What’s Motorola got to do with tackling corporate real estate issues?

November 4, 2014 / By  

I was first introduced to Six Sigma when reading a draft of the latest Corporate Research paper from the US. Perhaps this wasn’t covered in my university course in The Netherlands (or maybe I wasn’t paying attention), but the details behind Six Sigma were new to me. In essence, Six Sigma is a management philosophy developed by Motorola in the early nineties which, by highly structured processes and data analyses, helps reduce defects in products and services. Motorola attributed USD 16bn of savings to the use of Six Sigma… No small change!

Can it be applied to corporate real estate?

Although at first Six Sigma was mainly used in modelling manufacturing processes, its principles are applicable across industries and functions. In our latest research paper, “Time, productivity and value: Do you have the right working equation?” we propose a new holistic approach to managing corporate real estate (CRE) portfolios based on similar principles.

Applying a Six Sigma approach to real estate helps identify all the areas within a company or business line where there is the potential for real estate ‘waste’. This isn’t strictly limited to physical footprint or rental rates. Real estate waste can be identified across any individual work process, ranging from inefficient workplace design; to ineffective real estate management; to underutilised space.

Analysing real estate through a process improvement framework can help position the commercial real estate portfolio as a flexible business tool used to improve worker productivity and corporate performance.

Figure 1: Using Six Sigma to perform successful portfolio optimisation:

So how does it work?

Imagine two scenarios, both with the same goal: leveraging the real estate portfolio to reduce costs. A more traditional CRE approach proposes shifting two separate business units to one location, then selling off the unused building for $1 million. The plan sounds great—and offers the organi2ation a significant one-time savings.

The CRE working with the new model, however, approaches the problem of reducing costs from a more holistic point of view.  Instead of narrow cost focus, they systematically assess and identify the underlying problem in the organisation.  In the end, the problem comes down to a product that costs too much and takes too long to deliver. By looking at all the points in the product development cycle where real estate waste can be eliminated and processes can be enhanced, real estate now becomes a tool for reducing costs and speeding delivery time. This may include occupancy planning and portfolio optimisation, as well as workplace strategies that increase collaboration and focus by employees. By eliminating the real estate obstacles to business productivity and realigning employee focus on activities that create value for the company, the CRE can set up a continuous improvement cycle that keeps refining the efficiency of real estate and ultimately, enhances the company’s output.

It’s a game-changing way to think about the real estate portfolio’s role in an organisation and a smart approach to supporting the organisation’s strategies.

To find out more, please download the thought leadership paper: Time, productivity and value: Do you have the right working equation?

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