more expensive. Think of it as buying an insurance plan. You can extend it for a longer timeframe after the first period if you want to continue.
But beware of the commitment and consistency principle.
If you’ve really gone through all the steps above and every single review, referral, etc. are exactly the same… then flip a coin. If they’re exactly the same, then it clearly doesn’t matter what you choose. All that matters is that YOU CHOOSE SOMETHING. Again, you must set deadlines to force your hand.
If you subscribe to this framework, making a decision is better than no decision. The regret of commission will sting, but trust me, the feeling of success is worth it. Start now.
The Don’ts:
1. To pilot, or not to pilot, that is the question.
I once made a *slightly* off-putting joke on a sales call when a customer asked for a free pilot. This prospective customer would have needed at least a 2-3 month implementation. In other words, it would have cost us a ton of money with no promise of a contract. To which I said, “You know, I’m really not a fan of free labor. Reminds me of slavery. Are you a fan?” They backed down. Fortunately, they didn’t run away from us. Phew. 😅
If you want to pilot, do a short-term paid trial period. It’s not good for you or the CRE tech firm to postpone a real decision.
2. Don’t go to conferences for ideas of new tech without having done your research on pain points first.
Notice that I did not include conferences in my do’s recommendation above. That’s because most of the major CRE tech conferences today are massive sales and marketing events for CRE tech firms to blow VC’s money. When the major conferences are actually about innovation and users coming together to discuss problems rather than advertising tech solutions for a bunch of issues that don’t actually exist, then I may change my mind.
You’ll probably go to conferences anyway as part of your job. If you have to go, aim for the niche ones that focus on your specific pain point.
If you go to conferences without identifying your pain points, you’ll become a lemming faster than a minnow can swim a dipper.
3. Don’t hire most consultants.
“We never hired a consultant in our lives; our idea of consulting was to go out and buy a box of candy and eat it.” - Warren Buffett on See’s Candies
Good consultants - who identify problems rather than regurgitating what you tell them - are few and far between.
CRE Tech Firms: How to Use This Framework to Your Advantage
First, clearly identify the problem that you solve. Harp on it in every marketing material, branding, team meeting, etc. There should be no question internally or externally about it.
Figure out who the “leads” are in your customer space (read: Crossing the Chasm) and land them as your customers as quickly as you can. Lemmings will always be there regardless of my and others’ advice, and you need to catch the big fish the lemmings will follow.
Give loads of information online about your product. As mentioned last week, prospective customers seek information to support their confirmation bias.
Use the reciprocity rule to your advantage. Give out free resources as if you were Oprah.
It’s good for SEO.
It will genuinely help your customers, who will feel indebted to you.
Be well-liked. Your goal is to have people talking about how great you are to each other.
Avoid the endowment effect. Unless you’re in the luxury market, offer initial, shorter term contracts at a reasonable price.
Use prospect theory in your marketing materials. Compare your solution to the existing one for the problem and explain how staying with the status quo creates a deficit.
Good luck!
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Jen’s Startup of the Week
Multifamily software buying made easier.
Revyse.com empowers you to search by product or category to discover the best software and services, read reviews, and make better buying decisions.
Jen’s Reading Corner
I’ve read Influence: The Psychology of Persuasion by Robert B. Cialdini, PhD at least three, maybe four times now. I can’t wait to start my next re-read. For anyone who yearns to understand why we do what we do, this is the book for you.