A lot has happened in the nearly three years since I stepped down as chief executive of Unite Students to take up the same position at St Modwen and it is an interesting time to reflect on some of the themes I have experienced and observed.
The first big theme has been the rise of ‘alternative’ sectors. Demographics, government policy or profound shifts in consumer behaviour produce long-term trends that trump the economic cycle. In the past 10 years, this has led to the belated rise of alternative asset classes that tend to major on these factors and there is no longer such a thing as a generic property cycle; the wide variation in how different subsectors are now performing demonstrates that. Investors were slow to embrace alternatives initially but that has changed markedly over the past couple of years and those with sustained exposure are likely to have done particularly well.
The second big theme is the importance of innovating for customers. In the student accommodation world, where rooms are re-let every year, you ignore customers at your peril. The same will be true for other consumer-focused property businesses such as self-storage. So it is critical to constantly strive to improve your customers‘ experience and build brand loyalty through innovation.
At Unite, the rule was that 50% of every efficiency improvement was re-invested in improving service so that customers and shareholders benefited equally.
Need for innovation
In the housebuilding sector, I am struck by how little innovation there seems to be for customers’ benefit, at least at the volume end. With one or two exceptions, innovation seems to be focused almost entirely on enhancing returns. This does nothing to enhance confidence in business, which will have long-term consequences. I hope St Modwen Homes can do things differently.
The third big theme has been the power of investing in your people. You can have the best strategy in the world but without people who understand it and know what to do as a result, execution will fall short.
Investing in your people not only delivers higher performance but should also improve staff retention. Some housebuilders struggle with 30%-plus staff turnover, meaning that they have to embed their strategy with a different workforce every three years, making it more difficult to build real momentum.
It is critical to constantly strive to improve your customers’ experience
At St Modwen, we have made a clear commitment to invest meaningfully in everyone in the business, whether through pay levels, personal development or simply providing the right sort of working environment. It is early days, but in terms of performance and employee retention the signs are promising.
Near-term challenges such as Brexit will eventually subside (hopefully!) and we will have to deal with the next thing. The needs to focus on long-term trends, innovate continually for your customers and invest consistently in your people won’t be going anywhere.
Mark Allan is chief executive of St Modwen Properties