BCO Conference 2009: risk vs innovation

British Council for Offices

22 May 2009

Progress and growth need innovation. But an unfortunate bedfellow of innovation is risk, of which many organisations are especially fearful during a recession.

 
The land development sector in particular is aware of risk through pumping millions of pounds into commercial buildings, new and refurbished. But the vast majority of occupiers are also increasingly aware of risk.
 
Just how do both sides cope with their risks and at the same time innovate
to remain competitive in their individual business environments?
 
It may be a moot point as the economy picks up. The Treasury has pointed out
by 2010 it could be back to business as usual. Those shoots springing up
really do appear green.
 
But the blues may not be over anytime soon, said one long-time observer of
the financial scene. Recovery - when it comes - "will be sluggish" because
of the heavy debt that the nation has got itself into by bailing out not
just failing but failed banks.
 
There will be no going back to those heady days of 3 per cent economic
growth seen between 1992 and 1997. Get used to a "new capitalism", said BBC
journalist Robert Peston in his opening address to the British Council for
Offices annual conference in Edinburgh.
 
It's the end of the cult business leader era and the beginning of teamwork
importance, he told the 500 delegates at the city's modern convention
centre. Common sense should trump counter-intuitive statistics, meaning
complicated mathematical modelling should be less relied on to judge risk.
 
"We all must get better at understanding risk," said the FT's former
financial editor.
 
But greater risk because of a recession also means there is greater reason
for, and need for, innovation, said the second plenary speaker Mike Harris.
He built his career on risk and innovation, being the founder of online bank
Egg, Firstdirect and the online personal data protection business Garlik.
 
He said the worst business policy during a recession is for an organisation
to become risk averse and not take chances. It is only by taking chances
that an organisation will continue to develop in a recession. Innovation has
always offered the competitive edge, but he says the myth is that it costs a
lot to see it through. During a recession the vast majority of businesses
believe that that risk is too much.
 
In fact, said Harris, innovation if approached in a methodical and planned
fashion is highly low-risk. It is the calculation of competitive gain from
the innovation coupled with the best possible management of the risk that
creates winning business ideas and businesses. "Innovation will get more
than its fair share of the marketplace during a recession," he told
delegates.
 
The development line for innovative ideas is first the concept idea, then a
small-scale prototype followed by a limited pilot test of the service or
product. Finally, the launch that is most expensive. The pilot stage is the
point to bail out to keep the financial risk low: "Don't worry about
failure. But make sure when you fail, you fail cheap."
 
But what is innovation?
 
It is, explained Harris, a relentless search for new ideas or efficiencies.
In particular, it usually does not invent new technologies but use existing
ones. Most importantly, it will add value to end-users.
 
Nonetheless, do senior business executive recognise it when they see it?
 
The real question, according one delegate from a large FM provider, speaking
over a coffee during a break, is whether they want to see innovation all. He
believed property developers are living as if there is no financial crisis
and it's business as usual. They expect long rents, upwards-only rent
reviews and contracts with python-like clauses to disabuse occupiers of
leaving before the 20 or 25 years. Not much innovation there, he said.
 
The landscape has changed at least for architects and occupiers, according
to speakers in one breakout debate session. Architects are designing fewer
"curvy-wurvy" buildings, said chair Jack Pringle, immediate past president
of Riba and founder of architectural firm Pringle Brandon. Iconic buildings
will be fewer.
 
The debate, entitled "It's a about people, stupid", highlighted how
buildings will have to allow firms to get the best from their most valued
asset, people. Ironically, the recession means refurbishments and fit-outs
will dominate the market which is what the UK needs as "the epicentre of the
global knowledge economy", noted Pringle.
 
"There is no use talking bricks and mortar any more but about consumers of
real estate," said Chris Kane, head of workplace at the BBC. Landlords must
think of themselves as a service provider rather than a provider of
buildings.
 
By 2015 the BBC will occupy 30 per cent less property. Before that, the BBC
will completely digital whereby library space will be needed for around
6,000 tapes rather than nine million. The Beeb will be sharing production,
talent and studios with independent media companies and even competitors.
That's where the innovation lies for the BBC, not in being locked into
inflexible long-term leases as a tenant.
 
Kane challenged the BCO to think customer rather than tenant. Get rid of the
nightmare of landlord consent to change leases and building layouts. He said
that it took nine months of backwards and forwards negotiations to put a
rooftop camera in place just after the 7/7 terrorist bombings in London.
Customers such as the BBC have to move faster than that.
 
Victoria Fairhall, development manager at Land Securities, suggested that
more pre-let agreements will benefit both occupier and the landlord which is
looking for a closer relationship. Bringing the occupier into the design
process as early as possible is best for all parties, she said. But
producing buildings with extra specifications and sustainability are
high-risk and unless a better relationship is set up there could be a stall
in this sort of development.
 
Debates about innovation and risk are not new, said one FM delegate after
the debate had finished. The real issue is whether anything new will come of
such talk, especially now during a recession.