The Key to Greatness: 1% Improvements
“Take your 10-year life plan and ask yourself, ‘Why can’t I do this in six months?’” – Peter Thiel, co-founder of PayPal.
Thiel’s quote reflects a common narrative in business psychology that says, ‘if you don’t think big, you won’t win big.’
But the dynamics of commercial real estate, a sector unlike any other, demands we question that premise.
The accumulation of gradual, everyday improvements determines the value of your portfolio and enterprise. But these advances don’t have to be ground-breaking innovations.
In other words, making minor adjustments to the way you do things will compound and deliver considerable returns.
Rather than ‘go big or go home,’ think in terms of 1%.
1% improvements to the way you operate — whether it’s acquiring properties or managing contractors — the aggregation of small but deliberate steps produces massive success in commercial real estate.
Start small: The research behind 1% improvements
This quantum business approach has firm roots in behavioral psychology.
For more than 20 years, BJ Fogg, the founder and director of Stanford’s Behavior Design Lab, has been researching why some desired behaviors succeed and others don’t.
His most prominent finding is this: to achieve big things, you need to start small. This revelation challenges many of the existing notions about professional and personal growth.
Motivation naturally waxes and wanes. Consequently, if an investor expects to maintain constant motivation to accomplish lofty goals, they’re tenuously relying on a factor that’s not entirely in their control — though you can influence yourself to an extent with affirmations (positive thinking).
Instead, break those ambitions down into small, easily achievable objectives and form new habits that will lead to the desired outcome.
Though you can’t reliably control motivation, you can control the scope of your goals. If you set objectives that are more practical to achieve, you create momentum and inspire confidence in you and your team’s abilities.
Achievable short-term goals motivate your team (and yourself)
Aiming for 1% improvements alleviates the fear that people experience when they set ambitious goals.
Consider an operator who would like to improve the occupancy rate of a newly acquired property. They set the goal of getting a 60% occupancy rate up to 90% within a month.
Given such a tight deadline, not only is the operator likely to fail, but the goal also has the potential to become a significant stressor for the team.
By the first week of the initiative, if the building doesn’t have a 65% occupancy rate and the operator starts every meeting asking the team why they’re ‘so far behind,’ the unrealistic expectations will undermine the team’s motivation.
To repair this counterproductive atmosphere, set smaller, more manageable goals in every area, and it will improve mood across the board. When members see goals as achievable, they’re more likely to put in the work it takes to make it happen.
Tech helps commercial real estate operators make a series of small improvements
Often, people in debt don’t know how bad their debt is. Likewise, some commercial investments harbor hidden inefficiencies.
By implementing a data management system, you can more easily target the areas that increase your ROI when optimized.
For an operator that owns a moderately sized mixed-use portfolio and manages it using obsolete platforms and tools, there’s likely a significant opportunity to break the silos that keep data isolated.
When data across your organization is unified and analyzed, you can leverage it for enhanced situational awareness and decision-making.
Kaizen: A philosophy of continuous improvement
In the business world, the strategy we’ve been talking about has a name: Kaizen, or ‘continuous improvement.’
Toyota calls the kaizen methodology the ‘soul’ of its business. It’s one of the core principles of the Toyota Production Method, a system that made Toyota the 7th highest-revenue company in the world.
This business philosophy originated in post–WWII Japan, but you don’t need to be a historian or behavioral researcher to understand and appreciate its value:
In 1946, a famine limited food to less than 800 calories per person daily. Resources were scarce, and the country’s outlook was bleak.
Yet within 50 years of adopting the Kaizen methodology, Japan saw its economy grow by a factor of 15. Life expectancy doubled, and the unemployment rate steadied at 6% or lower.
The philosophy of focusing on small, manageable improvements transformed the country into the economic powerhouse it is today.
Start small for big results
You don’t need to achieve your 10-year goal in six months. But by thinking in terms of 1%, you can add tremendous value to your investment.
The micro improvements will compound, leaving you with better-performing assets, greater enterprise value, and a more productive team.