Cost of Delay

December 26, 2017 P Thaz Knowledge of Variation 1 minute, 37 seconds

As a multihousing operator, if there is only one thing you could measure to improve your operations, what would that be?

Real Estate Portfolio / Asset Managers (especially multihousing) should focus on just one overarching goal: maximizing Fixed Asset Utilization. By this reasoning we are no different than say airlines, fleet managers or manufacturing enterprises, who also have similar investments in fixed assets.

We also believe that the dominant paradigm for managing multifamily assets (target 95% occupancy, dynamic pricing ?, take your pick) is fundamentally wrong. Not just a little wrong, but very wrong. It is as wrong as we were in manufacturing before the Japanese unlocked the secret of lean manufacturing. Today's orthodoxy has institutionalized a set of internally consistent but non-optimal beliefs that make change difficult.

At Real Vectors, we are focused on promoting a new paradigm - not with the sole intention to challenge the current orthodoxy but to prove empirically that there are better alternatives. We hope we can present a convincing argument over time.

To answer the question I posed earlier, the measure is: delay. And strategies to maximize utilization should focus on managing and controlling for Flow.

One of the ways Real Vectors enables better decisions is by quantifying the cost of delay at various stages; particularly by focusing on rigorous pipeline management. The graphic below shows some of the piplelines that are important to achieving flow control.

Of course, we recognize that success lies in Execution; and Execution is more about People than Strategy. So any new paradigm has to approach problem solving holistically. We are believers in The Deming Philosophy, which in our opinion is well suited to managing Complex Systems, especially Human Activity Systems such as apartment operations.

  • How do we make others do what we want them to do? Hint: see work of @BjFogg
  • How do we reward better decisions as opposed to better outcomes? This is difficult.

We will expatiate on this more later. Stay tuned.